SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM 10-K
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|X| ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1999 OR
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|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 001-12917
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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 of organization) (I.R.S. employer identification number)
535 MADISON AVENUE, NEW YORK, NY 10022
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (212) 838-3400
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SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
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Common Stock American Stock Exchange
$.01 par value
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days. YES |X| NO |_|
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. |X|
The aggregate market value of the voting shares held by non-affiliates of the
registrant was approximately $126,900,000 based on the closing price on the
American Stock Exchange for such shares on February 29, 2000.
THE NUMBER OF THE REGISTRANT'S SHARES OF COMMON STOCK OUTSTANDING WAS 16,644,370
AS OF FEBRUARY 29, 2000 (INCLUDING 339,806 SHARES OF CLASS A COMMON STOCK).
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Definitive Proxy Statement for the Annual Shareholders' Meeting
to be held on June 9, 2000 are incorporated by reference into Part III.
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TABLE OF CONTENTS
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FORM
10-K
ITEM REPORT
NO. PAGE
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PART I
1. Business .............................................................3
2. Properties...........................................................12
3. Legal Proceedings ...................................................16
4. Submission of Matters to a Vote of Security-Holders..................16
PART II
5. Market for Registrant's Common Equity
and Related Shareholder Matters.............................17
6. Selected Consolidated Financial Data.................................18
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.........................19
7a. Quantitative and Qualitative Disclosures about Market Risk...........26
8. Consolidated Financial Statements and Supplementary Data.............26
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.........................26
PART III
10. Directors and Executive Officers of the Registrant...................27
11. Executive Compensation...............................................27
12. Security Ownership of Certain Beneficial Owners and Management.......27
13. Certain Relationships and Related Transactions ......................27
PART IV
14. Exhibits, Financial Statement Schedules and Reports on Form 8-K......28
FINANCIAL STATEMENTS
Consolidated Balance Sheets as of December 31, 1999 and 1998........F-3
Consolidated Statements of Income for the Years Ended
December 31, 1999, 1998 and 1997...........................F-4
Consolidated Statements of Changes in Shareholders' Equity for the
Years Ended December 31, 1999, 1998 and 1997...............F-5
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1999, 1998 and 1997...........................F-6
Notes to Consolidated Financial Statements..........................F-7
Wellsford/Whitehall Group, L.L.C. Consolidated Financial
Statements and Notes .....................................F-35
FINANCIAL STATEMENT SCHEDULES
III. Real Estate and Accumulated Depreciation............................S-1
IV. Mortgage Loans on Real Estate.......................................S-3
All other schedules have been omitted because the required information for such
other schedules is not present, is not present in amounts sufficient to require
submission of the schedule or is included in the consolidated financial
statements.
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PART I
ITEM 1. BUSINESS
Wellsford Real Properties, Inc. and subsidiaries, collectively, the "Company"
was formed on January 8, 1997, as a corporate subsidiary of Wellsford
Residential Property Trust (the "Trust"). The Trust was formed in 1992 as the
successor to Wellsford Group Inc. and affiliates, which was formed in 1986. On
May 30, 1997, the Trust merged (the "Merger") with Equity Residential Properties
Trust ("EQR"). Immediately prior to the Merger, the Trust contributed certain of
its assets to the Company and the Company assumed certain liabilities of the
Trust. Immediately after the contribution of assets to the Company and
immediately prior to the Merger, the Trust distributed to its common
shareholders all of the outstanding shares of the Company owned by the Trust
(the "Spin-off"). On June 2, 1997, the Company sold 12,000,000 shares of its
common stock in a private placement (the "Private Placement") to a group of
institutional investors at $10.30 per share, the Company's then book value per
share.
The Company 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. The Company's
operations are organized into three Strategic Business Units ("SBUs"). The
portfolio of investments held in each SBU at December 31, 1999 includes:
Wellsford/Whitehall Group, L.L.C.
o A 41.4% interest in a private joint venture that owned and operated 41
office properties totaling approximately 4,920,000 square feet,
including approximately 1,451,000 square feet under renovation,
primarily located in New Jersey, Massachusetts and Maryland.
Wellsford Capital
o $65,000,000 of debt related investments including $37,300,000 of
direct debt investments which bore interest at an average yield of
11.31% and $27,700,000 in a company which was organized to invest in
debt instruments;
o Venture capital investments of approximately $7,000,000 in a real
estate e-commerce company and other real estate-related ventures; and
o Seven commercial properties totaling approximately 597,000 square feet
primarily located in the Northeastern United States and California.
Wellsford Development
o An 80% interest in Palomino Park, a five phase, 1,800 unit multifamily
residential development in a suburb of Denver, Colorado. Two phases
containing 760 units are completed and operational, two phases
containing 688 units are under construction and the remaining
approximate 352 unit phase is being prepared for development ; and
o A 344-unit operational multifamily residential development in Tucson,
Arizona.
See the accompanying consolidated financial statements for certain financial
information regarding the Company's industry segments.
The Company's executive offices are located at 535 Madison Avenue, New York, New
York, 10022; telephone, (212) 838-3400. The Company has 49 employees, 32 of
whom are dedicated fully to the operations and management of
Wellsford/Whitehall Group, L.L.C.
COMMERCIAL PROPERTY OPERATIONS - WELLSFORD/WHITEHALL
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The Company seeks to acquire commercial properties and create value through
adaptive reuse. The Company believes that appropriate well-located commercial
properties which are currently underperforming can be acquired on advantageous
terms and repositioned with the expectation of achieving enhanced returns which
are greater than
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returns which could be achieved by acquiring stabilized properties. The
Company's current target markets include New York, New Jersey, Connecticut,
Boston, Philadelphia, Baltimore and the Washington D.C. metropolitan areas.
The Company's commercial property operations segment consists of
Wellsford/Whitehall Group, L.L.C. ("Wellsford/Whitehall"), which is accounted
for on the equity method.
At the time of the Spin-off, the Company owned six commercial office buildings,
five of which were then vacant, containing an aggregate of approximately 949,400
square feet which were acquired for an aggregate of approximately $47,600,000
(the "WRP Commercial Properties").
In August 1997, the Company, in a joint venture with WHWEL Real Estate Limited
Partnership ("Whitehall"), an affiliate of The Goldman Sachs Group Inc., formed
a private real estate operating company, Wellsford/Whitehall. The Company
contributed the WRP Commercial Properties and Whitehall contributed four
commercial properties upon formation of Wellsford/Whitehall. The Company manages
Wellsford/Whitehall on a day-to-day basis, and certain major decisions require
the consent of both primary partners. The Company had a 41.4% interest in
Wellsford/Whitehall at December 31, 1999.
As of December 31, 1999, Wellsford/Whitehall owned and operated 41 office
properties totaling approximately 4,920,000 square feet, including approximately
1,451,000 square feet under renovation, primarily located in New Jersey,
Massachusetts, and Maryland.
During the years ended December 31, 1999, 1998 and 1997, Wellsford/Whitehall
participated in the following transactions:
<TABLE>
<CAPTION>
(amounts in millions, except square feet and per square foot amounts)
1999 ACTIVITY:
Purchases:
Gross
Leasable
Square Number of Cost per
Month Type Location Feet Properties Cost (1) Square Foot
----- ---- -------- ---- ---------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
May ......... Office/Flex Warren, NJ 129,000 1 $ 8.0 $ 62
June ........ Office Boston, MA 64,000 1 10.2 159
June ........ Office Boston, MA 68,000 1 13.1 193
July ........ Office/Land Columbia, MD 97,000 1 10.7 110
July ........ Office Owings Mills, MD 32,000 1 3.9 122
August ...... Land Hanover, NJ 19.2 acres 1 2.0 --
August ...... Office Hanover, NJ 96,000 1 13.3 139
September ... Flex Columbia, MD 144,000 1 3.8 26
November .... Office Rockville, MD 236,000 1 19.9 84
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Total purchases 866,000 9 $ 84.9 --
======= = =======
Total, excluding land 866,000 8 $ 82.9 96
======= = =======
Sales:
Sales Price
Gross Leasable per
Square Number of Square
Month Location Feet Properties Sales Price Foot Gain
----- -------- ---- ---------- ----------- ---- ----
<S> <C> <C> <C> <C> <C> <C>
February .... Wayne, NJ 2.58 acres (2) 1 $ 0.3 $-- $ 0.2
May ......... Boston, MA 65,000 1 8.1 125 2.3
August ...... Needham, MA 261,000 1 26.0 100 5.6
November .... Washington, D.C. 225,000 1 43.4 193 7.5
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Total sales 551,000 4 $ 77.8 -- $ 15.6
======= = ======= =======
Total, excluding land 551,000 3 $ 77.5 141 $ 15.4
======= = ======= =======
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<FN>
(1) The 1999 Wellsford/Whitehall acquisitions described above were funded
with proceeds from first mortgage financing on five of the properties
and seller financing in the form of a second mortgage on one of the
properties of $43,401,000 and additional capital contributions by the
Company and Whitehall.
(2) Sale of vacant land.
</FN>
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1998 ACTIVITY:
Purchases:
Gross
Leasable Cost per
Square Number of Square
Month Type Location Feet Properties Cost (1) Foot
----- ---- -------- ---- ---------- -------- ----
<S> <C> <C> <C> <C> <C> <C>
February .... Office Boston, MA 65,000 1 $ 5.5 $ 85
February .... Land Somerset, NJ 19 acres 1 2.0 --
March ....... Office Somerset, NJ 82,000 1 5.4 66
May ......... Office Boston, MA 977,000 13 148.7 (2) 152
May ......... Warehouse Needham, MA 470,000 2 28.4 60
June ........ Office Andover, MA 63,000 1 7.4 117
June ........ Office Basking Ridge, NJ 104,000 2 15.0 144
September ... Office Franklin Township, NJ 199,000 2 22.8 115
November .... Office Columbia, MD 38,000 1 2.6 68
December .... Office Ridgefield Park, NJ 147,000 1 19.3 131
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Total purchases 2,145,000 25 $ 257.1 --
========= == ========
Total, excluding land 2,145,000 24 $ 255.1 119
========= == ========
Sale:
Sales Price
Gross Leasable per
Square Number of Square
Month Location Feet Properties Sales Price Foot Gain
----- -------- ---- ---------- ----------- ---- ----
<S> <C> <C> <C> <C> <C> <C>
May ......... Wayne, NJ 69,000 1 $ 5.0 $ 72 $ 2.9
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<FN>
(1) The 1998 Wellsford/Whitehall acquisitions described above, other than
the May Boston transaction, were funded primarily by capital
contributions from the Company and Whitehall, and by draws on the
Wellsford/Whitehall Bank Facility with Fleet National Bank as agent
for itself and several other financial institutions
("Wellsford/Whitehall Bank Facility").
(2) The Boston portfolio of 13 office buildings was financed with (i) the
assumption of $68,300,000 of mortgage debt, (ii) a $35,800,000 draw on
the Wellsford/Whitehall Bank Facility, (iii) the issuance of
$19,000,000 of Wellsford/Whitehall 6% convertible preferred units to
the sellers, (iv) $18,000,000 of capital contributions by Whitehall
and the Company and (v) the issuance of $7,600,000 of
Wellsford/Whitehall common units.
</FN>
1997 ACTIVITY:
Purchases (1):
Gross
Leasable Cost per
Square Number of Square
Month Type Location Feet Properties Cost (2) Foot
----- ---- -------- ---- ---------- -------- ----
<S> <C> <C> <C> <C> <C> <C>
September Office Somerset, NJ 181,000 1 $ 18.1 $ 100
December Office Berkeley Hts, NJ 297,000 2 29.1 98
December Industrial Parsippany, NJ 244,000 1 7.1 29
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Total purchases 722,000 4 $ 54.3 75
======= = =========
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<FN>
(1) Exclusive of properties contributed by the Company and Whitehall upon
formation of the joint venture.
(2) The Wellsford/Whitehall transactions described above were funded
primarily by capital contributions from the Company and Whitehall, the
assumption of $48,000,000 in mortgage debt which encumbered certain of
the properties contributed by Whitehall and the proceeds of a term
loan agreement (the "Wellsford/Whitehall Bridge Loan") by the Company
to Wellsford/Whitehall.
</FN>
</TABLE>
In July 1998, Wellsford/Whitehall modified the Wellsford/Whitehall Bank
Facility. Under the new terms, $300,000,000 represents a senior secured credit
facility bearing interest at LIBOR + 1.65% and $75,000,000 represents a secured
mezzanine facility bearing interest at LIBOR + 3.20%. Both facilities mature on
December 15, 2000 and are extendable for one year by Wellsford/Whitehall. As of
December 31, 1999 and 1998, approximately $238,700,000 and $276,200,000,
respectively, was outstanding under the Wellsford/Whitehall Bank Facility
(approximately $177,300,000 and $207,300,000, respectively, of which was under
the senior facility). At December 31, 1999, Wellsford/Whitehall expected to
borrow an additional $8,000,000 for tenant improvements and leasing commissions
through March 31, 2000, when the ability to draw on this facility expires under
the current terms of the Wellsford/Whitehall Bank Facility. The
Wellsford/Whitehall Bank Facility contains certain financial covenants including
limitations on distributions to members.
The Company is entitled to receive incentive compensation payable out of
distributions made by Wellsford/Whitehall (the "Promote") after return of
capital and minimum annual returns of at least 15% to 17.5% on such capital
balances to the Company and Whitehall (as defined in the Wellsford/Whitehall
Operating Agreement
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(the "Operating Agreement")). Pursuant to the Operating Agreement, the Company
is required to distribute to officers and employees of Wellsford/Whitehall and
the Company, 50% or, in some cases, 55% of the Promote it receives. To date, the
Company has not earned or received any distribution of the Promote and there can
be no assurance that such Promote will be earned.
In June 1999, the capital commitment requirements of Wellsford/Whitehall were
modified from an aggregate of $150,000,000 ($75,000,000 by each partner) to an
aggregate of $250,000,000. The Company's total portion is $85,000,000 of which
$72,769,000 was contributed as of December 31, 1999 and Whitehall's total
portion is $165,000,000 of which $101,604,000 was contributed as of December 31,
1999. These commitments expire December 31, 2000.
In connection with the formation of Wellsford/Whitehall, the Company issued
warrants (the "Whitehall Warrants") to Whitehall to purchase 4,132,230 shares of
the Company's common stock at an exercise price of $12.10 per share. The
Whitehall Warrants are exercisable until August 28, 2002. The exercise price for
the Whitehall Warrants is payable in cash or membership units in
Wellsford/Whitehall. As part of the new capital commitment from Whitehall in
1999, the Company issued to Whitehall additional warrants to purchase an
additional 123,967 shares of the Company's common stock exercisable at $12.10
per share, payable in cash or in exchange for membership units of
Wellsford/Whitehall, held by Whitehall based upon Wellsford/Whitehall's value as
defined. These additional warrants are exercisable for five years and expire on
May 28, 2004. Whitehall may exchange an additional $25,000,000 of the membership
units it owns in Wellsford/Whitehall for shares of the Company's common stock or
cash at the Company's sole discretion, based upon the price paid for such
membership units and the current market value of the Company's common stock. As
of December 31, 1999, no units have been converted.
The Company has agreed with Whitehall to conduct its business and activities
relating to office properties (but not other types of commercial properties)
located in North America solely through its interest in Wellsford/Whitehall
except, in certain circumstances, where Wellsford/Whitehall has declined the
investment opportunity.
DEBT AND EQUITY ACTIVITIES - WELLSFORD CAPITAL
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DEBT INVESTMENTS
The Company makes loans that constitute, or will invest in, real estate related
senior, junior or otherwise subordinated debt instruments, which may be
unsecured or secured by liens on real estate, interests therein or the economic
benefits thereof, and which have the potential for high yields or returns more
characteristic of equity ownership. These investments may include debt that is
acquired at a discount, mezzanine financing, commercial mortgage-backed
securities, secured and unsecured lines of credit, distressed loans and loans
previously made by foreign and other financial institutions. The Company
believes that there are opportunities to acquire real estate debt, especially in
the low or below investment grade tranches, at significant returns as a result
of inefficiencies in pricing, while utilizing management's real estate expertise
to analyze the underlying properties and thereby effectively minimizing risk.
At December 31, 1999, the Company had approximately $65,000,000 of debt related
investments, including $37,300,000 of direct debt investments which bore
interest at an average yield of 11.31% and had an average remaining term to
maturity of 4.8 years and $27,700,000 in a company which was organized to invest
in debt instruments. Following is information regarding these investments.
277 PARK
In April 1997, the Company and Fleet National Bank originated an $80,000,000
loan (the "277 Park Loan") to entities which own substantially all of the equity
interests (the "Equity Interests") in the entity which owns a 1,750,000 square
foot office building located in New York City (the "277 Park Property"). The
Company has advanced $25,000,000 pursuant to the 277 Park Loan. The 277 Park
Loan is secured primarily by a pledge of the Equity Interests owned by the
borrowers. The 277 Park Loan is subordinated to a 10-year $345,000,000
(amortized balance of $332,580,000 at December 31, 1999) first mortgage loan
(the "REMIC Loan") on the 277 Park Property.
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The 277 Park Loan bears interest at the rate of 12.00% per annum for the first
nine years of its term and at a floating annual rate during the tenth year equal
to LIBOR + 5.15% or the Fleet National Bank base rate plus 5.15%, as elected by
the borrowers. The principal amount of the 277 Park Loan and all accrued
interest will be payable in May 2007; the REMIC Loan is also due in May 2007.
The Company earned approximately $3,042,000, $3,042,000 and $2,000,000 per year
in interest income, or 10.1%, 11.7% and 22.1% of its total non-joint venture
revenues from the 277 Park Loan during 1999, 1998 and 1997, respectively.
PATRIOT
In September 1999, the Company and Fleet National Bank originated a $10,000,000
second mortgage. The Company has advanced $5,000,000 (its 50% share) pursuant to
the second mortgage. The second mortgage is subordinate to a $75,000,000 first
mortgage with Fleet National Bank. The loan bears interest at LIBOR + 4.75% with
payments of interest only through August 2001 and principal and interest based
on a 25-year amortization through the loan's maturity in July 2002 (the "Patriot
Loan"). The Patriot Loan is secured by a fee interest in a 608,000 square foot
mixed-use property in Boston, Massachusetts.
THE ABBEY COMPANY
In August 1997, the Company and Morgan Guaranty Trust Company of New York
("MGT") originated a $70,000,000 credit facility secured by first mortgages (the
"Abbey Credit Facility") to affiliates of The Abbey Company, Inc. ("Abbey"). In
May 1998, the Company and MGT expanded the Abbey Credit Facility to
$120,000,000. In December 1998, Abbey repaid $20,000,000, thereby reducing the
total available balance to $100,000,000. In September 1999, an additional
$83,500,000 was repaid, thereby reducing the total available balance to
$16,500,000. The Abbey Credit Facility will be made available to Abbey until
September 2000. Advances under the facility can be made for up to 65% of the
value of the borrowing base collateral which consisted of first mortgage loans
on three properties (one each of office, industrial and retail), all cross
collateralized, totaling approximately 250,000 square feet at December 31, 1999.
The Company's portion of the outstanding balance is approximately $4,300,000 and
$46,000,000 at December 31, 1999 and 1998, respectively. Under the terms of its
participation agreement with MGT, the Company will fund a 50% junior
participation on all advances under the Abbey Credit Facility. The Company is
entitled to receive interest on its advances under the Abbey Credit Facility at
LIBOR + 4.00%. The Company earned approximately $2,941,000, $3,920,000 and
$827,000, or 9.8%, 15.1% and 9.1% of its total non-joint venture revenues from
the Abbey Credit Facility during 1999, 1998 and 1997, respectively.
SAFEGUARD
In December 1998, the Company and MGT originated a $90,000,000 credit facility
secured by first mortgages (the "Safeguard Credit Facility") to Safeguard
Capital Fund, L.P. ("Safeguard"). The Safeguard Credit Facility will be made
available to Safeguard until April 2001. Advances under the facility can be made
for up to 75% of the value of the borrowing base collateral which consists of
nine self-storage properties, all cross-collateralized, totaling approximately
608,000 square feet at December 31, 1999. Under the terms of its participation
agreement with MGT, the Company will fund a 50% junior participation on all
advances under the Safeguard Credit Facility. The Company is entitled to receive
interest on its advances under the Safeguard Credit Facility at LIBOR + 4.00%.
Approximately $5,900,000 had been advanced by the Company under the Safeguard
Credit Facility at December 31, 1998, with additional advances made of
approximately $2,200,000 through March 1999, at which time, the loan with a
balance of $8,100,000 was contributed to the Company's joint venture investment,
Belford Capital Holdings, L.L.C. ("Belford Capital"). This venture also assumed
the first $25,000,000 of the Company's commitment to fund additional advances
under the Safeguard Credit Facility (including amounts advanced through December
31, 1999). The Company retained the remaining $20,000,000 commitment, of which
$2,900,000 was advanced to Safeguard in September 1999 and was outstanding at
December 31, 1999.
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DEBARTOLO
In July 1998, the Company, Bank One, N.A. and several other financial
institutions originated a $175,000,000 loan, in which the Company had an
$18,000,000 participation (the "DeBartolo Loan"), to entities owned by Simon
DeBartolo Group, L.P. The DeBartolo Loan is secured by partnership units in
Simon DeBartolo Group, L.P., the operating partnership of a real estate
investment trust which owns mall space nationwide. The DeBartolo Loan bears
interest at 8.547%, is payable quarterly, pays principal based on a 20-year
amortization schedule and is due in July 2008. In March 1999, the amortized loan
balance of approximately $17,600,000 was contributed to Belford Capital.
WOODLANDS
In December 1997, the Company, Fleet National Bank, Morgan Stanley Senior
Funding, Inc. and certain other lenders made available to the owners and
developers of a 25,000 acre master-planned residential community located north
of Houston (the "Woodlands Property"), loans in the aggregate principal amount
of $369,000,000 (the "Woodlands Loan"). The Woodlands Loan consisted of a
revolving credit loan in the principal amount of $179,000,000 (the "Revolving
Loan"), a secured term loan in the principal amount of $130,000,000 (the
"Secured Loan"), and a second secured term loan in the principal amount of
$60,000,000 (the "Second Secured Loan"). The Company advanced $15,000,000
pursuant to the Second Secured Loan. The Second Secured Loan was subordinate to
the Revolving Loan and the Secured Loan and bore interest equal to LIBOR +
4.40%. The principal amount of the Woodlands Loan was repaid in full prior to
December 31, 1999. The Company earned approximately $1,295,000 and $1,517,000,
or 4.3% and 5.8% of its total non-joint venture revenues from the Woodlands
Second Secured Loan during 1999 and 1998, respectively.
REIT BRIDGE LOAN
In August 1998, the Company, Deutsche Bank, N.A. and certain other lenders
originated a $100,000,000 unsecured loan in which the Company had a $15,000,000
participation (the "REIT Bridge Loan") to a publicly traded real estate
investment trust which owns 22 regional malls, eight multifamily apartment
properties and five office properties nationwide. This loan bore interest at
9.875% and was due in February 1999, with two three-month extensions available
to the borrower. In January 1999, the REIT Bridge Loan was modified to extend
the maturity date to August 1999 and increase the interest rate to 12.00%. The
borrower paid a 1.50% loan fee at origination and a 1.00% loan fee upon
modification. This loan was repaid in full in July 1999.
BROOMFIELD
In January 1999, the Company acquired a parcel of land in Broomfield, Colorado
for approximately $7,200,000 pursuant to an outstanding standby commitment
issued in 1998. In connection with this transaction, the Company collected
approximately $400,000 of fees in 1998. In July 1999, the Company sold this land
for $7,200,000 to a third party ("Buyer") and simultaneously collected an
additional $1,100,000 in fees. The Company then purchased $11,740,000 of
tax-exempt notes, bearing interest at 6.25% and due in December 1999. These
notes were issued by a quasi-governmental agency partially controlled by the
Buyer and were guaranteed by a AA rated bank. The notes were repaid in full in
December 1999. The Company earned approximately $1,555,000 and $401,000, or 5.2%
and 1.5% of its total non-joint venture revenues, on the Broomfield transaction
during 1999 and 1998, respectively.
BELFORD CAPITAL
The Company contributed approximately $24,200,000 and $4,900,000 in 1999 and
1998, respectively, to a 51% owned joint venture special purpose finance company
("SPFC"), Belford Capital, with The Liberty Hampshire Company, L.L.C. ("Liberty
Hampshire") owning 10% and another entity owning the remaining 39%. The 1999
contribution was comprised of two of the Company's debt investments, the
$17,600,000 DeBartolo Loan and the $8,100,000 outstanding balance of the
Safeguard Credit Facility, net of $1,500,000 of cash received back from Belford
Capital. The other partners contributed their respective shares of their capital
contributions in cash. Belford Capital also assumed the first $25,000,000 of the
Company's commitment to fund the Safeguard Credit Facility (including amounts
advanced to date).
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VENTURE CAPITAL INVESTMENTS
At December 31, 1999, the Company had venture capital investments of $7,000,000
in a real estate e-commerce company and other real estate-related ventures.
Following is information regarding these investments.
LIBERTY HAMPSHIRE
In July and August 1998, the Company invested a total of approximately
$2,100,000 for a 4.20% interest in Liberty Hampshire, which structures,
establishes and provides management and services for SPFCs formed to invest in
financial assets.
REIS REPORTS, INC.
Belford Capital has invested $6,500,000 in a real estate market research
internet company, Reis Reports, Inc. ("Reis"), a leading provider of real estate
market information to institutional investors, at December 31, 1999. The
Company's share of this investment was approximately $3,321,000 at December 31,
1999. The primary shareholder of Reis is the brother of Mr. Lynford, Chairman of
the Company; Mr. Lynford recused himself from the Reis investment decisions.
CREAMER VITALE WELLSFORD/CLAIRBORNE INVESTORS
In January 1998, the Company formed Creamer Vitale Wellsford, L.L.C. ("Creamer
Vitale Wellsford") in which it has a 49% interest and acquired the same interest
in a related real estate advisory and consulting firm.
Creamer Vitale Wellsford, together with Prudential Real Estate Investors
("PREI"), an affiliate of Prudential Life Insurance Company, have established
the Clairborne Investors Mortgage Investment Program ("Clairborne") to make
opportunistic investments and to provide liquidity to lenders and participants
in mortgage loan transactions. The parties have agreed to contribute up to
$150,000,000 to fund acquisitions approved by the parties, of which PREI will
fund 90% and a subsidiary of the Company will fund 10%. Creamer Vitale Wellsford
will originate, co-invest, and manage the investments of the program.
The Company's original investment in these entities was $1,250,000 of cash and
148,000 five-year warrants to purchase the Company's common shares at $15.175
per share, valued at approximately $750,000 at that time. In November 1998,
Clairborne acquired an approximate $17,000,000 participation in a $56,000,000
mortgage, bearing interest at LIBOR + 1.75% and due in 3.5 years, at a
significant discount to face value. The Company funded approximately $1,400,000
of the cost of this participation, which was prepaid entirely at the face amount
during 1999 by the borrower.
OTHER INVESTMENTS
VALUE PROPERTY TRUST
In February 1998, the Company completed the merger with Value Property Trust
("VLP") (the "VLP Merger") for total consideration of approximately
$169,000,000, which was accounted for as a purchase. Thirteen of the twenty VLP
properties, which were under contract to an affiliate of Whitehall, were
subsequently sold for an aggregate of approximately $64,000,000. The Company
retained seven of the VLP properties with an allocated value upon purchase of
approximately $38,300,000, containing an aggregate of approximately 597,000
square feet located primarily in the northeastern United States and California.
VLP had cash of $60,800,000 and other net assets of $5,900,000 at the close of
the transaction.
PROPERTY DEVELOPMENT AND LAND OPERATIONS - WELLSFORD DEVELOPMENT
- ----------------------------------------------------------------
The Company engages in selective development activities as opportunities arise
and when justified by expected returns. The Company believes that by pursuing
selective development activities, it can achieve returns which are greater than
returns which could be achieved by acquiring stabilized properties. Certain
development activities may be conducted in joint ventures with local developers
who may bear the substantial portion of the economic risks
-9-
<PAGE>
associated with the construction, development and initial rent-up of properties.
As part of its strategy, the Company may seek to issue tax-exempt bond financing
authorized by local governmental authorities which generally bears interest at
rates substantially below rates available from conventional financing.
PALOMINO PARK
The Company owns an approximate 80% interest in Phases I, II, III, IV and V of a
1,800-unit class A multifamily development ("Palomino Park") in a suburb of
Denver, Colorado. EQR owns the remaining 20% interest. The Company has a related
$14,755,000 tax exempt mortgage note payable which requires interest only
payments at a variable rate (average rate for 1999 was approximately 3.4%) until
it matures in December 2035 (the "Palomino Park Bonds"). The tax exempt mortgage
note payable is security for tax-exempt bonds, which are backed by a letter of
credit from a AAA rated financial institution. The Company and an affiliate of
EQR have guaranteed the reimbursement of the financial institution in the event
that the letter of credit is drawn upon (the latter guarantee being the "EQR
Enhancement").
In December 1997, Phase I, known as Blue Ridge, was completed at a cost of
approximately $41,500,000. At that time, the Company obtained a $34,500,000
permanent loan (the "Blue Ridge Mortgage") secured by a first mortgage on Blue
Ridge. The Blue Ridge Mortgage matures in January 2008 and bears interest at a
fixed rate of 6.92%. Principal payments are based on a 30-year amortization
schedule.
In November 1998, Phase II, known as Red Canyon, was completed at a cost of
approximately $33,900,000. At that time, the Company acquired the Red Canyon
improvements and the related construction loan was repaid with the proceeds of a
$27,000,000 permanent loan (the "Red Canyon Mortgage") secured by a first
mortgage on Red Canyon. The Red Canyon Mortgage matures in December 2008 and
bears interest at a fixed rate of 6.68%. Principal payments are based on a
30-year amortization schedule.
The estimated total costs of the remaining three multifamily development phases
at Palomino Park and related infrastructure costs at completion of these phases,
including the Company's gross investment, which is included in construction in
progress on the Company's consolidated financial statements, of approximately
$30,748,000 at December 31, 1999, are as follows:
<TABLE>
<CAPTION>
ESTIMATED ESTIMATED
TOTAL COMPLETION
NAME UNITS COST DATE
---- ----- ---- ----
<S> <C> <C> <C>
Phase III ("Silver Mesa") .... 264 $ 40,000,000 July 2000
Phase IV ("Green River") ..... 424 55,000,000 Fourth Quarter 2001
Phase V ("Gold Peak") ........ 352 42,000,000 Fourth Quarter 2002
----- -------------
1,040 $ 137,000,000
===== =============
</TABLE>
The third and fourth phases of this project are being developed pursuant to
fixed-price contracts. The Company is committed to purchase 100% of the
improvements upon completion and the achievement of certain occupancy levels of
these phases. In addition, the Company is obligated to fund the first 20% of
development costs on these phases as they are incurred.
In May 1997, the Company acquired the land for Silver Mesa for approximately
$2,100,000. In May 1998, the Company acquired the land for Green River for
approximately $3,200,000. In May 1999, the Company acquired the land for Gold
Peak for approximately $2,600,000. Construction in progress related to these
three phases, including the cost of land, was approximately $30,748,000 at
December 31, 1999.
SONTERRA
From the time of the Spin-off, the Company held a $17,800,000 mortgage on, and
option to purchase, a 344-unit class A residential apartment complex ("Sonterra
at Williams Centre") located in Tucson, Arizona.
In January 1998, the Company exercised its option and acquired Sonterra at
Williams Centre for approximately $20,500,000, including satisfaction of the
mortgage. In February 1998, the Company closed on $16,400,000 of first
-10-
<PAGE>
mortgage financing (the "Sonterra Mortgage") on this property, bearing interest
at 6.87% and maturing in March 2008. Principal payments are based on a 30-year
amortization schedule.
SEGMENT FINANCIAL INFORMATION
See Note 10 to the Company's consolidated financial statements for additional
information regarding the Company's industry segments.
FUTURE INVESTMENTS
The Company may in the future make equity investments in entities owned and/or
operated by unaffiliated parties and which engage in real estate-related
businesses and activities or businesses that service the real estate industry.
Some of the entities in which the Company may invest may be start-up companies
or companies in need of additional capital. The Company may also manage and
lease properties owned by it or in which it has an equity or debt investment.
-11-
<PAGE>
ITEM 2. PROPERTIES.
The following property information is presented by SBU.
WELLSFORD/WHITEHALL
Wellsford/Whitehall owned and operated 41 office properties, totaling
approximately 4,920,000 square feet at December 31, 1999. The following table
sets forth certain information related to these properties at December 31, 1999:
<TABLE>
<CAPTION>
LEASABLE
BUILDING YEAR NUMBER
SQUARE CONSTRUCTED/ OF
PROPERTY TYPE LOCATION FEET REHABILITATED TENANTS OCCUPANCY
-------- ---- -------- ---- ------------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
OPERATING PROPERTIES
1800 Valley Road ............ Office Wayne, NJ 56,000 1980 1 100.0%
Greenbrook Corporate Center . Office Fairfield, NJ 201,000 1987 12 96.6%
Chatham Executive Center .... Office Chatham, NJ 63,000 1972/1997 6 100.0%
300 Atrium Drive ............ Office Somerset, NJ 150,000 1983 4 82.4%
400 Atrium Drive ............ Office Somerset, NJ 355,000 1985 2 99.1%
500 Atrium Drive ............ Office Somerset, NJ 169,000 1984 3 94.2%
700 Atrium Drive ............ Office Somerset, NJ 181,000 1985 1 100.0%
Mountain Heights Center #1 .. Office Berkeley Hts, NJ 183,000 1986 13 99.7%
Garden State Exhibit Center . Flex Somerset, NJ 82,000 1968/1989 N/A N/A
150 Wells Avenue ............ Office Newton, MA 11,000 1987 1 100.0%
72 River Park ............... Office Needham, MA 22,000 1983 4 100.0%
70 Wells Avenue ............. Office Newton, MA 29,000 1979 2 100.0%
160 Wells Avenue ............ Office Newton, MA 19,000 1970/1997 1 100.0%
2331 Congress Street ........ Office Portland, ME 24,000 1980 3 84.4%
60/74 Turner Street ......... Office/Land Waltham, MA 16,000 1970 1 100.0%
100 Wells Avenue ............ Office Newton, MA 21,000 1978 1 100.0%
333 Elm Street .............. Office Dedham, MA 48,000 1983 7 96.3%
Dedham Place ................ Office Dedham, MA 160,000 1987 8 97.2%
BASE ESCALATED MARKET
RENT PER RENT PER RENT PER
PRINCIPAL LEASE SQUARE SQUARE SQUARE
PROPERTY TENANTS EXPIRATION FOOT FOOT FOOT* ENCUMBRANCES
-------- ------- ---------- ---- ---- ----- ------------
<S> <C> <C> <C> <C> <C> <C>
OPERATING PROPERTIES
1800 Valley Road ............ Rickitt & Coleman December 2003 $ 12.10 $ 14.41 $ 13.00 (A)
Greenbrook Corporate Center . Information Resources December 2003 20.14 22.18 22.50 (A)
Chatham Executive Center .... Quadrant July 2009 26.54 28.16 30.00 (A)
300 Atrium Drive ............ AT&T March 2004 17.93 19.82 21.50 (A)
400 Atrium Drive ............ Merrill Lynch December 2001 & 2003 17.39 19.90 21.50 (A)
500 Atrium Drive ............ AT&T December 2003 18.78 22.88 21.50 (A)
700 Atrium Drive ............ Merck June 2005 15.12 18.39 21.50 (A)
Mountain Heights Center #1 .. The Santa Cruz September 2006 20.54 22.57 28.50 (A)
Garden State Exhibit Center . N/A N/A 28.39 28.39 28.39 (A)
150 Wells Avenue ............ Linx Communications September 2001 19.50 19.99 22.50 (A)
72 River Park ............... JH Albert, Ins. November 2004 20.32 20.99 25.50 (A)
70 Wells Avenue ............. Renaissance Worldwide, Inc. November 2002 22.14 23.74 24.50 (A)
160 Wells Avenue ............ New England Cable December 2013 22.00 23.76 24.50 (A)
2331 Congress Street ........ Clark Associates April 2002 12.64 13.37 15.25 (A)
60/74 Turner Street ......... Brandeis University June 2002 7.00 7.00 9.00 (A)
100 Wells Avenue ............ The Larkin Group December 2002 21.25 22.53 24.50 (A)
333 Elm Street .............. Lojack May 2001 18.81 19.21 27.00 (A)(B)
Dedham Place ................ Harvard Pilgrim Healthcare September 2001 24.85 30.23 28.75 (A)(B)
-12-
<PAGE>
LEASABLE
BUILDING YEAR NUMBER
SQUARE CONSTRUCTED/ OF
PROPERTY TYPE LOCATION FEET REHABILITATED TENANTS OCCUPANCY
-------- ---- -------- ---- ------------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
128 Technology Center ....... Office Waltham, MA 218,000 1986 2 100.0%
201 University Avenue ....... Office Westwood, MA 82,000 1982 (E) (E)
7/57 Wells Avenue ........... Office Newton, MA 88,000 1982 15 74.1%
75/85/95 Wells Avenue ....... Office Newton, MA 242,000 1976/1986 12 99.9%
Shattuck Office Center ...... Office Andover, MA 63,000 1985 11 100.0%
180/188 Mt Airy Road ........ Office Basking Ridge, NJ 104,000 1980 12 98.8%
377/379 Campus Drive ........ Office Franklin Twp, NJ 199,000 1984 1 100.0%
105 Challenger Road ......... Office Ridgefield Park, NJ 147,000 1992 3 100.0%
6301 Stevens Forest ......... Office Columbia, MD 38,000 1980 2 100.0%
150 Mt. Bethel Road ......... Office/Flex Warren, NJ 129,000 1981 6 64.3%
One Mall North .............. Office Columbia, MD 97,000 1978/1998 40 95.6%
McDonough Crossroads ........ Office Owings Mills, MD 32,000 1988 5 100.0%
Oakland Ridge ............... Flex Columbia, MD 144,000 1972 9 66.6%
Airport Park ................ Office Hanover Twp, NJ 96,000 1979 17 98.5%
--------- --- ----
SUBTOTAL--OPERATING PROPERTIES ................................... 3,469,000 205 92.3%
--------- --- ----
PROPERTIES UNDER RENOVATION
Pointview Corporate Center .. Office Wayne, NJ 515,000 1976/1998 (F) --
Morris Technology Center .... Office Parsippany, NJ 244,000 1963/1977/1998 (F) --
Mountain Heights Center #2 .. Office Berkeley Hts, NJ 115,000 1968/1998 (G) (G)
117 Kendrick Street ......... Office Needham, MA 209,000 1963 (F) --
600 Atrium Drive ............ Land Somerset, NJ N/A N/A (H) --
Airport Park ................ Land Hanover Twp, NJ N/A N/A (H) --
401 North Washington ........ Office Rockville, MD 236,000 1972 1 26.2%
79 Milk Street .............. Office Boston, MA 64,000 1920/1998 28 83.7%
24 Federal Street ........... Office Boston, MA 68,000 1921/1997 (F) --
--------- --- ----
SUBTOTAL-PROPERTIES UNDER RENOVATION ............................. 1,451,000 29 8.1%
--------- --- ----
1999 TOTAL/AVERAGE ............................................... 4,920,000 234 92.3%
========= === ====
(I)
BASE ESCALATED MARKET
RENT PER RENT PER RENT PER
PRINCIPAL LEASE SQUARE SQUARE SQUARE
PROPERTY TENANTS EXPIRATION FOOT FOOT FOOT* ENCUMBRANCES
-------- ------- ---------- ---- ---- ----- ------------
<S> <C> <C> <C> <C> <C> <C>
128 Technology Center ....... Parametric Technology October 2001 21.13 23.75 31.25 (A)(B)
201 University Avenue ....... (E) (E) (E) (E) (E) (A)(B)
7/57 Wells Avenue ........... GEO Centers November 2004 28.89 28.94 30.00 (A)(B)
75/85/95 Wells Avenue ....... Marcam April 2005 24.20 24.26 31.00 (A)(B)
Shattuck Office Center ...... Codman Research Group March 2000 17.64 19.14 22.50 (A)
180/188 Mt Airy Road ........ Lucent Technology October 2004 22.90 24.64 26.50 (A)
377/379 Campus Drive ........ AT&T August 2003 11.00 11.00 13.50 (A)
105 Challenger Road ......... Samsung America, Inc. December 2003 21.79 23.93 27.50 (A)
6301 Stevens Forest ......... SecurityLink from Ameritech July 2005 14.59 14.78 16.50 (A)
150 Mt. Bethel Road ......... TMS Mortgage June 2003 11.71 13.69 15.00 (A)(C)
One Mall North .............. Alco Pharmaceuticals May 2000 17.61 17.99 21.00 (A)
McDonough Crossroads ........ Giancarlo Versacchi June 2002 15.75 16.60 19.00 (A)(C)
Oakland Ridge ............... Nightmare Graphics, Inc. December 2001 4.41 4.68 9.50 (D)
Airport Park ................ Gemini Consulting January 2006 19.92 21.56 25.00 (A)(C)
--------- -------- --------
SUBTOTAL--OPERATING PROPERTIES ................................... 18.73 20.56 23.26
--------- -------- --------
PROPERTIES UNDER RENOVATION
Pointview Corporate Center .. -- -- -- -- -- (A)
Morris Technology Center .... -- -- -- -- -- (A)
Mountain Heights Center #2 .. (G) (G) (G) (G) -- (A)
117 Kendrick Street ......... -- -- -- -- -- (A)
600 Atrium Drive ............ -- -- -- -- -- (A)
Airport Park ................ -- -- -- -- -- (D)
401 North Washington ........ GE Information Services April 2004 7.27 7.47 25.25 (D)
79 Milk Street .............. J.M. Forbes January 2002 21.46 22.59 40.75 (A)(C)
24 Federal Street ........... -- -- -- -- -- (A)(C)
--------- -------- --------
SUBTOTAL-PROPERTIES UNDER RENOVATION ............................. N/A N/A N/A
--------- -------- --------
1999 TOTAL/AVERAGE ............................................... $ 18.73 $ 20.56 $ 23.26
========= ======== ========
(I) (I) (I)
- ----------
<FN>
(A) Encumbered by the Wellsford/Whitehall Bank Facility.
(B) Encumbered by the Nomura Mortgage.
(C) Encumbered by other mortgages.
(D) Unencumbered.
(E) Lease with RCN-Becocom L.L.C. commenced January 1, 2000 for 100% of the
leasable building square feet with a triple net rent of $15.00 per square
foot. Lease term expires December 2009.
(F) Building under renovation.
(G) Subsequent to December 31, 1999, lease was signed with Compaq for 100% of
the leasable building square feet, with a base rent of $28.95 per square
foot. Tenant to take possession of space in stages throughout 2000. Lease
term expires August 2010.
(H) Land is held for development.
(I) Properties under renovation not included in 1999 Total/Average.
* Company's internal judgement as to specific property market rent per square
foot as of December 31, 1999.
</FN>
</TABLE>
-13-
<PAGE>
The following table sets forth historical Wellsford/Whitehall portfolio
information by year:
<TABLE>
<CAPTION>
TOTAL BUILDING LEASABLE BUILDING
DECEMBER 31, SQUARE FEET SQUARE FEET OCCUPANCY
------------ ----------- ----------- ---------
<S> <C> <C> <C>
1999 ..... 4,920,000 3,469,000 92%
1998 ..... 4,605,000 3,219,000 92%
1997 ..... 2,412,000 1,330,000 89%
</TABLE>
The average lease term of the tenants' leases is approximately 8.6 years. Leases
typically provide for step-ups in base rent periodically over the term of a
lease and pass throughs to tenants of their pro rata share of increases in
certain expenses (real estate taxes and operating expenses) over a base year.
Leases may also provide for improvement allowances for all or a portion of the
tenant's initial construction of its premises. The following table sets forth as
of December 31, 1999 lease expirations for each of the next ten years, assuming
tenants do not exercise any renewal options:
<TABLE>
<CAPTION>
ANNUAL BASE RENT
OF EXPIRING LEASES
LEASABLE PERCENTAGE ------------------
NUMBER OF SQUARE FEET OF TOTAL PER
EXPIRING OF EXPIRING LEASED SQUARE
YEAR LEASES LEASES SQUARE FEET TOTAL FOOT
---- ------ ------ ----------- ----- ----
<S> <C> <C> <C> <C> <C>
2000........ 62 211,055 6% $ 3,583,720 $ 16.98
2001........ 58 785,474 23% 15,185,385 19.33
2002........ 28 205,820 6% 4,039,558 19.62
2003........ 51 928,401 28% 17,692,938 19.05
2004........ 18 294,474 9% 5,766,837 19.58
2005........ 14 456,367 14% 10,030,521 21.98
2006........ 12 183,307 5% 4,269,990 23.29
2007........ 6 39,868 1% 988,924 24.80
2008........ 5 34,938 1% 935,528 26.79
2009........ 3 60,167 2% 1,600,814 26.61
</TABLE>
No tenant in the Wellsford/Whitehall portfolio accounts for more than 7% of 1999
rental revenues.
-14-
<PAGE>
WELLSFORD CAPITAL
Wellsford Capital owned the following commercial properties at December 31,
1999:
<TABLE>
LEASABLE
BUILDING YEAR NUMBER
SQUARE CONSTRUCTED/ OF
PROPERTY TYPE LOCATION FEET REHABILITATED TENANTS OCCUPANCY
-------- ---- -------- ---- ------------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Hoes Lane ........ Office Piscataway, NJ 37,632 1987 12 100%
Bradford Plaza ... Retail West Chester, PA 123,885 1990 16 82%
Chestnut Street .. Office Philadelphia, PA 50,053 1857/1990 7 91%
Keewaydin Drive .. Industrial Salem, NH 125,230 1973 3 49%
Turnpike Street .. Industrial Canton, MA 43,160 1980 2 100%
Two Executive .... Office Cherry Hill, NJ 102,310 1970 11 60%
Bay City Holdings Office Santa Monica, CA 114,375 1985 23 91%
------- --
1999 TOTAL/AVERAGE 596,645 74 76%
======= == ==
1998 TOTAL/AVERAGE 596,645 80%
======= ==
BASE ESCALATED MARKET
RENT PER RENT PER RENT PER
PRINCIPAL LEASE SQUARE SQUARE SQUARE
PROPERTY TENANTS EXPIRATION FOOT FOOT FOOT* ENCUMBRANCES
-------- ------- ---------- ---- ---- ----- ------------
<S> <C> <C> <C> <C> <C> <C>
Hoes Lane ........ A March 2004 $ 14.20 $ 15.70 $ 16.50 $ 1,340,000
Bradford Plaza ... B June 2011 10.80 13.00 13.00 8,400,000
Chestnut Street .. C December 2001 13.30 15.60 14.50 2,000,000
Keewaydin Drive .. D January 2004 5.70 7.50 7.25 2,420,000
Turnpike Street .. E January 2001 7.10 11.50 9.50 1,940,000
Two Executive .... F March 2007 12.10 12.30 14.50 2,300,000
Bay City Holdings G June 2010 16.10 19.10 25.00 9,600,000
-----------
1999 TOTAL/AVERAGE ........................ $ 10.70 $ 13.40 $ 13.90 $28,000,000
========= ========= ========= ===========
1998 TOTAL/AVERAGE ........................ $ 9.51 $ 11.33 $28,000,000
========= ========= ===========
- ----------
<FN>
Legend: Principal Tenants
- --------------------------
A .. Innovex-DAS, Inc. (13,645 square feet)
B .. Fleming Foods and CVS (42,616 square feet)
C .. Kittredge Donley (14,449 square feet)
D .. New Hampshire College (27,555 square feet)
E .. Techmar Communications (22,918 square feet)
F .. Computer Learning Center (20,983 square feet)
G .. Santa Monica Malibu School District (42,597 square feet)
*Company's internal judgement as to specific property market rent per square
foot as of December 31, 1999.
</FN>
</TABLE>
-15-
<PAGE>
The average lease term of the tenants' leases is approximately 6.9 years. Leases
typically provide for step-ups in base rent periodically over the term of a
lease and pass throughs to tenants of their pro rata share of increases in
certain expenses (real estate taxes and operating expenses) over a base year.
Leases may also provide for improvement allowances for all or a portion of the
tenant's initial construction of its premises. The following table, as of
December 31, 1999, details lease expirations for each of the next ten years,
assuming tenants do not exercise any renewal options:
<TABLE>
<CAPTION>
ANNUAL BASE RENT
OF EXPIRING LEASES
LEASABLE PERCENTAGE ------------------
NUMBER OF SQUARE FEET OF TOTAL PER
EXPIRING OF EXPIRING LEASED SQUARE
YEAR LEASES LEASES SQUARE FEET TOTAL FOOT
---- ------ ------ ----------- ----- ----
<S> <C> <C> <C> <C> <C>
2000........ 12 24,773 6% $ 411,042 $ 16.59
2001........ 11 69,971 16% 1,072,238 15.32
2002........ 25 112,577 25% 1,462,953 13.00
2003........ 9 43,713 10% 475,082 10.87
2004........ 5 47,275 10% 562,426 11.90
2005........ 3 20,511 5% 280,075 13.65
2006........ -- -- -- -- --
2007........ 3 37,990 8% 465,099 12.24
2008........ -- -- -- -- --
2009........ -- -- -- -- --
</TABLE>
No tenant in the Wellsford Capital portfolio accounts for more than 6.8% of 1999
rental revenues.
WELLSFORD DEVELOPMENT
The Company owned the following multifamily properties at December 31, 1999:
<TABLE>
<CAPTION>
AVERAGE RENT
PROPERTY LOCATION UNITS YEAR CONSTRUCTED OCCUPANCY PER UNIT ENCUMBRANCE
-------- -------- ----- ---------------- --------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Blue Ridge .................. Denver, CO 456 1997 86% $1,089 $33,762,792
Red Canyon .................. Denver, CO 304 1998 85% 1,235 26,683,184
Sonterra .................... Tucson, AZ 344 1995 96% 704 16,113,953
----- -----------
1999 TOTAL/AVERAGE 1,104 89% $1,001 $76,559,929
===== == ====== ===========
1998 TOTAL/AVERAGE 1,104 92% $ 984 $77,421,790
===== == ====== ===========
</TABLE>
The average lease term of the tenants' leases range from six to fourteen months.
Security deposits are generally required for all leases.
The Company is developing three additional phases at its property in Denver,
Colorado, which will include an additional 1,040 units. The Silver Mesa phase,
which consists of 264 units, is expected to be completed July 2000. Development
of the fourth phase, Green River, has begun and will include 424 units to be
completed in the fourth quarter of 2001. Development of the fifth phase, Gold
Peak, will include approximately 352 units and is expected to be completed in
the fourth quarter of 2002. Estimated total construction costs for these three
phases is approximately $137,000,000.
ITEM 3. LEGAL PROCEEDINGS.
Neither the Company nor Wellsford/Whitehall are presently defendants in any
material litigation nor, to the Company's knowledge, is any material litigation
threatened against the Company or its other equity investments other than
routine litigation arising in the ordinary course of business and which is
expected to be covered by liability insurance.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.
Not applicable.
-16-
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS.
MARKET INFORMATION
- ------------------
The Company's common shares are traded on the American Stock Exchange under the
symbol "WRP". The high and low sales prices for the common shares on the
American Stock Exchange and the dividends declared for the years ended December
31, 1999 and 1998 are as follows:
COMMON SHARES
---------------------------
1999 HIGH LOW DIVIDENDS
---- ---- --- ---------
1st Quarter.................. $10.50 $8.50 None
2nd Quarter.................. $12.25 $7.88 None
3rd Quarter.................. $10.75 $7.75 None
4th Quarter.................. $ 9.38 $7.63 None
COMMON SHARES
---------------------------
1998 HIGH LOW DIVIDENDS
---- ---- --- ---------
1st Quarter.................. $15.63 $13.25 None
2nd Quarter.................. $15.38 $13.00 None
3rd Quarter.................. $14.88 $ 9.00 None
4th Quarter.................. $10.50 $ 6.75 None
HOLDERS
- -------
The approximate number of holders of record of the common shares and Class A
common shares (collectively, "Common Shares" or " Common Stock") were 2,773 and
1, respectively, as of December 31, 1999.
DIVIDENDS
- ---------
The Company did not declare or distribute any dividends during 1999, 1998 or
1997. The Company does not plan to distribute dividends for the foreseeable
future, which will permit it to accumulate, for reinvestment, cash flow from
investments, disposition of investments and other business activities.
-17-
<PAGE>
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA.
The following table sets forth selected consolidated financial data for the
Company and should be read in conjunction with the consolidated financial
statements included elsewhere in this Form 10-K.
Prior to the Company's 1997 investments, the Company's operations consisted of
earning interest income on the Sonterra Mortgage (originated in July 1996) and
the initial phase of construction development activity with respect to Palomino
Park.
<TABLE>
<CAPTION>
SUMMARY CONSOLIDATED STATEMENT OF
OPERATIONS DATA FOR THE YEARS ENDED DECEMBER 31,
--------------- ----------------------------------------------------
1999 1998 1997 1996
(in thousands, except per share data) ---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues ............................ $ 30,170 $ 26,154 $ 9,070 $ 757
Expenses ............................ (28,981) (17,383) (3,819) --
Income from joint ventures .......... 9,622 3,523 15 --
-------- -------- -------- -------
Income before taxes ................. $ 10,811 $ 12,294 $ 5,266 $ 757
======== ======== ======== =======
Net income .......................... $ 8,861 $ 9,444 $ 3,053 $ 757
======== ======== ======== =======
Net income per common share, basic .. $ 0.43 $ 0.47 $ 0.18 $ 0.04
======== ======== ======== =======
Net income per common share, diluted $ 0.43 $ 0.46 $ 0.18 $ 0.04
======== ======== ======== =======
Cash dividends declared per common
share ............................ $ -- $ -- $ -- $ --
======== ======== ======== =======
Weighted average number of
common shares outstanding, basic .. 20,642 19,886 16,922 16,912
======== ======== ======== =======
Weighted average number of
common shares outstanding, diluted 20,657 20,379 17,348 16,912
======== ======== ======== =======
SUMMARY CONSOLIDATED STATEMENT OF
OPERATIONS DATA DECEMBER 31,
--------------- -------------------------------------------------------
1999 1998 1997 1996 1995
(in thousands) ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Real estate, at cost ....... $ 159,582 $ 150,322 $ 58,741 $ -- $ --
Accumulated depreciation ... (6,584) (2,707) -- -- --
Notes receivable ........... 37,260 124,706 105,632 17,800 --
Investment in joint ventures 114,390 80,776 44,780 -- --
Total assets ............... 366,331 384,971 249,974 44,760 18,369
Mortgage notes payable ..... 119,315 120,177 49,255 14,755 14,755
Credit facility ............ -- 17,000 7,500 -- --
Shareholders' equity ....... 229,691 231,625 181,158 30,005 3,614
</TABLE>
The earnings per share amounts conform with Statement of Financial Accounting
Standards No. 128 "Earnings per share". For further discussion of earnings per
share and the impact of Statement No. 128, see the notes to the consolidated
financial statements.
-18-
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
OVERVIEW
- --------
The following discussion should be read in conjunction with the "Selected
Consolidated Financial Data" and the Company's Consolidated Financial Statements
and Notes thereto appearing elsewhere in this Form 10-K.
RESULTS OF OPERATIONS
- ---------------------
The accompanying consolidated financial statements include the assets and
liabilities contributed to and assumed by the Company from the Trust, from the
time such assets and liabilities were acquired or incurred, respectively, by the
Trust. Such financial statements have been prepared using the historical basis
of the assets and liabilities and the historical results of operations related
to the Company's assets and liabilities.
COMPARISON OF THE YEAR ENDED DECEMBER 31, 1999 TO THE YEAR ENDED DECEMBER 31,
1998
Rental income increased by $4,747,000. This increase is primarily due to a full
year of operations during 1999 for assets acquired or put into service during
1998. The seven VLP properties were acquired in February 1998 ($833,000
increase) and Red Canyon was completed and placed into service in November 1998
($3,818,000 increase).
Interest income decreased by $593,000. This decrease is primarily the result of
loans being repaid in part or in full ($2,609,000) and from investments
contributed to Belford Capital ($356,000) offset by investments held for a
longer period during 1999 than in 1998 ($1,107,000), additional interest and fee
income from the Broomfield investment ($1,153,000) and increased income on cash
and cash equivalents ($112,000).
Property operating and maintenance expense increased by $1,241,000. This
increase is primarily due to a full year of operations during 1999 for assets
acquired or put into service during 1998.
Real estate taxes increased by $345,000. This increase is primarily due to a
full year of operations during 1999 for assets acquired or put into service
during 1998, offset by reduced taxes at certain properties during 1999.
Depreciation and amortization increased by $2,997,000. This increase is
primarily due to a full year of operations during 1999 for assets acquired or
put in service during 1998 ($1,168,000 increase), as well as increased
amortization during 1999 associated with the Company's joint venture investments
and deferred financing costs ($249,000 and $639,000 increases, respectively) and
the write-down of one of its long-lived assets by $912,000 to its estimated fair
value.
Property Management expense increased $175,000. This increase is primarily due
to a full year of operations during 1999 for assets acquired or put in service
during 1998.
Interest expense increased by $4,799,000. This increase is primarily due to debt
that was outstanding for the full year in 1999 and only a partial year during
1998 as well as higher average outstanding balances. The Sonterra at Williams
Centre debt was outstanding from February 1998 ($174,000 increase), the mortgage
on the VLP properties was secured in October 1998 ($2,025,000 increase), the
mortgage on Red Canyon was secured in November 1998 ($1,628,000 increase) and
there was a higher average outstanding balance on credit facilities ($1,283,000
increase), offset by additional interest capitalized to the Company's remaining
phases at Palomino Park ($268,000).
General and administrative expenses increased by $2,063,000. This increase is
primarily due to overhead costs, primarily rent, resulting from the increase in
the size of the Company's headquarters, salary increases related to an
-19-
<PAGE>
increased number of employees in Wellsford Capital, as well as an increase in
professional fees from costs related to transactions the Company is no longer
pursuing.
Gain on sale of investments in 1998 results from the sale of certain notes
receivable acquired in the VLP merger.
Income from joint ventures increased by $6,099,000. This increase is primarily
due to the Company's proportionate share of the increase in gains of $5,339,000
on the sale of assets from Wellsford/Whitehall, in excess of 1998 share of
gains, plus growth from the Liberty Hampshire/Belford Capital Joint Venture
investments ($2,006,000 increase) offset by a decrease in the Company's
proportionate share of Wellsford/Whitehall operating income ($968,000 decrease).
The income tax provision decreased $900,000. This decrease is primarily the
result of lower pretax income, a reduction of the valuation allowance
attributable to the utilization of available net operating loss carryforwards,
and a lower effective state and local tax rate.
COMPARISON OF THE YEAR ENDED DECEMBER 31, 1998 TO THE YEAR ENDED DECEMBER 31,
1997
Rental income increased by $11,800,000. This increase is a result of the
acquisition of properties in connection with the VLP Merger in February 1998
($4,700,000 increase), the completion of Blue Ridge ($5,300,000 increase) and
Red Canyon ($400,000 increase) (Phases I and II of the Company's Palomino Park
development) in December 1997 and November 1998, respectively, and the
acquisition of Sonterra at Williams Centre in January 1998 ($2,700,000
increase), net of the decrease associated with the contribution of all of the
Company's then owned commercial properties to Wellsford/Whitehall in August
1997.
Interest income increased by $5,100,000. This increase is primarily a result of
the acquisition of approximately $157,500,000 in notes receivable during the
period from April 1997 through December 1998 bearing interest at rates between
LIBOR + 2.00% and approximately LIBOR + 6.00% offset by the repayment of
$60,000,000 of notes receivable during this period.
Property operating and maintenance expense, real estate tax expense,
depreciation and amortization, and property management expense increased by
$2,500,000, $1,100,000, $2,900,000, and $500,000, respectively. These increases
are a result of the factors which affected rental income, as described above.
Interest expense increased by $4,600,000 as a result of the issuance of
substantially all of the Company's debt other than the Palomino Park Bonds on or
after December 31, 1997. All of the interest on the Company's debt prior to
December 31, 1997 was capitalized to the Company's Palomino Park development.
General and administrative expense increased by $1,900,000. This increase is a
result of the Company commencing operations subsequent to the Spin-off in May
1997, as well as the Company's growth over the last year.
Gain on sale of investments results from the sale of certain notes receivable
acquired in the VLP Merger.
Income from joint ventures increased by $3,500,000. This increase is a result of
the Wellsford/Whitehall joint venture transaction in August 1997, the Creamer
Vitale Wellsford joint venture transaction in January 1998 and the Liberty
Hampshire joint venture transaction in July 1998.
Minority interest is a result of EQR's 20% interest in the Company's Palomino
Park development, as well as certain limited partnership interests (aggregating
approximately 10%) in one of the Company's commercial office properties acquired
in the VLP Merger. These limited partnership interests were bought out by the
Company in October 1998 for approximately $1,100,000.
-20-
<PAGE>
The income tax provision increased $600,000 as a result of the increase from
approximately $4,200,000 of taxable income during the period from the Spin-off
through December 31, 1997 to approximately $12,300,000 of taxable income during
the year ended December 31, 1998, net of the effects of the utilization of the
net operating loss carry forwards acquired in the VLP Merger ($2,200,000).
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Company expects to meet its short-term liquidity requirements generally
through its working capital and cash flow provided by operations. The Company
considers its ability to generate cash to be adequate and expects it to continue
to be adequate to meet operating requirements both in the short and long terms.
The Company utilized approximately $20,589,000 of available cash and cash
equivalents to purchase 2,573,632 shares of its outstanding common stock from an
institutional investor on February 25, 2000.
The Company expects to meet its long-term liquidity requirements such as
refinancing mortgages, financing acquisitions and development, financing capital
improvements and joint venture capital requirements by long-term borrowings,
through available cash, the issuance of debt and the offering of additional debt
and equity securities.
RECURRING AND NON-RECURRING CAPITAL EXPENDITURES
WELLSFORD DEVELOPMENT
Regarding the Company's Blue Ridge (456 units), Red Canyon (304 units) and
Sonterra at Williams Centre (344 units) properties, the Company expects to incur
approximately $134 per unit in apartment preparation costs between tenant leases
during the year ending December 31, 2000 which will be charged to property
operations.
The estimated total costs of the remaining three multifamily development phases
at Palomino Park and related infrastructure costs at completion of these phases,
including the Company's gross investment, which is included in construction in
progress on the Company's consolidated financial statements, of approximately
$30,748,000 at December 31, 1999 are as follows:
<TABLE>
<CAPTION>
ESTIMATED ESTIMATED
NAME UNITS TOTAL COST COMPLETION DATE
---- ----- ---------- ---------------
<S> <C> <C> <C>
Phase III ("Silver Mesa") . 264 $ 40,000,000 July 2000
Phase IV ("Green River") .. 424 55,000,000 Fourth Quarter 2001
Phase V ("Gold Peak") ..... 352 42,000,000 Fourth Quarter 2002
----- --------------
1,040 $ 137,000,000
===== ==============
</TABLE>
The third and fourth phases of this project are being constructed pursuant to
fixed-price contracts. The Company is committed to purchase 100% of the
improvements upon completion and the achievement of certain occupancy levels of
these phases. In addition, the Company is obligated to fund the first 20% of
construction costs on these phases as they are incurred.
WELLSFORD CAPITAL
The Company expects to incur approximately $1,730,000 of total capital
expenditures with respect to the seven VLP properties during the year ending
December 31, 2000 as follows:
<TABLE>
<CAPTION>
AMOUNT PER SQUARE FOOT
------ ---------------
<S> <C> <C>
Maintenance capital ...... $ 611,000 $ 1.02
Tenant improvements ...... 796,000 1.33
Leasing commissions ...... 323,000 0.54
------------- --------
$ 1,730,000 $ 2.89
============= ========
</TABLE>
-21-
<PAGE>
WELLSFORD/WHITEHALL
In connection with its fully operational properties, Wellsford/Whitehall expects
to incur approximately $28,714,000 of capital expenditures during the year
ending December 31, 2000 as follows:
<TABLE>
<CAPTION>
AMOUNT PER SQUARE FOOT
------ ---------------
<S> <C> <C>
Maintenance capital ...... $13,427,000 $ 3.45
Tenant improvements ...... 11,257,000 2.90
Leasing commissions ...... 4,030,000 1.04
----------- --------
$28,714,000 $ 7.39
=========== ========
</TABLE>
Wellsford/Whitehall is currently involved in several projects to renovate,
expand or reposition certain of its properties. For the year ending December 31,
2000, Wellsford/Whitehall expects to incur approximately $36,933,000 in
connection with these projects.
To the extent that cash flows from operations and borrowings from financial
institutions are not available to finance such capital projects, the Company
will be required to provide approximately 20% of unfunded costs under the
existing agreement with Whitehall.
OTHER CAPITAL COMMITMENTS
At December 31, 1999, the Company had the following discretionary capital
commitments. Draws under the Abbey Credit Facility and Safeguard Credit Facility
require additional collateral to be made available to the Company which is
subject to the Company's approval. Capital calls related to investments to be
made by the Company's joint ventures are also subject to the Company's approval
of such investments. At December 31, 1999, discretionary capital commitments are
as follows:
<TABLE>
<CAPTION>
COMMITMENT AMOUNT
---------- ------
<S> <C>
Abbey Credit Facility ......... $ 8,980,000
Safeguard Credit Facility ..... 17,100,000
Wellsford/Whitehall equity .... 12,231,000
Creamer Vitale Wellsford equity 13,608,000
Reis .......................... 1,500,000
</TABLE>
RESOURCES
The Company has the option to put to an affiliate of EQR until May 30, 2000, up
to $25,000,000 of the Company's Series A 8% Convertible Redeemable Preferred
Stock ("Series A Preferred"), each share of which is convertible into shares of
common stock at a price of $11.124 (the "EQR Preferred Commitment"). If at May
30, 2000, the affiliate of EQR has purchased less than $25,000,000 of Series A
Preferred, it has the option to call the remainder of the $25,000,000 not
purchased prior to that time. The Company expects EQR to purchase the full
amount of the Series A Preferred.
In May 1999, the Company modified the $50,000,000 secured loan facility from
Fleet National Bank and MGT (the "WRP Bank Facility") to extend the maturity
date to May 2000. The modified WRP Bank Facility bears interest at LIBOR + 1.75%
and the Company is obligated to pay a fee equal to three-eighths of one percent
(0.375%) per annum on the average daily amount of the unused portion of the WRP
Bank Facility until maturity. As of December 31, 1999, there was no outstanding
balance under the WRP Bank Facility.
-22-
<PAGE>
The WRP Bank Facility contains various customary loan covenants. The WRP Bank
Facility also limits the amount of undeveloped land the Company may hold. The
Company does not expect to borrow funds under this facility prior to its
expiration.
In January 1999, a wholly-owned subsidiary of the Company obtained a $35,000,000
secured loan facility (the "Wellsford Finance Facility") from Fleet National
Bank, as agent, which can potentially be increased to $50,000,000 to finance
note receivable investments under its debt program. The Wellsford Finance
Facility bears interest at LIBOR + 2.75% and has a term of three years. The
Company is obligated to pay a fee equal to one-quarter of one percent (0.25%)
per annum on the average daily amount of the unused portion of the Wellsford
Finance Facility until maturity. The facility contains various loan covenants
including covenants which are restrictive under existing competitive market
conditions. Accordingly, the facility terms require modification for the Company
to fully utilize the facility. As of December 31, 1999, there was no outstanding
balance under the Wellsford Finance Facility.
In July 1998, Wellsford/Whitehall modified the Wellsford/Whitehall Bank
Facility. Under the new terms, $300,000,000 represents a senior secured credit
facility bearing interest at LIBOR + 1.65% and $75,000,000 represents a second
mezzanine facility bearing interest at LIBOR + 3.20%. Both facilities mature on
December 15, 2000 and are extendable for one year by Wellsford/Whitehall. As of
December 31, 1999 and 1998, approximately $238,700,000 and $276,200,000,
respectively, was outstanding under the Wellsford/Whitehall Bank Facility
(approximately $177,300,000 and $207,300,000, respectively, of which was under
the senior facility). At December 31, 1999, Wellsford/Whitehall expected to
borrow an additional $8,000,000 for tenant improvements and leasing commissions
through March 31, 2000, when the ability to draw on this facility expires under
the current terms of the Bank Facility. The Bank Facility contains certain
financial covenants including limitations on distributions to members.
Wellsford/Whitehall expects to meet its liquidity requirements, such as
financing additional renovations to its properties and acquisitions of new
properties, with operating cash flow from its properties, proceeds from
financings of unencumbered properties, proceeds from any asset sales, the
remaining commitment of the Wellsford/Whitehall Bank Facility and equity
contributions from the owners of Wellsford/Whitehall. At December 31, 1999 the
Company's unfunded capital commitment is approximately $12,231,000 and the
Whitehall unfunded capital commitment is approximately $63,396,000.
CASH FLOWS
- ----------
1999 CASH FLOWS
Cash flow provided by operating activities of $13,857,000 primarily consists of
net income of $8,861,000 plus (i) depreciation and amortization of $5,937,000
and (ii) amortization of deferred compensation of $848,000, offset by
undistributed joint venture income of $675,000, increases in restricted cash of
$459,000 and prepaid and other assets of $498,000 and a decrease in accrued
expenses and other liabilities of $297,000.
Cash flow provided by investing activities of $40,834,000 consists of repayments
of notes receivable of $112,741,000, the proceeds from sale of real estate
assets of $7,238,000 and returns of capital from joint ventures of $6,091,000,
offset by additional investments in (i) notes receivable of $49,295,000, (ii)
real estate assets of $18,975,000 and (iii) capital contributions to joint
ventures of $16,968,000.
Cash flow used in financing activities of $30,072,000 primarily consists of (i)
repayment of credit facilities of $54,000,000, (ii) the repurchase of common
shares of $12,209,000 and (iii) repayment of mortgage notes payable of $862,000,
offset by borrowings from credit facilities of $37,000,000.
-23-
<PAGE>
1998 CASH FLOWS
Cash flow provided by operating activities of $7,005,000 primarily consists of
net income of $9,444,000 plus depreciation and amortization of $3,034,000, an
increase in accrued expenses and other liabilities of $4,031,000 and share
grants of $775,000, offset by an increase in prepaid and other assets of
$6,525,000 and undistributed joint venture income of $3,515,000.
Cash flow used in investing activities of $107,115,000 consists of additional
investments in (i) real estate assets of $125,514,000, (ii) notes receivable of
$67,230,000 and (iii) joint ventures of $33,512,000, offset by proceeds from the
sale of real estate of $64,133,000 and repayments of notes receivable of
$55,009,000.
Cash flow provided by financing activities of $80,337,000 primarily consists of
proceeds from (i) credit facility of $86,500,000 and (ii) mortgage notes payable
of $71,400,000 offset by repayments of (i) credit facilities of $77,000,000 and
(ii) mortgage notes payable of $478,000.
1997 CASH FLOWS
Cash flow provided by operating activities of $6,005,000 primarily consists of
net income of $3,053,000 plus additional accrued expenses and other liabilities
of $7,116,000 and share grants of $897,000, offset by decreases in (i) prepaid
and other assets of $3,164,000 and (ii) restricted cash of $2,176,000.
Cash flow used in investing activities of $156,912,000 consists of investments
in (i) notes receivable of $162,846,000, (ii) real estate assets of $85,552,000
and (iii) joint ventures of $13,955,000, offset by repayments of notes
receivable of $105,441,000.
Cash flow provided by financing activities of $180,802,000 consists of proceeds
from (i) common shares issued of $121,695,000, (ii) credit facilities of
$64,400,000, (iii) mortgage notes payable of $34,500,000, (iv) the bridge loan
of $6,000,000 and (v) equity contributions of $17,108,000, offset by repayments
of (i) credit facilities of $56,900,000 and (ii) the bridge loan of $6,000,000.
See the accompanying consolidated statements of cash flows included in the
consolidated financial statements for a reconciliation of the Company's cash
position for the years described therein.
INFLATION
- ---------
Substantially all of Wellsford Capital's and Wellsford/Whitehall's office leases
provide for separate escalations of real estate taxes and operating expenses
over a base amount. In addition, many of the office leases provide for fixed
base rent increases or indexed escalations (based on the CPI or other measures).
The Company believes that inflationary increases in expenses will generally be
offset by the expense reimbursements and contractual rent increases described
above.
A substantial majority of the leases at the Company's multifamily properties are
for a term of one year or less which may enable the Company to seek increased
rents upon renewal or re-letting of apartment units. Such short-term leases
generally minimize the risk to the Company of the adverse effects of inflation.
YEAR 2000
- ---------
During 1999, the Company developed a plan to modify its information technology
("IT"), primarily its accounting software, to recognize the year 2000 ("Y2K"). A
Y2K compliant version of the accounting software was obtained, along with
certain upgraded computer equipment to accommodate the new software. The Company
completed the installation and testing of the new system software and hardware
during the fourth quarter of 1999. Total project costs were approximately
$100,000 which were funded from operations.
The Company also had extensive discussions with its third-party property
management companies (the "Managers") to ensure that those parties had
appropriate plans to allay any Y2K issues that may impact the
-24-
<PAGE>
Company's operations. These issues included both accounting/management software
and non-IT systems such as fire safety, security and elevator systems.
Wellsford/Whitehall, Wellsford Capital and Wellsford Development, which
constitute all of the Company's property operations, had completed their
analyses of such systems by September 30, 1999 and determined that no material
adverse consequences were likely to result from their Y2K issues. Under the most
reasonably likely worst case scenario, wherein the Managers failed to update
their software and non-IT systems, the Company had the ability to convert its
accounting and management systems to a spreadsheet-based system on a temporary
basis and to utilize its building engineers to manually override any non-IT
systems which fail.
Furthermore, the Company had contacted its key vendors, tenants, banks, joint
venture partners, creditors, and debtors and had obtained Y2K compliance
certification (either verbal or written) from the majority of them.
Subsequent to December 31, 1999, the Company did not encounter any Y2K related
problems from its accounting software or hardware, from the operations of its
properties, or from other companies on which the Company's systems and
operations rely, primarily its banks, payroll processing company, joint venture
partners, creditors, and debtors.
NET CASH FLOW
- -------------
The Company considers Net Cash Flow to be an important measure of its
performance, to be considered in addition to Net Income predicated on generally
accepted accounting principles. Net Cash Flow, for the Company's purposes,
represents net income, plus depreciation and amortization on real estate assets,
and depreciation and amortization from unconsolidated partnerships and joint
ventures. Included in such cash flow is the Company's share of undistributed
cash retained by the unconsolidated partnerships and joint ventures for
continuing investment in lieu of future fundings. Net Cash Flow should not be
considered a replacement for Net Income as an indicator of the Company's
operating performance and is not necessarily indicative of cash available to
fund cash needs.
The following table reconciles Net Income and Net Cash Flow:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Net income .............................. $ 8,860,801 $ 9,443,756 $ 3,053,077
Add:
Depreciation and amortization ........... 5,384,782 3,115,555 259,731
Share of JV depreciation and amortization 5,238,357 3,564,206 611,144
----------- ----------- -----------
Net Cash Flow ........................... $19,483,940 $16,123,517 $ 3,923,952
=========== =========== ===========
- ----------
<FN>
Note: The number of shares that should be used for determining Net Cash
Flow per share, basic and diluted, are the same number of shares used
for Net Income per share, basic and diluted.
</FN>
</TABLE>
Below are the Company's cash flows provided by operating activities as disclosed
in the Consolidated Statements of Cash Flows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Operating activities $13,856,594 $ 7,004,813 $ 6,005,116
=========== =========== ===========
</TABLE>
-25-
<PAGE>
RISKS ASSOCIATED WITH FORWARD-LOOKING STATEMENTS.
This Form 10-K, together with other statements and information publicly
disseminated by the Company, contains certain forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause the actual results, performance or achievements of
the Company or industry results to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements. Such factors include, among others, the following,
which are discussed in greater detail in the "Risk Factors" section of the
Company's registration statement on Form S-11 (file No. 333-32445) filed with
the Securities and Exchange Commission ("SEC") on July 30, 1997, as may be
amended, which is incorporated herein by reference: general economic and
business conditions, which will, among other things, affect demand for
commercial and residential properties, availability and credit worthiness of
prospective tenants, lease rents and the availability and cost of financing;
ability to find suitable investments; competition; risks of real estate
acquisition, development, construction and renovation; ability to comply with
zoning and other laws; vacancies at commercial and multifamily properties;
dependence on rental income from real property; adverse consequences of debt
financing including, without limitation, the necessity of future financings to
repay debt obligations; risks of investments in debt instruments, including
possible payment defaults and reductions in the value of collateral; risks
associated with equity investments in and with third parties: illiquidity of
real estate investments; environmental risks; and other risks listed from time
to time in the Company's reports filed with the SEC. Therefore, actual results
could differ materially from those projected in such statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Company's primary market risk exposure is to changes in interest rates. The
Company manages this risk by offsetting its investments and financing exposures
as well as by strategically timing and structuring its transactions.
The Company had investments in $12,151,000 of LIBOR-based instruments and
$42,755,000 of LIBOR and other variable rate based financings as of December 31,
1999. The Company had investments in $25,000,000 of fixed rate instruments and
has $76,560,000 of fixed rate financings as of December 31, 1999. These
exposures substantially offset one another as a one-percent increase in the base
rates used to determine the interest rates of both the variable rate notes
receivable and debt would result in a net decrease in the Company's net income
of $306,000 ($0.01 per diluted share).
The Company had investments in $67,028,000 of LIBOR-based instruments and
$59,755,000 of LIBOR and other variable rate based financings as of December 31,
1998. The Company had investments in $57,678,000 of fixed rate instruments and
$77,422,000 of fixed rate financings as of December 31, 1998. These exposures
substantially offset one another as a one-percent increase in the base rates
used to determine the interest rates of both the variable rate notes receivable
and debt would result in a net increase in the Company's net income of $73,000
(no change in the per share amount).
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The response to this Item 8 is included as a separate section of this annual
report on Form 10-K (see page F-1).
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
-26-
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The executive officers and directors of the Company, their ages and their
positions are as follows:
<TABLE>
<CAPTION>
Name Age Positions and Offices Held
---- --- --------------------------
<S> <C> <C>
Jeffrey H. Lynford................. 52..... Chairman of the Board, Secretary and Director***
Edward Lowenthal................... 55..... President, Chief Executive Officer and Director**
Rodney F. Du Bois.................. 64..... Vice Chairman, Chief Financial Officer and Director**
James J. Burns..................... 60..... Senior Vice President, Chief Accounting Officer
David M. Strong.................... 41..... Vice President for Development
Douglas Crocker II................. 59..... Director***
Richard S. Frary................... 52..... Director*
Mark S. Germain.................... 49..... Director***
Frank J. Hoenemeyer................ 80..... Director*
Frank J. Sixt...................... 48..... Director*
- ----------
<FN>
*........Term expires 2000.
**.......Term expires 2001.
***......Term expires 2002.
</FN>
</TABLE>
The information contained in the sections captioned "Nominees for Election as
Directors", "Other Directors", "Executive Officers", and "Key Employees" of the
Company's definitive proxy statement for the 2000 annual meeting of shareholders
is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION.
The information contained in the sections captioned "Executive Compensation",
"Compensation of Directors", "Board Committees", "Employment Agreements", and
"Management Incentive Plans" of the Company's definitive proxy statement for the
2000 annual meeting of shareholders is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information contained in the section captioned "Security Ownership of
Certain Beneficial Owners and Management" of the Company's definitive proxy
statement for the 2000 annual meeting of shareholders is incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information contained in the section captioned "Certain Transactions" of the
Company's definitive proxy statement for the 2000 annual meeting of shareholders
is incorporated herein by reference.
-27-
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(A) (1) FINANCIAL STATEMENTS
The following consolidated financial information is included
as a separate section of this annual report on Form 10-K:
Consolidated Balance Sheets as of December 31, 1999 and 1998.
Consolidated Statements of Income for the years ended December
31, 1999, 1998 and 1997.
Consolidated Statements of Changes in Shareholders' Equity for
the years ended December 31, 1999, 1998 and 1997.
Consolidated Statements of Cash Flows for the years ended
December 31, 1999, 1998 and 1997.
Notes to Consolidated Financial Statements.
Wellsford/Whitehall Group, L.L.C. Consolidated Financial
Statements and Notes.
(2) FINANCIAL STATEMENT SCHEDULES
III. Real Estate and Accumulated Depreciation
IV. Mortgage Loans on Real Estate
All other schedules have been omitted because the required
information of such other schedules is not present, is not
present in amounts sufficient to require submission of the
schedule or is included in the consolidated financial
statements.
(3) EXHIBITS
(a) EXHIBIT NO. DESCRIPTION+++
----------- -----------
3.1 Articles of Amendment and Restatement of the Company.****
3.2 Articles Supplementary Classifying 350,000 Shares of Common Stock
as Class A Common Stock.****
3.3 Articles Supplementary Classifying 2,000,000 Shares of Common
Stock as Series A 8% Convertible Redeemable Preferred Stock.****
3.4 Bylaws of the Company.****
4.1 Specimen certificate for Common Stock.***
4.2 Specimen certificate for Class A Common Stock.****
4.3 Specimen certificate for Series A 8% Convertible Redeemable
Preferred Stock.****
4.4 Warrant Agreement, dated as of August 28, 1997, between the
Company and United States Trust Company of New York, as warrant
agent, and Warrant Certificate No. 1 of the Company for 5,000,000
Warrants registered in the name of WHWEL Real Estate Limited
Partnership.+
-28-
<PAGE>
EXHIBIT NO. DESCRIPTION+++ (continued)
----------- -----------
4.41 Amendment No. 2 to the Warrant Agreement dated as of August 28,
1997 by and between Wellsford Real Properties, Inc. and United
States Trust Company, dated as of May 28, 1999.
4.42 Warrant Agreement by and between Wellsford Real Properties, Inc.
and United States Trust Company, dated as of May 28, 1999.
4.43 Registration Rights Agreement by and between Wellsford Real
Properties, Inc. and W/W Group Holdings, L.L.C., dated as of May
28, 1999.
4.44 Letter Agreement dated May 28, 1999 between WHWEL Real Estate
Limited Partnership and Wellsford Real Properties, Inc.,
confirming that Wellsford Real Properties, Inc. will exchange
shares of its stock for Excess Membership Units held by WHWEL.
4.5 Registration Rights Agreement, dated as of February 23, 1998,
among the Company and Franklin Mutual Advisors, Inc. and Angelo
Gordon & Co., L.P.+
10.1 Operating Agreement of Red Canyon at Palomino Park LLC between
Wellsford Park Highlands Corp. and Al Feld, dated as of April 17,
1996, relating to Red Canyon.*
10.2 First Amendment to Operating Agreement of Red Canyon at Palomino
Park LLC between Wellsford Park Highlands Corp. and Al Feld,
dated as of May 19, 1997, relating to Red Canyon.****
10.3 Tri-Party Agreement by and among NationsBank of Texas, N.A., Red
Canyon at Palomino Park LLC, Wellsford Park Highlands Corp.,
Wellsford Residential Property Trust, Al Feld and The Feld
Company, dated May 29, 1997, relating to Red Canyon.****
10.4 Assignment and Assumption of Tri-Party Agreement by and among
Wellsford Residential Property Trust, ERP Operating Limited
Partnership, Red Canyon at Palomino Park LLC, Wellsford Park
Highlands Corp., The Feld Company, Al Feld and NationsBank of
Texas, N.A. dated May 30, 1997, relating to Red Canyon.****
10.5 Agreement and Acknowledgment Regarding Tri-Party Agreement by and
among NationsBank of Texas, N.A., Red Canyon at Palomino Park
LLC, Wellsford Park Highlands Corp. and ERP Operating Limited
Partnership dated May 30, 1997, relating to Red Canyon.****
10.6 Second Amended and Restated Vacant Land Purchase and Sale
Agreement between Mission Viejo Company and The Feld Company
dated March 23, 1995, as amended by First Amendment, dated May 1,
1996, relating to the land underlying Palomino Park.*
10.7 Trust Indenture, dated as of December 1, 1995, between Palomino
Park Public Improvements Corporation ("PPPIC") and United States
Trust Company of New York, as trustee, securing Wellsford
Residential Property Trust's Assessment Lien Revenue Bonds Series
1995 - $14,755,000.**
10.8 Letter of Credit Reimbursement Agreement, dated as of December 1,
1995, between PPPIC, Wellsford Residential Property Trust and
Dresdner Bank AG, New York Branch.**
10.9 First Amendment to Letter of Credit Reimbursement Agreement,
dated as of May 30, 1997, between PPPIC, Wellsford Residential
Property Trust, Dresdner Bank AG, New York Branch and the
Company.****
10.10 Amendment to Wellsford Reimbursement Agreement by and between
PPPIC, Wellsford Residential Property Trust and the Company,
dated as of May 30, 1997.****
-29-
<PAGE>
EXHIBIT NO. DESCRIPTION+++ (continued)
----------- -----------
10.11 Assignment and Assumption Agreement by and between Wellsford
Residential Property Trust and the Company, dated as of May 30,
1997.****
10.12 Credit Enhancement Agreement by and between the Company and ERP
Operating Limited Partnership, dated as of May 30, 1997, relating
to Palomino Park.****
10.13 Reimbursement and Indemnification Agreement by and between the
Company and ERP Operating Limited Partnership, dated as of May
30, 1997, relating to Palomino Park.****
10.14 Guaranty by ERP Operating Limited Partnership for the benefit of
Dresdner Bank AG, New York Branch, dated as of May 30, 1997,
relating to Palomino Park.****
10.15 Amended and Restated Promissory Note of the Company to the order
of Dresdner Bank AG, New York Branch, dated May 30, 1997,
relating to Palomino Park.****
10.16 Common Stock and Preferred Stock Purchase Agreement by and
between the Company and ERP Operating Limited Partnership dated
as of May 30, 1997.****
10.17 Registration Rights Agreement by and between the Company and ERP
Operating Limited Partnership dated as of May 30, 1997.****
10.18 Credit Agreement, dated as of April 25, 1997, by and among Park
Avenue Financing Company LLC, PAMC Co-Manager Inc., PAFC
Management, Inc., Stanley Stahl, The First National Bank of
Boston, the Company, Other Banks that may become parties to the
Agreement and The First National Bank of Boston, as Agent,
relating to 277 Park Avenue.**
10.19 Assignment of Member's Interest, dated as of April 25, 1997, by
PAFC Management, Inc. and Stanley Stahl to The First National
Bank of Boston, relating to 277 Park Avenue (relating to
interests in the Park Avenue Financing Company, LLC).**
10.20 Assignment of Member's Interest, dated as of April 25, 1997, by
PAMC Co-Manager Inc. and Park Avenue Financing, LLC to The First
National Bank of Boston, relating to 277 Park Avenue (relating to
interests in 277 Park Avenue, LLC).**
10.21 Stock Pledge Agreement, dated as of April 25, 1997, by Stanley
Stahl to The First National Bank of Boston, relating to 277 Park
Avenue (relating to stock in Park Avenue Management
Corporation).**
10.22 Stock Pledge Agreement, dated as of April 25, 1997, by Stanley
Stahl to The First National Bank of Boston, relating to 277 Park
Avenue (relating to stock in PAMC Co-Manager Inc.).**
10.23 Stock Pledge Agreement, dated as of April 25, 1997, by Stanley
Stahl to The First National Bank of Boston, relating to 277 Park
Avenue (relating to stock in PAFC Management, Inc.).**
10.24 Conditional Guaranty of Payment and Performance, dated as of
April 25, 1997, by Stanley Stahl, relating to 277 Park Avenue.**
10.25 Cash Collateral Account Security, Pledge and Assignment
Agreement, dated as of April 25, 1997, by and among 277 Park
Avenue, LLC, Park Avenue Management Corporation, Park Avenue
Financing Company LLC, PAMC Co-Manager Inc., Stanley Stahl and
The First National Bank of Boston, relating to 277 Park Avenue.**
-30-
<PAGE>
EXHIBIT NO. DESCRIPTION+++ (continued)
----------- -----------
10.26 Recognition Agreement, dated as of April 25, 1997, by and among
The First National Bank of Boston, the Company, Column Financial,
Inc., Park Avenue Financing Company LLC, PAMC Co-Manager, Inc.
and 277 Park Avenue, LLC, relating to 277 Park Avenue.**
10.27 Intercreditor Agreement, dated as of April 25, 1997, between the
Company and The First National Bank of Boston, as Agent, relating
to 277 Park Avenue.**
10.28 Assignment and Acceptance Agreement, dated June 19, 1997,
between BankBoston, N.A. (formerly known as The First National
Bank of Boston) ("BankBoston") and the Company, relating to 277
Park Avenue.****
10.29 Revolving Credit Agreement by and among the Company, BankBoston,
Morgan Guaranty Trust Company of New York ("Morgan Guaranty"),
other banks which may become parties and BankBoston, as agent,
and Morgan Guaranty, as co-agent dated as of May 30, 1997.****
10.30 Agreement Regarding Common Stock and Preferred Stock Purchase
Agreement, dated as of May 30, 1997, among ERP Operating Limited
Partnership, the Company and BankBoston, as agent.****
10.31 Assignment of Common Stock Agreements, dated as of May 30, 1997,
between the Company and BankBoston, as agent.****
10.32 Collateral Assignment of Documents, Rights and Claims (including
Collateral Assignment of Deed of Trust, Assignment of Leases and
Rents, Security Agreement and Fixture Filing), made as of May 30,
1997, by the Company to BankBoston, as agent.****
10.33 First Amended and Restated Loan Agreement, dated as of July 16,
1998 (the "First Amended and Restated Loan Agreement"), among
Wellsford/Whitehall Holdings, L.L.C., as Borrower, and
BankBoston, Goldman Sachs Mortgage Company, and Other Banks, as
Banks, and BankBoston, as Administrative Agent and Co-Arranger
and Co-Syndication Agent, and Goldman Sachs Mortgage Company, as
Co-Arranger and Co-Syndication Agent.++
10.34 Form of promissory note payable to the order of eight lenders by
Wellsford/Whitehall Properties, L.L.C. under the First Amended
and Restated Loan Agreement. ++
10.35 Amended and Restated Assignment of Member's Interest under the
First Amended and Restated Loan Agreement, dated as of July 16,
1998, by Wellsford/Whitehall Holdings, L.L.C. to BankBoston, as
Agent. ++
10.36 Amended and Restated Cash Collateral Agreement under the First
Amended and Restated Loan Agreement, dated as of July 16, 1998,
by and among Wellsford/Whitehall Holdings, L.L.C., WASH Manager
L.L.C., Wells Avenue Holdings L.L.C. and BankBoston, as Agent. ++
10.37 Indemnity Agreement Regarding Hazardous Materials under the
First Amended and Restated Loan Agreement, dated as of July 16,
1998, by Wellsford/Whitehall Holdings, L.L.C., Wellsford
Commercial Properties Trust and WHWEL Real Estate Limited
Partnership for the benefit of BankBoston. ++
10.38 Conditional Guaranty of Payment under the First Amended and
Restated Loan Agreement, dated as of July 16, 1998, by Wellsford
Commercial Properties Trust, WHWEL Real Estate Limited
Partnership, the Company, Whitehall Street Real Estate Limited
Partnership V, Whitehall Street Real Estate Limited Partnership
VI, Whitehall Street Real Estate Limited Partnership VII and
Whitehall Street Real Estate Limited Partnership VIII in favor of
BankBoston and Goldman Sachs Mortgage Company. ++
-31-
<PAGE>
EXHIBIT NO. DESCRIPTION+++ (continued)
----------- -----------
10.39 Indemnity and Guaranty Agreement under the First Amended and
Restated Loan Agreement, dated as of July 16, 1998, by Wellsford
Commercial Properties Trust and WHWEL Real Estate Limited
Partnership in favor of BankBoston, Goldman Sachs Mortgage
Company and Other Banks. ++
10.40 Mezzanine Loan Agreement, dated as of July 16, 1998 (the
"Mezzanine Loan Agreement"), among Wellsford/Whitehall Holdings
II, L.L.C., as Borrower, and BankBoston, Goldman Sachs Mortgage
Company, and Other Banks, as Banks, and BankBoston, as
Administrative Agent and Co-Arranger and Co-Syndication Agent,
and Goldman Sachs Mortgage Company, as Co-Arranger and
Co-Syndication Agent. ++
10.41 Form of promissory note payable to the order of five lenders by
Wellsford/Whitehall Properties II, L.L.C. under the Mezzanine
Loan Agreement. ++
10.42 Assignment of Member's Interest under the Mezzanine Loan
Agreement, dated as of July 16, 1998, between Wellsford/Whitehall
Properties II, L.L.C. and BankBoston, as Agent. ++
10.43 Indemnity Agreement Regarding Hazardous Materials under the
Mezzanine Loan Agreement, dated as of July 16, 1998, by
Wellsford/Whitehall Properties II, L.L.C., Wellsford Commercial
Properties Trust and WHWEL Real Estate Limited Partnership for
the benefit of BankBoston. ++
10.44 Nomura Conditional Guaranty of Payment under the Mezzanine Loan
Agreement, dated as of July 16, 1998, by Wellsford Commercial
Properties Trust, WHWEL Real Estate Limited Partnership, the
Company, Whitehall Street Real Estate Limited Partnership V,
Whitehall Street Real Estate Limited Partnership VI, Whitehall
Street Real Estate Limited Partnership VII and Whitehall Street
Real Estate Limited Partnership VIII in favor of BankBoston and
Goldman Sachs Mortgage Company. ++
10.45 Conditional Guaranty of Payment under the Mezzanine Loan
Agreement, dated as of July 16, 1998, by Wellsford Commercial
Properties Trust, WHWEL Real Estate Limited Partnership, the
Company, Whitehall Street Real Estate Limited Partnership V,
Whitehall Street Real Estate Limited Partnership VI, Whitehall
Street Real Estate Limited Partnership VII and Whitehall Street
Real Estate Limited Partnership VIII in favor of BankBoston and
Goldman Sachs Mortgage Company. ++
10.46 Indemnity and Guaranty Agreement under the Mezzanine Loan
Agreement, dated as of July 16, 1998, by Wellsford Commercial
Properties Trust and WHWEL Real Estate Limited Partnership in
favor of BankBoston, Goldman Sachs Mortgage Company and Other
Banks. ++
10.461 First Amendment to Mezzanine Loan Agreement, dated as of May
28, 1999 by and among Wellsford/Whitehall Properties II, L.L.C.,
Wellsford Commercial Properties Trust, WHWEL Real Estate Limited
Partnership, Wellsford Real Properties, Inc., Whitehall Street
Real Estate Limited Partnership V, Whitehall Street Real Estate
Limited Partnership VI, Whitehall Street Real Estate Limited
Partnership VII, Whitehall Street Real Estate Limited Partnership
VIII, Wells Avenue Holdings, L.L.C., Wash Manager L.L.C.,
BankBoston, N.A., Goldman Sachs Mortgage Company, BHF-Bank
Aktiengesellschaft, Morgan Stanley Senior Funding Inc., and PAM
Capital Funding LP.
-32-
<PAGE>
EXHIBIT NO. DESCRIPTION+++ (continued)
----------- -----------
10.462 Contribution Agreement, dated as of February 12, 1998, among
Saracen Properties, Inc., Saraceno Holding Trust General
Partnership, Dominic J. Saraceno, 150 Wells Avenue Realty Trust,
River Park Realty Trust, Seventy Wells Avenue LLC, Newton
Acquisition LLC I, Saracen Portland L.L.C., KSA Newton
Acquisition Limited Partnership II and KSA Newton Limited
Partnership I, as Contributor, and Wellsford/Whitehall
Properties, L.L.C., as Contributee.++++
10.47 $50 million Revolving Credit Agreement, dated as of January 12,
1999, among Wellsford Finance, Inc., as Borrower, and BankBoston
and Other Banks, as Lender, and BankBoston, as Agent. ++
10.48 $50 million promissory note, dated January 12, 1999, payable to
BankBoston by Wellsford Finance, Inc. ++
10.49 Collateral Assignment of Documents, Rights and Claims, dated
January 12, 1999, from Wellsford Finance, Inc. to BankBoston, as
Agent.++
10.50 Limited Liability Company Operating Agreement of
Wellsford/Whitehall Group, L.L.C., dated as of May 28, 1999.
10.51 Letter Agreement, dated as of July 16, 1998, between the Company
and WHWEL Real Estate Limited Partnership, relating to warrants
to be issued to WHWEL Real Estate Limited Partnership. ++
10.52 Fixed Rate Loan Agreement, dated as of August 11, 1998 (the
"Fixed Rate Loan Agreement"), by and among First Union Real
Estate Equity and Mortgage Investments, as Borrower, Bankers
Trust Company, as Agent, and Bankers Trust Company, Wellsford
Capital and BankBoston, as Lenders. ++
10.53 $15 million promissory note, dated August 11, 1998, payable to
the order of Wellsford Capital by First Union Real Estate Equity
and Mortgage Investments under the Fixed Rate Loan Agreement. ++
10.54 First Amendment of Fixed Rate Loan Agreement, dated as of
January 8, 1999, among First Union Real Estate Equity and
Mortgage Investments, as Borrower, Bankers Trust Company,
Wellsford Capital and BankBoston, as Lenders, and Bankers Trust
Company, as Agent. ++
10.55 Letter dated January 8, 1999, among First Union Real Estate
Equity and Mortgage Investments, as Borrower, Bankers Trust
Company, Wellsford Capital and BankBoston, as Lenders, and
Bankers Trust Company, as Agent. ++
10.56 Revolving Credit Agreement for $70 million, dated as of August
28, 1997, between AP-Anaheim LLC, AP-Arlington LLC, AP-Atlantic
LLC, AP-Cityview LLC, AP-Farrell Ramon LLC, AP-Palmdale LLC,
AP-Redlands LLC, AP-Victoria LLC, AP-Victorville LLC, and
AP-Sierra LLC, each a California limited liability company
(collectively, the "Abbey Affiliates"), as Borrower, and Morgan
Guaranty Trust Company of New York, as Lender.+
10.57 Amendment to Revolving Credit Agreement, dated as of April 6,
1998, by AP-Diamond Bar LLC, AP-Edinger LLC, AP- Glendora LLC,
AP- Anaheim LLC, AP- Arlington LLC, AP- Atlantic LLC, AP-
Cityview LLC, AP- Redlands LLC, AP- Palmdale LLC, AP- Farrell
Ramon LLC, AP- Sierra LLC, AP- Victoria LLC and AP- Victorville
LLC (collectively, the "Amended Abbey Affiliates"), as Borrower,
and Morgan Guaranty Trust Company of New York, as Lender. ++
10.58 Loan Participation Agreement, dated as of August 28, 1997,
between Morgan Guaranty Trust Company of New York and the
Company.+
-33-
<PAGE>
EXHIBIT NO. DESCRIPTION+++ (continued)
----------- -----------
10.59 First Amendment to Loan Participation Agreement, dated as of
April 7, 1998, between Morgan Guaranty Trust Company of New York
and Wellsford Capital.++
10.60 $70 million promissory note (the "Promissory Note"), dated
August 28, 1997, payable to the order of Morgan Guaranty Trust
Company of New York by the Abbey Affiliates.+
10.61 Amendment to Promissory Note, dated as of April 6, 1998, between
the Amended Abbey Affiliates and Morgan Guaranty Trust Company of
New York. ++
10.62 Purchase and Sale Agreement, dated as of September 18, 1997,
among the Company, Wellsford Capital Corporation and Whitehall
Street Real Estate Limited Partnership VII.++
10.63 First Amended and Restated Master Credit Agreement, dated
December 30, 1997, effective as of July 31, 1997, among The
Woodlands Commercial Properties Company, L.P., The Woodlands Land
Development Company, L.P., and BankBoston, Morgan Stanley Senior
Funding, Inc., as Documentation Agent, and Other Banks, and
BankBoston, as Managing Agent and Syndication Agent.+
10.64 Intercreditor Agreement, dated December 30, 1997, effective as
of July 31, 1997, by and between BankBoston, Morgan Stanley
Senior Funding, Inc. and the Other Lenders, relating to
Woodlands.+
10.65 $4,186,991.87 Commercial Company Second Secured Term Loan Note,
dated December 30, 1997, payable to the order of the Company by
The Woodlands Commercial Properties Company, L.P. and The
Woodlands Land Development Company, L.P.+
10.66 $10,813,008.13 Land Company Second Secured Term Loan Note, dated
December 30, 1997, payable to the order of the Company by The
Woodlands Land Development Company, L.P. and The Woodlands
Commercial Properties Company, L.P.+
10.67 Revolving Credit Agreement, dated as of March 28, 1998, among
Safeguard Capital Fund, L.P., as Borrower, and Morgan Guaranty
Trust Company of New York, as Lender. ++
10.68 $90 million promissory note, dated March 28, 1998, payable to
Morgan Guaranty Trust Company of New York by Safeguard Capital
Fund, L.P. ++
10.69 Loan Participation Agreement, dated as of December 1, 1998,
between Morgan Guaranty Trust Company of New York and Wellsford
Capital. ++
10.70 Program Agreement for Clairborne Investors Mortgage Program
between Creamer Realty Consultants and The Prudential Investment
Corporation, dated as of December 10, 1997.+
10.71 Amended and Restated General Partnership Agreement of Creamer
Realty Consultants, dated as of January 1, 1998, by and between
Wellsford CRC Holding Corp. and FGC Realty Consultants, Inc.+
10.72 Limited Liability Company Operating Agreement of Creamer Vitale
Wellsford, L.L.C., dated as of January 20, 1998, by and between
Wellsford CRC Holding Corp. and SX Advisors, LLC. +
10.73 Loan Agreement, dated as of February 27, 1998, between Wellsford
Sonterra L.L.C., as Borrower, and Nationsbank, N.A., as Lender.+
10.74 $16,400,000 promissory note, dated February 27, 1998, payable to
the order of NationsBank, N.A., by Wellsford Sonterra, L.L.C.+
-34-
<PAGE>
EXHIBIT NO. DESCRIPTION+++ (continued)
----------- -----------
10.75 Deed of Trust, Assignment of Leases and Rents and Security
Agreement, dated February 27, 1998 by Wellsford Sonterra, L.L.C.
in favor of NationsBank, N.A.+
10.76 $34,500,000 Multifamily Note, dated December 24, 1997, payable
to the order of GMAC Commercial Mortgage Corporation by Park at
Highlands L.L.C.+
10.77 Multifamily Deed of Trust, Assignment of Rents and Security
Agreement, dated December 24, 1997, by Park at Highlands L.L.C.
in favor of GMAC Commercial Mortgage Corporation.+
10.78 $28 million secured promissory note, dated October 22, 1998,
payable to the order of Lehman Brothers Holdings Inc. by
Wellsford Capital Properties, L.L.C. ++
10.79 Conditional Guarantee, dated as of October 22, 1998, by
Wellsford Capital in favor of Lehman Brothers Holdings Inc. ++
10.80 Mortgage and Security Agreement, dated as of October 22, 1998,
by Wellsford Capital Properties, L.L.C. to Lehman Brothers
Holdings Inc. ++
10.81 1998 Management Incentive Plan of the Company. ++
10.82 1997 Management Incentive Plan of the Company.**
10.83 Rollover Stock Option Plan of the Company.**
10.84 Employment Agreement between the Company and Jeffrey H.
Lynford.****
10.85 Employment Agreement between the Company and Edward
Lowenthal.****
10.86 Employment Agreement between the Company and David M.
Strong.****
10.87 Employment Agreement between the Company and Rodney F. Du Bois.
10.88 Employment Agreement between the Company and James J. Burns.
21.1 Subsidiaries of the Registrant.
27.1 Financial Data Schedule.
99.1 "Risk Factors" section of the Company's Registration Statement on
Form S-11 (file no. 333-32445), as may be amended.
- ----------
* Previously filed as an exhibit to the Form 10 filed on April 23, 1997.
** Previously filed as an exhibit to the Form 10/A Amendment No. 1 filed on
May 21, 1997.
*** Previously filed as an exhibit to the Form 10/A Amendment No. 2 filed on
May 28, 1997.
**** Previously filed as an exhibit to the Form S-11 filed on July 30, 1997.
*****Previously filed as an exhibit to Amendment No. 1 to Form S-11 filed on
November 14, 1997.
+ Previously filed as an exhibit to the Form 8-K filed on September 11, 1997.
++ Previously filed as an exhibit to the Form 8-K filed on September 23, 1997.
+++ Wellsford acquired its interest in a number of these documents by
assignment.
++++ Previously filed as an exhibit to the Form 8-K filed on April 28, 1998.
+ Previously filed as an exhibit to the Form 10-K filed on March 31, 1998.
++ Previously filed as an exhibit to the Form 10-K filed on March 31, 1999.
(b) During the last quarter of the period covered by this report, the Company
filed the following reports on Form 8-K:
None.
(c) The following exhibits are filed as exhibits to this Form 10-K: See Item 14
(a)(3) above.
(d) The following documents are filed as a part of this report:
None.
-35-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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/ James J. Burns
-----------------------------------------------
James J. Burns
Senior Vice President, Chief Accounting Officer
Dated: March 17, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<S> <C> <C>
/s/ Jeffrey H. Lynford Chairman of the Board, Secretary and March 17, 2000
- ------------------------ Director
(Jeffrey H. Lynford)
/s/ Edward Lowenthal President, Chief Executive Officer and March 17, 2000
- ------------------------ Director (Principal Executive Officer)
(Edward Lowenthal)
/s/ Rodney F. Du Bois Vice Chairman, Chief Financial Officer March 17, 2000
- ------------------------ and Director
(Rodney F. Du Bois)
/s/ Mark S. Germain Director March 17, 2000
- ------------------------
(Mark S. Germain)
/s/ Frank J. Hoenemeyer Director March 17, 2000
- ------------------------
(Frank J. Hoenemeyer)
/s/ Frank J. Sixt Director March 17, 2000
- ------------------------
(Frank J. Sixt)
/s/ Douglas Crocker II Director March 17, 2000
- ------------------------
(Douglas Crocker II)
/s/ Richard S. Frary Director March 17, 2000
- ------------------------
(Richard S. Frary)
</TABLE>
-36-
<PAGE>
WELLSFORD REAL PROPERTIES, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE NO. IN
FORM 10-K
---------
Report of Independent Auditors............................................F-2
Consolidated Balance Sheets as of December 31, 1999 and 1998..............F-3
Consolidated Statements of Income for the Years Ended
December 31, 1999, 1998 and 1997.....................................F-4
Consolidated Statements of Changes in Shareholders' Equity for
the Years Ended December 31, 1999, 1998 and 1997.....................F-5
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1999, 1998 and 1997.....................................F-6
Notes to Consolidated Financial Statements................................F-7
Wellsford/Whitehall Group, L.L.C.
Consolidated Financial Statements and Notes ........................F-35
FINANCIAL STATEMENT SCHEDULES
III - Real Estate and Accumulated Depreciation............................S-1
IV - Mortgage Loans on Real Estate........................................S-3
All other schedules have been omitted because the required information for such
other schedules is not present, is not present in amounts sufficient to require
submission of the schedule or because the required information is included in
the consolidated financial statements.
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Shareholders and Board of Directors of
Wellsford Real Properties, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of Wellsford Real
Properties, Inc. and subsidiaries (the "Company") as of December 31, 1999 and
1998, and the related consolidated statements of income, changes in
shareholders' equity and cash flows for each of the three years in the period
ended December 31, 1999. Our audits also included the financial statement
schedules listed in the Index at Item 14(a)(2). These financial statements and
schedules are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and schedules based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Wellsford Real
Properties, Inc. and subsidiaries at December 31, 1999 and 1998, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1999, in conformity with accounting
principles generally accepted in the United States. Also, in our opinion, the
related financial statement schedules, when considered in relation to the basic
financial statements taken as a whole, present fairly in all material respects
the information set forth therein.
ERNST & YOUNG LLP
New York, New York
March 17, 2000
F-2
<PAGE>
WELLSFORD REAL PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1999 1998
---- ----
<S> <C> <C>
ASSETS
Real estate assets, at cost:
Land ................................................... $ 18,813,000 $ 18,813,000
Buildings and improvements ............................. 116,605,231 115,425,760
------------- -------------
135,418,231 134,238,760
Less, accumulated depreciation ......................... (6,584,328) (2,707,390)
------------- -------------
128,833,903 131,531,370
Construction in progress ............................... 30,747,867 18,791,075
------------- -------------
159,581,770 150,322,445
Notes receivable .......................................... 37,259,587 124,706,499
Investment in joint ventures .............................. 114,390,298 80,776,338
------------- -------------
Total real estate assets .................................. 311,231,655 355,805,282
Cash and cash equivalents ................................. 34,739,866 10,122,037
Restricted cash ........................................... 8,467,092 8,007,850
Prepaid and other assets .................................. 11,892,713 11,035,489
------------- -------------
Total assets .............................................. $ 366,331,326 $ 384,970,658
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Mortgage notes payable ................................. $ 119,314,929 $ 120,176,790
Credit facility ........................................ -- 17,000,000
Accrued expenses and other liabilities ................. 13,891,212 12,788,324
------------- -------------
Total liabilities ......................................... 133,206,141 149,965,114
------------- -------------
Commitments and contingencies
Minority interest ......................................... 3,433,972 3,380,721
Shareholders' equity:
Series A 8% convertible redeemable preferred stock,
$.01 par value per share, 2,000,000 shares authorized,
no shares issued and outstanding ..................... -- --
Common stock, 197,650,000 shares authorized-
18,882,493 and 20,410,605 shares, $.01 par value per
share, issued and outstanding ........................ 188,825 204,106
Class A common stock , 350,000 shares authorized -
339,806 shares, $.01 par value per share,
issued and outstanding ............................... 3,398 3,398
Paid in capital in excess of par value ................. 215,674,726 228,212,205
Retained earnings ...................................... 20,246,075 11,385,274
Deferred compensation .................................. (1,861,677) (3,240,023)
Treasury stock, 416,759 and 489,671 shares ............. (4,560,134) (4,940,137)
------------- -------------
Total shareholders' equity ................................ 229,691,213 231,624,823
------------- -------------
Total liabilities and shareholders' equity ................ $ 366,331,326 $ 384,970,658
============= =============
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-3
<PAGE>
WELLSFORD REAL PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
REVENUE
Rental income ....................... $ 17,874,272 $ 13,126,974 $ 1,291,354
Interest income ..................... 12,295,771 12,888,607 7,779,021
------------ ------------ ------------
Total revenue .................... 30,170,043 26,015,581 9,070,375
------------ ------------ ------------
EXPENSES
Property operating and maintenance .. 4,027,842 2,786,839 241,257
Real estate taxes ................... 1,545,822 1,201,051 105,692
Depreciation and amortization ....... 6,154,549 3,157,129 294,563
Property management ................. 673,726 498,596 18,356
Interest ............................ 9,398,630 4,599,309 --
General and administrative .......... 7,125,876 5,062,895 3,159,558
------------ ------------ ------------
Total expenses ................... 28,926,445 17,305,819 3,819,426
Gain on sale of investment ............. -- 138,770 --
Income from joint ventures ............. 9,621,952 3,523,072 15,135
------------ ------------ ------------
Income before minority interest ........ 10,865,550 12,371,604 5,266,084
Minority interest ...................... (54,749) (77,550) --
------------ ------------ ------------
Income before taxes .................... 10,810,801 12,294,054 5,266,084
Income tax expense ..................... 1,950,000 2,850,298 2,213,007
------------ ------------ ------------
Net income ............................. $ 8,860,801 $ 9,443,756 $ 3,053,077
============ ============ ============
Net income per common share, basic ..... $ 0.43 $ 0.47 $ 0.18
============ ============ ============
Net income per common share, diluted ... $ 0.43 $ 0.46 $ 0.18
============ ============ ============
Weighted average number of common shares
outstanding, basic ................ 20,642,023 19,886,305 16,922,135
============ ============ ============
Weighted average number of common shares
outstanding, diluted .............. 20,657,488 20,379,162 17,348,298
============ ============ ============
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-4
<PAGE>
WELLSFORD REAL PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
COMMON SHARES*
-------------- PAID-IN
SHARES AMOUNT CAPITAL**
------ ------ ---------
<S> <C> <C> <C>
BALANCE, JANUARY 1, 1997 .................... -- $ -- $ 29,248,000
Equity contributions prior to Spin-off ...... -- -- 19,310,633
Net income prior to Spin-off ................ -- -- --
Spin-off .................................... 4,887,577 48,875 1,819,684
Private offering of common shares (net of
issuance costs) ......................... 12,000,000 120,000 121,574,562
Issuance of warrants ........................ -- -- 6,198,345
Director and officer share grant ............ 108,936 1,090 1,570,603
Net income subsequent to Spin-off ........... -- -- --
---------- ------------- -------------
BALANCE, DECEMBER 31, 1997 .................. 16,996,513 169,965 179,721,827
Shares issued in connection with VLP Merger . 3,350,000 33,500 39,329,000
Issuance of warrants ........................ -- -- 750,000
Director and officer share grants ........... 403,898 4,039 3,471,241
Amortization of deferred compensation ....... -- -- --
Net income .................................. -- -- --
---------- ------------- -------------
BALANCE, DECEMBER 31, 1998 .................. 20,750,411 207,504 223,272,068
Director and officer share grants ........... 34,612 346 334,987
Shares repurchased from former officer and
cancellation of share grants ............ (86,231) (862) (853,810)
Amortization of deferred compensation ....... -- -- --
Issuance of warrants ........................ -- -- 480,992
Shares repurchased and cancelled ............ (1,476,493) (14,765) (12,119,645)
Net income .................................. -- -- --
---------- ------------- -------------
BALANCE, DECEMBER 31, 1999 .................. 19,222,299 $ 192,223 $ 211,114,592
========== ============= =============
TOTAL
RETAINED DEFERRED SHAREHOLDERS'
EARNINGS COMPENSATION EQUITY
-------- ------------ ------
<S> <C> <C> <C>
BALANCE, JANUARY 1, 1997 .................... $ 757,000 $ -- $ 30,005,000
Equity contributions prior to Spin-off ...... -- -- 19,310,633
Net income prior to Spin-off ................ 1,111,559 -- 1,111,559
Spin-off .................................... (1,868,559) -- --
Private offering of common shares (net of
issuance costs) ......................... -- -- 121,694,562
Issuance of warrants ........................ -- -- 6,198,345
Director and officer share grant ............ -- (675,014) 896,679
Net income subsequent to Spin-off ........... 1,941,518 -- 1,941,518
------------- ------------- -------------
BALANCE, DECEMBER 31, 1997 .................. 1,941,518 (675,014) 181,158,296
Shares issued in connection with VLP Merger . -- -- 39,362,500
Issuance of warrants ........................ -- -- 750,000
Director and officer share grants ........... -- (2,700,023) 775,257
Amortization of deferred compensation ....... -- 135,014 135,014
Net income .................................. 9,443,756 -- 9,443,756
------------- ------------- -------------
BALANCE, DECEMBER 31, 1998 .................. 11,385,274 (3,240,023) 231,624,823
Director and officer share grants ........... -- (250,000) 85,333
Shares repurchased from former officer and
cancellation of share grants ............ -- 780,003 (74,669)
Amortization of deferred compensation ....... -- 848,343 848,343
Issuance of warrants ........................ -- -- 480,992
Shares repurchased and cancelled ............ -- -- (12,134,410)
Net income .................................. 8,860,801 -- 8,860,801
------------- ------------- -------------
BALANCE, DECEMBER 31, 1999 .................. $ 20,246,075 $ (1,861,677) $ 229,691,213
============= ============= =============
<FN>
*Includes 339,806 Class A Common Shares.
**Net of treasury stock.
</FN>
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-5
<PAGE>
WELLSFORD REAL PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ............................................. $ 8,860,801 $ 9,443,756 $ 3,053,077
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization .................... 5,936,944 3,033,569 294,563
Amortization of deferred compensation ............ 848,343 135,014 --
Undistributed joint venture income ............... (674,788) (3,515,359) (15,135)
Undistributed minority interest .................. 54,749 77,550 --
Share grants ..................................... 85,333 775,257 896,679
Gain on sale of investments ...................... -- (138,770) --
Changes in assets and liabilities:
Restricted cash ............................... (459,242) (311,940) (2,175,910)
Prepaid and other assets ...................... (498,434) (6,525,355) (3,164,296)
Accrued expenses and other liabilities ........ (297,112) 4,031,091 7,116,138
------------- ------------- -------------
Net cash provided by operating activities ........ 13,856,594 7,004,813 6,005,116
------------- ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in real estate assets ...................... (18,974,593) (125,514,325) (85,551,813)
Investments in joint ventures:
Capital contributions ............................. (16,967,948) (33,511,554) (13,955,069)
Returns of capital ................................ 6,091,481 -- --
Investments in notes receivable ........................ (49,295,088) (67,230,199) (162,845,982)
Repayments of notes receivable ......................... 112,741,492 55,008,523 105,440,515
Proceeds from sale of real estate assets ............... 7,238,329 64,132,507 --
------------- ------------- -------------
Net cash provided by (used in) investing activities 40,833,673 (107,115,048) (156,912,349)
------------- ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from credit facilities ........................ 37,000,000 86,500,000 64,400,000
Repayment of credit facilities ......................... (54,000,000) (77,000,000) (56,900,000)
Proceeds from bridge loan .............................. -- -- 6,000,000
Repayment of bridge loan ............................... -- -- (6,000,000)
Proceeds from mortgage notes payable ................... -- 71,400,000 34,500,000
Repayment of mortgage notes payable .................... (861,861) (478,210) --
Equity contributions prior to Spin-off ................. -- -- 17,060,633
Equity contributions from minority interest ............ -- -- 47,250
Distributions to minority interest ..................... (1,498) (84,730) --
Proceeds from common shares ............................ -- -- 121,694,562
Repurchase of common shares ............................ (12,209,079) -- --
------------- ------------- -------------
Net cash (used in) provided by financing activities (30,072,438) 80,337,060 180,802,445
------------- ------------- -------------
Net increase (decrease) in cash and cash equivalents ...... 24,617,829 (19,773,175) 29,895,212
Cash and cash equivalents, beginning of year .............. 10,122,037 29,895,212 --
------------- ------------- -------------
Cash and cash equivalents, end of year .................... $ 34,739,866 $ 10,122,037 $ 29,895,212
============= ============= =============
SUPPLEMENTAL INFORMATION:
Cash paid during the year for interest ................. $ 10,410,110 $ 5,017,279 $ 1,506,508
============= ============= =============
Cash paid during the year for income taxes ............. $ 4,229,164 $ 2,228,336 $ 2,242,000
============= ============= =============
SUPPLEMENTAL SCHEDULE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES:
Shares issued in connection with acquisition of
commercial office properties and notes receivable . $ -- $ (39,362,500) $ (2,250,000)
Warrants issued in connection with joint venture
investments ....................................... $ (480,992) $ (750,000) $ (6,198,345)
Notes receivable contributed for joint venture interest. $ (24,218,113) $ -- $ --
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-6
<PAGE>
WELLSFORD REAL PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND BUSINESS
Wellsford Real Properties, Inc. (and subsidiaries, collectively the
"Company") was formed on January 8, 1997, as a corporate subsidiary of
Wellsford Residential Property Trust (the "Trust"). The Trust was
formed in 1992 as the successor to Wellsford Group Inc. (and
affiliates) which was formed in 1986. On May 30, 1997, the Trust merged
(the "Merger") with Equity Residential Properties Trust ("EQR").
Immediately prior to the Merger, the Trust contributed certain of its
assets to the Company and the Company assumed certain liabilities of
the Trust. Immediately after the contribution of assets to the Company
and immediately prior to the Merger, the Trust distributed to its
common shareholders all the outstanding shares of the Company owned by
the Trust (the "Spin-off"). On June 2, 1997, the Company sold
12,000,000 shares of its common stock in a private placement (the
"Private Placement") to a group of institutional investors at $10.30
per share, the Company's then book value per share.
The Company 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. The Company has established three strategic business units
("SBUs") within which it executes its business plan: (i) commercial
property operations which are held in the Company's subsidiary,
Wellsford Commercial Properties Trust, through its ownership interest
in Wellsford/Whitehall Group, L.L.C. ("Wellsford/Whitehall"); (ii) debt
and other equity activities; and (iii) property development and land
operations.
See Note 10 for additional information regarding the Company's industry
segments.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION AND FINANCIAL STATEMENT PRESENTATION. The
accompanying consolidated financial statements include the accounts of
Wellsford Real Properties, Inc. and its majority-owned and controlled
subsidiaries. Investments in entities where the Company does not have a
controlling interest, including Wellsford/Whitehall, are accounted for
under the equity method of accounting. These investments are initially
recorded at cost and are subsequently adjusted for the Company's
proportionate share of the investment's income (loss), additional
contributions or distributions. All significant inter-company accounts
and transactions among Wellsford Real Properties, Inc. and its
subsidiaries have been eliminated in consolidation.
The accompanying consolidated financial statements include the assets
and liabilities contributed to and assumed by the Company from the
Trust, from the time such assets and liabilities were acquired or
incurred, respectively, by the Trust. Such financial statements have
been prepared using the historical basis of the assets and liabilities
and the historical results of operations related to the Company's
assets and liabilities.
CASH AND CASH EQUIVALENTS. The Company considers all demand and money
market accounts and short term investments in government funds with an
original maturity of three months or less at the date of purchase to be
cash and cash equivalents.
REAL ESTATE AND DEPRECIATION AND AMORTIZATION. Costs directly related
to the acquisition, development and improvement of real estate are
capitalized, including interest and other costs incurred during the
construction period. Ordinary repairs and maintenance are expensed as
incurred.
F-7
<PAGE>
WELLSFORD REAL PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Tenant improvements and leasing commissions related to commercial
properties are capitalized and amortized over the terms of the related
leases. Costs incurred to acquire investments in joint ventures are
capitalized and if ascribed to tangible assets are amortized over the
life of the related assets and if ascribed to intangible assets are
amortized over a ten-year period. Depreciation is computed over the
expected useful lives of depreciable property on a straight-line basis,
principally 27.5 years for residential buildings and improvements, 40
years for commercial properties and five to twelve years for
furnishings and equipment.
Depreciation and amortization expense was approximately $6,155,000,
$3,157,000 and $295,000 in 1999, 1998 and 1997, respectively, and
included $1,510,000, $390,000 and $295,000 of amortization of certain
assets capitalized to the Company's Investment in Joint Ventures in
1999, 1998 and 1997, respectively.
The Company reviews its real estate assets and investments in joint
ventures (collectively its "long-lived assets") for impairment whenever
events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. During the year ended December 31,
1999, the Company determined that one of its long-lived assets was
impaired due to lower than expected operating results and accordingly
wrote the asset down by approximately $912,000 to its estimated fair
value by recording additional depreciation and amortization expense in
the accompanying consolidated financial statements. Fair value was
based on estimated future cash flows to be generated by the long-lived
asset, discounted at a market rate. There were no such impairment
provisions recorded during the years ended December 31, 1998 or 1997.
MORTGAGE NOTE RECEIVABLE IMPAIRMENT. The Company considers a note
impaired if, based on current information and events, it is probable
that all amounts due under the note agreement are not collectable.
Impairment is measured based upon the fair value of the underlying
collateral. No impairment has been recorded during the years ended
December 31, 1999, 1998 and 1997.
INCOME RECOGNITION. Commercial properties are leased under operating
leases. Rental revenue is recognized on a straight-line basis over the
terms of the respective leases. Residential communities are leased
under operating leases with terms of generally six to 14 months. Rental
revenue is recognized monthly as it is earned. Interest income is
recorded on an accrual basis over the life of the loan. Sales of real
estate assets are recognized at closing, subject to receipt of down
payments and other requirements in accordance with applicable
accounting guidelines.
SHARE BASED COMPENSATION. Statement of Financial Accounting Standard
("SFAS") 123 "Accounting for Stock-Based Compensation" establishes a
fair value based method of accounting for share based compensation
plans, including share options. However, registrants may elect to
continue accounting for share option plans under Accounting Principles
Board Opinion ("APB") 25, but are required to provide pro forma net
income and earnings per share information "as if" the new fair value
approach had been adopted. Because the Company has elected to continue
to account for its share based compensation plans under APB 25, there
has been no impact on the Company's consolidated financial statements
resulting from SFAS 123.
Shares issued pursuant to the Company's deferred compensation plan are
recorded at the market price on the date of issuance and amortized over
the respective vesting periods. Such amortization does not impact the
Company's results of operations.
F-8
<PAGE>
WELLSFORD REAL PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES. The Company accounts for income taxes under SFAS 109
"Accounting for Income Taxes." Deferred income tax assets and
liabilities are determined based upon differences between financial
reporting and tax bases of assets and liabilities and are measured
using the enacted tax rates and laws that will be in effect when the
differences are expected to reverse.
The components of the income tax provision are as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Current federal tax ........ $ 700,000 $ 2,756,165 $ 1,776,595
Current state and local tax 930,000 909,197 456,838
Deferred federal tax ....... 240,000 (693,965) (16,239)
Deferred state and local tax 80,000 (121,099) (4,187)
----------- ----------- -----------
$ 1,950,000 $ 2,850,298 $ 2,213,007
=========== =========== ===========
</TABLE>
The reconciliation of income tax computed at the U.S. federal
statutory rate to income tax expense is as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------------------------------------------------
1999 1998 1997
---------------------- --------------------- ----------------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
------ ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Tax at U.S. statutory rate .......... $ 3,785,000 35.00% $ 4,302,919 35.00% $ 1,454,084 35.00%
State taxes, net of federal benefit . 660,000 6.11% 944,153 7.68% 374,711 9.02%
Change in valuation allowance ....... (2,425,000) (22.43%) (2,345,007) (19.07%) 381,490 9.18%
Non-deductible/non-taxable items, net (70,000) (0.64%) 12,355 0.10% 2,722 0.07%
Effect of change in state tax rate .. -- -- (64,122) (0.53%) -- --
----------- ----- ----------- ----- ----------- -----
$ 1,950,000 18.04% $ 2,850,298 23.18% $ 2,213,007 53.27%
=========== ===== =========== ===== =========== =====
</TABLE>
The Company has net operating loss ("NOL") carryforwards, for Federal
income tax purposes, resulting from the Company's merger with Value
Property Trust ("VLP") in 1998. The NOLs aggregate $70,374,315 at
December 31, 1999, expire in the years 2005 through 2012 and are
subject to an annual and aggregate limit on utilization of NOLs after
an ownership change, pursuant to Section 382 of the Internal Revenue
Code.
F-9
<PAGE>
WELLSFORD REAL PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amount of assets and liabilities for
financial reporting purposes and the amounts used for income tax
purposes. Significant components of the Company's deferred tax assets
and liabilities are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------
Deferred Tax Assets 1999 1998
------------------- ---- ----
<S> <C> <C>
Net operating loss ....................................... $ 23,927,267 $ 32,674,669
Deferred compensation arrangements ....................... 2,779,540 2,496,027
AMT credit carryforward .................................. 549,799 377,612
Deferred interest deduction .............................. 378,779 --
Other .................................................... 628,077 407,844
------------ ------------
28,263,462 35,956,152
Valuation allowance ...................................... (18,984,217) (28,132,547)
------------ ------------
Total deferred tax assets ................................ 9,279,245 7,823,605
------------ ------------
Deferred Tax Liabilities
------------------------
Acquisition of Value Property Trust ...................... (1,992,584) (2,236,945)
Wellsford/Whitehall net income in excess of taxable income (2,411,104) (595,506)
Other .................................................... (410,112) (149,066)
------------ ------------
Total deferred tax liabilities ........................... (4,813,800) (2,981,517)
------------ ------------
Net deferred tax asset ................................... $ 4,465,445 $ 4,842,088
============ ============
</TABLE>
SFAS 109 requires a valuation allowance to reduce the deferred tax
assets if, based on the weight of the evidence, it is more likely than
not that some portion or all of the deferred tax assets will not be
realized. Accordingly, management has determined that a $18,984,517 and
$28,132,547 valuation allowance at December 31, 1999 and 1998,
respectively, is necessary to reduce the deferred tax assets to the
amount that will more likely than not be realized. The valuation
allowance relates to the NOL carryforwards and the deferred
compensation arrangements. The $9,148,030 reduction in the valuation
allowance in 1999 is primarily due to the utilization of the available
NOL carryforwards for Federal income tax purposes and the determination
by the Company during 1999 that the NOL carryforwards acquired as part
of the VLP merger, for the most part, are not available at the state
and local tax level. There was a corresponding reduction in the
computation of the gross deferred tax asset as is indicated above.
PER SHARE DATA. Basic earnings per common share are computed based upon
the weighted average number of common shares outstanding during the
period, including Class A common shares. Diluted earnings per common
share are based upon the increased number of common shares that would
be outstanding assuming the exercise of dilutive common share options
and warrants.
F-10
<PAGE>
WELLSFORD REAL PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The following table details the computation of earnings per share,
basic and diluted:
<TABLE>
<CAPTION>
(amounts in thousands, except per share amounts)
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Numerator for net income per common share, basic and diluted $ 8,861 $ 9,444 $ 3,053
======= ======= =======
Denominator:
Denominator for net income per common share, basic--
Weighted average common shares ..................... 20,642 19,886 16,922
Effect of dilutive securities:
Employee stock options ............................. 15 196 169
Warrants ........................................... -- 297 257
------- ------- -------
Denominator for net income per common share, diluted--
Weighted average common shares ..................... 20,657 20,379 17,348
======= ======= =======
Net income per common share, basic ......................... $ 0.43 $ 0.47 $ 0.18
======= ======= =======
Net income per common share, diluted ....................... $ 0.43 $ 0.46 $ 0.18
======= ======= =======
</TABLE>
ESTIMATES. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could
differ from those estimates.
RECLASSIFICATION. Amounts in certain accounts have been reclassified
to conform to the current year presentation.
3. RESTRICTED CASH
Restricted cash primarily consists of deferred compensation arrangement
deposits and debt service and construction reserve balances. At
December 31, 1999 and 1998, deferred compensation arrangement deposits
amounted to approximately $6,335,000 and $5,965,000, respectively, and
reserve balances amounted to approximately $2,132,000 and $2,043,000,
respectively. Deferred compensation arrangement deposits are made
solely by, and at the discretion of, the Company's officers who
participate in the plan.
F-11
<PAGE>
WELLSFORD REAL PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
4. NOTES RECEIVABLE
At December 31, 1999 and 1998, notes receivable consisted of the
following:
<TABLE>
<CAPTION>
BALANCE AT DECEMBER 31,
STATED -----------------------
NOTES RECEIVABLE (A) INTEREST RATE MATURITY DATE PAYMENT TERMS 1999 1998
-------------------- ------------- ------------- ------------- ---- ----
<S> <C> <C> <C> <C> <C>
277 Park Loan ........... 12.00% May 2007 Interest only $ 25,000,000 $ 25,000,000
Patriot Loan ............ LIBOR + 4.75% July 2002 Interest only 5,000,000 --
Abbey Credit Facility ... LIBOR + 4.00% September 2000 Interest only 4,251,486 46,019,350
Safeguard Credit Facility LIBOR + 4.00% April 2001 (B) Interest only 2,900,000 5,912,500
DeBartolo Loan .......... 8.54% July 2008 (B) 20 year amort. -- 17,677,943
Woodlands Loan .......... LIBOR + 4.40% July 2000 (C) Interest only -- 15,000,000
REIT Bridge Loan ........ 12.00% August 1999 (D) Interest only -- 15,000,000
Other ................... Various Various Various 108,101 96,706
------------ ------------
$ 37,259,587 $124,706,499
============ ============
- ----------
<FN>
(A) For additional information regarding notes receivable, see Footnote
10, "Segment Information, Debt and Equity Investments."
(B) In March 1999, these notes were contributed to the Company's joint
venture investment, Belford Capital Holdings, L.L.C. ("Belford
Capital").
(C) Repaid in December 1999.
(D) In January 1999, the interest rate and maturity date of this loan were
modified to 12.00% from 9.88% and August 1999 from February 1999,
respectively. This loan was repaid in July 1999.
</FN>
</TABLE>
5. DEBT
At December 31, 1999 and 1998, the Company's debt consisted of the
following:
<TABLE>
<CAPTION>
BALANCE AT DECEMBER 31,
-----------------------
DEBT MATURITY DATE STATED INTEREST RATE 1999 1998
---- ------------- -------------------- ---- ----
<S> <C> <C> <C> <C>
WRP Bank Facility .............. May 2000 LIBOR + 1.75% (A) $ -- $ 17,000,000
Wellsford Finance Bank Facility January 2002 LIBOR + 2.75% (A) -- --
Palomino Park Bonds (B) ........ December 2035 Variable (C) 14,755,000 14,755,000
Blue Ridge Mortgage ............ January 2008 6.92% (D) 33,762,791 34,144,108
Red Canyon Mortgage ............ December 2008 6.68% (D) 26,683,184 27,000,000
Wellsford Capital Mortgage (E) . October 2001 LIBOR + 2.75% (A) 28,000,000 28,000,000
Sonterra Mortgage .............. March 2008 6.87% (D) 16,113,953 16,277,682
------------ ------------
$119,314,928 $137,176,790
============ ============
- ----------
<FN>
(A) Applicable LIBOR rates approximated 6.30% and 4.94% at December 31,
1999 and 1998, respectively.
(B) Mortgage secures tax-exempt bonds.
(C) Rate approximates the Standard & Poor's / J.J. Kenney index for
short-term high grade tax-exempt bonds (average rate for 1999 was
approximately 3.4%).
(D) Principal payments are made based on a 30-year amortization schedule.
(E) Secured by the seven properties acquired in the VLP Merger.
</FN>
</TABLE>
In December 1995, the Trust marketed and sold $14,755,000 of tax-exempt
bonds to fund construction at Palomino Park. At December 31, 1999,
$647,000 of the bond proceeds were being held in escrow pending their
use for the funding of development or other bond-related costs. The
bonds are secured by a letter of credit from a bank. An affiliate of
EQR has made its own credit available to the bank in the form of a
guaranty. The Company incurs annual fees of approximately $214,000 for
these enhancements.
F-12
<PAGE>
WELLSFORD REAL PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
DEBT (CONTINUED)
In May 1997, the Company obtained a $50,000,000 two-year line of credit
(extendable for one year) from Fleet National Bank and Morgan Guaranty
Trust Company of New York (the "WRP Bank Facility"). The WRP Bank
Facility is secured by a capital contribution commitment and a
$25,000,000 note receivable. In May 1999, the Company modified the WRP
Bank Facility to extend the maturity date to May 2000. The modified WRP
Bank Facility bears interest at LIBOR + 1.75% and the Company is
obligated to pay a fee equal to three-eighths of one percent (0.375%)
per annum on the average daily amount of the unused portion of the WRP
Bank Facility until maturity. Prior to the modification, the Company
was obligated to pay a fee equal to one-quarter of one percent (0.25%)
per annum on the average daily amount of the unused portion of the WRP
Bank Facility. The Company does not expect to borrow funds under this
facility prior to its expiration.
In January 1999, a wholly-owned subsidiary of the Company obtained a
$35,000,000 loan facility (the "Wellsford Finance Facility") from Fleet
National Bank, which can potentially be increased to $50,000,000 to
finance note receivable investments under its debt program. The
Wellsford Finance Facility bears interest at LIBOR + 2.75% and has a
term of three years. The Company is obligated to pay a fee equal to
one-quarter of one percent (0.25%) per annum on the average daily
amount of the unused portion of the Wellsford Finance Facility until
maturity. The facility contains various loan covenants including
covenants which are restrictive under existing competitive market
conditions. Accordingly, the facility terms require modification for
the Company to fully utilize the facility. As of December 31, 1999,
there was no outstanding balance under the Wellsford Finance Facility.
The Company's long-term debt maturities for the next five years and
thereafter are as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31, AMOUNT
-------------------------------- ------
<S> <C>
2000............................. $ 894,256
2001............................. 28,960,676
2002............................. 1,028,540
2003............................. 1,101,199
2004............................. 1,175,895
Thereafter....................... 86,154,362
</TABLE>
The Company capitalizes interest related to buildings under
construction and renovation to the extent such assets qualify for
capitalization. Total interest capitalized during the years ended
December 31, 1999, 1998 and 1997 was approximately $1,071,000, $803,000
and $1,158,000, respectively.
6. TRANSACTIONS WITH AFFILIATES
The Company earned approximately $517,000, $36,000 and $2,137,000 in
interest income and $600,000, $300,000 and $100,000 in management fees
during the years ended December 31, 1999, 1998 and 1997, respectively,
from Wellsford/Whitehall. Approximately $463,000 and $300,000 was due
to the Company from Wellsford/Whitehall for interest and management
fees at December 31, 1999 and 1998, respectively.
In September 1999, the Company purchased a commercial liability
insurance policy for all of the Company's assets, through an affiliate
of one of its joint venture partners in Wellsford/Whitehall. The total
expense related to this policy was approximately $45,000 in 1999.
F-13
<PAGE>
WELLSFORD REAL PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
TRANSACTIONS WITH AFFILIATES (CONTINUED)
The seven VLP properties are managed by an affiliate of one of the
Company's joint venture partners in Wellsford/Whitehall. Management
fees incurred during the years ended December 31, 1999 and 1998, were
approximately $140,000 and $115,000, respectively. Simultaneous with
the VLP merger transaction in February 1998, the Company sold 13 of the
20 VLP properties to another affiliate of one of its joint venture
partners in Wellsford/Whitehall for an aggregate of approximately
$64,000,000.
As part of the terms of the Merger, two of the Company's executive
officers are on the board of directors of EQR. In addition, the
president of EQR is a member of the Company's board of directors. EQR
has a 20% interest in the Company's residential project in Denver,
Colorado.
During 1999, the Company, through one of its joint venture investments,
has agreed to invest up to $6,500,000 in a real estate market research
internet company, Reis Reports, Inc. ("Reis"), a provider of real
estate market information to institutional investors. The primary
shareholder of Reis is the brother of the Company's chairman, who
recused himself from the Reis investment decisions.
7. SHAREHOLDERS' EQUITY
The Company has issued shares to executive officers through annual
bonus and deferred compensation awards, as well as certain shares
issued at the date of the Merger, pursuant to the Company's
non-qualified deferred compensation plan. At December 31, 1999, an
aggregate of 416,759 shares, which had an aggregate market value of
approximately $4,560,000 at the respective dates of issuance, have
been classified as Treasury Stock in the Company's consolidated
financial statements. Such shares are held in a Rabbi Trust and are
accounted for pursuant to existing accounting literature. The bonus
awards vest immediately and the deferred compensation awards vest over
various periods ranging from two to five years as long as the officer
is still employed by the Company; any unvested shares at termination
are purchased at $0.01 per share. A summary of activity for the three
years ended December 31, 1999 follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
------------------------------------------------------------------------
1999 1998 1997
----------------------- ------------------ -------------------
NUMBER VALUE AT NUMBER VALUE AT NUMBER VALUE AT
OF DATE OF OF DATE OF OF DATE OF
SHARES ISSUANCE SHARES ISSUANCE SHARES ISSUANCE
------ -------- ------ -------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Shares issued pursuant to plan,
January 1 ................... 489,671 92,126 11,172
Shares issued as bonus awards ... -- 93,317 $ 8.875 38,096 $ 15.75
Shares issued as deferred
compensation awards ......... 25,882 $ 10.00/$8.50 304,228 $ 8.875 42,858 $ 15.75
Shares re-acquired at termination
of employment ............... (79,034) $ 8.875/$15.75 -- --
Shares released at termination of
employment .................. (19,760) $ 8.875/$15.75 -- --
------- ------- ------
Balance at December 31 .......... 416,759 489,671 92,126
======= ======= ======
Shares vested at December 31 .... 235,749 151,159 49,268
======= ======= ======
</TABLE>
During the years ended December 31, 1999, 1998 and 1997, the Company
recorded costs of approximately $848,000, $963,000 and $600,000,
respectively, pursuant to the issuances under the deferred compensation
arrangements. Such amounts are included in General and Administrative
expenses in the Company's consolidated financial statements.
F-14
<PAGE>
WELLSFORD REAL PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
SHAREHOLDERS' EQUITY (CONTINUED)
In July 1999, the Company purchased 7,197 common shares at the current
market price of $10.375 per share from an officer who resigned.
The Company implemented two separate programs to repurchase an
aggregate of 2,000,000 outstanding shares of its common stock during
1999. One program allows the Company to repurchase common shares on
the open market, while the odd-lot share program offered identified
eligible shareholders owning fewer than 100 shares the opportunity to
sell all of their shares back to the Company. These programs resulted
in 1,476,493 shares being repurchased and cancelled by December 31,
1999, at an average purchase price of $8.18 per common share.
The Company issued an aggregate of 8,730 and 6,353 common shares during
1999 and 1998, as part of the non-cash compensation arrangements to the
non-employee members of the Company's Board of Directors, which were
valued at an aggregate of approximately $85,000 and $81,000,
respectively.
In February 1998, the Company issued 3,350,000 shares of its common
stock in connection with the VLP Merger.
The Company has issued a total of 4,404,197 warrants, including 123,967
issued during 1999, to purchase shares of common stock to certain joint
venture partners through December 31, 1999, including 4,256,197 to one
of its joint venture partners in Wellsford/Whitehall and 148,000 to its
partners in the Creamer Vitale Wellsford joint venture. Such warrants
are exercisable over a five-year period.
The Company has the option to put to an affiliate of EQR, until May 30,
2000, up to $25,000,000 of the Company's Series A 8% Convertible
Redeemable Preferred Stock ("Series A Preferred"), each share of which
is convertible into shares of common stock at a price of $11.124 (the
"EQR Preferred Commitment"). If at May 30, 2000, the affiliate of EQR
has purchased less than $25,000,000 of Series A Preferred, it has the
option to call the remainder of the $25,000,000 not purchased prior to
that time. The Company expects EQR to purchase the full amount of the
Series A Preferred.
Approximately $13,145,000, $3,523,000 and $15,000 of the Company's
retained earnings at December 31, 1999, 1998 and 1997, respectively,
relate to the Company's joint venture investments.
The Company did not declare or distribute any dividends during 1999,
1998 or 1997.
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, or $8.00 per common share.
8. SHARE OPTION PLANS
The Company has adopted certain incentive plans for the purpose of
attracting and retaining the Company's directors, officers and
employees. The Company has established share option and management
incentive plans (the "Incentive Plans") which reserved 5,076,235 common
shares for issuance under the Incentive Plans. Options granted under
the Incentive Plans expire ten years from the date of grant, vest over
periods ranging generally from six months to five years, and generally
contain the right to receive reload options under certain conditions.
F-15
<PAGE>
WELLSFORD REAL PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
SHARE OPTION PLANS (CONTINUED)
The following table presents the changes in options outstanding by
year, as well as other plan data:
<TABLE>
<CAPTION>
1999 1998 1997
----------------------- ------------------------ -----------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
------- ----- ------- ----- ------- -----
<S> <C> <C> <C> <C> <C> <C>
Outstanding at January 1 .......... 3,558,610 $ 12.79 2,947,610 $ 12.20 -- $ --
Replacement options from Trust .... -- -- -- -- 1,326,235 10.30
Granted ........................... 412,250 8.66 636,000 15.58 1,622,375 13.89
Exercised ......................... -- -- -- -- --
Forfeited ......................... (381,500) 15.04 (25,000) 13.65 (1,000) 10.30
Expired ........................... -- -- -- -- -- --
----------- ---------- ----------
Outstanding at December 31 ........ 3,589,360 12.08 3,558,610 12.79 2,947,610 12.20
=========== ========== ==========
Options exercisable at December 31 1,345,649 12.11 572,117 12.36 115,545 10.30
=========== ========== ==========
Weighted average fair value of
options granted (per option) . $ 5.14 $ 5.63 $ 7.31
=========== ========== ==========
Weighted average remaining
contractual life at December 31 7.9 years 7.7 years 7.6 years
</TABLE>
Pursuant to SFAS 123, described in Note 2, the pro forma net income
available to common shareholders as if the fair value approach to
accounting for share-based compensation had been applied (as well as
the assumptions to calculate fair value using the Black-Scholes option
pricing model) is as follows:
<TABLE>
<CAPTION>
(amounts in thousands, except per share amounts)
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Net income - as reported ............ $ 8,861 $ 9,444 $ 3,053
Expense ............................. 2,112 2,024 601
------------ ----------- ------------
Net income - pro forma .............. $ 6,749 $ 7,420 $ 2,452
============ =========== ============
Net income per common share, basic:
As reported ..................... $ 0.43 $ 0.47 $ 0.18
============ =========== ============
Pro forma ....................... $ 0.33 $ 0.37 $ 0.14
============ =========== ============
Net income per common share, diluted:
As reported ..................... $ 0.43 $ 0.46 $ 0.18
============ =========== ============
Pro forma ....................... $ 0.33 $ 0.36 $ 0.14
============ =========== ============
Assumptions:
Expected volatility ranges....... 36% to 37% 26% to 38% 20% to 29%
Expected life.................... 10 years 10 years 10 years
Risk-free interest rate ranges... 4.68% to 6.08% 4.89% to 5.79% 5.84% to 6.27%
Expected dividend yield.......... -- -- --
</TABLE>
F-16
<PAGE>
WELLSFORD REAL PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
SHARE OPTION PLANS (CONTINUED)
The Black-Scholes option pricing model was developed for use in
estimating the fair value of traded options which have no vesting
restrictions and are fully transferable. In addition, option pricing
models require the input of highly subjective assumptions including the
expected share price volatility. Because the Company's employee share
options have characteristics significantly different from those of
traded options, and because changes in the subjective input assumptions
can materially affect the fair value estimate, in management's opinion,
the existing models do not necessarily provide a reliable single
measure of the fair value of its employee share options.
9. COMMITMENTS AND CONTINGENCIES
The Company has entered into employment agreements with five of its
officers. Such agreements are for terms which expire between 2000 and
2002, and provide for aggregate minimum annual fixed payments of
approximately $1,061,000, $818,000 and $601,000 in 2000, 2001 and 2002,
respectively.
As a commercial real estate owner, the Company and its principal joint
venture are subject to potential environmental costs. At December 31,
1999, management of the Company is not aware of any environmental
concerns that would have a material adverse effect on the Company's
financial condition, results of operations or cash flows.
From time-to-time, legal actions are brought against the Company in the
ordinary course of business. In the opinion of management, such matters
will not have a material effect on the Company's financial condition,
results of operations or cash flows.
In 1997 the Company adopted a defined contribution savings plan
pursuant to Section 401 of the Internal Revenue Code. Under such a plan
there are no prior service costs. All employees are eligible to
participate in the plan after one year of service. Employer
contributions are made based on a discretionary amount determined by
the Company's management. Employer contributions, if any, are based
upon the amount contributed by an employee. During the years ended
December 31, 1999 and 1998, the Company made contributions of
approximately $43,000 and $12,000, respectively.
The Company is a tenant under operating leases for its New York and
Denver offices. Rent expense was approximately $812,000, $233,000 and
$112,000 for the years ended December 31, 1999, 1998 and 1997. Future
minimum lease payments under operating leases at December 31, 1999 are
as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31, AMOUNT
-------------------------------- ------
<S> <C>
2000............................. $ 763,881
2001............................. 753,081
2002............................. 753,081
2003............................. 753,081
2004............................. 815,262
Thereafter....................... 3,125,171
</TABLE>
F-17
<PAGE>
WELLSFORD REAL PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
COMMITMENTS AND CONTINGENCIES (CONTINUED)
The Company and its joint venture partner, WHWEL Real Estate Limited
Partnership ("Whitehall"), an affiliate of The Goldman Sachs Group
Inc., each have made limited guarantees for certain debt obligations on
behalf of Wellsford/Whitehall. The Company and Whitehall each have
guaranteed joint and severally up to a 50% share of the principal
amount of $24,500,000 and 50% share of interest on the $375,000,000
term and mezzanine loans in the event of certain defaults or
non-compliance by Wellsford/Whitehall.
At December 31, 1999, the Company had the following discretionary
capital commitments. Draws under the Abbey Credit Facility and
Safeguard Credit Facility require additional collateral to be made
available to the Company which is subject to the Company's approval.
Capital calls related to investments to be made by the Company's joint
ventures are also subject to the Company's approval of such
investments. The Company may make additional equity investments subject
to board approval if deemed prudent to do so to protect or enhance its
existing investment. At December 31, 1999, discretionary capital
commitments are as follows:
<TABLE>
<CAPTION>
COMMITMENT AMOUNT
----------- ------
<S> <C>
Abbey Credit Facility............. $ 8,980,000
Safeguard Credit Facility......... 17,100,000
Wellsford/Whitehall equity........ 12,231,000
Creamer Vitale Wellsford equity... 13,608,000
Reis ............................. 1,500,000
</TABLE>
F-18
<PAGE>
WELLSFORD REAL PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
10. SEGMENT INFORMATION
The Company's operations are organized into three SBUs. The following
table presents condensed balance sheet and operating data for these
SBUs for 1999, 1998 and 1997:
<TABLE>
<CAPTION>
(amounts in thousands)
COMMERCIAL DEBT AND DEVELOPMENT
PROPERTY EQUITY AND LAND
INVESTMENTS INVESTMENTS INVESTMENTS OTHER* CONSOLIDATED
----------- ----------- ----------- ------ ------------
<S> <C> <C> <C> <C> <C>
DECEMBER 31, 1999
- -----------------
Real estate, net ................ $ -- $ 38,103 $ 121,479 $ -- $ 159,582
Notes receivable ................ -- 37,260 -- -- 37,260
Investment in joint ventures .... 79,688 34,702 -- -- 114,390
Cash and cash equivalents ....... 67 28,694 172 5,807 34,740
Restricted cash and other assets -- 8,142 1,881 10,336 20,359
--------- --------- --------- --------- ---------
Total assets .................... $ 79,755 $ 146,901 $ 123,532 $ 16,143 $ 366,331
========= ========= ========= ========= =========
Mortgage notes payable .......... $ -- $ 28,000 $ 91,315 $ -- $ 119,315
Credit facilities ............... -- -- -- -- --
Accrued expenses and other
liabilities ................. -- 1,908 1,396 10,587 13,891
Minority interest ............... 46 -- 3,388 -- 3,434
Equity .......................... 79,709 116,993 27,433 5,556 229,691
--------- --------- --------- --------- ---------
Total liabilities and equity .... $ 79,755 $ 146,901 $ 123,532 $ 16,143 $ 366,331
========= ========= ========= ========= =========
YEAR ENDED DECEMBER 31, 1999
- ----------------------------
Rental income ................... $ -- $ 5,545 $ 12,329 $ -- $ 17,874
Interest income ................. -- 11,707 -- 589 12,296
--------- --------- --------- --------- ---------
Total income .................... -- 17,252 12,329 589 30,170
--------- --------- --------- --------- ---------
Operating expenses .............. -- 2,561 3,686 -- 6,247
Depreciation and amortization ... 337 2,509 2,999 309 6,154
Interest ........................ -- 4,346 4,827 226 9,399
General and administrative ...... -- 1,131 -- 5,995 7,126
--------- --------- --------- --------- ---------
337 10,547 11,512 6,530 28,926
--------- --------- --------- --------- ---------
Gain on sale of investments ..... -- -- -- -- --
Income from joint ventures ...... 7,183 2,439 -- -- 9,622
Minority interest ............... -- (1) (54) -- (55)
--------- --------- --------- --------- ---------
Income (loss) before taxes ...... $ 6,846 $ 9,143 $ 763 $ (5,941) $ 10,811
========= ========= ========= ========= =========
- ----------
<FN>
*Includes corporate cash, other assets, accrued expenses and other
liabilities, general and administrative expenses, interest income and
interest expense that has not been allocated to the operating segments.
</FN>
</TABLE>
F-19
<PAGE>
WELLSFORD REAL PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
SEGMENT INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
(amounts in thousands)
COMMERCIAL DEBT AND DEVELOPMENT
PROPERTY EQUITY AND LAND
INVESTMENTS INVESTMENTS INVESTMENTS OTHER* CONSOLIDATED
----------- ----------- ----------- ------ ------------
<S> <C> <C> <C> <C> <C>
DECEMBER 31, 1998
- -----------------
Real estate, net ................ $ -- $ 37,666 $ 112,657 $ -- $ 150,323
Notes receivable ................ -- 124,707 -- -- 124,707
Investment in joint ventures .... 69,529 11,248 -- -- 80,777
Cash and cash equivalents ....... 49 2,333 153 7,588 10,123
Other assets .................... -- 8,078 2,257 8,706 19,041
--------- --------- --------- --------- ---------
Total assets .................... $ 69,578 $ 184,032 $ 115,067 $ 16,294 $ 384,971
========= ========= ========= ========= =========
Mortgage notes payable .......... $ -- $ 28,000 $ 92,177 $ -- $ 120,177
Credit facilities ............... -- -- -- 17,000 17,000
Accrued expenses and
other liabilities ........... -- 2,660 2,451 7,677 12,788
Minority interest ............... 47 -- 3,334 -- 3,381
Equity .......................... 69,531 153,372 17,105 (8,383) 231,625
--------- --------- --------- --------- ---------
Total liabilities and equity .... $ 69,578 $ 184,032 $ 115,067 $ 16,294 $ 384,971
========= ========= ========= ========= =========
YEAR ENDED DECEMBER 31, 1998
- ----------------------------
Rental income ................... $ -- $ 4,761 $ 8,366 $ -- $ 13,127
Interest income ................. -- 12,130 401 357 12,888
--------- --------- --------- --------- ---------
Total income .................... -- 16,891 8,767 357 26,015
--------- --------- --------- --------- ---------
Operating expenses .............. -- 2,087 2,399 -- 4,486
Depreciation and amortization ... 175 842 2,040 100 3,157
Interest ........................ -- 472 3,272 855 4,599
General and administrative ...... -- 397 -- 4,666 5,063
--------- --------- --------- --------- ---------
Total expenses .................. 175 3,798 7,711 5,621 17,305
--------- --------- --------- --------- ---------
Gain on sale of investments ..... -- 139 -- -- 139
Income from joint venture ....... 2,812 711 -- -- 3,523
Minority interest ............... -- (50) (28) -- (78)
--------- --------- --------- --------- ---------
Income (loss) before taxes ...... $ 2,637 $ 13,893 $ 1,028 $ (5,264) $ 12,294
========= ========= ========= ========= =========
- ----------
<FN>
*See footnote * on page F-19.
</FN>
</TABLE>
F-20
<PAGE>
WELLSFORD REAL PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
SEGMENT INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
(amounts in thousands)
COMMERCIAL DEBT AND DEVELOPMENT
PROPERTY EQUITY AND LAND
INVESTMENTS INVESTMENTS INVESTMENTS OTHER* CONSOLIDATED
----------- ----------- ----------- ------ ------------
<S> <C> <C> <C> <C> <C>
DECEMBER 31, 1997
- -----------------
Real estate, net ................ $ -- $ -- $ 58,741 $ -- $ 58,741
Notes receivable ................ -- 87,832 17,800 -- 105,632
Investment in joint venture ..... 44,780 -- -- -- 44,780
Cash and cash equivalents ....... -- -- -- 29,896 29,896
Other assets .................... -- 1,313 3,040 6,572 10,925
--------- --------- --------- --------- ---------
Total assets .................... $ 44,780 $ 89,145 $ 79,581 $ 36,468 $ 249,974
========= ========= ========= ========= =========
Mortgage notes payable .......... $ -- $ -- $ 49,255 $ -- $ 49,255
Credit facilities ............... -- -- 7,500 -- 7,500
Accrued expenses and other
liabilities ................. -- -- 1,838 7,925 9,763
Minority interest ............... -- -- 2,297 -- 2,297
Equity .......................... 44,780 89,145 18,691 28,543 181,159
--------- --------- --------- --------- ---------
Total liabilities and equity .... $ 44,780 $ 89,145 $ 79,581 $ 36,468 $ 249,974
========= ========= ========= ========= =========
YEAR ENDED DECEMBER 31, 1997
- ----------------------------
Rental income ................... $ 1,291 $ -- $ -- $ -- $ 1,291
Interest income ................. -- 5,002 1,602 1,175 7,779
--------- --------- --------- --------- ---------
Total income .................... 1,291 5,002 1,602 1,175 9,070
--------- --------- --------- --------- ---------
Operating expenses .............. 365 -- -- -- 365
Depreciation and amortization ... 188 -- -- 106 294
Interest ........................ -- -- -- -- --
General and administrative ...... -- -- -- 3,160 3,160
--------- --------- --------- --------- ---------
Total expenses .................. 553 -- -- 3,266 3,819
--------- --------- --------- --------- ---------
Income from joint venture ....... 15 -- -- -- 15
--------- --------- --------- --------- ---------
Income (loss) before taxes ...... $ 753 $ 5,002 $ 1,602 $ (2,091) $ 5,266
========= ========= ========= ========= =========
- ----------
<FN>
*See footnote * on page F-19.
</FN>
</TABLE>
F-21
<PAGE>
WELLSFORD REAL PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
SEGMENT INFORMATION (CONTINUED)
COMMERCIAL PROPERTY OPERATIONS - WELLSFORD/WHITEHALL
----------------------------------------------------
The Company's commercial property operations segment consists of
Wellsford/Whitehall, which is accounted for on the equity method.
At the time of the Spin-off, the Company owned six commercial office
buildings, five of which were then vacant, containing an aggregate of
approximately 949,400 square feet which were acquired for an aggregate
of approximately $47,600,000 (the "WRP Commercial Properties").
In August 1997, the Company, in a joint venture with Whitehall, formed
a private real estate operating company, Wellsford/Whitehall. The
Company contributed the WRP Commercial Properties and Whitehall
contributed four commercial properties upon formation of
Wellsford/Whitehall. The Company manages Wellsford/Whitehall on a
day-to-day basis, and certain major decisions require the consent of
both primary partners. The Company had a 41.4% interest in
Wellsford/Whitehall at December 31, 1999.
The following table presents a condensed balance sheet and operating
data for the Wellsford/Whitehall segment:
<TABLE>
<CAPTION>
(amounts in thousands)
CONDENSED BALANCE SHEET DATA DECEMBER 31,
---------------------------- ------------
1999 1998
---- ----
<S> <C> <C>
Real estate, net................... $ 551,152 $ 493,207
========= =========
Total assets....................... $ 572,279 $ 511,381
========= =========
Mortgage notes payable............. $ 110,831 $ 68,043
========= =========
Credit facility.................... $ 238,661 $ 276,197
========= =========
Equity............................. $ 200,740 $ 151,866
========= =========
Total liabilities and equity....... $ 572,279 $ 511,381
========= =========
CONDENSED OPERATING DATA FOR THE YEARS ENDED DECEMBER 31,
------------------------ --------------------------------
1999 1998 1997*
---- ---- -----
<S> <C> <C> <C>
Rental income.................... $ 74,148 $ 53,460 $ 8,540
========= ========= ========
Operating expenses............... $ 27,431 $ 20,279 $ 3,494
========= ========= ========
Depreciation and amortization.... $ 11,702 $ 7,387 $ 1,220
========= ========= ========
Interest......................... $ 25,586 $ 19,085 $ 2,949
========= ========= ========
Total expenses................... $ 72,862 $ 50,050 $ 8,498
========= ========= ========
Gain on sale of investments...... $ 15,642 $ 2,866 $ --
========= ========= ========
Income before distributions...... $ 17,457 $ 6,439 $ 30
========= ========= ========
- ----------
<FN>
*From inception.
</FN>
</TABLE>
As of December 31, 1999, Wellsford/Whitehall owned and operated 41
office properties totaling approximately 4,920,000 square feet,
including approximately 1,451,000 square feet under renovation,
primarily located in New Jersey, Massachusetts and Maryland.
F-22
<PAGE>
WELLSFORD REAL PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
SEGMENT INFORMATION (CONTINUED)
During the years ended December 31, 1999, 1998 and 1997,
Wellsford/Whitehall participated in the following transactions:
<TABLE>
<CAPTION>
(amounts in millions, except square feet and per square foot amounts)
1999 ACTIVITY:
Purchases:
Gross
Leasable
Square Number of Cost per
Month Type Location Feet Properties Cost (1) Square Foot
----- ---- -------- ---- ---------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
May ......... Office/Flex Warren, NJ 129,000 1 $ 8.0 $ 62
June ........ Office Boston, MA 64,000 1 10.2 159
June ........ Office Boston, MA 68,000 1 13.1 193
July ........ Office/Land Columbia, MD 97,000 1 10.7 110
July ........ Office Owings Mills, MD 32,000 1 3.9 122
August ...... Land Hanover, NJ 19.2 acres 1 2.0 --
August ...... Office Hanover, NJ 96,000 1 13.3 139
September ... Flex Columbia, MD 144,000 1 3.8 26
November .... Office Rockville, MD 236,000 1 19.9 84
------- - -------
Total purchases 866,000 9 $ 84.9 --
======= = =======
Total, excluding land 866,000 8 $ 82.9 96
======= = =======
Sales:
Sales Price
Gross Leasable per
Square Number of Square
Month Location Feet Properties Sales Price Foot Gain
----- -------- ---- ---------- ----------- ---- ----
<S> <C> <C> <C> <C> <C> <C>
February .... Wayne, NJ 2.58 acres (2) 1 $ 0.3 $-- $ 0.2
May ......... Boston, MA 65,000 1 8.1 125 2.3
August ...... Needham, MA 261,000 1 26.0 100 5.6
November .... Washington, D.C. 225,000 1 43.4 193 7.5
------- - ------- -------
Total sales 551,000 4 $ 77.8 -- $ 15.6
======= = ======= =======
Total, excluding land 551,000 3 $ 77.5 141 $ 15.4
======= = ======= =======
- ----------
<FN>
(1) The 1999 Wellsford/Whitehall acquisitions described above were funded
with proceeds from first mortgage financing on five of the properties
and seller financing in the form of a second mortgage on one of the
properties of $43,401,000 and additional capital contributions by the
Company and Whitehall.
(2) Sale of vacant land.
</FN>
F-23
<PAGE>
WELLSFORD REAL PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
SEGMENT INFORMATION (CONTINUED)
1998 ACTIVITY:
Purchases:
Gross
Leasable Cost per
Square Number of Square
Month Type Location Feet Properties Cost (1) Foot
----- ---- -------- ---- ---------- -------- ----
<S> <C> <C> <C> <C> <C> <C>
February .... Office Boston, MA 65,000 1 $ 5.5 $ 85
February .... Land Somerset, NJ 19 acres 1 2.0 --
March ....... Office Somerset, NJ 82,000 1 5.4 66
May ......... Office Boston, MA 977,000 13 148.7 (2) 152
May ......... Warehouse Needham, MA 470,000 2 28.4 60
June ........ Office Andover, MA 63,000 1 7.4 117
June ........ Office Basking Ridge, NJ 104,000 2 15.0 144
September ... Office Franklin Township, NJ 199,000 2 22.8 115
November .... Office Columbia, MD 38,000 1 2.6 68
December .... Office Ridgefield Park, NJ 147,000 1 19.3 131
--------- -- --------
Total purchases 2,145,000 25 $ 257.1 --
========= == ========
Total, excluding land 2,145,000 24 $ 255.1 119
========= == ========
Sale:
Sales Price
Gross Leasable per
Square Number of Square
Month Location Feet Properties Sales Price Foot Gain
----- -------- ---- ---------- ----------- ---- ----
<S> <C> <C> <C> <C> <C> <C>
May ......... Wayne, NJ 69,000 1 $ 5.0 $ 72 $ 2.9
- ----------
<FN>
(1) The 1998 Wellsford/Whitehall acquisitions described above, other than
the May Boston transaction, were funded primarily by capital
contributions from the Company and Whitehall, and by draws on the
Wellsford/Whitehall Bank Facility.
(2) The Boston portfolio of 13 office buildings was financed with (i) the
assumption of $68,300,000 of mortgage debt, (ii) a $35,800,000 draw on
the Wellsford/Whitehall Bank Facility, (iii) the issuance of $19,000,000
of Wellsford/Whitehall 6% convertible preferred units to the sellers,
(iv) $18,000,000 of capital contributions by Whitehall and the Company
and (v) the issuance of $7,600,000 of Wellsford/Whitehall common units.
</FN>
1997 ACTIVITY:
Purchases (1):
Gross
Leasable Cost per
Square Number of Square
Month Type Location Feet Properties Cost (2) Foot
----- ---- -------- ---- ---------- -------- ----
<S> <C> <C> <C> <C> <C> <C>
September Office Somerset, NJ 181,000 1 $ 18.1 $ 100
December Office Berkeley Hts, NJ 297,000 2 29.1 98
December Industrial Parsippany, NJ 244,000 1 7.1 29
------- - ---------
Total purchases 722,000 4 $ 54.3 75
======= = =========
- ----------
<FN>
(1) Exclusive of properties contributed by the Company and Whitehall upon
formation of the joint venture.
(2) The Wellsford/Whitehall transactions described above were funded
primarily by capital contributions from the Company and Whitehall, the
assumption of $48,000,000 in mortgage debt which encumbered certain of
the properties contributed by Whitehall and the proceeds of a term
loan agreement (the "Wellsford/Whitehall Bridge Loan") by the Company
to Wellsford/Whitehall.
</FN>
</TABLE>
F-24
<PAGE>
WELLSFORD REAL PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
SEGMENT INFORMATION (CONTINUED)
In July 1998, Wellsford/Whitehall modified the Wellsford/Whitehall Bank
Facility. Under the new terms, $300,000,000 represents a senior secured
credit facility bearing interest at LIBOR + 1.65% and $75,000,000
represents a secured mezzanine facility bearing interest at LIBOR +
3.20%. Both facilities mature on December 15, 2000 and are extendable
for one year by Wellsford/Whitehall. As of December 31, 1999 and 1998,
approximately $238,700,000 and $276,200,000, respectively, was
outstanding under the Wellsford/Whitehall Bank Facility (approximately
$177,300,000 and $207,300,000, respectively, of which was under the
senior facility). At December 31, 1999, Wellsford/Whitehall expects to
borrow an additional $8,000,000 for tenant improvements and leasing
commissions through March 31, 2000, when the ability to draw on this
facility expires under the current terms of the Wellsford/Whitehall
Bank Facility. The Wellsford/Whitehall Bank Facility contains certain
financial covenants including limitations on distributions to members.
The Company is entitled to receive incentive compensation payable out
of distributions made by Wellsford/Whitehall (the "Promote") after
return of capital and minimum annual returns of at least 15% to 17.5%
on such capital balances to the Company and Whitehall (as defined in
the Wellsford/Whitehall Operating Agreement (the "Operating
Agreement")). Pursuant to the Operating Agreement, the Company is
required to distribute to officers and employees of Wellsford/Whitehall
and the Company, 50% or, in some cases, 55% of the Promote it receives.
To date, the Company has not earned or received any distribution of the
Promote and there can be no assurance that such Promote will be earned.
In June 1999, the capital commitment requirements of
Wellsford/Whitehall were modified from an aggregate of $150,000,000
($75,000,000 by each partner) to an aggregate of $250,000,000. The
Company's total portion is $85,000,000 of which $72,769,000 was
contributed as of December 31, 1999 and Whitehall's total portion is
$165,000,000 of which $101,604,000 was contributed as of December 31,
1999.
In connection with the formation of Wellsford/Whitehall, the Company
issued warrants (the "Whitehall Warrants") to Whitehall to purchase
4,132,230 shares of the Company's common stock at an exercise price of
$12.10 per share. The Whitehall Warrants are exercisable until August
28, 2002. The exercise price for the Whitehall Warrants is payable in
cash or membership units in Wellsford/Whitehall. As part of the new
capital commitment from Whitehall in 1999, the Company issued to
Whitehall additional warrants to purchase an additional 123,967 shares
of the Company's common stock exercisable at $12.10 per share, payable
in cash or in exchange for membership units of Wellsford/Whitehall,
held by Whitehall based upon Wellsford/Whitehall's value as defined.
These additional warrants are exercisable for five years and expire on
May 28, 2004. Whitehall may exchange an additional $25,000,000 of the
membership units it owns in Wellsford/Whitehall for shares of the
Company's common stock or cash at the Company's sole discretion, based
upon the price paid for such membership units and the current market
value of the Company's common stock. As of December 31, 1999, no units
have been converted.
The Company has agreed with Whitehall to conduct its business and
activities relating to office properties (but not other types of
commercial properties) located in North America solely through its
interest in Wellsford/Whitehall except, in certain circumstances, where
Wellsford/Whitehall has declined the investment opportunity.
F-25
<PAGE>
WELLSFORD REAL PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
SEGMENT INFORMATION (CONTINUED)
DEBT AND EQUITY ACTIVITIES--WELLSFORD CAPITAL
---------------------------------------------
At December 31, 1999, the Company had approximately $65,000,000 of
debt related investments, including approximately $37,300,000 of
direct debt investments which bore interest at an average yield of
approximately 11.31% and had an average remaining term to maturity of
approximately 4.8 years and $27,700,000 in a company which was
organized to invest in debt instruments. The Company also had venture
capital investments of approximately $7,000,000 in a real estate
related e-commerce company and other real estate-related ventures. In
addition, the Company owned and operated seven commercial properties
totaling approximately 597,000 square feet primarily located in the
Northeastern United States and California.
277 PARK
In April 1997, the Company and Fleet National Bank originated an
$80,000,000 loan (the "277 Park Loan") to entities which own
substantially all of the equity interests (the "Equity Interests") in
the entity which owns a 1,750,000 square foot office building located
in New York City (the "277 Park Property"). The Company has advanced
$25,000,000 pursuant to the 277 Park Loan. The 277 Park Loan is secured
primarily by a pledge of the Equity Interests owned by the borrowers.
The 277 Park Loan is subordinated to a 10-year $345,000,000 (amortized
balance of $332,580,000 at December 31, 1999) first mortgage loan (the
"REMIC Loan") on the 277 Park Property. The 277 Park Loan bears
interest at the rate of 12.00% per annum for the first nine years of
its term and at a floating annual rate during the tenth year equal to
LIBOR + 5.15% or the Fleet National Bank base rate plus 5.15%, as
elected by the borrowers. The principal amount of the 277 Park Loan and
all accrued interest will be payable in May 2007; the REMIC Loan is
also due in May 2007. The Company earned approximately $3,042,000,
$3,042,000 and $2,000,000 per year in interest income, or 10.1%, 11.7%
and 22.1% of its total non-joint venture revenues from the 277 Park
Loan during 1999, 1998 and 1997, respectively.
PATRIOT
In September 1999, the Company and Fleet National Bank originated a
$10,000,000 second mortgage. The Company has advanced $50,000,000 (its
50% share) pursuant to the second mortgage. The second mortgage is
subordinate to a $75,000,000 first mortgage with Fleet National Bank.
The loan bears interest at LIBOR + 4.75% with payments of interest only
through August 2001 and principal and interest based on a 25-year
amortization through the loan's maturity in July 2002 (the "Patriot
Loan"). The Patriot Loan is secured by a fee interest in a 608,000
square foot mixed-use property in Boston, Massachusetts.
THE ABBEY COMPANY
In August 1997, the Company and Morgan Guaranty Trust Company of New
York ("MGT") originated a $70,000,000 credit facility secured by first
mortgages (the "Abbey Credit Facility") to affiliates of The Abbey
Company, Inc. ("Abbey"). In May 1998, the Company and MGT expanded the
Abbey Credit Facility to $120,000,000. In December 1998, Abbey repaid
$20,000,000, thereby reducing the total available balance to
$100,000,000. In September 1999, an additional $83,500,000 was repaid,
thereby reducing the total available balance to $16,500,000. The Abbey
Credit Facility will be made available to Abbey until September 2000.
Advances under the facility can be made for up to 65% of the value of
the borrowing base collateral which consisted of first mortgage loans
on three properties (one each of office, industrial and retail), all
cross-collateralized, totaling approximately 250,000 square feet at
December 31, 1999.
F-26
<PAGE>
WELLSFORD REAL PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
SEGMENT INFORMATION (CONTINUED)
The Company's portion of the outstanding balance is approximately
$4,300,000 and $46,000,000 at December 31, 1999 and 1998, respectively.
Under the terms of its participation agreement with MGT, the Company
will fund a 50% junior participation on all advances under the Abbey
Credit Facility. The Company is entitled to receive interest on its
advances under the Abbey Credit Facility at LIBOR + 4.00%. The Company
earned approximately $2,941,000, $3,920,000 and $827,000, or 9.8%,
15.1% and 9.1% of its total non-joint venture revenues from the Abbey
Credit Facility during 1999, 1998 and 1997, respectively.
SAFEGUARD
In December 1998, the Company and MGT originated a $90,000,000 credit
facility secured by first mortgages (the "Safeguard Credit Facility")
to Safeguard Capital Fund, L.P. ("Safeguard"). The Safeguard Credit
Facility will be made available to Safeguard until April 2001. Advances
under the facility can be made for up to 75% of the value of the
borrowing base collateral which consists of nine self-storage
properties, all cross-collateralized, totaling approximately 608,000
square feet at December 31, 1999. Under the terms of its participation
agreement with MGT, the Company will fund a 50% junior participation on
all advances under the Safeguard Credit Facility. The Company is
entitled to receive interest on its advances under the Safeguard Credit
Facility at LIBOR + 4.00%.
Approximately $5,900,000 had been advanced by the Company under the
Safeguard Credit Facility at December 31, 1998, with additional
advances made of approximately $2,200,000 through March 1999, at which
time the loan with a balance of $8,100,000 was contributed to the
Company's joint venture investment, Belford Capital. This venture also
assumed the first $25,000,000 of the Company's commitment to fund
additional advances under the Safeguard Credit Facility (including
amounts advanced through December 31, 1999). The Company retained the
remaining $20,000,000 commitment, of which $2,900,000 was advanced to
Safeguard in September 1999 and was outstanding at December 31, 1999.
DEBARTOLO
In July 1998, the Company, Bank One, N.A. and several other financial
institutions originated a $175,000,000 loan, in which the Company had
an $18,000,000 participation (the "DeBartolo Loan"), to entities owned
by Simon DeBartolo Group, L.P. The DeBartolo Loan is secured by
partnership units in Simon DeBartolo Group, L.P., the operating
partnership of a real estate investment trust which owns mall space
nationwide. The DeBartolo Loan bears interest at 8.547%, is payable
quarterly, pays principal based on a 20-year amortization schedule and
is due in July 2008. In March 1999, the amortized loan balance of
approximately $17,600,000 was contributed to Belford Capital.
F-27
<PAGE>
WELLSFORD REAL PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
SEGMENT INFORMATION (CONTINUED)
WOODLANDS
In December 1997, the Company, Fleet National Bank, Morgan Stanley
Senior Funding, Inc. and certain other lenders made available to the
owners and developers of a 25,000 acre master-planned residential
community located north of Houston (the "Woodlands Property"), loans in
the aggregate principal amount of $369,000,000 (the "Woodlands Loan").
The Woodlands Loan consisted of a revolving credit loan in the
principal amount of $179,000,000 (the "Revolving Loan"), a secured term
loan in the principal amount of $130,000,000 (the "Secured Loan"), and
a second secured term loan in the principal amount of $60,000,000 (the
"Second Secured Loan"). The Company advanced $15,000,000 pursuant to
the Second Secured Loan. The Second Secured Loan was subordinate to the
Revolving Loan and the Secured Loan and bore interest equal to LIBOR +
4.40%. The principal amount of the Woodlands Loan was repaid in full
prior to December 31, 1999. The Company earned approximately $1,295,000
and $1,517,000, or 4.3% and 5.8% of its total non-joint venture
revenues from the Woodlands Loan during 1999 and 1998, respectively.
REIT BRIDGE LOAN
In August 1998, the Company, Deutsche Bank, N.A. and certain other
lenders originated a $100,000,000 unsecured loan in which the Company
had a $15,000,000 participation (the "REIT Bridge Loan") to a publicly
traded real estate investment trust which owns 22 regional malls, eight
multifamily apartment properties and five office properties nationwide.
This loan bore interest at 9.875% and was due in February 1999, with
two three-month extensions available to the borrower. In January 1999,
the REIT Bridge Loan was modified to extend the maturity date to August
1999 and increase the interest rate to 12.00%. The borrower paid a
1.50% loan fee at origination and a 1.00% loan fee upon modification.
This loan was repaid in full in July 1999.
BROOMFIELD
In January 1999, the Company acquired a parcel of land in Broomfield,
Colorado for approximately $7,200,000 pursuant to an outstanding
standby commitment issued in 1998. In connection with this transaction,
the Company collected approximately $400,000 of fees in 1998. In July
1999, the Company sold this land for $7,200,000 to a third party
("Buyer") and simultaneously collected an additional $1,100,000 in
fees. The Company then purchased $11,740,000 of tax-exempt notes,
bearing interest at 6.25% and due in December 1999. These notes were
issued by a quasi-governmental agency partially controlled by the Buyer
and were guaranteed by a AA rated bank. The notes were repaid in full
in December 1999. The Company earned approximately $1,555,000 and
$401,000, or 5.2% and 1.5% of its total non-joint venture revenues, on
the Broomfield transaction during 1999 and 1998, respectively.
F-28
<PAGE>
WELLSFORD REAL PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
SEGMENT INFORMATION (CONTINUED)
BELFORD CAPITAL
The Company contributed approximately $24,200,000 and $4,900,000 in
1999 and 1998, respectively, to a 51% owned joint venture special
purpose finance company ("SPFC"), Belford Capital, with The Liberty
Hampshire Company, L.L.C. ("Liberty Hampshire") owning 10% and another
entity owning the remaining 39%. The 1999 contribution was comprised of
two of the Company's debt investments, the $17,600,000 DeBartolo Loan
and the $8,100,000 outstanding balance of the Safeguard Credit
Facility, net of $1,500,000 of cash received back from Belford Capital.
The other partners contributed their respective shares of their capital
contributions in cash. Belford Capital also assumed the first
$25,000,000 of the Company's commitment to fund the Safeguard Credit
Facility (including amounts advanced to date).
LIBERTY HAMPSHIRE
In July and August 1998, the Company invested a total of approximately
$2,100,000 for a 4.20% interest in Liberty Hampshire, which structures,
establishes and provides management and services for SPFCs formed to
invest in financial assets.
REIS REPORTS, INC.
Belford Capital has invested $6,500,000 in Reis at December 31, 1999.
The Company's share of this investment was approximately $3,321,000 at
December 31, 1999.
The following table presents a condensed balance sheet and operating
data for Belford Capital (1998 amounts are unaudited):
<TABLE>
<CAPTION>
(amounts in thousands)
DECEMBER 31,
------------
CONDENSED OPERATING DATA 1999 1998
------------------------ ---- ----
<S> <C> <C>
Investments...................... $ 40,143 $ 3,924
============ ===========
Investment in Reis............... $ 6,500 $ 5,000
============ ===========
Total assets..................... $ 60,870 $ 9,951
============ ===========
Total equity..................... $ 60,639 $ 9,928
============ ===========
Total liabilities and equity..... $ 60,870 $ 9,951
============ ===========
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------
CONDENSED OPERATING DATA 1999 1998*
------------------------ ---- -----
<S> <C> <C>
Interest.................. $ 3,243 $ 126
Interest from Reis........ 506 205
----------- ----------
Total revenue............. 3,749 331
Total expenses............ 812 1
----------- ----------
Net income................ $ 2,937 $ 330
=========== ==========
- ----------
<FN>
*From inception of investment.
</FN>
</TABLE>
F-29
<PAGE>
WELLSFORD REAL PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
SEGMENT INFORMATION (CONTINUED)
CREAMER VITALE WELLSFORD/CLAIRBORNE INVESTORS
In January 1998, the Company formed Creamer Vitale Wellsford, L.L.C.
("Creamer Vitale Wellsford") in which it has a 49% interest and
acquired the same interest in a related real estate advisory and
consulting firm.
Creamer Vitale Wellsford, together with Prudential Real Estate
Investors ("PREI"), an affiliate of Prudential Life Insurance Company,
have established the Clairborne Investors Mortgage Investment Program
("Clairborne") to make opportunistic investments and to provide
liquidity to lenders and participants in mortgage loan transactions.
The parties have agreed to contribute up to $150,000,000 to fund
acquisitions approved by the parties, of which PREI will fund 90% and a
subsidiary of the Company will fund 10%. Creamer Vitale Wellsford will
originate, co-invest, and manage the investments of the program.
The Company's original investment in these entities was $1,250,000 of
cash and 148,000 five-year warrants to purchase the Company's common
shares at $15.175 per share, valued at approximately $750,000 at that
time. In November 1998, Clairborne acquired an approximate $17,000,000
participation in a $56,000,000 mortgage, bearing interest at LIBOR +
1.75% and due in 3.5 years, at a significant discount to face value.
The Company funded approximately $1,400,000 of the cost of this
participation, which was prepaid entirely at the face amount during
1999 by the borrower.
VALUE PROPERTY TRUST
In February 1998, the Company completed the merger with VLP (the "VLP
Merger") for total consideration of approximately $169,000,000, which
was accounted for as a purchase. Thirteen of the twenty VLP properties,
which were under contract to an affiliate of Whitehall, were
subsequently sold for an aggregate of approximately $64,000,000. The
Company retained seven of the VLP properties with an allocated value
upon purchase of approximately $38,300,000 containing an aggregate of
approximately 597,000 square feet located primarily in the northeastern
United States and California. VLP had cash of $60,800,000 and net other
assets of $5,900,000 at the close of the transaction.
Contractual future minimum lease payments from tenants of the VLP
properties with operating leases for the next five years and thereafter
are as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31, AMOUNT
-------------------------------- ------
<S> <C>
2000..................................... $ 4,306,000
2001..................................... 3,733,000
2002..................................... 2,422,000
2003..................................... 1,552,000
2004..................................... 979,000
Thereafter............................... 1,156,000
</TABLE>
F-30
<PAGE>
WELLSFORD REAL PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
SEGMENT INFORMATION (CONTINUED)
PROPERTY DEVELOPMENT AND LAND OPERATIONS--WELLSFORD DEVELOPMENT
---------------------------------------------------------------
PALOMINO PARK
The Company owns an approximate 80% interest in Phases I, II, III, IV
and V of a 1,800-unit class A multifamily development ("Palomino Park")
in a suburb of Denver, Colorado. EQR owns the remaining 20% interest.
The Company has a related $14,755,000 tax exempt mortgage note payable
which requires interest only payments at a variable rate (average rate
for 1999 was approximately 3.4%) until it matures in December 2035 (the
"Palomino Park Bonds"). The tax exempt mortgage note payable is
security for tax-exempt bonds, which are backed by a letter of credit
from a AA rated financial institution. The Company and an affiliate of
EQR have guaranteed the reimbursement of the financial institution in
the event that the letter of credit is drawn upon (the latter guarantee
being the "EQR Enhancement").
In December 1997, Phase I, known as Blue Ridge, was completed at a cost
of approximately $41,500,000. At that time, the Company obtained a
$34,500,000 permanent loan (the "Blue Ridge Mortgage") secured by a
first mortgage on Blue Ridge. The Blue Ridge Mortgage matures in
January 2008 and bears interest at a fixed rate of 6.92%. Principal
payments are based on a 30-year amortization schedule.
In November 1998, Phase II, known as Red Canyon, was completed at a
cost of approximately $33,900,000. At that time, the Company acquired
the Red Canyon improvements and the related construction loan was
repaid with the proceeds of a $27,000,000 permanent loan (the "Red
Canyon Mortgage") secured by a first mortgage on Red Canyon. The Red
Canyon Mortgage matures in December 2008 and bears interest at a fixed
rate of 6.68%. Principal payments are based on a 30-year amortization
schedule.
The estimated total costs of the remaining three multifamily
development phases at Palomino Park and related infrastructure costs at
completion of these phases, including the Company's gross investment,
which is included in construction in progress on the Company's
consolidated financial statements, of approximately $30,748,000 at
December 31, 1999, are as follows:
<TABLE>
<CAPTION>
ESTIMATED ESTIMATED
NAME UNITS TOTAL COST COMPLETION DATE
---- ----- ---------- ---------------
<S> <C> <C> <C>
Phase III ("Silver Mesa") . 264 $ 40,000,000 July 2000
Phase IV ("Green River") .. 424 55,000,000 Fourth Quarter 2001
Phase V ("Gold Peak") ..... 352 42,000,000 Fourth Quarter 2002
----- --------------
1,040 $ 137,000,000
===== ==============
</TABLE>
The third and fourth phases of this project are being developed
pursuant to fixed-price contracts. The Company is committed to purchase
100% of the improvements upon completion and the achievement of certain
occupancy levels of these phases. In addition, the Company is obligated
to fund the first 20% of development costs on these phases as they are
incurred.
F-31
<PAGE>
WELLSFORD REAL PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
SEGMENT INFORMATION (CONTINUED)
In May 1997, the Company acquired the land for Silver Mesa for
approximately $2,100,000. In May 1998, the Company acquired the land
for Green River for approximately $3,200,000. In May 1999, the Company
acquired the land for Gold Peak for approximately $2,600,000.
Construction in progress related to these three phases, including the
cost of land, was approximately $30,748,000 at December 31, 1999.
SONTERRA
From the time of the Spin-off, the Company held a $17,800,000 mortgage
on, and option to purchase, a 344-unit class A residential apartment
complex ("Sonterra at Williams Centre") located in Tucson, Arizona.
In January 1998, the Company exercised its option and acquired Sonterra
at Williams Centre for approximately $20,500,000, including
satisfaction of the mortgage. In February 1998, the Company closed on
$16,400,000 of first mortgage financing (the "Sonterra Mortgage") on
this property, bearing interest at 6.87% and maturing in March 2008.
Principal payments are based on a 30-year amortization schedule.
F-32
<PAGE>
WELLSFORD REAL PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
11. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table presents the historical cost and fair value of the
Company's financial instruments at December 31, 1999 and 1998:
<TABLE>
<CAPTION>
(amounts in thousands)
HISTORICAL COST AT DECEMBER 31, FAIR VALUE AT DECEMBER 31,
------------------------------- --------------------------
NOTES RECEIVABLE (A) 1999 1998 1999 1998
- -------------------- ---- ---- ---- ----
<S> <C> <C> <C> <C>
Fixed rate:
277 Park Loan .......... $ 25,000 $ 25,000 $ 25,508 (C) $ 27,580 (C)
REIT Bridge Loan ....... -- 15,000 -- 15,000 (G)
DeBartolo Loan ......... -- 17,678 -- 16,916 (C)
-------- -------- -------- --------
Total fixed rate notes .... 25,000 57,678 25,508 59,496
-------- -------- -------- --------
Floating rate:
Patriot Loan ........... 5,000 -- 5,000 (D) --
Abbey Credit Facility .. 4,251 46,019 4,251 (D) 46,019 (D)
Safeguard Loan ......... 2,900 5,913 2,900 (D) 5,913 (D)
Woodlands Loan ......... -- 15,000 -- 15,000 (D)
Other .................. 109 96 109 (D) 96 (D)
-------- -------- -------- --------
Total floating rate notes . 12,260 67,028 12,260 67,028
-------- -------- -------- --------
Total notes receivable .... $ 37,260 $124,706 $ 37,768 $126,524
======== ======== ======== ========
DEBT (B)
--------
WRP Bank Facility ......... $ -- $ 17,000 $ -- $ 17,000 (E)
Wellsford Finance Bank
Facility ............. -- -- -- --
Wellsford Capital Mortgage 28,000 28,000 28,000 (E) 28,000 (E)
Palomino Park Bonds ....... 14,755 14,755 14,755 (E) 14,755 (E)
-------- -------- -------- --------
Total floating rate debt .. 42,755 59,755 42,755 59,755
-------- -------- -------- --------
Blue Ridge Mortgage ....... 33,763 34,144 34,813 (F) 34,144 (H)
Red Canyon Mortgage ....... 26,683 27,000 28,063 (F) 27,000 (I)
Sonterra Mortgage ......... 16,114 16,278 16,615 (F) 16,278 (H)
-------- -------- -------- --------
Total fixed rate debt ..... 76,560 77,422 79,491 77,422
-------- -------- -------- --------
Total debt ................ $119,315 $137,177 $122,246 $137,177
======== ======== ======== ========
</TABLE>
- ----------
[FN]
(A) For more information, see Footnote 4.
(B) For more information, see Footnote 5.
(C) The fair value of the Company's fixed rate investment was determined
by reference to various market data.
(D) The fair value of the Company's floating rate investments is
considered to be their carrying amount.
(E) The fair value of the Company's floating rate debt is considered to be
its carrying amount.
(F) The fair value of the Company's fixed rate debt was determined by
reference to various market data.
(G) The fair value of this short-term investment is considered to be its
carrying amount.
(H) The fair value of this mortgage is considered to be its carrying
amount since it is similar in both terms and collateral to the Red
Canyon Mortgage, which reflects current market conditions (see (I)
below).
(I) The fair value of this mortgage is considered to be its carrying
amount as it is a recently executed transaction reflective of current
market conditions.
</FN>
F-33
<PAGE>
WELLSFORD REAL PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
12. SUMMARIZED CONSOLIDATED QUARTERLY INFORMATION (UNAUDITED)
Summarized consolidated quarterly financial information for the years
ended December 31, 1999 and 1998 is as follows:
<TABLE>
<CAPTION>
1999 FOR THE THREE MONTHS ENDED
---- -------------------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-------- ------- ------------ -----------
<S> <C> <C> <C> <C>
Revenue ............................. $ 7,951,667 $ 8,580,213 $ 6,873,537 $ 6,764,625
Expenses ............................ 5,489,340 7,303,956 7,102,567 9,030,581
Income from joint ventures .......... 1,016,794 1,905,519 3,160,343 3,539,296
Minority interest ................... (7,872) (9,566) (43,405) 6,094
------------ ------------ ------------ ------------
Income before taxes ................. 3,471,249 3,172,210 2,887,908 1,279,434
Income tax expense (credit) ......... 863,000 731,000 702,000 (346,000)
------------ ------------ ------------ ------------
Net income .......................... $ 2,608,249 $ 2,441,210 $ 2,185,908 $ 1,625,434
============ ============ ============ ============
Net income per common share, basic* $ 0.13 $ 0.12 $ 0.11 $ 0.08
============ ============ ============ ============
Net income per common share, diluted* $ 0.13 $ 0.12 $ 0.11 $ 0.08
============ ============ ============ ============
Weighted average number of common
shares outstanding, basic ....... 20,750,411 20,763,378 20,697,390 20,367,236
============ ============ ============ ============
Weighted average number of common
shares outstanding, diluted ..... 20,773,391 20,797,955 20,723,010 20,375,850
============ ============ ============ ============
1998 FOR THE THREE MONTHS ENDED
---- -------------------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-------- ------- ------------ -----------
<S> <C> <C> <C> <C>
Revenue ............................. $ 5,959,302 $ 6,090,863 $ 6,444,143 $ 7,521,273
Expenses ............................ 3,481,015 4,144,236 4,783,648 4,896,920
Income from joint ventures .......... 265,866 2,268,076 333,679 655,451
Gain on sale of investment .......... -- -- -- 138,770
Minority interest ................... (18,864) (16,436) (6,434) (35,816)
------------ ------------ ------------ ------------
Income before taxes ................. 2,725,289 4,198,267 1,987,740 3,382,758
Income tax expense (credit).......... 1,248,000 1,984,000 (1,029,000) 647,298
------------ ------------ ------------ ------------
Net income .......................... $ 1,477,289 $ 2,214,267 $ 3,016,740 $ 2,735,460
============ ============ ============ ============
Net income per common share, basic* $ 0.08 $ 0.11 $ 0.15 $ 0.13
============ ============ ============ ============
Net income per common share, diluted* $ 0.08 $ 0.10 $ 0.15 $ 0.13
============ ============ ============ ============
Weighted average number of common
shares outstanding, basic ....... 18,376,910 20,349,688 20,349,688 20,441,157
============ ============ ============ ============
Weighted average number of common
shares outstanding, diluted ..... 19,337,976 21,210,805 20,503,990 20,450,680
============ ============ ============ ============
- ----------
<FN>
*Aggregate quarterly earnings per share amounts may not equal annual
amounts presented elsewhere in these consolidated financial statements
due to rounding differences.
</FN>
</TABLE>
F-34
<PAGE>
WELLSFORD/WHITEHALL GROUP, L.L.C. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE NO.
--------
Report of Independent Auditors............................................F-36
Consolidated Balance Sheets...............................................F-37
Consolidated Statements of Income.........................................F-38
Consolidated Statements of Changes in Members' Equity.....................F-39
Consolidated Statements of Cash Flows.....................................F-40
Notes to Consolidated Financial Statements................................F-42
F-35
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Members of
Wellsford/Whitehall Group, L.L.C. and Subsidiaries:
We have audited the accompanying consolidated balance sheets of
Wellsford/Whitehall Group, L.L.C. (formerly Wellsford/Whitehall Properties II,
L.L.C.) and subsidiaries (the "Company") as of December 31, 1999 and 1998, and
the related consolidated statements of income, changes in members' equity and
cash flows for the years ended December 31, 1999 and 1998, and for the period
from August 28, 1997 (Inception) to December 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Wellsford/Whitehall Group, L.L.C. and subsidiaries at December 31, 1999 and
1998, and the consolidated results of their operations and their cash flows for
the years ended December 31, 1999 and 1998, and for the period from August 28,
1997 (Inception) to December 31, 1997, in conformity with accounting principles
generally accepted in the United States.
ERNST & YOUNG LLP
New York, New York
February 15, 2000
F-36
<PAGE>
WELLSFORD/WHITEHALL GROUP, L.L.C. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------
1999 1998
---- ----
<S> <C> <C>
ASSETS
Real estate assets, at cost:
Land .......................................... $ 64,399,873 $ 61,131,765
Buildings and improvements .................... 392,057,176 387,897,683
------------- -------------
456,457,049 449,029,448
Less accumulated depreciation .............. (17,650,723) (8,484,889)
------------- -------------
438,806,326 440,544,559
Construction in progress ...................... 112,345,379 52,662,902
------------- -------------
551,151,705 493,207,461
Cash and cash equivalents ........................ 8,468,462 6,410,614
Restricted cash .................................. 5,495,300 2,174,026
Deferred costs, less accumulated amortization ... 1,932,440 3,764,980
Receivables, prepaids and other assets ........... 5,230,859 5,823,846
------------- -------------
Total assets ..................................... $ 572,278,766 $ 511,380,927
============= =============
LIABILITIES AND MEMBERS' EQUITY
Liabilities:
Mortgages payable ............................. $ 110,830,847 $ 68,043,333
Secured senior credit facility ................ 177,260,995 207,289,846
Secured mezzanine credit facility ............. 61,400,270 68,907,482
Accrued expenses and other liabilities ........ 14,166,844 11,224,384
Distributions payable ......................... 5,599,034 3,298,814
Ground lease obligation ....................... 1,108,099 --
Security deposits ............................. 1,173,082 751,234
------------- -------------
Total liabilities ................................ 371,539,171 359,515,093
------------- -------------
Commitments and contingencies .................... -- --
Members' equity:
Membership units, $.01 par value per unit ..... 132,111 99,403
Paid in capital ............................... 181,841,448 130,032,663
Series A convertible preferred membership units 19,000,000 19,000,000
Retained earnings/(deficit) ................... (233,964) 2,733,768
------------- -------------
Total members' equity ............................ 200,739,595 151,865,834
------------- -------------
Total liabilities and members' equity ............ $ 572,278,766 $ 511,380,927
============= =============
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-37
<PAGE>
WELLSFORD/WHITEHALL GROUP, L.L.C. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE PERIOD FROM
FOR THE YEARS ENDED DECEMBER 31, AUGUST 28, 1997
-------------------------------- (INCEPTION) TO
1999 1998 DECEMBER 31, 1997
---- ---- -----------------
<S> <C> <C> <C>
Revenues:
Rental income ............................ $ 73,355,970 $ 52,514,859 $ 8,334,619
Interest and other income ................ 1,319,987 1,108,437 193,086
------------ ------------ ------------
Total revenues .................... 74,675,957 53,623,296 8,527,705
------------ ------------ ------------
Expenses:
Property operations and maintenance ...... 18,141,650 13,379,303 2,346,644
Real estate taxes ........................ 7,891,159 5,550,662 970,501
Depreciation and amortization ............ 11,701,917 7,387,077 1,219,849
Property and asset management ............ 1,398,399 1,348,552 175,873
Interest ................................. 25,586,242 19,085,016 2,949,280
General and administrative ............... 8,142,147 3,299,496 835,349
------------ ------------ ------------
Total expenses .................... 72,861,514 50,050,106 8,497,496
------------ ------------ ------------
Income available before gains on dispositions
and preferred distributions .............. 1,814,443 3,573,190 30,209
Gains on dispositions ....................... 15,642,149 2,866,183 --
------------ ------------ ------------
Income available for members before
preferred distributions .................. 17,456,592 6,439,373 30,209
Preferred distributions ..................... (1,140,000) (728,333) --
------------ ------------ ------------
Net income available for members ............ $ 16,316,592 $ 5,711,040 $ 30,209
============ ============ ============
Net income per membership unit, basic ....... $ 1.42 $ 0.69 $ 0.01
============ ============ ============
Net income per membership unit, diluted ..... $ 1.39 $ 0.69 $ 0.01
============ ============ ============
Weighted average number of membership
units outstanding, basic ................. 11,526,864 8,291,273 5,277,314
============ ============ ============
Weighted average number of membership units
outstanding, diluted ..................... 12,545,264 8,291,273 5,277,314
============ ============ ============
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-38
<PAGE>
WELLSFORD/WHITEHALL GROUP, L.L.C. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN MEMBERS' EQUITY
FOR THE PERIOD FROM AUGUST 28, 1997 (INCEPTION) TO DECEMBER 31, 1999
<TABLE>
<CAPTION>
SERIES A
CONVERTIBLE
MEMBERSHIP UNITS PREFERRED RETAINED TOTAL
---------------- PAID-IN MEMBERSHIP EARNINGS/ MEMBERS'
UNITS AMOUNT CAPITAL UNITS (DEFICIT) EQUITY
----- ------ ------- ----- --------- ------
<S> <C> <C> <C> <C> <C> <C>
Initial equity contributions -
August 28, 1997 (Inception) 5,000,000 $ 50,000 $ 49,950,000 $ -- $ -- $ 50,000,000
Additional equity contributions 1,485,508 14,855 24,080,079 -- -- 24,094,934
Net income ..................... -- -- -- -- 30,209 30,209
---------- -------- ------------- ------------- ------------- -------------
December 31, 1997 .............. 6,485,508 64,855 74,030,079 -- 30,209 74,125,143
Issuance of membership units in
connection with contribution
of assets ................... 468,557 4,686 7,595,309 19,000,000 -- 26,599,995
Additional equity contributions 2,986,260 29,862 48,407,275 -- -- 48,437,137
Net income ..................... -- -- -- 728,333 5,711,040 6,439,373
Distributions .................. -- -- -- (728,333) (3,007,481) (3,735,814)
---------- -------- ------------- ------------- ------------- -------------
December 31, 1998 .............. 9,940,325 99,403 130,032,663 19,000,000 2,733,768 151,865,834
Additional equity contributions,
net ......................... 3,270,756 32,708 51,808,785 -- -- 51,841,493
Net income ..................... -- -- -- 1,140,000 16,316,592 17,456,592
Distributions .................. -- -- -- (1,140,000) (19,284,324) (20,424,324)
---------- -------- ------------- ------------- ------------- -------------
December 31, 1999 .............. 13,211,081 $132,111 $ 181,841,448 $ 19,000,000 $ (233,964) $ 200,739,595
========== ======== ============= ============= ============= =============
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-39
<PAGE>
WELLSFORD/WHITEHALL GROUP, L.L.C. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE PERIOD FROM
FOR THE YEARS ENDED DECEMBER 31, AUGUST 28, 1997
-------------------------------- (INCEPTION) TO
1999 1998 DECEMBER 31, 1997
---- ---- -----------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Basic Earnings ........................................ $ 17,456,592 $ 6,439,373 $ 30,209
Adjustments to reconcile basic earnings to net cash
provided by operating activities:
Gain on disposal of real estate assets ........... (15,642,149) (2,866,183) --
Depreciation and amortization .................... 11,701,917 7,387,077 1,233,889
Amortization of deferred financing costs ......... 2,826,429 1,672,413 --
Deferred rental revenue .......................... (1,217,697) (1,476,178) (380,103)
Decrease (increase) in assets:
Receivables, prepaids and other assets ........ 40,372 (851,453) 192,076
Increase in liabilities:
Accrued expenses and other liabilities ........ 777,086 4,828,066 1,285,498
Security deposits ............................. 421,848 157,140 --
------------- ------------- -------------
Net cash provided by operating activities ........ 16,364,398 15,290,255 2,361,569
------------- ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of real estate assets .................... (74,232,052) (163,082,206) (46,768,417)
Prepaid acquisition costs ............................. -- (1,124,579) --
Disposal of real estate assets, net of selling expenses 71,957,877 4,561,013 --
Improvements to real estate assets .................... (39,730,980) (22,066,915) (15,519,011)
------------- ------------- -------------
Net cash used in investing activities ............ (42,005,155) (181,712,687) (62,287,428)
------------- ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from term loans .............................. -- 23,587,620 107,925,000
Proceeds from credit facilities ....................... -- 67,037,844 38,984,000
Proceeds from mortgage loans .......................... 35,645,000 -- 375,602
Proceeds from unsecured loan .......................... -- -- 48,025,000
Proceeds from secured senior credit facility .......... 5,913,930 207,289,846 --
Proceeds from secured mezzanine credit facility ....... 1,478,482 68,907,482 --
Repayment of term loans ............................... -- (131,512,620) --
Repayment of credit facilities ........................ -- (106,021,844) --
Repayment of mortgage loans ........................... (623,205) (297,483) (48,468,556)
Repayment of unsecured loan ........................... -- (4,283,925) (105,440,515)
Repayment of secured senior credit facility ........... (35,942,780) -- --
Repayment of secured mezzanine credit facility ........ (8,985,695) -- --
Increase in restricted cash ........................... (3,321,274) (2,174,026) --
Deferred financing and organization costs ............. (183,242) (578,244) (4,774,774)
Preferred distributions ............................... (1,140,000) (437,000) --
Member distributions .................................. (16,984,104) -- --
Initial cash contribution ............................. -- -- 2,083,427
Equity contributions, net ............................. 51,841,493 48,437,137 24,094,934
------------- ------------- -------------
Net cash provided by financing activities ............. 27,698,605 169,954,787 62,804,118
------------- ------------- -------------
Net increase in cash and cash equivalents ............ 2,057,848 3,532,355 2,878,259
Cash and cash equivalents, beginning of period ........ 6,410,614 2,878,259 --
------------- ------------- -------------
Cash and cash equivalents, end of period .............. $ 8,468,462 $ 6,410,614 $ 2,878,259
============= ============= =============
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-40
<PAGE>
WELLSFORD/WHITEHALL GROUP, L.L.C. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(CONTINUED)
<TABLE>
<CAPTION>
FOR THE PERIOD FROM
FOR THE YEARS ENDED DECEMBER 31, AUGUST 28, 1997
-------------------------------- (INCEPTION) TO
1999 1998 DECEMBER 31, 1997
---- ---- -----------------
<S> <C> <C> <C>
SUPPLEMENTAL DISCLOSURE:
Cash paid for interest................................. $ 28,615,307 $ 18,296,284 $ 2,953,786
============= ============= =============
SUPPLEMENTAL DISCLOSURE OF NONCASH
INVESTING AND FINANCING ACTIVITIES:
Initial contribution of real estate assets............. $ 157,927,131
Initial contribution of other assets................... 968,786
Assumption of unsecured loan........................... (61,699,440)
Assumption of mortgage................................. (48,092,954)
Assumption of other liabilities........................ (1,186,950)
Initial equity contribution............................ (50,000,000)
-------------
Initial cash contribution.............................. $ (2,083,427)
=============
Membership units issued in exchange for contribution
of real estate assets..................... $ 7,599,995
Series A convertible preferred membership units issued
in exchange for contribution of real estate assets 19,000,000
Assumption of mortgage loan............................ 68,340,816
Purchase of real estate assets......................... (94,940,811)
-------------
$ --
=============
Seller financing - 2nd Mortgage - One Mall............. $ 2,750,000
Assumption of Mortgage IDS Loan - One Mall............. 5,015,719
Capitalized Lease Obligation - Airport Park........... 1,108,099
-------------
$ 8,873,818
=============
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-41
<PAGE>
WELLSFORD/WHITEHALL GROUP, L.L.C. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND BUSINESS
Wellsford/Whitehall Group, L.L.C. and subsidiaries (the "Company") was
formed in May 1999 by the then members of Wellsford/Whitehall
Properties II, L.L.C. ("Properties"). Properties was a joint venture
between Wellsford Commercial Properties Trust ("WCPT"), a subsidiary
of Wellsford Real Properties, Inc. ("WRP"), WHWEL Real Estate Limited
Partnership ("Whitehall"), an affiliate of The Goldman Sachs Group
Inc., and the Saracen Members (the "Members"). Properties (formerly
Wellsford/Whitehall Properties, L.L.C.) was formed on August 28, 1997
as a private real estate operating company.
On May 28, 1999 the Whitehall interests were partially transferred to
two of its affiliates and all the Members assigned their interests in
Properties to the Company. No other changes occurred in the operations
of the owned properties at that time. The Company will terminate on
December 31, 2045, unless sooner by the written consent of the Members.
On May 15, 1998 thirteen office buildings located in suburban Boston
with an aggregate value of approximately $148,700,000 were contributed
to Properties for a combination of cash, Series A convertible preferred
membership units and membership units (the "Saracen Transaction"). In
connection with this transaction, several shareholders of the Saracen
Companies (the "Saracen Members") were issued both Series A convertible
preferred membership units and membership units and Properties assumed
a mortgage loan on six of the properties aggregating approximately
$68,300,000.
The Company seeks to acquire commercial properties and create value
through adaptive reuse. The Company believes that appropriate
well-located commercial properties which are currently underperforming
can be acquired on advantageous terms and repositioned with the
expectation of achieving enhanced returns which are greater than
returns which could be achieved by acquiring stabilized properties. The
Company's current target markets include New York, New Jersey,
Connecticut, Boston, Philadelphia, Baltimore and the Washington D.C.
metropolitan areas. WCPT manages the Company through WRP on a
day-to-day basis, and certain major and operational decisions require
the consent of the Members. WCPT intends to qualify as a real estate
investment trust ("REIT").
As of December 31, 1999, the Company owned and operated 41 office
properties totaling approximately 4,920,000 square feet, including
approximately 1,451,000 square feet under renovation. The properties
are located in Northern New Jersey (19), Downtown and Suburban Boston
(17), and Suburban Baltimore (5).
F-42
<PAGE>
WELLSFORD/WHITEHALL GROUP, L.L.C. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION. The accompanying consolidated financial
statements include the accounts of the Company and its wholly-owned
subsidiaries and Properties and its wholly-owned subsidiaries for their
respective periods of ownership. All significant inter-company accounts
and transactions among the Company and Properties and their
subsidiaries have been eliminated in the consolidation.
CASH AND CASH EQUIVALENTS. The Company considers all demand and money
market accounts and short term investments in government funds with an
original maturity of three months or less when purchased to be cash
and cash equivalents.
RESTRICTED CASH. Restricted cash primarily consists of debt service
reserve balances.
REAL ESTATE AND DEPRECIATION. Real estate assets are stated at cost.
Costs directly related to the acquisition and improvement of real
estate are capitalized, including the purchase price, legal fees,
acquisition costs, interest, property taxes and other operational costs
during the period of development and until the lease up of the acquired
development properties.
Ordinary repairs and maintenance items are expensed as incurred.
Replacements and betterments are capitalized and depreciated over their
estimated useful lives. Tenant improvements and leasing commissions are
capitalized and amortized over the terms of the related leases.
Depreciation is computed over the expected useful lives of the
depreciable property on a straight-line basis, principally 40 years for
commercial properties and 5 to 12 years for furnishings and equipment.
Statement of Financial Accounting Standard ("SFAS") 121 "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed of" requires that long-lived assets to be held and used be
reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable.
SFAS 121 has not had an impact on the accompanying consolidated
financial statements.
DEFERRED COSTS. Deferred costs consist primarily of costs incurred to
obtain financing. Such deferred financing costs are amortized over the
expected term of the respective agreement; such amortization is
included in interest expense in the accompanying Consolidated
Statements of Income.
FAIR VALUE OF FINANCIAL INSTRUMENTS. The Company's financial
instruments consist of cash and cash equivalents and long term debt.
The Company believes that the carrying amount of cash and cash
equivalents approximates fair value due to the short maturity of this
item. In addition, the Company believes that the carrying values of its
senior secured credit facility, its secured mezzanine credit facility
and certain mortgages approximate fair values because such debt
consists of variable rate debt that reprices frequently. The Company
believes that the carrying values of the remainder of the mortgage
loans approximate fair values based upon various market data analysis.
F-43
<PAGE>
WELLSFORD/WHITEHALL GROUP, L.L.C. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INTEREST-RATE SWAP AGREEMENT. To reduce the impact of certain changes
in interest rates on its long-term debt, the Company has entered into
an interest-rate swap agreement during 1998. This agreement involves
the exchange of amounts based on a variable interest rate for amounts
based on a fixed interest rate over the life of the agreement without
an exchange of the notional amount upon which the payments are based.
The differential to be paid or received as interest rates change is
settled quarterly and recognized as an adjustment to interest expense
(the accrual accounting method). The fair value of the swap agreement
and changes in the fair value as a result of changes in market interest
rate are not recognized in the accompanying financial statements. There
have been no gains or losses on termination of interest-rate swap
agreements in 1999 or 1998.
PROFIT AND REVENUE RECOGNITION. Sales of real estate assets are
recognized at closing, subject to the receipt of down payments and
other requirements in accordance with applicable accounting guidelines.
Commercial properties are leased under operating leases. Rental revenue
is recognized on a straight-line basis over the terms of the respective
leases.
INCOME TAXES. The Company is a limited liability company as were the
predecessor companies. In accordance with the tax law regarding such
entities, each of the Company's membership unit holders is responsible
for reporting their share of the Company's taxable income or loss on
their separate tax returns. Accordingly, the Company has recorded no
provision for federal, state or local income taxes.
PER UNIT DATA. Net income per membership unit is computed based upon
the weighted average number of membership units outstanding during the
period. The assumed conversion of the Series A convertible preferred
membership units is dilutive in 1999 and anti-dilutive in 1998. The
Company had no dilutive securities during 1997.
ESTIMATES. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and the disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could
differ from those estimates.
RECLASSIFICATIONS. Certain reclassifications have been made to the
prior period presentation to conform with the current year.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS. In June 1998, SFAS 133
"Accounting for Derivative Instruments and Hedging Activities" was
issued. SFAS 133 was required to be adopted in years beginning after
June 15, 2000. SFAS 133 permits early adoption as of the beginning of
any fiscal quarter after its issuance. The Company expects to adopt
SFAS 133 effective January 1, 2000. The Company does not anticipate
that the adoption of SFAS 133 will have a material impact on its
consolidated financial position or consolidated results of operations.
F-44
<PAGE>
WELLSFORD/WHITEHALL GROUP, L.L.C. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
3. COMMERCIAL PROPERTIES
The Company owns the following commercial properties at December 31,
1999 and 1998:
Properties Collateralizing Bank Facility*
-----------------------------------------
(amounts in thousands, except square foot amounts)
<TABLE>
<CAPTION>
YEAR
SQUARE FEET (UNAUDITED) CONSTRUCTED/ GROSS INVESTMENT
----------------------- REHABILITATED ----------------
PROPERTY LOCATION 1999 1998 (UNAUDITED) 1999 1998
-------- -------- ---- ---- ----------- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Pointview Corporate Center .. Wayne, NJ 515,000 515,000 1976/1998 $ 38,935 $ 32,369
1800 Valley Road ............ Wayne, NJ 56,000 56,000 1980 4,070 4,122
Greenbrook Corporate Center.. Fairfield, NJ 201,000 201,000 1987 24,617 24,472
Chatham Executive Center .... Chatham, NJ 63,000 63,000 1972/1997 10,840 10,855
300 Atrium Drive ............ Somerset, NJ 150,000 150,000 1983 18,976 18,489
400 Atrium Drive ............ Somerset, NJ 355,000 355,000 1985 35,519 32,795
500 Atrium Drive ............ Somerset, NJ 169,000 169,000 1984 21,239 20,721
700 Atrium Drive ............ Somerset, NJ 181,000 181,000 1985 18,167 18,167
1275 K Street ............... Washington, DC -- 225,000 1983 -- 35,422
Mountain Heights Center I ... Berkeley Hts, NJ 183,000 183,000 1968/1986/1998 25,544 25,394
Mountain Heights Center II .. Berkeley Hts, NJ 115,000 115,000 1968/1986/1998 18,086 9,802
Morris Technology Center .... Parsippany, NJ 244,000 244,000 1963/1977/1998 14,757 8,417
15 Broad Street ............. Boston, MA -- 65,000 1920/1984 -- 5,599
600 Atrium Drive (land) ..... Somerset, NJ N/A N/A N/A 2,336 2,075
Garden State Exhibit Center . Somerset, NJ 82,000 82,000 1968/1989 5,841 5,832
150 Wells Avenue ............ Newton, MA 11,000 11,000 1987 1,273 1,273
72 River Park ............... Needham, MA 22,000 22,000 1983 2,630 2,630
70 Wells Avenue ............. Newton, MA 29,000 29,000 1979 3,930 3,930
160 Wells Avenue ............ Newton, MA 19,000 19,000 1970/1997 3,421 3,421
2331 Congress Street ........ Portland, ME 24,000 24,000 1980 2,158 2,158
60/74 Turner Street ......... Waltham, MA 16,000 16,000 1970 2,153 2,153
100 Wells Avenue ............ Newton, MA 21,000 21,000 1978 2,548 2,548
333 Elm Street .............. Dedham, MA 48,000 48,000 1983 5,836 5,814
Dedham Place ................ Dedham, MA 160,000 160,000 1987 27,190 27,189
128 Technology Center ....... Waltham, MA 218,000 218,000 1986 36,186 36,138
201 University Avenue ....... Westwood, MA 82,000 82,000 1982 10,227 9,677
7/57 Wells Avenue ........... Newton, MA 88,000 88,000 1982 12,390 12,089
75/85/95 Wells Avenue ....... Newton, MA 242,000 242,000 1976/1986 40,315 40,127
117 Kendrick Street ......... Needham, MA 209,000 209,000 1963 22,247 13,292
140 Kendrick Street ......... Needham, MA -- 261,000 1963 -- 16,266
Shattuck Office Center ...... Andover, MA 63,000 63,000 1985 7,646 7,597
180/188 Mt Airy Road ........ Basking Ridge, NJ 104,000 104,000 1980 15,782 15,649
377/379 Campus Drive ........ Franklin Twp, NJ 199,000 199,000 1984 22,934 22,934
6301 Stevens Forest Lane .... Columbia, MD 38,000 38,000 1980 4,519 2,640
One Mall North .............. Columbia, MD 97,000 -- 1978/1998 10,733 --
105 Challenger Road ......... Ridgefield Park, NJ 147,000 147,000 1992 21,002 19,636
--------- --------- ------- -------
4,151,000 4,605,000 494,047 501,692
========= ========= ======= =======
</TABLE>
F-45
<PAGE>
WELLSFORD/WHITEHALL GROUP, L.L.C. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
COMMERCIAL PROPERTIES (CONTINUED)
Properties Collateralizing Other Mortgages or Unencumbered
----------------------------------------------------------
<TABLE>
<CAPTION>
YEAR
SQUARE FEET (UNAUDITED) CONSTRUCTED/ GROSS INVESTMENT
----------------------- REHABILITATED ----------------
PROPERTY LOCATION 1999 1998 (UNAUDITED) 1999 1998
-------- -------- ---- ---- ----------- ---- ----
<S> <C> <C> <C> <C> <C> <C>
150 Mount Bethel Road ....... Warren, NJ 129,000 -- 1981 8,037 --
79 Milk Street .............. Boston, MA 64,000 -- 1920/1998 10,408 --
24 Federal Street ........... Boston, MA 68,000 -- 1921/1997 13,895 --
McDonough Crossroads ........ Owings Mills, MD 32,000 -- 1988 3,893 --
Airport Park ................ Hanover Twp, NJ 96,000 -- 1979 12,554 --
Airport Park-Land** ......... Hanover Twp, NJ N/A -- N/A 2,089 --
Oakland Ridge** ............. Columbia, MD 144,000 -- 1972 3,962 --
401 North Washington** ...... Rockville, MD 236,000 -- 1972 19,917 --
--------- --------- ---------- ---------
769,000 -- 74,755 --
--------- --------- ---------- ---------
Total Commercial Properties ..................... 4,920,000 4,605,000 $ 568,802 $ 501,692
========= ========= ========== =========
- ----------
<FN>
*In addition, 333 Elm Street, Dedham Place, 128 Technology Center, 201
University Avenue, 7/57 Wells Avenue and 75/85/95 Wells Avenue are also
encumbered by the Nomura Loan.
**Unencumbered.
</FN>
</TABLE>
No individual tenant aggregated greater than 7% of rental revenue in
1999 and 9% in 1998.
The Company capitalizes interest related to buildings under renovation
to the extent such assets qualify for capitalization. Total interest
incurred and capitalized was $28,627,209 and $5,867,396 and $20,385,672
and $2,973,069 respectively, for the years ended December 31, 1999 and
December 31, 1998 and $4,207,793 and $1,258,513, respectively, for the
period from August 28, 1997 (Inception) to December 31, 1997 (the
"Period").
The Company sold the following buildings and properties:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1999 1998
---- ----
<S> <C> <C>
Number of buildings (including a small land parcel in 1999) 4 1
=========== ===========
Net sales proceeds (approximate) .......................... $71,958,000 $ 4,561,000
=========== ===========
Gains on sales ............................................ $15,642,149 $ 2,866,183
=========== ===========
</TABLE>
4. LEASES
Office space in the properties is generally leased to tenants under
lease terms which provide for the tenants to pay base rents plus
increases in operating expenses in excess of specified amounts.
F-46
<PAGE>
WELLSFORD/WHITEHALL GROUP, L.L.C. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
LEASES (CONTINUED)
Non-cancelable operating leases with tenants expire on various dates
through 2015. The future minimum lease payments to be received under
leases existing as of December 31, 1999 are as follows:
<TABLE>
<CAPTION>
(amounts in thousands)
PROPERTIES COLLATERALIZING
FOR THE YEARS --------------------------
ENDED BANK
DECEMBER 31, TOTAL FACILITY OTHER
------------ ----- -------- -----
<S> <C> <C> <C>
2000 ..... $ 64,178 $ 59,292 $ 4,886
2001 ..... 62,764 58,636 4,128
2002 ..... 59,931 56,765 3,166
2003 ..... 44,390 41,803 2,587
2004 ..... 26,592 24,850 1,742
Thereafter 57,676 55,925 1,751
-------- -------- --------
Total .... $315,531 $297,271 $ 18,260
======== ======== ========
</TABLE>
The above future minimum lease payments do not include specified
payments for tenant reimbursements of operating expenses which
amounted to approximately $6,543,000, $4,878,000 and $602,000 for the
years ended December 31, 1999 and 1998 and the Period, respectively.
5. GROUND LEASE
The leasehold interests in two buildings totaling 291,000 square feet
and 15.22 acres of developable land are subject to ground leases. At
December 31, 1999, future minimum rental payments under the leases
which expire in October 2066, April 2077 and January 2084, are as
follows:
<TABLE>
<CAPTION>
(amounts in thousands)
FOR THE YEARS ENDED DECEMBER 31, AMOUNT
-------------------------------- ------
<S> <C>
2000 .......................... $ 214
2001 .......................... 215
2002 .......................... 216
2003 .......................... 218
2004 .......................... 231
Thereafter .................... 27,749
-------
Total ......................... $28,843
=======
</TABLE>
6. LONG TERM DEBT
The Company's long term debt consisted of the following:
<TABLE>
<CAPTION>
(amounts in thousands)
DECEMBER 31,
------------
DEBT MATURITY DATE 1999 1998
---- ------------- ---- ----
<S> <C> <C> <C>
Secured Senior Credit Facility .. December 2000 $177,261 $207,290
Secured Mezzanine Credit Facility December 2000 61,400 68,907
Nomura Loan ..................... February 2027 67,469 68,043
Other Mortgage Loans ............ May 2002 - May 2019 43,362 --
-------- --------
$349,492 $344,240
======== ========
</TABLE>
F-47
<PAGE>
WELLSFORD/WHITEHALL GROUP, L.L.C. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
LONG TERM DEBT (CONTINUED)
The Company's transactions described in Note 1 were funded primarily by
capital contributions from WCPT and Whitehall, by approximately
$47,600,000 in debt which encumbered certain of the properties
contributed by Whitehall (the "Atrium Loan") which was assumed by the
Company, and by a mortgage ("Mortgage") between the Company and WRP.
The Atrium Loan bore interest at LIBOR + 3.00% and was due on May 15,
2000. The lender on this loan was Goldman Sachs Mortgage Company. This
loan was repaid in December 1997.
Pursuant to an unsecured loan, WRP had agreed to loan the Company up to
approximately $86,300,000 bearing interest at LIBOR + 3.00% until
November 1997 and at LIBOR + 4.00% until maturity in June 1998 (the
"Unsecured Loan"). This loan, aggregating $4,283,925 at December 31,
1997, was repaid in June 1998. Interest expense on the Unsecured Loan
was $145,321 and $2,137,488 in 1998 and the Period, respectively.
In December 1997, the Company obtained a $375,000,000 loan facility
(the "Prior Bank Facility") consisting of a secured term loan facility
("Secured Term Loan") of up to $225,000,000 and a secured revolving
credit facility ("Secured Revolving Credit Facility") of up to
$150,000,000. The term loan facility bore interest at LIBOR + 1.60% and
had a term of four years; the revolving credit facility bore interest
at LIBOR + 2.50% and had a term of three years. Interest expense on the
Prior Bank Facility was $7,456,062 in 1998.
In July 1998, the Company modified the Prior Bank Facility with Fleet
National Bank and Goldman Sachs Mortgage to provide for a secured
senior credit facility ("Secured Senior Credit Facility") of up to
$300,000,000 and a secured mezzanine credit facility ("Secured
Mezzanine Credit Facility") of up to $75,000,000 (collectively, the
"Bank Facility"). The loans bear interest at LIBOR + 1.65% and LIBOR +
3.20%, respectively, are due on December 15, 2000 and may be renewed by
the Company for an additional twelve months, subject to certain
conditions. The proceeds from the Bank Facility were used to repay
amounts outstanding under the Prior Bank Facility. At December 31,
1999, the Company expected to borrow an additional $8,000,000 for
tenant improvements and leasing commisions, through March 31, 2000,
when the ability to draw on this facility expires under the current
terms of the Bank Facility. Interest expense on the Secured Senior
Credit Facility and the Secured Mezzanine Credit Facility was
$15,293,524 and $6,088,260, respectively, in 1999 and $6,643,428 and
$2,697,381, respectively, in 1998. The 30-day LIBOR was 6.30% and 4.94%
at December 31, 1999 and 1998, respectively.
WRP and Whitehall each have made limited guarantees of the Bank
Facility on behalf of the Company. WRP and Whitehall each have
guaranteed joint and severally up to a 50% share of the principal
amount of $24,500,000 and 50% share of interest on the $375,000,000
term and mezzanine loans in the event of certain defaults or
non-compliance by the Company.
In connection with the Saracen transaction, the Company assumed a
mortgage loan held by Nomura Asset Capital Corporation in the original
amount of approximately $68,341,000 (the "Nomura Loan"). The loan bears
interest at a rate of 8.03% and requires monthly payments of principal
and interest until maturity in February 2027.
F-48
<PAGE>
WELLSFORD/WHITEHALL GROUP, L.L.C. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
LONG TERM DEBT (CONTINUED)
During 1999, the Company obtained six mortgages to acquire and improve
five properties including one second mortgage provided by the seller on
one property (the "Other Mortgage Loans"). The interest rates on the
Other Mortgage Loans range from the LIBOR + 2.05% to 10.50% and the
maturity dates range from May 30, 2002 to May 31, 2019.
The Bank Facility and the Nomura Loan contain various customary
covenants including the ratio of liabilities to assets, debt service
coverage, minimum equity, and the amount of distributions that can be
paid to Members among other covenants. As of December 31, 1999 and
1998, the Company was in compliance with the terms of covenants under
all loan agreements.
The aggregate maturities for the Company's long-term debt obligations
for each of the next five years and thereafter are as follows:
<TABLE>
<CAPTION>
(amounts in thousands)
SECURED SECURED
SENIOR MEZZANINE OTHER
FOR THE YEARS CREDIT CREDIT NOMURA MORTGAGE
ENDED DECEMBER 31, TOTAL FACILITY FACILITY LOAN LOANS
------------------ ----- -------- -------- ---- -----
<S> <C> <C> <C> <C> <C>
2000 ............... $239,373 $177,261 $ 61,400 $ 607 $ 105
2001 ............... 788 -- -- 674 114
2002 ............... 28,200 -- -- 731 27,469
2003 ............... 9,228 -- -- 793 8,435
2004 ............... 3,742 -- -- 845 2,897
Thereafter ......... 68,161 -- -- 63,819 4,342
-------- -------- -------- -------- --------
Total .............. $349,492 $177,261 $ 61,400 $ 67,469 $ 43,362
======== ======== ======== ======== ========
</TABLE>
To reduce the impact of certain changes in interest rates on its
long-term debt, the Company has an interest rate swap agreement (see
Note 2) and an interest rate protection agreement. The interest rate
swap agreement fixes LIBOR at 5.90% for up to $220,000,000 until May
2000. The interest rate protection agreement caps LIBOR at 7.69% for
up to $64,000,000 until June 15, 2000. The cost of the interest rate
protection agreement is being amortized over its life. The net
settlement amount of the interest-rate swap agreement and the
amortization of the interest rate protection agreement which is
recorded as an adjustment of interest expense in 1999 and 1998
aggregated approximately $1,354,000 and $459,000, respectively. At
December 31, 1999 and 1998, the fair value of the interest rate swap
agreement was approximately $202,000 and ($2,700,000), respectively.
7. TRANSACTIONS WITH AFFILIATES
In connection with the formation of the Company, WRP issued warrants
(the "Warrants") to Whitehall to purchase 4,132,230 shares of WRP's
common stock at an exercise price of $12.10 per share. The Warrants
are exercisable until August 28, 2002. The exercise price for the
Warrants is payable in cash or membership units in the Company. As
part of the new capital commitment from Whitehall in 1999, WRP issued
to Whitehall additional warrants to purchase an additional 123,967
shares of WRP's common stock exercisable at $12.10 per share, payable
in cash or in exchange for membership units of the Company, held by
Whitehall based upon the Company's value as defined. These additional
warrants are exercisable for five years and expire on May 28, 2004.
F-49
<PAGE>
WELLSFORD/WHITEHALL GROUP, L.L.C. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
v
TRANSACTIONS WITH AFFILIATES (CONTINUED)
Under the terms of the current joint venture, WCPT or WRP is entitled
to an administrative fee of $600,000 per year for the reimbursement of
salaries and costs incurred relating to the operation of the Company.
Such fees were $600,000 and $300,000 for the years ended December 31,
1999 and 1998, respectively, and $100,000 for the Period.
The Company incurred aggregate interest to WRP on short term advances
during the year ended December 31, 1999 of approximately $517,000. The
interest rate charged was LIBOR + 5.00%.
See Note 6 for additional related party interest information.
An affiliate of Whitehall performed asset management services for the
Company for which the Company incurred fees of approximately $133,000
for the year ended December 31, 1998. This contract expired February
25, 1998.
Affiliates of the Saracen Members performed asset management and
property management services for the Company. These fees amounted to
approximately $649,000 for the year ended December 31, 1998. Fees paid
during 1999 amounted to $495,000 which included asset management fees
through January 21, 1999, when the asset management agreement was
terminated. Upon termination, the Company agreed to pay $1,000,000 in
2004 plus quarterly interest at 10% per annum paid currently.
At December 31, 1998, the Company has $408,023 of receivables from its
Members, which amount is included in receivables, prepaids and other
assets on the accompanying consolidated balance sheets. At December 31,
1999, the Company had aggregate accrued expenses and other liabilities
approximating $462,791 due to Members or affiliated companies for
unpaid fees, interest and other items.
Affiliates of the Saracen Members lease space at 7/57 Wells Avenue.
Revenue related to these leases for the years ended December 31, 1999
and 1998, amounted to $43,650 and $67,572, respectively.
8. MEMBERS' EQUITY
WRP, through WCPT, is entitled to receive incentive compensation,
payable out of distributions, made by the Company to WCPT and the
Whitehall members (the "Promote") after return of capital and minimum
annual returns of at least 15% to 17.5% on such capital balances to
WCPT and Whitehall (as defined in the Company's Operating Agreement
(the "Operating Agreement")). Pursuant to the Operating Agreement, WRP
is required to distribute to certain officers and employees of the
Company and WRP 50%, and in some cases, 55% of the Promote it
receives. To date, WRP has not earned or received any distribution of
the Promote.
At December 31, 1999, WCPT and the Whitehall entities have committed to
make additional equity contributions through December 31, 2000, of
approximately $12,231,000 and $63,396,000, respectively, for new
acquisitions, renovations, and working capital.
Whitehall may exchange an additional $25,000,000 of the membership
units it owns in the Company for shares of WRP's common stock or cash
at WRP's sole discretion, based upon the price paid for such
membership units and the current market value of WRP's common stock.
Such transaction would have no net impact on the number of membership
units outstanding.
F-50
<PAGE>
WELLSFORD/WHITEHALL GROUP, L.L.C. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
MEMBERS' EQUITY (CONTINUED)
At the formation of the Company, 2,505,000 membership units were issued
to WCPT, representing its 50.1% interest, and 2,495,000 units were
issued to Whitehall, representing its 49.9% interest. Subsequently, an
additional 2,958,413 and 4,784,111 units were issued to WCPT and the
Whitehall entities (719,385 and 2,551,371, respectively, in 1999),
respectively, in connection with net additional capital contributions
used to fund acquisitions and renovations.
In connection with the Saracen Transaction, 468,557 membership units
and 760,000 Series A convertible preferred membership units were issued
to the Saracen Members. The membership units were issued at a price of
$16.22 per membership unit. The Series A convertible preferred
membership units are convertible into membership units at a price of
$18.65 per membership unit. These units also provide for cumulative
dividend payments of the greater of (a) 6% or (b) the dividend payable
to membership unit holders, calculated on an as converted basis,
payable quarterly in arrears, and have a liquidation preference of
$25.00 per Series A convertible preferred membership unit plus accrued
and unpaid distributions.
The number of membership units issued and outstanding are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
WCPT ............... 5,463,413 4,744,028 3,248,062
Whitehall .......... 7,279,111 4,727,740 3,237,446
Saracen Members .... 468,557 468,557 --
---------- --------- ---------
Total .............. 13,211,081 9,940,325 6,485,508
========== ========= =========
</TABLE>
Distributions of $3,007,481 were declared on November 19, 1998 to
membership unit holders on record as of that date. These distributions
were paid during the first quarter 1999. During 1999, additional
distributions of $19,284,324 were declared, of which $5,323,534
remained unpaid at December 31, 1999.
9. COMMITMENTS AND CONTINGENCIES
Under the terms of the joint venture agreement either WCPT or
Whitehall may require the Company to sell any and all of its
properties.
As a commercial real estate owner, the Company is subject to potential
environmental costs. At December 31, 1999, management of the Company is
not aware of any environmental concerns that would have a material
adverse effect on the Company's consolidated financial condition,
consolidated results of operations or consolidated cash flows.
From time to time, legal actions are brought against the Company in the
ordinary course of business. In the opinion of management, such matters
will not have a material effect on the Company's consolidated financial
condition, consolidated results of operations or consolidated cash
flows.
The Company has management agreements with unaffiliated property
management companies to manage the operations of the properties.
Management fees are generally based on 2% to 3% of gross rentals
collected and are generally terminable on 30 days notice.
F-51
<PAGE>
WELLSFORD/WHITEHALL GROUP, L.L.C. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
COMMITMENTS AND CONTINGENCIES (CONTINUED)
The Company participates in WRP's defined contribution savings plan
which was established pursuant to Section 401 of the Internal Revenue
Code. All of the Company's employees are eligible to participate after
90 days of service. Employer contributions are made based upon a
discretionary amount determined by the Company's management. Employer
contributions, if any, are based upon the amount contributed by an
employee. During 1999 and 1998, the Company made contributions of
approximately $20,000 and $14,000, respectively.
10. YEAR 2000 (UNAUDITED)
During 1999, management of the Company developed a plan to modify its
information technology ("IT"), primarily its accounting software, to
recognize the year 2000 ("Y2K"). A Y2K compliant version of the
accounting software was obtained, along with certain upgraded computer
equipment to accommodate the new software. Installation and testing of
the new system software and hardware was completed during the fourth
quarter of 1999. Total project costs for WRP and the Company were
approximately $100,000, which were funded from operations.
Management had extensive discussions with its third-party property
management companies (the "Managers") to ensure that those parties had
appropriate plans to allay any issues that may impact the Company's
operations. These issues included both accounting/management software
and non-IT technology systems such as fire safety, security and
elevator systems. The analysis of the Company's systems was completed
September 30, 1999 and it was determined that no material adverse
consequences were likely to result from Y2K issues. Under the most
reasonably likely worst case scenario, wherein the Managers failed to
update their software and non-IT systems, the Company had the ability
to convert its accounting and management systems to a spreadsheet-based
system on a temporary basis and to utilize its building engineers to
manually override any non-IT systems which failed.
Furthermore, Management had contacted its key vendors, tenants, banks,
joint venture partners, creditors, and debtors and had obtained Y2K
compliance certifications (either verbal or written) from the majority
of them.
Subsequent to December 31, 1999, the Company did not encounter any Y2K
related problems from its accounting software or hardware, from the
operations of its properties, or from other companies on which the
Company's systems and operations rely, primarily its banks, payroll
processing company, joint venture partners, creditors, and debtors.
F-52
<PAGE>
WELLSFORD REAL PROPERTIES, INC. AND SUBSIDIARIES
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1999
(AMOUNTS IN THOUSANDS, EXCEPT SQUARE FOOTAGE AND UNITS)
<TABLE>
<CAPTION>
Number of Initial Cost
Units/ --------------------------------
Date Year Square Depreciable Buildings and
Description Acquired Built Footage Life Land Improvements Total
----------- -------- ----- ------- ---- ---- ------------ -----
<S> <C> <C> <C> <C> <C> <C> <C>
DEVELOPMENT
Blue Ridge - Garden Apts .......
Denver, CO .................. December 1997 1997 456 27.5 years $ 5,225 $ 36,339 $ 41,564
Red Canyon - Garden Apts .......
Denver, CO .................. November 1998 1998 304 27.5 years 5,060 28,844 33,904
Sonterra - Garden Apts .........
Tucson, AZ .................. January 1998 1995 344 27.5 years 3,075 17,272 20,347
------- -------- -------- --------
TOTAL DEVELOPMENT ................. 1,104 13,360 82,455 95,815
======= -------- -------- --------
OFFICE, RETAIL AND INDUSTRIAL
Hoes Lane - Office
Piscataway, NJ .............. February 1998 1987 37,632 40 years 289 1,652 1,941
Bradford Plaza - Retail
West Chester, PA ............ February 1998 1990 123,885 40 years 1,692 9,628 11,320
Chestnut Street - Office
Philadelphia, PA ............ February 1998 1857 (B) 50,053 40 years 533 3,018 3,551
Keewaydin Drive - Industrial
Salem, NH ................... February 1998 1973 125,230 40 years 502 2,847 3,349
Turnpike Street - Industrial
Canton, MA .................. February 1998 1980 43,160 40 years 359 3,037 3,396
Two Executive - Office
Cherry Hill, NJ ............. February 1998 1970 102,310 40 years 517 3,013 3,530
Bay City Holdings - Office
Santa Monica, CA ............ February 1998 1985 114,375 40 years 1,561 9,640 11,201
------- -------- -------- --------
TOTAL OFFICE, RETAIL AND INDUSTRIAL 596,645 5,453 32,835 38,288
======= -------- -------- --------
TOTAL ............................. $ 18,813 $115,290 $134,103
======== ======== ========
Cost
Capitalized Total Cost
Subsequent -------------------------------
to Buildings and Accumulated
Description Acquisition Land Improvements Total Depreciation Encumbrances
----------- ----------- ---- ------------ ----- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
DEVELOPMENT
Blue Ridge - Garden Apts .......
Denver, CO .................. $ 100 $ 5,225 $ 36,442 $ 41,667 $ 2,650 $ 33,763
Red Canyon - Garden Apts .......
Denver, CO .................. (198) 5,060 28,647 33,707 1,129 26,683
Sonterra - Garden Apts .........
Tucson, AZ .................. -- 3,075 17,320 20,395 1,260 16,114
-------- -------- -------- -------- -------- -----------
TOTAL DEVELOPMENT ................. (98) 13,360 82,409 95,769 5,039 76,560
-------- -------- -------- -------- -------- -----------
OFFICE, RETAIL AND INDUSTRIAL
Hoes Lane - Office
Piscataway, NJ .............. 300 289 1,952 2,241 95 1,340 (A)
Bradford Plaza - Retail
West Chester, PA ............ 54 1,692 9,683 11,375 444 8,400 (A)
Chestnut Street - Office
Philadelphia, PA ............ 96 533 3,114 3,647 144 2,000 (A)
Keewaydin Drive - Industrial
Salem, NH ................... 341 502 3,205 3,707 133 2,420 (A)
Turnpike Street - Industrial
Canton, MA .................. 118 359 3,155 3,514 142 1,940 (A)
Two Executive - Office
Cherry Hill, NJ ............. 444 517 3,457 3,974 159 2,300 (A)
Bay City Holdings - Office
Santa Monica, CA ............ (10) 1,561 9,630 11,191 428 9,600 (A)
-------- -------- -------- -------- -------- -----------
TOTAL OFFICE, RETAIL AND INDUSTRIAL 1,343 5,453 34,196 39,649 1,545 28,000
-------- -------- -------- -------- -------- -----------
TOTAL ............................. $ 1,245 $ 18,813 $116,605 $135,418 $ 6,584 $ 104,560
======== ======== ======== ======== ======== ===========
- ----------
<FN>
(A) These encumbrances are cross collateralized under a blanket mortgage
in the amount of $28,000 at December 31, 1999. Individual amounts have
been allocated based upon the mortgage agreement.
(B) Renovated in 1986 and 1990.
</FN>
</TABLE>
S-1
<PAGE>
WELLSFORD REAL PROPERTIES, INC. AND SUBSIDIARIES
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1999
(AMOUNTS IN THOUSANDS)
The following is a reconciliation of real estate assets and accumulated
depreciation:
<TABLE>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
REAL ESTATE
Balance at beginning of period ................. $ 134,239 $ 41,564 $ --
Additions:
Acquisitions ............................... 7,238 156,533 85,552
Capital improvements ....................... 1,179 136 --
--------- --------- ---------
142,656 198,233 85,552
Less:
Cost of real estate sold ................... (7,238) (63,994) (43,988)
--------- --------- ---------
Balance at end of period ....................... $ 135,418 (A) $ 134,239 $ 41,564
========= ========= =========
ACCUMULATED DEPRECIATION
Balance at beginning of period ................. $ 2,707 $ -- $ --
Additions:
Charged to operating expense ............... 3,877 2,707 --
--------- --------- ---------
6,584 2,707 --
Less:
Accumulated depreciation on real estate sold -- -- --
--------- --------- ---------
Balance at end of period ....................... $ 6,584 (A) $ 2,707 $ --
========= ========= =========
- ----------
<FN>
(A) The aggregate depreciated cost for federal income tax purposes approximated
$121,900 at December 31, 1999.
</FN>
</TABLE>
S-2
<PAGE>
WELLSFORD REAL PROPERTIES, INC. AND SUBSIDIARIES
SCHEDULE IV
MORTGAGE LOANS ON REAL ESTATE
DECEMBER 31, 1999
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
NOTES RECEIVABLE TYPE OF SECURITY INTEREST RATE MATURITY DATE PAYMENT TERMS
---------------- ---------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
277 Park Loan ........... Office (B) 12.00% May 2007 (C) Interest Only
Abbey Credit Facility ... Mixed (D) LIBOR + 4.00% September 2000 Interest Only
Safeguard Credit Facility StorageFacility (F) LIBOR + 4.00% April 2001 Interest Only
Patriot Games ........... Office (H) LIBOR + 4.75% July 2002 Interest Only
REMICs .................. Coops/Condos Various Various Various
TOTAL ...................
TOTAL PRINCIPAL
SUBJECT TO
CARRYING DELINQUENT
NOTES RECEIVABLE PRIOR LIENS FACE AMOUNT AMOUNT(A) PAYMENTS
---------------- ----------- ----------- --------- --------
<S> <C> <C> <C> <C>
277 Park Loan ........... $345,000 $ 25,000 $ 25,000 $ --
Abbey Credit Facility ... -- 46,019 (E) 4,251 --
Safeguard Credit Facility -- 2,900 (G) 2,900 --
Patriot Games ........... -- 5,000 5,000 --
REMICs .................. -- 248 109 21
-------- -------- -------- --------
TOTAL ................... $345,000 $ 79,167 $ 37,260 (I) $ 21
======== ======== ======== ========
- ----------
<FN>
(A) The aggregate carrying amount for federal income tax purposes is equal to
the total face amount reflected in this schedule.
(B) This loan is secured by certain equity interests in an entity which owns a
52-story, 1.75 million square foot office building in New York, NY.
(C) This loan precludes prepayments until May 2003. From May 2003 to April
2006, a prepayment penalty based on a yield maintenance formula (as defined
in the related documents) is applicable. From May 2006 to maturity, no
prepayment penalty is applicable.
(D) This loan is secured by first mortgage liens on one office, one retail and
one industrial building totaling 249,709 square feet located in Palm
Springs, Santa Maria and Long Beach, CA .
(E) The maximum balance of the Company's 50% portion of this facility is
$60,000.
(F) This loan is secured by first mortgage liens on 2 self-storage facilities
totaling 141,721 square feet located in Marrero and New Orleans, LA.
(G) The maximum balance of the Company's portion of this facility is $20,000.
(H) This loan is secured by a fee interest in an office property totaling
607,668 square feet located in Boston, MA.
(I) Reconciliation of carrying amount:
Balance at January 1, 1997 ................. $ 17,800
Additions:
New loans ............................... 164,645
Funding of credit facilities ............ 28,627
Deductions:
Collection of principal ................. (105,440)
---------
Balance at January 1, 1998 ................. 105,632
Additions:
New loans ............................... 40,604
Funding of credit facilities ............ 33,305
Amortization of discount ................ 410
Deductions:
Collection of principal ................. (55,244)
---------
Balance at January 1, 1999 ................. 124,707
Additions:
New loans ............................... 49,295
Amortization of discount ................ 217
Deductions:
Collection of principal ................. (112,741)
Contributions for joint venture interests (24,218)
---------
Balance at December 31, 1999 ............... $ 37,260
=========
</FN>
</TABLE>
S-3
<PAGE>
AMENDMENT NO. 2 TO WARRANT AGREEMENT
This AMENDMENT NO. 2 (this "Amendment") to the Warrant Agreement, dated as
of August 28, 1997, as amended , is made and entered into as of May 28, 1999 by
and between Wellsford Real Properties, Inc., a Maryland corporation (together
with its successors and permitted assigns, the "Company"), and United States
Trust Company of New York (together with its successors and permitted assigns,
the "Warrant Agent").
R E C I T A L S
---------------
WHEREAS, the Company and the Warrant Agent are parties to that certain
Warrant Agreement, dated as of August 28, 1997 (the "Original Warrant
Agreement"), pursuant to which the Company had issued to WHWEL Real Estate
Limited Partnership, a Delaware limited partnership ("WHWEL"), five million
(5,000,000) warrants (the "Warrants") to purchase shares of the Company's common
stock;
WHEREAS, the Company and the Warrant Agent entered into that certain
Amendment No. 1 to Warrant Agreement, dated as of July 16, 1998 ("First
Amendment"; the Original Warrant Agreement as amended by the First Amendment,
the "Warrant Agreement"), to reflect the transactions whereby WHWEL, Wellsford
Commercial Properties Trust, a Maryland real estate investment trust ("WCPT")
and other parties formed Wellsford/Whitehall Properties II, L.L.C., a Delaware
limited liability company ("WWP II");
WHEREAS, WHWEL, W/W Group Holdings, L.L.C., a Delaware limited liability
company ("Holding Co."), WXI/WWG Realty, L.L.C., a Delaware limited liability
company, WCPT and other members of WWPII have formed, and contributed certain
assets to, Wellsford/Whitehall Group, L.L.C. (collectively, the "Group
Transactions");
WHEREAS, in connection with the Group Transactions, WHWEL desires to assign
its interest in the Warrants to Holding Co.; and
WHEREAS, the parties hereto desire to amend the Warrant Agreement to
reflect the transactions described above and certain other matters.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth below, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and Warrant Agent
hereby agree as follows:
1. Definitions. All capitalized terms used and not defined herein shall
have the meanings given to such terms in the Warrant Agreement.
Exhibit 4.41 Page 1
<PAGE>
2. Amendment to Warrant Agreement.
(a) The terms "Initial Holder", "Membership Unit", and "Wellsford/Whitehall
II LLC Agreement", as defined in Section 1 of the Warrant Agreement, shall be
deleted in their entirety and replaced with the following terms and definitions:
(i) "'Initial Holder' shall mean Holding Co."
(ii) "'Membership Unit' shall have the meaning set forth in the
Wellsford/Whitehall Group LLC Agreement."
(iii) "'Wellsford/Whitehall Group LLC Agreement' shall mean that certain
Limited Liability Company Operating Agreement of Wellsford/Whitehall Group dated
as of May ___, 1999, as such agreement may be amended or modified from time to
time."
All further references in the Warrant Agreement to the term "Initial
Holder", "Membership Unit" and "Wellsford/Whitehall II LLC Agreement" shall be
deemed to refer to the terms "Initial Holder", "Membership Unit" and
"Wellsford/Whitehall Group LLC Agreement", respectively, as each is defined in
this Amendment.
(b) The following defined terms and definitions shall
be inserted into Section 1 of the Warrant Agreement in their appropriate
alphabetical order:
(i) "'Deemed Value Per Membership Unit' shall have the meaning set forth in
the Wellsford/Whitehall Group LLC Agreement."
(ii) "'Holding Co.' shall mean W/W Group Holdings, L.L.C., a Delaware
limited liability company."
(iii) "'Registration Rights Agreement' shall mean the Registration Rights
Agreement dated as of May ___, 1999, by and between the Company and the Initial
Holder, as such agreement may be amended or modified from time to time."
Exhibit 4.41 Page 2
<PAGE>
(iii) "'Wellsford/Whitehall Group' shall mean Wellsford/Whitehall Group,
L.L.C., a Delaware limited liability company."
(c) The following defined terms and definitions shall be deleted from
Section 1 of the Warrant Agreement: "Company Shares", "Demand Registration",
"Eligible Common Stock", "Eligible Securities", "Favorable Term", "Piggyback
Registration", "Prospectus", "Registration Demand", "Registration Procedures",
"Registration Rights", "Registration Statement", "Representative", "Saracen
Members", "Saracen Registration Rights Agreement", "selling holder", "Shelf
Registration", "Shelf Registration Statement", "Subsequent Warrant Holder",
"Takedown", "underwriter" and "underwriting or agency agreement".
(d) The last sentence of Article 1 is hereby deleted in its entirety and
replaced with the following language:
"Certain terms used principally in Article 6 are defined in that Section."
(e) Section 3.1(b) of the Warrant Agreement is hereby deleted in its
entirety and replaced with the following:
"(b) When exercised in accordance with subparagraph (c) below, each Warrant
shall entitle the Holder to purchase, and the Company shall be required to
deliver, a number of shares of Common Stock equal to the Shares Amount in effect
on the day such Warrant is exercised in accordance with Section 3.1(c), at an
exercise price (the "Exercise Price") of, at the sole election of the Holder,
either (x) a number of Membership Unit(s) equal to the quotient (rounded to the
nearest one ten-thousandth (0.0001)) of (i) $10.00 divided by (ii) the Deemed
Value Per Membership Unit or (y) $10.00 in cash; provided,
Exhibit 4.41 Page 3
<PAGE>
however, that the Company may, at its sole election, pay to the Holder of each
Warrant so exercised in respect of any one or more of such Warrants cash in an
amount equal to the Cash Amount in lieu of delivering the shares of Common
Stock. When multiple Warrants are exercised, the Exercise Price may consist of
cash, Membership Units or any combination thereof. For the avoidance of doubt,
the Holder may procure Membership Units for the payment of the Exercise Price
from its Affiliates or other third-parties. Notwithstanding the foregoing, the
Holder may not elect to deliver Membership Units as the Exercise Price upon the
exercise of any Warrant before August 28, 1999."
(f) Article 7 of the Warrant Agreement is hereby amended to read in its
entirety as follows:
ARTICLE 7
REGISTRATION RIGHTS AND PROCEDURES
Section 7.1. The Company acknowledges that it is subject to the terms and
conditions of the Registration Rights Agreement.
(g) Article 8 of the Warrant Agreement is hereby amended to read in its
entirety as follows:
ARTICLE 8
Intentionally Deleted
(h) Section 13.9 of the Warrant Agreement is hereby amended to read in its
entirety as follows:
Section 13.9 Remedies. In the event of a breach by the Company or by a
Holder of any of their obligations under this Agreement, each Holder or the
Company, as the case may be, in addition to being entitled to exercise all
rights granted by law, including
Exhibit 4.41 Page 4
<PAGE>
recovery of damages, will be entitled to specific performance of its rights
under this Agreement. The Company and each Holder agree that monetary damages
would not be adequate compensation for any loss incurred by reason of a breach
by it of any of the provisions of this Agreement and hereby further agrees that,
in the event of any action for specific performance in respect of such breach,
it shall waive the defense that a remedy at law would be adequate.
3. Persons Benefitting. This Amendment shall be binding upon and inure to
the benefit of any Holders (each of whom is an intended third party
beneficiary), the Company and the Warrant Agent, and their respective
successors, assigns, beneficiaries, executors and administrators. Nothing in
this Amendment is intended or construed to confer upon any Person, other than
the Company, the Warrant Agent and the Holders (and such successors, assigns,
beneficiaries, executors and administrators), any right, remedy or claim under
or by reason this Amendment or any part hereof.
4. Continued Force and Effect. The Warrant Agreement, as amended by this
Amendment, and each and every provision, covenant, representation, warranty,
condition and right contained therein, as amended by this Amendment, is hereby
ratified and affirmed as of the date hereof, and shall continue in full force
and effect.
5. Counterparts. This Amendment may be executed in one or more
counterparts, each of which shall constitute an original and all of which, when
taken together, shall constitute one agreement.
6. Headings and Captions. All headings and captions contained in this
Amendment hereto are inserted for convenience only and shall not be deemed a
part of this Amendment.
7. Governing Law. THIS AMENDMENT AND ALL RIGHTS ARISING HEREUNDER SHALL BE
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK.
Exhibit 4.41 Page 5
<PAGE>
[SIGNATURE PAGE FOLLOWS]
Exhibit 4.41 Page 6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed, as of the day and year first above written.
WELLSFORD REAL PROPERTIES, INC.
By: /s/ Edward Lowenthal
--------------------
Name: Edward Lowenthal
Title: President
UNITED STATES TRUST COMPANY OF
NEW YORK, Warrant Agent
By: /s/ Cynthia Chaney
------------------
Name: Cynthia Chaney
Title: Assistant Vice President
Exhibit 4.41 Page 7
<PAGE>
WARRANT AGREEMENT
This WARRANT AGREEMENT is made and entered into as of May 28, 1999 by and
between Wellsford Real Properties, Inc., a Maryland corporation (together with
its successors and permitted assigns, the "Company"), and United States Trust
Company of New York (together with its successors and permitted assigns, the
"Warrant Agent").
R E C I T A L S
---------------
WHEREAS, W/W Group Holdings, L.L.C., a Delaware limited liability company
("Holding Co."), WHWEL Real Estate Limited Partnership, a Delaware limited
partnership ("WHWEL"), WXI/WWG Realty, L.L.C., a Delaware limited liability
company, Wellsford Commercial Properties Trust, a Maryland real estate
investment trust ("WCPT"), and other parties have agreed to form, and contribute
certain assets to, Wellsford/Whitehall Group, L.L.C., a Delaware limited
liability company ("Wellsford/Whitehall Group"), subject to the concurrent
issuance by the Company to WHWEL of one hundred fifty thousand (150,000)
warrants to purchase shares of the Company's Common Stock;
WHEREAS, WHWEL has directed the Company to issue such 150,000 warrants to
Holding Co.; and
WHEREAS, the Company desires the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is so willing to act, in connection with the
issuance, transfer or exercise of Warrants and other matters as provided herein.
NOW, THEREFORE, in consideration of the mutual agreements
hereinafter contained, and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE 1
DEFINITIONS
Section 1.1. Definitions. For purposes of this Agreement, the following
terms shall have the following respective meanings:
"Affiliate" of any Person shall mean any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such Person. For purposes of this definition, "control" when used
with respect to any Person means the power to direct the management and policies
of such Person, directly or indirectly, whether through the ownership of
Exhibit 4.42 Page 1
<PAGE>
voting securities, by contract or otherwise, and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Agreement" shall mean this Warrant Agreement, as it may be amended or
modified from time to time.
"Articles of Incorporation" shall mean the Company's Articles of Amendment
and Restatement, as amended from time to time.
"Business Day" shall mean any day other than a Saturday, Sunday or any
other day on which banks in New York are authorized or required to close.
"Cash Amount" shall mean, with respect to any Warrant, an amount of cash
equal to the product of (i) the Closing Price of the Common Stock as of the date
of exercise of such Warrant multiplied by (ii) the Shares Amount in effect on
such date.
"Close of Business" shall mean, for any day, 5:00 P.M., New York City time,
on such date.
"Closing Price" shall mean the last reported sale price regular way on the
day in question or, in case no such sale takes place on such day, the average of
the reported closing bid and asked prices regular way of the Common Stock, in
each case on the American Stock Exchange ("AMEX"), or, if the Common Stock is
not listed or admitted to trading on the AMEX, on the principal national
securities exchange or quotation system on which the Common Stock 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 the Common Stock in the over-the-counter
market on the day in question as reported by the National Quotation Bureau
Incorporated, or a similarly generally accepted reporting service, or, if not so
available in such manner, as furnished by any AMEX member firm selected from
time to time by the board of directors of the Company for the purpose. In the
case of a closing price of Common Stock on the AMEX, such price shall mean the
closing price reported in the AMEX composite transactions reporting system (as
reported in the New York City edition of The Wall Street Journal or, if not so
reported, another authoritative source).
"Common Stock" shall mean the common stock, par value $.01 per share, of
the Company and any other stock of the Company into which such common stock may
be converted or reclassified (other than stock of the Company into which
unissued Common Stock has been reclassified) or that may be issued in respect
of, in exchange for, or in substitution of, such common stock by reason of any
stock splits, stock dividends, distributions, mergers, consolidations,
recapitalizations or other like events. For purposes of Section 6.1, the term
"Common Stock" shall include the Class A common stock, $.01 par value per share,
of the Company.
"Company" shall have the meaning set forth in the first paragraph of this
Agreement.
"current market price" shall have the meaning set forth in Section
6.1(a)(vii).
Exhibit 4.42 Page 2
<PAGE>
"Deemed Value Per Membership Unit" shall have the meaning set forth in
Section 1 of the Wellsford/Whitehall Group LLC Agreement.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Exercise Price" shall have the meaning set forth in Section 3.1(b).
"Expiration Date" shall mean the fifth anniversary of the date of this
Agreement, provided that if such date is not a Business Day, the next Business
Day thereafter.
"Holders" shall mean, collectively, the holders from time to time of
Warrant Certificates and "Holder" shall mean any such holder.
"Holding Co." shall have the meaning set forth in the second paragraph of
this Agreement.
"Initial Holder" shall mean Holding Co.
"Membership Unit" shall have the meaning set forth in the
Wellsford/Whitehall Group LLC Agreement.
"Partial Spin-Off" shall have the meaning set forth in Section 6.1(a)(iv).
"Person" shall mean any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Registration Rights Agreement" shall mean the Registration Rights
Agreement, dated as of May ___, 1999, between the Company and the Initial
Holder, as such agreement may be amended or modified from time to time .
"SEC" shall mean the Securities and Exchange Commission.
"SEC Reports" shall mean the annual and quarterly reports and the
information, documents, and other reports that the Company is required to file
with the SEC pursuant to Section 13(a) or 15(d) of the Exchange Act.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Shares Amount" shall mean, with respect to any Warrant, 0.826446 shares of
Common Stock, subject to all adjustments made pursuant to Article 6 hereof on or
prior to the date of exercise of such Warrant.
"Trading Day" shall mean a day on which the principal national securities
exchange on which the shares of Common Stock are listed or admitted to trading
is open for the transaction of
Exhibit 4.42 Page 3
<PAGE>
business or, if the shares of Common Stock are not listed or admitted to trading
on any national securities exchange, any Business Day.
"Transfer Agent" shall have the meaning set forth in Section 11.1.
"Underlying Common Stock" shall mean all shares of Common Stock either
issuable upon the exercise of the Warrants or previously issued upon the prior
exercise of the Warrants.
"Warrants" shall mean the warrants issued by the Company on the date hereof
pursuant to this Agreement, and any additional warrants issued in accordance
with this Agreement.
"Warrant Certificates" shall mean the certificates substantially in the
form of Exhibit A evidencing the Warrants.
"Warrant Agent" shall have the meaning set forth in the first paragraph of
this Agreement.
"WCPT" shall have the meaning set forth in the second paragraph of this
Agreement.
"Wellsford/Whitehall Group" shall mean the meaning set forth in the second
paragraph of this Agreement.
"Wellsford/Whitehall Group LLC Agreement" shall mean the limited liability
company agreement of Wellsford/Whitehall Group dated as of May, ___ 1999, as
such agreement may be amended or modified from time to time.
Certain terms used principally in Article 6 are defined in that Section.
ARTICLE 2
ORIGINAL ISSUE OF WARRANTS
Section 2.1. Form of Warrant Certificates. Warrant Certificates shall be in
registered form only, substantially in the form attached hereto as Exhibit A and
dated the date on which countersigned by the Warrant Agent.
Pending the preparation of definitive Warrant Certificates, temporary
Warrant Certificates may be issued, which may be printed, lithographed,
typewritten, mimeographed or otherwise produced, which will be substantially of
the tenor of the definitive Warrant Certificates in lieu of which they are
issued and which are not required to be countersigned by the Warrant Agent.
If temporary Warrant Certificates are issued, the Company will
cause definitive Warrant Certificates to be prepared without unreasonable delay.
After the preparation of definitive Warrant Certificates, the temporary Warrant
Certificates shall be exchangeable for definitive Warrant Certificates upon the
surrender of the temporary Warrant Certificates to the Warrant Agent, without
Exhibit 4.42 Page 4
<PAGE>
charge to the Initial Holder. Until so exchanged the temporary Warrant
Certificates shall in all respects be entitled to the same benefits under this
Agreement as definitive Warrant Certificates.
Section 2.2. Execution and Delivery of Warrant Certificates.
----------------------------------------------
(a) Simultaneously with the execution of this Agreement, Warrant
Certificates evidencing one hundred fifty thousand (150,000) Warrants, shall be
executed on behalf of the Company as provided in paragraph (b) below and
delivered to the Warrant Agent for countersignature and the Warrant Agent shall
thereupon countersign and deliver such Warrant Certificates to Whitehall. In
addition, the Warrant Agent is irrevocably authorized to countersign and deliver
Warrant Certificates as required by Sections 3.1(e), 5.1 and 5.2.
(b) Warrant Certificates shall be executed on behalf of the Company by its
Chairman, Chief Executive Officer or President, either manually or by facsimile
signature printed thereon. Warrant Certificates shall be countersigned by the
Warrant Agent, either manually or by facsimile signature printed thereupon, and
shall not be valid for any purpose unless so countersigned. In case any officer
of the Company whose signature shall have been placed upon any Warrant
Certificate shall cease to be such officer of the Company before
countersignature by the Warrant Agent and issue and delivery thereof, such
Warrant Certificates may, nevertheless, be countersigned by the Warrant Agent
and issued and delivered with the same force and effect as though such person
had not ceased to be such officer of the Company.
ARTICLE 3
EXERCISE OF WARRANTS
Section 3.1. Exercise Procedures.
-------------------
(a) Each Warrant shall be exercisable as provided in this Section 3 from
time to time on any Business Day prior to the Close of Business on the
Expiration Date.
(b) When exercised in accordance with subparagraph (c) below, each Warrant
shall entitle the Holder to purchase, and the Company shall be required to
deliver, a number of shares of Common Stock equal to the Shares Amount in effect
on the day such Warrant is exercised in accordance with Section 3.1(c), at an
exercise price (the "Exercise Price") of, at the sole election of the Holder,
either (x) a number of Membership Unit(s) equal to the quotient (rounded to the
nearest one ten-thousandth (0.0001)) of (i) $10.00 divided by (ii) the Deemed
Value Per Membership Unit or (y) $10.00 in cash; provided, however, that the
Company may, at its sole election, pay to the Holder of each Warrant so
exercised in respect of any one or more of such Warrants cash in an amount equal
to the Cash Amount in lieu of delivering the shares of Common Stock. When
multiple Warrants are exercised, the Exercise Price may consist of cash,
Membership Units or any combination thereof. For the avoidance of doubt, the
Holder may procure Membership Units for the payment of the Exercise Price from
its Affiliates or other third-parties. Notwithstanding the foregoing, the Holder
may not elect to deliver Membership Units as the Exercise Price upon the
exercise of any Warrant before August 28, 1999.
Exhibit 4.42 Page 5
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(c) In order to exercise a Warrant, the Holder must surrender the Warrant
Certificate evidencing such Warrant to the Warrant Agent, with the form of
election on the reverse of or attached to the Warrant Certificate duly executed,
together with any required payment or delivery, as the case may be, of the
Exercise Price, to the Warrant Agent at the principal office of the Warrant
Agent in New York, New York. In the event Holder elects to tender Membership
Units as provided in subparagraph (b) above, all such Membership Units (and the
corresponding Interest (as defined in Wellsford/Whitehall Group LLC Agreement))
shall be assigned by the Warrant Agent to the Company. In the event a Holder
elects to pay the cash Exercise Price as provided in subparagraph (b) above,
such Holder shall transfer to the Warrant Agent, together with the surrendered
Warrant Certificate, the required payment in full of the Exercise Price for each
Warrant which is exercised. Any such payment of the Exercise Price shall be by
certified or official bank check or wire transfer of same day funds, and such
funds shall be deposited by the Warrant Agent for the account of the Company,
unless otherwise instructed in writing by the Company.
(d) Upon surrender of a Warrant Certificate in conformity with the
foregoing, the Warrant Agent shall thereupon promptly notify the Company. In the
event the Company elects to deliver the Shares Amount as provided in
subparagraph (b) above, the Company shall transfer to the Holder of the
exercised Warrant share certificates representing the shares of Common Stock to
which such Holder is entitled and the Holder shall be deemed to own and have all
the rights associated with any shares of Common Stock to which it is entitled
pursuant to this Agreement upon the surrender of any Warrant Certificate in
accordance with this Section 3.1. If the Company elects to deliver the Cash
Amount as provided in subparagraph (b) above, the Company shall deliver to the
Holder of the exercised Warrant payment of the Cash Amount in same day funds to
the account specified on the form of election on the reverse of or attached to
the Warrant Certificate. The Holder acknowledges that the Company does not
currently intend to issue Common Stock equal to 20% or more of its currently
outstanding Common Stock upon the exercise of any Warrants and, in the event of
such an exercise that could result in Common Stock being issued in excess of
such limit, the Company will instead deliver the Cash Amount.
(e) If fewer than all the Warrants represented by a Warrant Certificate are
exercised, such Warrant Certificate shall be surrendered by the Warrant Agent to
the Company with instructions for the issuance of a new Warrant Certificate and
the Company shall promptly execute such new Warrant Certificate for the Warrants
that were not exercised and deliver the same to the Warrant Agent. The Warrant
Agent shall promptly countersign the new Warrant Certificate, register it and
deliver it to the registered Holder thereof.
ARTICLE 4
COMPLIANCE WITH THE SECURITIES ACT
Section 4.1. Transfers. The Initial Holder hereby acknowledges that the
Warrants and the shares of Common Stock which may be received by the Initial
Holder upon exercise of any Warrant are and will be subject to certain
restrictions on transfers under the Securities Act and the regulations
promulgated thereunder.
Exhibit 4.42 Page 6
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Section 4.2. Representations. The Initial Holder has been afforded full and
complete access to all information and other materials relating to the Company
and to the offer of the Warrants and has had the opportunity to have answered
any questions it had concerning the Company and the offering of the Warrants.
The Initial Holder hereby represents that it is acquiring the Warrants for
its own account for investment and not with a view to the resale or distribution
of any interest therein.
ARTICLE 5
REGISTRATION OF TRANSFERS AND EXCHANGES
Section 5.1. Generally. The Warrant Certificates shall be issued in
registered form only. The Company shall cause to be kept at the office of the
Warrant Agent a register in which, subject to such reasonable regulations as it
may prescribe, the Company shall provide for the registration of the transfers
or exchanges of the Warrant Certificates as herein provided.
The Warrant Agent shall from time to time register the transfer or exchange
of any outstanding Warrant, in the records to be maintained by it for that
purpose, upon surrender of such Warrant. Upon any such registration of transfer
or exchange, a new Warrant Certificate shall be issued to the transferee in the
case of a transfer or to the Holder making the exchange, and the surrendered
Warrant Certificate shall be canceled by the Warrant Agent. Canceled Warrant
Certificates shall be disposed of by the Warrant Agent in accordance with its
customary procedures and the Warrant Agent shall deliver a certificate of their
destruction to the Company.
All Warrant Certificates issued upon any registration of transfer or
exchange shall be valid obligations of the Company, evidencing the same
obligations, and entitled to the same benefits under this Agreement, as the
Warrant Certificates surrendered for such registration of transfer or exchange.
Every Warrant Certificate surrendered for registration of transfer or
exchange shall (if so required by the Company or the Warrant Agent) be duly
endorsed, or be accompanied by a written instrument of transfer in form
contained in Exhibit B hereto or such other form satisfactory to the Company and
the Warrant Agent, duly executed by the Holder thereof or his attorney duly
authorized in writing.
No service charge shall be made to a Holder for any registration of
transfer or exchange of the Warrant Certificates. 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 registration of transfer or exchange of
the Warrant Certificates.
Any Warrant Certificate when duly endorsed in blank shall be deemed
negotiable and when any Warrant Certificate shall have been so endorsed, the
Holder thereof may be treated by the Company, the Warrant Agent and all other
persons dealing therewith as the absolute owner thereof for
Exhibit 4.42 Page 7
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any purpose and as the Person entitled to either exercise the rights represented
thereby or to transfer the Warrants represented thereby on the register of the
Company maintained by the Warrant Agent, any notice to the contrary
withstanding; but until such transfer on such register, the Company and the
Warrant Agent may treat the registered Holder thereof as the owner for all
purposes.
Section 5.2. Mutilated, Destroyed, Lost or Stolen Warrant Certificates. If
any mutilated Warrant Certificate is surrendered to the Warrant Agent or the
Company, or if the Warrant Agent receives evidence to its satisfaction of the
destruction, loss or theft of any Warrant Certificate, and there is delivered to
the Company and the Warrant Agent such security or indemnity as may be
reasonably required by them to save each of them harmless, then, in the absence
of notice to the Company or the Warrant Agent that such Warrant Certificate has
been acquired by a bona fide purchaser, the Company shall execute and upon its
written request the Warrant Agent shall countersign and deliver, in exchange for
any such mutilated Warrant Certificate, or in lieu of any such destroyed, lost
or stolen Warrant Certificate, a new Warrant Certificate of like tenor and for a
like aggregate number of Warrants. Upon the issuance of any new Warrant
Certificate under this Section 5.2, 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 other expenses (including the reasonable fees and expenses
of the Warrant Agent) in connection therewith.
Every new Warrant Certificate executed and delivered pursuant to this
Section 5.2 in lieu of any destroyed, lost or stolen Warrant Certificate shall
constitute an original contractual obligation of the Company, whether or not the
destroyed, lost or stolen Warrant Certificate shall be at any time enforceable
as provided herein, and shall be entitled to the benefits of this Agreement
equally and proportionately with any and all other Warrant Certificates duly
executed and delivered hereunder. The provisions of this Section 5.2 are
exclusive and shall preclude (to the extent lawful) all other rights or remedies
with respect to the replacement of mutilated, destroyed, lost or stolen Warrant
Certificates.
ARTICLE 6
ADJUSTMENTS
Section 6.1. Adjustment upon Certain Transactions.
------------------------------------
(a) The Shares Amount (and, by virtue thereof, the Cash Amount) shall be
subject to adjustment from time to time as follows:
(i) In case the Company shall pay or make a dividend or other distribution
on its Common Stock exclusively in Common Stock or shall pay or make a dividend
or other distribution on any other class or series of stock of the Company which
dividend or distribution includes Common Stock, the Shares Amount in effect at
the opening of business on the date following the date fixed for the
determination of stockholders entitled to receive such dividend or other
distribution shall be increased by multiplying such Shares Amount by a fraction
of which the denominator shall be the number of shares of Common Stock
outstanding at the Close of Business on the date fixed for such determination
and the
Exhibit 4.42 Page 8
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numerator shall be the sum of such number of shares plus the total number of
shares constituting such dividend or other distribution, such increase to become
effective immediately after the opening of business on the day following the
date fixed for such determination. For the purposes of this subparagraph (i),
the number of shares of Common Stock at any time outstanding shall not include
shares held in the treasury of the Company. The Company shall not pay any
dividend or make any distribution on shares of Common Stock held in the treasury
of the Company.
(ii) In case the Company shall pay or make a dividend or other distribution
on its Common Stock consisting exclusively of, or shall otherwise issue to all
holders of its Common Stock, rights or warrants entitling the holders thereof to
subscribe for or purchase shares of Common Stock at a price per share less than
the current market price per share (determined as provided in subparagraph (vii)
of this Section 6.1(a)) of the Common Stock on the date fixed for the
determination of stockholders entitled to receive such rights or warrants, the
Shares Amount in effect at the opening of business on the day following the date
fixed for such determination shall be increased by multiplying the Shares Amount
by a fraction of which the denominator shall be the number of shares of Common
Stock outstanding at the Close of Business on the date fixed for such
determination plus the number of shares of Common Stock which the aggregate of
the offering price of the total number of shares of Common Stock so offered for
subscription or purchase would purchase at such current market price and the
numerator shall be the number of shares of Common Stock outstanding at the Close
of Business on the date fixed for such determination plus the number of shares
of Common Stock so offered for subscription or purchase, such increase to become
effective immediately after the opening of business on the day following the
date fixed for such determination. For the purposes of this subparagraph (ii),
the number of shares of Common Stock at any time outstanding shall not include
shares held in the treasury of the Company. The Company shall not issue any
rights or warrants in respect of shares of Common Stock held in the treasury of
the Company. In case any rights or warrants referred to in this subparagraph
(ii) in respect of which an adjustment shall have been made shall expire
unexercised within 60 days after the same shall have been distributed or issued
by the Company, the Shares Amount shall be readjusted at the time of such
expiration to the Shares Amount that would have been in effect if no adjustment
had been made on account of the distribution or issuance of such expired rights
or warrants.
(iii) In case outstanding shares of Common Stock shall be subdivided into a
greater number of shares of Common Stock, the Shares Amount in effect at the
opening of business on the day following the day upon which such subdivision
becomes effective shall be proportionately increased, and conversely, in case
outstanding shares of Common Stock shall each be combined into a smaller number
of shares of Common Stock, the Shares Amount in effect at the opening of
business on the day following the day upon which such combination becomes
effective shall be proportionately decreased, such reduction or increase, as the
case may be, to become effective immediately after the opening of business on
the day following the day upon which such subdivision or combination becomes
effective. No reduction in the Shares Amount may occur except pursuant to this
subparagraph (iii).
Exhibit 4.42 Page 9
<PAGE>
(iv) Subject to the last two sentences of this subparagraph (iv), in case
the Company shall, by dividend or otherwise, distribute to all holders of its
Common Stock evidences of its indebtedness, shares of any class or series of
stock, cash or assets (including securities, but excluding any rights or
warrants referred to in subparagraph (ii) of this Section 6.1(a), any dividend
or distribution paid exclusively in cash and any dividend or distribution
referred to in subparagraph (i) of this Section 6.1(a)), the Shares Amount shall
be increased so that the same shall equal the number determined by multiplying
the Shares Amount in effect immediately prior to the effectiveness of the Shares
Amount increase contemplated by this subparagraph (iv) by a fraction of which
the denominator shall be the current market price per share (determined as
provided in subparagraph (vii) of this Section 6.1(a)) of the Common Stock on
the date fixed for the payment of such distribution (the "Reference Date") less
the fair market value (as determined in good faith by the Board of Directors,
whose determination shall be conclusive and described in a resolution of the
Board of Directors), on the Reference Date, of the portion of the evidences of
indebtedness, shares of stock, cash and assets so distributed applicable to one
share of Common Stock and the numerator shall be such current market price per
share of the Common Stock, such increase to become effective immediately prior
to the opening of business on the day following the Reference Date. If the Board
of Directors determines the fair market value of any distribution for purposes
of this subparagraph (iv) by reference to the actual or when issued trading
market for any securities comprising such distribution, it must in doing so
consider the prices in such market over the same period used in computing the
current market price per share of Common Stock pursuant to subparagraph (vii) of
this Section 6.1(a). For purposes of this subparagraph (iv), any dividend or
distribution that includes shares of Common Stock or rights or warrants to
subscribe for or purchase shares of Common Stock shall be deemed instead to be
(1) a dividend or distribution of the evidences of indebtedness, cash, assets or
shares of stock other than such shares of Common Stock or such rights or
warrants (making any Shares Amount increase required by this subparagraph (iv))
immediately followed by (2) a dividend or distribution of such shares of Common
Stock or such rights or warrants (making any further Shares Amount increase
required by subparagraph (i) or (ii) of this Section 6.1(a), except (A) the
Reference Date of such dividend or distribution as defined in this subparagraph
(iv) shall be substituted as "the date fixed for the determination of
stockholders entitled to receive such dividend or other distribution, "the date
fixed for the determination of stockholders entitled to receive such rights or
warrants" and "the date fixed for such determination" within the meaning of
subparagraphs (i) and (ii) of this Section 6.1(a) and (B) any shares of Common
Stock included in such dividend or distribution shall not be deemed "outstanding
at the Close of Business on the date fixed for such determination" within the
meaning of subparagraph (i) of this Section 6.1(a)). Notwithstanding anything to
the contrary contained in this Article 6, the Company may one time in any
twelve-month period pay a dividend or distribution on its Common Stock
exclusively in the form of securities of (or other ownership interests in) any
subsidiary of the Company (a "Partial Spin-Off") without any adjustment to the
Shares Amount on account thereof if the fair market value (determined in good
faith by the Board of Directors, whose determination shall be conclusive and
described in a resolution of the Board of Directors) of the Partial Spin-Off
distributed per share of Common Stock outstanding on the date fixed for such
determination does not exceed 8% of the current market price per share
(determined as provided in subparagraph (vii) of this
Exhibit 4.42 Page 10
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Section 6.1(a) of the Common Stock on the Trading Day next preceding the date of
declaration of such dividend).
(v) In case the Company shall pay or make a dividend or other distribution
on its Common Stock exclusively in cash (excluding, in the case of any quarterly
cash dividend on the Common Stock, the portion thereof that does not exceed the
greater of (x) the per share amount of the next preceding quarterly cash
dividend on the Common Stock (as adjusted to appropriately reflect any of the
events referred to in subparagraphs (i), (ii), (iii), (iv), (v) and (vi) of this
Section 6.1(a)), and (y) the per share amount which, when multiplied by four,
and added to the fair market value (as determined in the last sentence of (iv)
above) of any Partial Spin-Off distributed per share of Common Stock during the
preceding twelve-month period, is equal to or less than 8% of the current market
price per share (determined as provided in subparagraph (vii) of this Section
6.1(a)) of the Common Stock on the Trading Day next preceding the date of
declaration of such dividend), the Shares Amount shall be increased so that the
same shall equal the number determined by multiplying the Shares Amount in
effect immediately prior to the effectiveness of the Shares Amount increase
contemplated by this subparagraph (v) by a fraction of which the denominator
shall be the current market price per share (determined as provided in
subparagraph (vii) of this Section 6.1(a)) of the Common Stock on the date fixed
for the payment of such distribution less the amount of cash so distributed and
not excluded as provided above applicable to one share of Common Stock and the
numerator shall be such current market price per share of Common Stock, such
increase to become effective immediately prior to the opening of business on the
day following the date fixed for the payment of such distribution.
(vi) In case a tender or exchange offer made by the Company or by any
subsidiary of the Company for all or any portion of the Company's Common Stock
shall expire and such tender or exchange offer shall involve the payment by the
Company or such subsidiary of consideration per share of Common Stock having a
fair market value (as determined in good faith by the Board of Directors, whose
determination shall be conclusive and described in a resolution of the Board of
Directors) at the last time (the "Expiration Time") tenders or exchanges may be
made pursuant to such tender or exchange offer (as it shall have been amended)
that exceeds the current market price per share (determined as provided in
subparagraph (vii) of this Section 6.1(a)) of the Common Stock on the Trading
Day next succeeding the Expiration Time, the Shares Amount shall be increased so
that the same shall equal the number determined by multiplying the Shares Amount
in effect immediately prior to the effectiveness of the Shares Amount increase
contemplated by this subparagraph (vi) by a fraction of which the denominator
shall be the number of shares of Common Stock outstanding (including any
tendered or exchanged shares) at the Expiration Time multiplied by the current
market price per share (determined as provided in subparagraph (vii) of this
Section 6.1(a)) of the Common Stock on the Trading Day next succeeding the
Expiration Time and the numerator shall be the sum of (x) the fair market value
(determined as aforesaid) of the aggregate consideration payable to stockholders
based on the acceptance (up to any maximum specified in the terms of the tender
or exchange offer) of all shares validly tendered or exchanged and not withdrawn
as of the Expiration Time (the shares deemed so accepted, up to any such
maximum, being referred to as the "Purchased Shares") and (y) the product of the
number of shares of Common Stock outstanding (less any Purchased Shares) at the
Exhibit 4.42 Page 11
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Expiration Time and the current market price per share (determined as provided
in subparagraph (vii) of this Section 6.1(a)) of the Common Stock on the Trading
Day next succeeding the Expiration Time, such increase to become effective
immediately prior to the opening of business on the day following the Expiration
Time.
(vii) For the purpose of any computation under subparagraph (ii), (iv) and
(v) of this Section 6.1(a), the "current market price" per share of Common Stock
on any date in question shall be deemed to be the average of the daily Closing
Prices for the five consecutive Trading Days prior to and including the date in
question; provided, however, that (1) if the "ex" date (as hereinafter defined)
for any event (other than the issuance or distribution requiring such
computation) that requires an adjustment to the Shares Amount pursuant to
subparagraph (i), (ii), (iii), (iv), (v) or (vi) above ("Other Event") occurs
after the fifth Trading Day prior to the day in question and prior to the "ex"
date for the issuance or distribution requiring such computation (the "Current
Event"), the Closing Price for each Trading Day prior to the "ex" date for such
Other Event shall be adjusted by multiplying such Closing Price by the
reciprocal of the fraction by which the Shares Amount is so required to be
adjusted as a result of such Other Event, (2) if the "ex" date for any Other
Event occurs after the "ex" date for the Current Event and on or prior to the
date in question, the Closing Price for each Trading Day on and after the "ex"
date for such Other Event shall be adjusted by multiplying such Closing Price by
the fraction by which the Shares Amount is so required to be adjusted as a
result of such Other Event, (3) if the "ex" date of any Other Event occurs on
the "ex" date for the Current Event, one of those events shall be deemed for
purposes of clauses (1) and (2) of this proviso to have an "ex" date occurring
prior to the "ex" date for the other event, and (4) if the "ex" date for the
Current Event is on or prior to the date in question, after taking into account
any adjustment required pursuant to clause (2) of this proviso, the Closing
Price for each Trading Day on or after such "ex" date shall be adjusted by
adding thereto the amount of any cash and the fair market value on the date in
question (as determined in good faith by the Board of Directors in a manner
consistent with any determination of such value for purposes of paragraph (iv)
or (v) of this Section 6.1(a), whose determination shall be conclusive and
described in a resolution of the Board of Directors) of the portion of the
rights, warrants, evidences of indebtedness, shares of stock or assets being
distributed applicable to one share of Common Stock. For the purpose of any
computation under subparagraph (vi) of this Section 6.1(a), the current market
price per share of Common Stock on any date in question shall be deemed to be
the average of the daily Closing Prices for such date in question and the next
two succeeding Trading Days; provided, however, that if the "ex" date for any
event (other than the tender or exchange offer requiring such computation) that
requires an adjustment to the Shares Amount pursuant to subparagraph (i), (ii),
(iii), (iv), (v) or (vi) above occurs after the Expiration Time for the tender
or exchange offer requiring such computation and on or prior to the second
Trading Day following the date in question, the Closing Price for each Trading
Day on and after the "ex" date for such other event shall be adjusted by
multiplying such Closing Price by the fraction by which the Shares Amount is so
required to be adjusted as a result of such other event. For purposes of this
paragraph, the term "ex" date, (1) when used with respect to any issuance or
distribution, means the first date on which the Common Stock trades regular way
on the relevant exchange or in the relevant market from which the Closing Price
was obtained without the right to receive such issuance or distribution, (2)
when used with respect to any subdivision or
Exhibit 4.42 Page 12
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combination of shares of Common Stock, means the first date on which the Common
Stock trades regular way on such exchange or in such market after the time at
which such subdivision or combination becomes effective, and (3) when used with
respect to any tender or exchange offer, means the first date on which the
Common Stock trades regular way on such exchange or in such market after the
Expiration Time of such offer.
(viii) The Company may make such increase in the Shares Amount, in addition
to those required by subparagraphs (i), (ii), (iii), (iv), (v) and (vi) of this
Section 6.1(a), as it considers to be advisable to avoid or diminish an income
tax to holders of Common Stock or rights to purchase Common Stock resulting from
any dividend or distribution of stock (or rights to acquire stock) or from any
event treated as such for income tax purposes. The Company from time to time may
increase the Shares Amount by any amount for any period of time if the period is
at least twenty days, the increase is irrevocable during the period, and the
Board of Directors of the Company shall have made a determination that such
increase would be in the best interest of the Company, which determination shall
be conclusive. Whenever the Shares Amount is increased pursuant to the preceding
sentence, the Company shall mail to Holders a notice of the increase at least
fifteen days prior to the date the increased Shares Amount takes effect, and
such notice shall state the increased Shares Amount and the period it will be in
effect.
(ix) No adjustment in the Shares Amount shall be required unless such
adjustment would require an increase or decrease of at least 1% in the Shares
Amount; provided, however, that any adjustments which by reason of this
subparagraph (ix) are not required to be made shall be carried forward and taken
into account in any subsequent adjustment.
(x) Whenever the Shares Amount is adjusted as herein provided:
(1) the Company shall compute the adjusted Shares Amount and shall prepare
a certificate signed by the Chief Financial Officer of the Company setting forth
the adjusted Shares Amount and showing in reasonable detail the facts upon which
such adjustment is based, and such certificate shall forthwith be filed with the
Warrant Agent; and
(2) a notice stating the Shares Amount have been adjusted and setting forth
the adjusted Shares Amount shall forthwith be required, and as soon as
practicable after it is required such notice shall be mailed by the Company to
all Holders.
(b) No Fractional Shares. No fractional shares of Common Stock shall be
issued upon exercise of the Warrants. If more than one Warrant is exercised by
the same Holder at one time, the number of full shares issuable upon such
exercise shall be computed on the basis of the aggregate number of Warrants so
exercised. Instead of any fractional share of Common Stock that would otherwise
be issuable to a holder upon exercise of the Warrants, the Company shall pay a
cash adjustment in respect of such fractional share in an amount equal to the
same fraction of the Closing Price per share of Common Stock as of the date of
such exercise.
(c) Reclassification, Consolidation, Merger or Sale of Assets. In the event
that the Company shall be a party to any transaction (including without
limitation any recapitalization or
Exhibit 4.42 Page 13
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reclassification of the 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 of the Common Stock and other than the
reclassification of unissued Common Stock into other stock of the Company), any
consolidation of the Company with, or merger of the Company into, any other
Person, any merger of another person into the Company (other than a merger which
does not result in a reclassification, conversion, exchange or cancellation of
outstanding shares of Common Stock of the Company), any sale or transfer of all
or substantially all of the assets of the Company or any compulsory share
exchange) pursuant to which the Common Stock is converted into the right to
receive other securities, cash or other property, then lawful provisions shall
be made as part of the terms of such transaction whereby the holder of each
Warrant then outstanding shall have the right thereafter to exercise such
Warrant only for (i) in the case of any such transaction other than a Common
Stock Fundamental Change and subject to funds being legally available for such
purpose under applicable law at the time of such exercise, the kind and amount
of securities, cash and other property receivable upon such transaction by a
holder of the number of shares of Common Stock of the Company for which such
Warrant could have been exercised immediately prior to such transaction, and
(ii) in the case of a Common Stock Fundamental Change, common stock of the kind
received by holders of Common Stock as a result of such Common Stock Fundamental
Change in an amount determined pursuant to the provisions of Section 6.1(e). The
Company or the Person formed by such consolidation or resulting from such merger
or which acquires such assets or which acquires the Company's shares, as the
case may be, shall execute an agreement in form and substance reasonably
acceptable to the Holders evidencing such right. Such agreement shall provide
for adjustments which, for events subsequent to the effective date of such
agreement, shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Article 6. The above provisions shall similarly
apply to each and every successive transaction of the foregoing type.
(d) Prior Notice of Certain Events. In case:
(i) the Company shall (1) declare any dividend (or any other distribution)
on its Common Stock, other than (A) a dividend payable in shares of Common Stock
or (B) a dividend payable in cash in an amount not greater than its retained
earnings other than any special or nonrecurring or other extraordinary dividend
or (2) declare or authorize a redemption or repurchase of in excess of 10% of
the then-outstanding shares of Common Stock; or
(ii) the Company shall authorize the granting to all holders of Common
Stock of rights or warrants to subscribe for or purchase any share of stock of
any class or series or of any other rights or warrants; or
(iii) of any reclassification of Common Stock (other than a subdivision or
combination of the outstanding Common Stock, or a change in par value, or from
par value to no par value, or from no par value to par value and other than the
reclassification of unissued Common Stock into other stock of the Company), or
of any consolidation or merger to which the Company is a party and for which
approval of any shareholders of the Company shall be required, or of the sale or
transfer of all or substantially all of the assets of the Company or of any
compulsory share exchange whereby the Common Stock is converted into other
securities, cash or other property; or
Exhibit 4.42 Page 14
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(iv) of the voluntary or involuntary dissolution, liquidation or winding up
of the Company;
then the Company shall cause to be filed with the Warrant Agent and shall cause
to be mailed to the Holders, at least 10 days prior to the applicable record or
effective date hereinafter specified, a notice stating (x) the date on which a
record (if any) is to be taken for the purpose of such dividend, distribution,
redemption, repurchase, rights or warrants or, if a record is not to be taken,
the date as of which the holders of Common Stock of record to be entitled to
such dividend, distribution, redemption, rights or warrants are to be determined
or (y) the date on which such reclassification, consolidation, merger, sale,
transfer, share exchange, dissolution, liquidation or winding up is expected to
become effective, and the date as of which it is expected that holders of Common
Stock of record shall be entitled to exchange their shares of Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer, share exchange, dissolution, liquidation
or winding up (but no failure to mail such notice or any defect therein or in
the mailing thereof shall affect the validity of the corporate action required
to be specified in such notice).
(e) Adjustments in Case of Fundamental Changes. Notwithstanding any other
provision in this Article 6 to the contrary, if any Fundamental Change (as
defined in Section 6.1(f)) occurs, then the Shares Amount in effect will be
adjusted immediately after such Fundamental Change as described below. In
addition, in the event of a Common Stock Fundamental Change (as defined in
Section 6(f)), each Warrant shall be exercisable solely in exchange for common
stock of the kind and amount received by holders of Common Stock as a result of
such Common Stock Fundamental Change as more specifically provided below in this
Section 6.1(e).
For purposes of calculating any adjustment to be made pursuant to this
Section 6.1(e) in the event of a Fundamental Change, immediately after such
Fundamental Change in the case of a Common Stock Fundamental Change, the Shares
Amount in effect immediately prior to such Common Stock Fundamental Change, but
after giving effect to any other prior adjustments effected pursuant to this
Section 6, shall thereupon be adjusted by multiplying such Shares Amount by a
fraction of which the denominator shall be the Purchaser Stock price (as defined
in Section 6.1(f)) and the numerator shall be the Applicable Price; provided,
however, that in the event of a Common Stock Fundamental Change in which (A)
100% by value of the consideration received by a holder of Common Stock is
common stock of the successor, acquiror or other third party (and cash, if any,
is paid with respect to any fractional interests in such common stock resulting
from such Common Stock Fundamental Change) and (B) all of the Common Stock shall
have been exchanged for, converted into or acquired for common stock (and cash
with respect to fractional interests) of the successor, acquiror or other third
party, the Shares Amount in effect immediately prior to such Common Stock
Fundamental Change shall thereupon be adjusted by multiplying such Shares Amount
by the number of shares of common stock of the successor, acquiror, or other
third party received by a shareholder for one share of Common Stock as a result
of such Common Stock Fundamental Change.
(f) Definitions. The following definitions shall apply to terms used in
this Article 6:
Exhibit 4.42 Page 15
<PAGE>
(i) "Applicable Price" shall mean (1) in the event of a Non-Stock
Fundamental Change in which the holders of the Common Stock receive only cash,
the amount of cash received by a shareholder for one share of Common Stock and
(2) in the event of any other Non-Stock Fundamental Change or any Common Stock
Fundamental Change, the average of the daily Closing Prices of the Common Stock
for the ten consecutive Trading Days prior to and including the record date for
the determination of the holders of Common Stock entitled to receive securities,
cash or other property in connection with such Non-Stock Fundamental Change or
Common Stock Fundamental Change, or, if there is no such record date, the date
upon which the holders of the Common Stock shall have the right to receive such
securities, cash or other property, in each case, as adjusted in good faith by
the Board of Directors of the Company to appropriately reflect any of the events
referred to in subparagraphs (i), (ii), (iii), (iv), (v) and (vi) of Section
6.1(a).
(ii) "Common Stock Fundamental Change" shall mean any Fundamental Change in
which more than 50% by value (as determined in good faith by the Board of
Directors of the Company) of the consideration received by holders of Common
Stock consists of common stock that for each of the ten consecutive Trading Days
referred to with respect to such Fundamental Change in Section 6.1(f)(i) above
has been admitted for listing or admitted for listing subject to notice of
issuance on a national securities exchange or quoted on the NASDAQ National
Market System; provided, however, that a Fundamental Change shall not be a
Common Stock Fundamental Change unless either (1) the Company continues to exist
after the occurrence of such Fundamental Change and the outstanding Warrants
continue to exist as outstanding Warrants, or (2) not later than the occurrence
of such Fundamental Change, the outstanding Warrants are converted into or
exchanged for warrants of a corporation succeeding to the business of the
Company, which warrants have terms identical to those of the Warrants.
(iii) "Fundamental Change" shall mean the occurrence of any transaction or
event in connection with a plan pursuant to which all or substantially all of
the Common Stock shall be exchanged for, converted into, acquired for or
constitute solely the right to receive securities, cash or other property
(whether by means of an exchange offer, liquidation, tender offer,
consolidation, merger, combination, reclassification, recapitalization or
otherwise); provided, however, in the case of a plan involving more than one
such transaction or event, for purposes of adjustment of the Shares Amount, such
Fundamental Change shall be deemed to have occurred when substantially all of
the Common Stock of the Company shall be exchanged for, converted into, or
acquired for or constitute solely the right to receive cash, securities,
property or other assets, but the adjustment shall be based upon the highest
weighted average of consideration per share which a holder of Common Stock could
have received in such transactions or events as a result of which more than 50%
of the Common Stock of the Company shall have been exchanged for, converted
into, or acquired for or constitute solely the rights to receive cash,
securities, property or other assets.
(iv) "Non-Stock Fundamental Change" shall mean any Fundamental Change other
than a Common Stock Fundamental Change.
Exhibit 4.42 Page 16
<PAGE>
(v) "Purchaser Stock Price" shall mean, with respect to any Common Stock
Fundamental Change, the average of the daily Closing Prices of the common stock
received in such Common Stock Fundamental Change for the ten consecutive Trading
Days prior to and including the record date for the determination of the holders
of Common Stock entitled to receive such common stock, or, if there is no such
record date, the date upon which the holders of the Common Stock shall have the
right to receive such common stock, in each case, as adjusted in good faith by
the Board of Directors of the Company to appropriately reflect any of the events
referred to in subparagraphs (i), (ii), (iii), (iv), (v) and (vi) of Section
6.1(a); provided, however, if no such Closing Prices of the common stock for
such Trading Days exist, then the Purchaser Stock price shall be set at a price
determined in good faith by the Board of Directors of the Company.
(g) Certain Additional Rights. In case the Company shall, by dividend or
otherwise, declare or make a distribution on its Common Stock referred to in
Section 6(a)(iv) or 6(a)(v) (including, without limitation, dividends or
distributions referred to in the last two sentences of Section 6(a)(iv)), the
holder of each Warrant, upon the exercise thereof subsequent to the Close of
Business on the date fixed for the determination of shareholders entitled to
receive such distribution and prior to the effectiveness of the Shares Amount
adjustment in respect of such distribution, shall also be entitled to receive
for each share of Common Stock for which such Warrant is exercised, the portion
of the shares of Common Stock, rights, warrants, evidences of indebtedness,
shares of stock, cash and assets so distributed applicable to one share of
Common Stock; provided, however, that, at the election of the Company (whose
election shall be evidenced by a resolution of the Board of Directors) with
respect to all holders so exercising, the Company may, in lieu of distributing
to such holder any portion of such distribution not consisting of cash or
securities of the Company, pay such holder an amount in cash equal to the fair
market value thereof (as determined in good faith by the Board of Directors,
whose determination shall be conclusive and described in a resolution of the
Board of Directors). If any exercise of a Warrant described in the immediately
preceding sentence occurs prior to the payment date for a distribution to
holders of Common Stock which the holder of the Warrant so exercised is entitled
to receive in accordance with the immediately preceding sentence, the Company
may elect (such election to be evidenced by a resolution of the Board of
Directors) to distribute to such holder a due bill for the shares of Common
Stock, rights, warrants, evidences of indebtedness, shares of stock, cash or
assets to which such holder is so entitled, provided that such due bill (i)
meets any applicable requirements of the principal national securities exchange
or other market on which the Common Stock is then traded and (ii) requires
payment or delivery of such shares of Common Stock, rights, warrants, evidences
of indebtedness, shares of stock, cash or assets no later than the date of
payment or delivery thereof to holders of shares of Common Stock receiving such
distribution.
(h) Reservation of Shares, Etc. The Company shall at all times reserve and
keep available, free from preemptive rights out of its authorized and unissued
stock, solely for the purpose of allowing the exercise of the Warrants, such
number of shares of its Common Stock as shall from time to time be sufficient to
permit the Company to deliver the Shares Amount in the event all of the Warrants
from time to time outstanding were exercised. The Company shall from time to
time, in accordance with the laws of the State of Maryland, increase the
authorized number of shares of Common Stock if at any time the number of shares
of authorized and unissued Common Stock shall not be sufficient to permit the
Company to deliver the Shares Amount upon the exercise of all of the
Exhibit 4.42 Page 17
<PAGE>
then-outstanding Warrants (taking into account the adjustments to the Shares
Amount that are provided for herein).
If any shares of common stock required to be reserved for purposes of the
exercise of the Warrants hereunder require registration with or approval of any
governmental authority under any Federal or State law before such shares may be
issued upon exercise, and an exemption under Section 3(a)(9) of the Securities
Act or similar exemption is not available, the Company will in good faith and as
expeditiously as possible endeavor to cause such shares to be duly registered or
approved as the case may be. If the Common Stock is quoted on the NASDAQ
National Market System or listed on any U.S. national securities exchange, the
Company will, if permitted by the rules of such exchange, list and keep listed
on such exchange, upon official notice of issuance, all shares of Common Stock
issuable upon exercise of the Warrants. The second sentence of this paragraph
shall apply only when the Warrants shall have become freely transferable
pursuant to Rule 144(k) under the Securities Act or if the shares of Common
Stock issuable upon exercise of the Warrants are exempt from the registration
requirements of the Securities Act by operation of an exemption referred to in
the first sentence of this paragraph.
(i) Dividend or Interest Reinvestment Plans or Other Plans. Notwithstanding
the foregoing provisions, the issuance of any shares of Common Stock pursuant to
any plan providing for the reinvestment of dividends or interest payable on
securities of the Company and the investment of additional optional amounts in
shares of Common Stock under any such plan (a "DRIP"), and the issuance of any
shares of Common Stock or options or rights to purchase such shares pursuant to
any employee or director benefit plan or program of the Company or pursuant to
any option, warrant, right or exercisable, exchangeable or convertible security
outstanding as of the date hereof shall not be deemed to constitute an issuance
of Common Stock or exercisable, exchangeable or convertible securities by the
Company to which any of the adjustment provisions described above applies. There
shall also be no adjustment of the Shares Amount in case of the issuance of any
stock (or securities convertible into or exchangeable for stock) of the Company
except as specifically described in this Article 6. If any action would require
adjustment of the Shares Amount pursuant to more than one of the provisions
described above, only one adjustment shall be made and such adjustment shall be
the amount of adjustment which has the highest absolute value to holders of the
Warrants.
ARTICLE 7
REGISTRATION RIGHTS AND PROCEDURES
Section 7.1. The Company acknowledges that it is subject to the terms and
conditions of the Registration Rights Agreement.
ARTICLE 8
Intentionally Deleted
ARTICLE 9
Exhibit 4.42 Page 18
<PAGE>
WARRANT AGENT
Section 9.1. Nature of Duties and Responsibilities Assumed.
---------------------------------------------
(a) The Company hereby appoints the Warrant Agent to act as agent of the
Company as set forth in this Agreement. The Warrant Agent hereby accepts such
appointment as agent of the Company and agrees to perform that agency upon the
terms and conditions herein set forth, by all of which the Company and the
Holders, by their acceptance thereof, shall be bound.
(b) The Warrant Agent shall not by countersigning the Warrant Certificates
or by any other act hereunder be deemed to make any representations as to (i)
the validity or authorization of the Warrants or the Warrant Certificates
(except as to its countersignature thereon), or of any securities or other
property delivered upon exercise or tender of any Warrant, (ii) the accuracy of
the computation of the Exercise Price or the number or kind or amount of stock
or other securities or other property deliverable upon exercise of any Warrant,
or (iii) the correctness of the representations of the Company made in such
certificates that the Warrant Agent receives.
(c) The Warrant Agent shall not have any duty to calculate or determine any
adjustments with respect either to the Exercise Price, the kind and amount of
shares or other securities or any property receivable by Holders upon the
exercise or tender of Warrants, and the Warrant Agent shall have no duty or
responsibility in determining the accuracy or correctness of such calculation.
The Warrant Agent shall not (i) be liable for any recital or statement of fact
contained herein, or in the Warrant Certificates, or for any action taken,
suffered or omitted by it in good faith on the belief that any Warrant
Certificate, or any other documents or any signatures are genuine or properly
authorized, (ii) be responsible for any failure on the part of the Company to
comply with any of its covenants and obligations contained in this Agreement or
in the Warrant Certificates, or (iii) be liable for any act or omission in
connection with this Agreement except for its own negligence or willful
misconduct.
(d) The Warrant Agent is hereby authorized to accept instructions with
respect to the performance of its duties hereunder from the Chairman, Chief
Executive Officer or President of the Company and to apply to any such officer
for instructions (which instructions will be promptly given in writing when
requested) and the Warrant Agent shall not be liable for any action taken or
suffered to be taken by it in good faith in accordance with the instructions of
any such officer, but in its discretion the Warrant Agent may in lieu thereof
accept other evidence of such or may require such further or additional evidence
as it may deem reasonable.
(e) The Warrant Agent may execute and exercise any of the rights and powers
hereby vested in it or perform any duty hereunder either itself or by or through
its attorneys, agents or employees, provided reasonable care has been exercised
in the selection and in the continued employment of any such attorney, agent or
employee. The Warrant Agent shall not be under any obligation or duty to
institute, appear in or defend any action, suit or legal proceeding in respect
hereof, unless first indemnified to its reasonable satisfaction, but this
provision shall not affect the power of the Warrant Agent to take such action as
the Warrant Agent may consider proper, whether with or without such indemnity.
The Warrant Agent shall promptly notify the Company in writing of
Exhibit 4.42 Page 19
<PAGE>
any claim made or action, suit or proceeding instituted against it arising out
of or in connection with this Agreement.
(f) The Company will perform, execute, acknowledge and deliver or cause to
be performed, executed, acknowledged and delivered all such further acts,
instruments and assurances as may reasonably be required by the Warrant Agent in
order to enable it to carry out or perform its duties under this Agreement.
(g) The Warrant Agent shall act solely as agent of the Company hereunder.
The Warrant Agent shall not be liable except for the failure to perform such
duties as are specifically set forth herein, and no implied covenants or
obligations shall be read into this Agreement against the Warrant Agent, whose
duties and obligations shall be determined solely by the express provisions
hereof.
Section 9.2. Right to Consult Counsel. The Warrant Agent may at any time
consult with competent legal counsel, and the Warrant Agent shall incur no
liability or responsibility to the Company and to the Holders for any action
taken, suffered or omitted by it in good faith in accordance with the opinion or
advice of such counsel.
Section 9.3. Compensation and Reimbursement. The Company agrees to pay to
the Warrant Agent from time to time compensation for all services rendered by it
hereunder as the Company and the Warrant Agent may agree from time to time, and
to reimburse the Warrant Agent for reasonable expenses and disbursements
incurred in connection with the execution and administration of this Agreement
(including the reasonable compensation and the expenses of its counsel), and
further agrees to indemnify the Warrant Agent for, and to hold it 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 and
administration of this Agreement, 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.
Section 9.4. Warrant Agent May Hold Company Securities. The Warrant Agent
and any stockholder, director, officer or employee of the Warrant Agent may buy,
sell or deal in any of the securities of the Company or its Affiliates or become
pecuniarily interested in transactions in which the Company or its Affiliates
may be interested, or contract with or lend money to the Company or its
Affiliates or otherwise act as fully and freely as though it were not the
Warrant Agent under this Agreement. Nothing herein shall preclude the Warrant
Agent from acting in any other capacity for the Company or for any other legal
entity.
Section 9.5. Resignation and Removal; Appointment of Successor.
-------------------------------------------------
(a) No resignation or removal of the Warrant Agent and no appointment of a
successor warrant agent shall become effective until the acceptance of
appointment by the successor warrant agent as provided herein. The Warrant Agent
may resign its duties and be discharged from all further duties and liability
hereunder (except liability arising as a result of the Warrant Agent's own
negligence or willful misconduct) after giving written notice to the Company.
Exhibit 4.42 Page 20
<PAGE>
(b) The Company may remove the Warrant Agent upon written notice, and the
Warrant Agent shall thereupon in like manner be discharged from all further
duties and liabilities hereunder, except as aforesaid. The Warrant Agent shall,
at the Company's expense, cause to be mailed (by first-class mail, postage
prepaid) to the Holders at their last address as shown on the register of the
Company maintained by the Warrant Agent a copy of said notice of resignation or
notice of removal, as the case may be.
(c) Upon such resignation or removal, the Company shall appoint in writing
a new warrant agent. If the Company shall fail to make such appointment within a
period of twenty (20) days after it has been notified in writing of such
resignation by the resigning Warrant Agent or after such removal, then the
Holders may apply to any court of competent jurisdiction for the appointment of
a new warrant agent. Any new warrant agent, whether appointed by the Company or
by such a court, shall be a corporation doing business under the laws of the
United States or any state thereof, in good standing and having a combined
capital and surplus of not less than $50,000,000. The combined capital and
surplus of any such new warrant agent shall be deemed to be the combined capital
and surplus as set forth in the most recent annual report of its condition
published by such warrant agent prior to its appointment, provided that such
reports are published at least annually pursuant to law or to the requirements
of a Federal or state supervising or examining authority.
(d) After acceptance in writing of such appointment by the new warrant
agent, it shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named herein as the Warrant Agent,
without any further assurance, conveyance, act or deed; but if for any reason it
shall be necessary or expedient to execute and deliver any further assurance,
conveyance, act or deed, the same shall be done at the expense of the Company
and shall be legally and validly executed and delivered by the resigning or
removed Warrant Agent. Not later than the effective date of any such
appointment, the Company shall give notice thereof to the resigning or removed
Warrant Agent. Failure to give any notice provided for in this Section, however,
or any defect therein, shall not affect the legality or validity of the
resignation of the Warrant Agent or the appointment of a new warrant agent, as
the case may be.
(e) Any corporation into which the Warrant Agent or any new warrant agent
may be merged or any corporation resulting from any consolidation to which the
Warrant Agent or any new warrant agent shall be a party, shall be a successor
Warrant Agent under this Agreement without any further act, provided that such
corporation would be eligible for appointment as successor to the Warrant Agent
under the provisions of Section 9.5(c). Any such successor Warrant Agent shall
promptly cause notice of its succession as Warrant Agent to be mailed (by
first-class mail, postage prepaid) to the Holders at their last address as shown
on the register of the Company maintained by the Warrant Agent.
ARTICLE 10
REPRESENTATIONS AND WARRANTIES
Section 10.1. Representations and Warranties. The Company hereby represents
and warrants that, as of the date of this Agreement:
Exhibit 4.42 Page 21
<PAGE>
(a) Authorization. It has the corporate power and authority to enter into
this Agreement and to perform its obligations under, and consummate the
transactions contemplated by, this Agreement and has by proper action duly
authorized the execution and delivery of this Agreement.
(b) No Conflicts or Consents. Neither the execution and delivery of this
Agreement, nor the consummation of the transactions contemplated herein, nor the
performance of and compliance with the terms and provisions hereof will: (i)
violate or conflict with any provision of its Articles of Incorporation or
By-laws; (ii) violate any law, regulation (including without limitation
Regulation G, T, U or X), order, writ, judgment, injunction, decree or permit
applicable to it; (iii) violate or materially conflict with any contractual
provisions of, or cause an event of default under, any indenture, loan
agreement, mortgage, deed of trust, contract or other agreement or instrument to
which it is a party or by which it or any of its properties may be bound; or
(iv) result in or require the creation of any lien, security interest or other
charge or encumbrance (other than those contemplated in or in connection with
this Agreement) upon or with respect to its properties.
(c) Consents. No consent, approval, authorization or order of, or filing,
registration or qualification with, any court or governmental authority or other
Person is required in connection with the execution, delivery or performance of
this Agreement or the Warrants.
(d) Enforceable Obligations. This Agreement has been duly executed and
delivered by the Company and constitutes a legal, valid and binding obligation
of the Company, enforceable in accordance with its terms subject, as to
enforcement, to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles.
(e) Capitalization. As of the date hereof, the Company's authorized stock
consists of (i) 197,650,000 shares of Common Stock of which 20,410,605 have been
issued and are outstanding, (ii) 350,000 shares of Class A Common Stock, $.01
par value per share, of which 339,806 have been issued and are outstanding,
(iii) 2,000,000 shares of Series A 8% Convertible Redeemable Preferred Stock,
.$.01 par value per share, of which no shares have been issued and are
outstanding. As of the date hereof, (i) no shares of Common Stock are held in
treasury, except for shares in deferred compensation plan, which are accounted
for as treasury stock (489,671 shares of Common Stock), (ii) 1,326,235 shares of
Common Stock have been reserved for issuance under the Company's Rollover Stock
Option Plan of which options to acquire all 1,326,235 shares of Common Stock
have been granted and (iii) 3,750,000 shares of Common Stock have been reserved
for issuance under the Company's 1997 Management Incentive Plan and 1998
Management Incentive Plan of which options to acquire 2,232,375 shares of Common
Stock have been granted. The Company also grants shares of Common Stock to
directors in consideration of their service as directors.
ARTICLE 11
COVENANTS
Exhibit 4.42 Page 22
<PAGE>
Section 11.1. Reservation of Common Stock for Issuance on Exercise of
Warrants. The Company covenants that it will at all times reserve and keep
available, free from pre-emptive rights, out of its authorized but unissued
shares of Common Stock, solely for the purpose of issue upon exercise of
Warrants, as herein provided, such number of shares of Common Stock as shall
then be issuable upon the exercise of all Warrants issuable hereunder. The
transfer agent for the Common Stock (the "Transfer Agent") will be irrevocably
authorized and directed at all times to reserve such number of authorized shares
as shall be required for such purpose. The Company will keep a copy of this
Agreement on file with the Transfer Agent. The Warrant Agent is hereby
irrevocably authorized to requisition from time to time from such Transfer Agent
the stock certificates required to honor outstanding Warrants upon exercise
thereof in accordance with the terms of this Agreement. The Company covenants
that all shares of Common Stock which shall be so issuable shall, upon payment
therefor as set forth in this Agreement and such issue, be duly and validly
issued and fully paid and non-assessable, free of preemptive rights and free
from all taxes, liens, charges and security interests with respect to the issue
thereof.
Section 11.2. Notice of Dividends. At any time when and if the Company
declares any dividend on its Common Stock, it shall give notice to the Holders
of all the then outstanding Warrants of any such declaration not less than ten
(10) days prior to the related record date for payment of the dividend so
declared.
Section 11.3. Reports. For so long as any Warrants remain outstanding and
not expired by their terms, the Company shall furnish to the Holders the
information required to be delivered pursuant to Rule 144A(d)(4) under the
Securities Act. In addition, the Company shall file with the Warrant Agent
within 15 days after it files them with the Commission copies of its SEC
Reports. In the event the Company shall cease to be required to file SEC Reports
pursuant to the Exchange Act, the Company shall nevertheless mail such SEC
Reports to Holders upon their request. The Company shall furnish copies of its
SEC Reports to Holders promptly after the Company files the same with the
Warrant Agent. The Company shall make all such information available to
investors, securities analysts and broker-dealers who request it in writing.
ARTICLE 12
WARRANT HOLDERS
Section 12.1. Warrant Certificate Holder Not Deemed a Shareholder. No
holder, as such, of any Warrant Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of Common Stock or any other
securities of the Company which may at any time be issuable on the exercise or
conversion of the Warrants represented thereby, nor shall anything contained
herein or in any Warrant Certificate be construed to confer upon the holder of
any Warrant Certificate, as such, any of the rights of a shareholder of the
Company or any right to vote for the election of directors or upon any matter
submitted to shareholders at any meeting thereof, or to give or withhold consent
to any corporate action, or to receive notice of meetings or other actions
affecting shareholders (except as specifically provided herein), or to receive
dividends or subscriptions rights, or otherwise, until the Warrant or Warrants
evidenced by such Warrant Certificate shall have been
Exhibit 4.42 Page 23
<PAGE>
exercised and the Company shall have elected to deliver Common Stock (and not
cash) upon such exercise.
Section 12.2. Right of Action. All rights of action in respect of this
Agreement are vested in the Holders of the Warrants, and any Holder of any
Warrant, without consent of the Warrant Agent or any other Holder, may on such
Holder's own behalf and for such Holder's own benefit, enforce, and may
institute and maintain any suit, action or proceeding against the Company
suitable to enforce, or otherwise in respect of, such Holder's right to exercise
or exchange such Holder's Warrants in the manner provided in this Agreement.
ARTICLE 13
MISCELLANEOUS
Section 13.1. Money and Other Property Deposited with the Warrant Agent.
Any moneys, securities or other property which at any time shall be deposited by
the Company or by Holders with the Warrant Agent pursuant to this Agreement
shall be and are hereby assigned, transferred and set over to the Warrant Agent
in trust for the purpose for which such moneys, securities or other property
shall have been deposited; but such moneys, securities or other property need
not be segregated from other funds, securities or other property except to the
extent required by law. The Warrant Agent shall distribute any money deposited
with it for payment and distribution to the Company or to Holders by a wire
transfer in the appropriate amount to an account designated by each such Person.
Any money deposited with the Warrant Agent for payment and distribution to the
Company or the Holders that remains unclaimed for two years after the date the
money was deposited with the Warrant Agent shall be returned to the Company or
the relevant Holder(s) upon its or their request therefor.
Section 13.2. Payment of Taxes. The Company shall pay all transfer, stamp
and other similar taxes that may be imposed in respect of the issuance or
delivery of Warrants, or in respect of the issuance or delivery by the Company
of any securities upon exercise of Warrants with respect thereto. The Company
shall not be required, however, to pay any tax or other charge imposed in
connection with any transfer involved in the issue of any certificate for shares
of Common Stock or other securities underlying the Warrants or payment of cash
to any Person other than the Holder of a Warrant Certificate surrendered upon
the exercise or purchase of a Warrant, and in case of such transfer or payment,
the Warrant Agent and the Company shall not be required to issue any stock
certificate or pay any cash until such tax or charge has been paid or it has
been established to the Warrant Agent's and the Company's satisfaction that no
such tax or other charge is due.
Section 13.3. Notices. (a) Any notice, demand or delivery authorized by
this Agreement shall be in writing and shall be sufficiently given or made when
delivered or on the third Business Day following the date sent by first-class
mail, postage prepaid, addressed (i) to any Holder at such Holder's address
shown on the register of the Company maintained by the Warrant Agent, (ii) to
the Company or the Warrant Agent as follows:
Exhibit 4.42 Page 24
<PAGE>
If to the Company: Wellsford Real Properties, Inc.
535 Madison Avenue
26th Floor
New York, New York 10022
Attention: President
If to the Warrant Agent: United States Trust Company of New York
114 West 47th Street
New York, New York 10036
Attention: Corporate Trust Department
or (iii) such other address as shall have been furnished to the party giving or
making such notice, demand or delivery.
(b) The Company hereby irrevocably authorizes the Warrant Agent, in the
name and at the expense of the Company, to mail to the Holders any such notice
upon receipt thereof from the Company.
Section 13.4. APPLICABLE LAW. THIS AGREEMENT, EACH WARRANT CERTIFICATE AND
EACH WARRANT ISSUED HEREUNDER AND ALL RIGHTS ARISING HEREUNDER SHALL BE GOVERNED
BY THE INTERNAL LAWS OF THE STATE OF NEW YORK.
Section 13.5. Persons Benefitting. This Agreement shall be binding upon and
inure to the benefit of any Holders (each of whom is an intended third party
beneficiary), the Company and the Warrant Agent, and their respective
successors, assigns, beneficiaries, executors and administrators. Nothing in
this Agreement is intended or shall be construed to confer upon any Person,
other than the Company, the Warrant Agent and the Holders (and such successors,
assigns, beneficiaries, executors and administrators), any right, remedy or
claim under or by reason of this Agreement or any part hereof.
Section 13.6. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together constitute one and the same instrument.
Section 13.7. Supplements and Amendments. The Company and the Warrant Agent
may from time to time, without the consent of the Holders, by supplemental
agreement or otherwise, make any changes or corrections in this Agreement in
order to (a) cure any ambiguity or to correct or supplement any provision herein
which may be defective or inconsistent with any other provision herein, (b) add
to the covenants and agreements of the Company for the benefit of the Holders,
or surrender any rights or power reserved to or conferred upon the Company in
this Agreement, (c) modify the restrictions on, and procedures for, resale and
other transfers of the Warrants to the extent required or permitted by any
change in applicable law or regulation (or the interpretation thereof) of the
United States of America or in practices relating to the resale or transfer of
restricted securities generally or (d) evidence the succession of another Person
to the Company or
Exhibit 4.42 Page 25
<PAGE>
the Warrant Agent and the assumption by such successor of this Agreement as
provided herein; provided, that, in each case, such changes or corrections shall
in any respect not adversely affect the interests of the Holders. The Warrant
Agent shall send a copy of any such supplemental agreement or amendment to each
of the Holders by first-class mail at the Company's expense. The Warrant Agent
shall join with the Company in the execution and delivery of any such
supplemental agreements and amendments unless it affects the Warrant Agent's own
rights, duties or immunities hereunder, in which case the Warrant Agent may, but
shall not be required to, join in such execution and delivery. Any amendment or
supplement to this Agreement that has an adverse effect on the rights of Holders
as set forth in this Agreement shall require the written consent of registered
Holders of two-thirds (2/3) of the then outstanding Warrants. Notwithstanding
the foregoing, the consent of each Holder of a Warrant affected shall be
required for any amendment pursuant to which the Shares Amount would be
decreased.
Section 13.8. Headings. The descriptive headings of the several Sections of
this Agreement are inserted for convenience and shall not control or affect the
meaning or construction of any of the provisions hereof.
Section 13.9. Remedies. In the event of a breach by the Company or by a
Holder of any of their obligations under this Agreement, each Holder or the
Company, as the case may be, in addition to being entitled to exercise all
rights granted by law, including recovery of damages, will be entitled to
specific performance of its rights under this Agreement. The Company and each
Holder agree that monetary damages would not be adequate compensation for any
loss incurred by reason of a breach by it of any of the provisions of this
Agreement and hereby further agrees that, in the event of any action for
specific performance in respect of such breach, it shall waive the defense that
a remedy at law would be adequate.
[SIGNATURE PAGE FOLLOWS]
Exhibit 4.42 Page 26
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the day and year first above written.
WELLSFORD REAL PROPERTIES, INC.
By: /s/ Edward Lowenthal
--------------------
Name: Edward Lowenthal
Title: President
UNITED STATES TRUST COMPANY OF
NEW YORK, Warrant Agent
By: /s/ Cynthia Chaney
------------------
Name: Cynthia Chaney
Title: Assistant Vice President
Exhibit 4.42 Page 27
<PAGE>
EXHIBIT A
FORM OF FACE OF WARRANT CERTIFICATE
WARRANTS TO PURCHASE COMMON STOCK
OF WELLSFORD REAL PROPERTIES, INC.
No.[ ] Certificate for [ ] Warrants
This certifies that [HOLDER], or registered assigns, is the registered
holder of the number of Warrants set forth above. Each Warrant entitles the
holder thereof (a "Holder"), subject to the provisions contained herein and in
the Warrant Agreement referred to below, to purchase, from Wellsford Real
Properties, Inc., a Maryland corporation (the "Company"), the number of shares
of the Company's common stock, par value $.01 per share (the "Common Stock"), as
provided in the Warrant Agreement, at an exercise price and subject to all of
the terms and conditions set forth in the Warrant Agreement. At the sole
election of the Company, upon the exercise of any Warrant, the Company may pay
to the Holder a certain amount of cash, as provided in the Warrant Agreement, in
lieu of delivering the shares of Common Stock.
This Warrant Certificate is issued under and in accordance with the Warrant
Agreement, dated as of May ___, 1999 (the "Warrant Agreement"), between the
Company and United States Trust Company of New York, as warrant agent (the
"Warrant Agent", which term includes any successor Warrant Agent under the
Warrant Agreement), and is subject to the terms and provisions contained in the
Warrant Agreement, to all of which terms and provisions the Holder of this
Warrant Certificate consents by acceptance hereof. The Warrant Agreement is
hereby incorporated herein by reference and made a part hereof. Reference is
hereby made to the Warrant Agreement for a full statement of the respective
rights, limitations of rights, duties, obligations and immunities thereunder of
the Company, the Warrant Agent and the Holders of the Warrants.
This Warrant Certificate shall terminate and be void as of the Close of
Business on May ___, 2004.
As provided in the Warrant Agreement and subject to the terms and
conditions therein set forth, the Warrants shall be exercisable from time to
time on any Business Day beginning on May ___, 2004, and ending on the
Expiration Date.
The Exercise Price and the number of shares of Common Stock issuable upon
the exercise of each Warrant are subject to adjustment as provided in the
Warrant Agreement.
Exhibit 4.42 Page 28
<PAGE>
All shares of Common Stock issuable by the Company upon the exercise of
Warrants shall, upon payment therefor as set forth in the Warrant Agreement and
such issue, be duly and validly issued and fully paid and non-assessable.
In order to exercise a Warrant, the registered holder hereof must surrender
this Warrant Certificate at the corporate trust office of the Warrant Agent,
with the Exercise Subscription Form on the reverse hereof duly executed by the
Holder hereof, with signature guaranteed as therein specified, together with any
required payment in full of the Exercise Price then in effect for the share(s)
of Underlying Common Stock as to which the Warrant(s) represented by this
Warrant Certificate are submitted for exercise, all subject to the terms and
conditions hereof and of the Warrant Agreement. Any such payment of the cash
Exercise Price shall be by certified or official bank check drawn on a New York
City bank payable to the order of the Company.
The Company shall pay all transfer, stamp and other similar taxes that may
be imposed in respect of the issuance or delivery of the Warrants or in respect
of the issuance or delivery by the Company of any securities upon exercise of
the Warrants. The Company shall not be required, however, to pay any tax or
other charge imposed in connection with any transfer involved in the issuance of
any certificate for shares of Common Stock or other securities underlying the
Warrants or payment of cash to any Person other than the Holder of a Warrant
Certificate surrendered upon the exercise or purchase of a Warrant, and in case
of such transfer or payment, the Warrant Agent and the Company shall not be
required to issue any stock certificate or pay any cash until such tax or other
charge has been paid or it has been established to the Company's satisfaction
that no such tax or other charge is due.
Subject to the Warrant Agreement, this Warrant Certificate and all rights
hereunder are transferable by the registered holder hereof, in whole or in part,
on the register of the Company, upon surrender of this Warrant Certificate for
registration of transfer at the office of the Warrant Agent maintained for such
purpose in The City of New York, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Company and the Warrant Agent
duly executed by, the Holder hereof or his attorney duly authorized in writing,
with signature guaranteed as specified in the attached Form of Assignment. Upon
any partial transfer, the Company will issue and deliver to such holder a new
Warrant Certificate or Certificates with respect to any portion not so
transferred.
No service charge shall be made to a Holder for any registration of
transfer or exchange of the Warrant Certificates, but the Company may require
payment of a sum sufficient to cover any tax or other governmental charge
payable in connection therewith.
Each taker and holder of this Warrant Certificate, by taking or holding the
same, consents and agrees that this Warrant Certificate when duly endorsed in
blank shall be deemed negotiable and that when this Warrant Certificate shall
have been so endorsed, the holder hereof may be treated by the Company, the
Warrant Agent and all other persons dealing with this Warrant Certificate as the
absolute owner hereof for any purpose and as the person entitled to exercise the
rights represented hereby, or to the transfer hereof on the register of the
Company maintained by the Warrant Agent, any notice to the contrary
notwithstanding, but until such transfer on such register, the Company and the
Warrant Agent may treat the registered Holder hereof as the owner for all
purposes.
Exhibit 4.42 Page 29
<PAGE>
This Warrant Certificate and the Warrant Agreement are subject to amendment
as provided in the Warrant Agreement.
All terms used in this Warrant Certificate that are defined in the Warrant
Agreement shall have the meanings assigned to them in the Warrant Agreement.
Copies of the Warrant Agreement are on file at the office of the Company
and may be obtained by writing to the Company at the following address: 535
Fifth Avenue, 26th Floor, New York, New York 10022.
Exhibit 4.42 Page 30
<PAGE>
This Warrant Certificate shall not be valid for any purpose until it shall
have been countersigned by the Warrant Agent.
Dated:
WELLSFORD REAL PROPERTIES, INC.
By:
---------------------------
Name:
Title:
Countersigned:
UNITED STATES TRUST COMPANY OF
NEW YORK, Warrant Agent
By:
---------------------------
Name:
Title:
Exhibit 4.42 Page 31
<PAGE>
FORM OF REVERSE OF WARRANT CERTIFICATE
EXERCISE SUBSCRIPTION FORM
(To be executed only upon exercise of Warrant)
To: Wellsford Real Properties, Inc.
The undersigned irrevocably exercises [ ] of the Warrants for, at your
election, either (i) the Shares Amount or (ii) the Cash Amount and herewith
makes payments of $[ ] and/or delivers membership units of Wellsford\Whitehall
Group, L.L.C. (such cash payment being by certified or official bank check drawn
on a New York City bank payable to the order of Wellsford Real Properties,
Inc.), all at the Exercise Price and on the terms and conditions specified in
the within Warrant Certificate and the Warrant Agreement therein referred to,
surrenders this Warrant Certificate and all right, title and interest therein to
Wellsford Real Properties, Inc. and directs that any shares of Common Stock
deliverable upon the exercise of such Warrants be registered in the name and
delivered at the address specified below or any Cash Amount be wired to the
account specified below.
Date:
(Signature of Owner)
(Street Address)
(City) (State) (Zip Code)
[Signature Guaranteed by:
]
Securities and/or check to be issued to:
Please insert social security or identifying number:
Name:
- ----------
* The signature must correspond with the name as written upon
the face of the within Warrant Certificate in every particular, without
alteration or enlargement or any change whatever, and must be
guaranteed by a financial institution satisfactory to the Warrant
Agent.
Exhibit 4.42 Page 32
<PAGE>
Street Address:
City, State and Zip Code:
Any unexercised Warrants evidenced by the within Warrant Certificate to be
issued to:
Please insert social security or identifying number:
Name:
Street Address:
City, State and Zip Code:
Wire transfer instructions:
Exhibit 4.42 Page 33
<PAGE>
FORM OF ASSIGNMENT
FOR VALUE RECEIVED the undersigned registered holder of the within Warrant
Certificate hereby sells, assigns, and transfers unto the Assignee(s) named
below (including the undersigned with respect to any Warrants constituting a
part of the Warrants evidenced by the within Warrant Certificate not being
assigned hereby) all of the rights of the undersigned under the within Warrant
Certificate, with respect to the number of Warrants set forth below:
SOCIAL SECURITY OR
OTHER IDENTIFYING
NAMES OF NUMBER OF
ASSIGNEES ADDRESS ASSIGNEE(S) NUMBER OF WARRANTS
--------- ------- ----------- ------------------
Exhibit 4.42 Page 34
<PAGE>
and does hereby irrevocably constitute and appoint [ ] the undersigned's
attorney to make such transfer on the books of [ ] maintained for that purpose,
with full power of substitution in the premises.
Date:
*
(Signature of Owner)
(Street Address)
(City) (State) (Zip Code)
[Signature Guaranteed by:
]
- --------
* The signature must correspond with the name as written upon the face of the
within Warrant Certificate in every particular, without alteration or
enlargement or any change whatever, and must be guaranteed by a financial
institution satisfactory to the Warrant Agent.
Exhibit 4.42 Page 35
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1DEFINITIONS
Section 1.1. Definitions.................................................1
ARTICLE 2ORIGINAL ISSUE OF WARRANTS
Section 2.1. Form of Warrant Certificates................................5
Section 2.2. Execution and Delivery of Warrant Certificates..............6
ARTICLE 3EXERCISE OF WARRANTS
Section 3.1. Exercise Procedures.........................................6
ARTICLE 4COMPLIANCE WITH THE SECURITIES ACT
Section 4.1. Transfers...................................................7
Section 4.2. Representations.............................................7
ARTICLE 5REGISTRATION OF TRANSFERS AND EXCHANGES
Section 5.1. Generally...................................................8
Section 5.2. Mutilated, Destroyed, Lost or Stolen Warrant Certificates...8
ARTICLE 6ADJUSTMENTS
Section 6.1. Adjustment upon Certain Transactions........................9
ARTICLE 7REGISTRATION RIGHTS
Section 7.1. Demand Registration........................................19
Section 7.2. Piggyback Registration Rights..............................22
Section 7.3. Company's Ability to Postpone Registration Rights..........23
Section 7.4. Holder Withdrawal Rights...................................24
ARTICLE 8REGISTRATION PROCEDURES
Section 8.1. Covenants of the Company Applicable to All Registration
Statements ................................................25
Section 8.2. Covenants of the Selling Holders...........................29
Section 8.3. Registration Expenses......................................30
Section 8.4. Indemnification and Contribution...........................31
Section 8.5. Rule 144...................................................34
Section 8.6. Participation in Underwritten Offerings....................34
Section 8.7. Lock-Up Agreements.........................................35
ARTICLE 9WARRANT AGENT
Section 9.1. Nature of Duties and Responsibilities Assumed..............35
Section 9.2. Right to Consult Counsel...................................37
Section 9.3. Compensation and Reimbursement.............................37
Section 9.4. Warrant Agent May Hold Company Securities..................37
Section 9.5. Resignation and Removal; Appointment of Successor..........37
Exhibit 4.42 Page 36
<PAGE>
ARTICLE 10REPRESENTATIONS AND WARRANTIES
Section 10.1. Representations and Warranties.............................38
ARTICLE 11COVENANTS
Section 11.1. Reservation of Common Stock for Issuance on Exercise
of Warrants ...............................................39
Section 11.2. Notice of Dividends........................................40
Section 11.3. Reports....................................................40
ARTICLE 12WARRANT HOLDERS
Section 12.1. Warrant Certificate Holder Not Deemed a Shareholder........40
Section 12.2. Right of Action............................................40
ARTICLE 13MISCELLANEOUS
Section 13.1. Money and Other Property Deposited with the Warrant Agent..41
Section 13.2. Payment of Taxes...........................................41
Section 13.3. Notices....................................................41
Section 13.4. APPLICABLE LAW.............................................42
Section 13.5. Persons Benefitting........................................42
Section 13.6. Counterparts...............................................42
Section 13.7. Supplements and Amendments.................................42
Section 13.8. Headings...................................................42
Section 13.9. Remedies...................................................43
Exhibit 4.42 Page 37
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT is made and entered into as of May 28,
1999 by and between Wellsford Real Properties, Inc., a Maryland corporation
(together with its successors and permitted assigns, the "Company"), and W/W
Group Holdings, L.L.C., a Delaware limited liability company (the "Initial
Holder").
R E C I T A L S
---------------
WHEREAS, the Company and United States Trust Company of New York are
parties to that certain Warrant Agreement dated as of August 28, 1997, as
amended by Amendment No. 1 to Warrant Agreement dated as of July 16, 1998, and
as further amended by Amendment No. 2 to Warrant Agreement dated as of May 28,
1999 (as so amended, the "Warrant Agreement"), pursuant to which the Company has
issued to five million (5,000,000) warrants to purchase shares of the Company's
common stock currently held by the Initial Holder;
WHEREAS, the Company and the Warrant Agent are parties to that certain
Warrant Agreement dated as of May 28, 1999 (the "New Warrant Agreement"),
pursuant to which the Company has issued to the Initial Holder one hundred fifty
thousand (150,000) warrants to purchase shares of the Company's common stock;
WHEREAS, the Company and the Initial Holder desire that the registration
rights and procedures set forth in this Agreement supercede those granted under
the Warrant Agreement and to set forth their respective rights and obligations
regarding the registration of the Company's shares that are issuable in respect
of warrants exercised by the Initial Holder pursuant to the New Warrant
Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
agreements herein set forth and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE 1
DEFINITIONS
Section 1.1. Definitions. For purposes of this Agreement, the following
terms shall have the following respective meanings:
"Affiliate" of any Person shall mean any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such Person. For purposes of this definition, "control" when used
with respect to any Person means the power to direct
Exhibit 4.43 Page 1
<PAGE>
the management and policies of such Person, directly or indirectly, whether
through the ownership of voting securities, by contract or otherwise, and the
terms "controlling" and "controlled" have meanings correlative to the foregoing.
"Agreement" shall mean this Registration Rights Agreement, as it may be
amended or modified from time to time.
"Articles of Incorporation" shall mean the Company's Articles of Amendment
and Restatement, as amended from time to time.
"Business Day" shall mean any day other than a Saturday, Sunday or any
other day on which banks in New York are authorized or required to close.
"Closing Price" shall mean the last reported sale price regular way on the
day in question or, in case no such sale takes place on such day, the average of
the reported closing bid and asked prices regular way of the Common Stock, in
each case on the American Stock Exchange ("AMEX"), or, if the Common Stock is
not listed or admitted to trading on the AMEX, on the principal national
securities exchange or quotation system on which the Common Stock 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 the Common Stock in the over-the-counter
market on the day in question as reported by the National Quotation Bureau
Incorporated, or a similarly generally accepted reporting service, or, if not so
available in such manner, as furnished by any AMEX member firm selected from
time to time by the board of directors of the Company for the purpose. In the
case of a closing price of Common Stock on the AMEX, such price shall mean the
closing price reported in the AMEX composite transactions reporting system (as
reported in the New York City edition of The Wall Street Journal or, if not so
reported, another authoritative source).
"Common Stock" shall mean the common stock, par value $.01 per share, of
the Company and any other stock of the Company into which such common stock may
be converted or reclassified (other than stock of the Company into which
unissued Common Stock has been reclassified) or that may be issued in respect
of, in exchange for, or in substitution of, such common stock by reason of any
stock splits, stock dividends, distributions, mergers, consolidations,
recapitalizations or other like events.
"Company" shall have the meaning set forth in the first paragraph of this
Agreement.
"Company Shares" shall have the meaning set forth in Section 2.1(g).
"Demand Registration" shall mean a registration of Eligible Securities
pursuant to Section 2.1 hereof.
"Eligible Common Stock" shall mean all shares of Underlying Common Stock
that are Eligible Securities.
Exhibit 4.43 Page 2
<PAGE>
"Eligible Securities" shall mean (x) all shares of Underlying Common Stock
and unless otherwise provided herein, any related Warrants and (y) any other
securities of the Company or any other entity issued or issuable with respect to
the Underlying Common Stock or Warrants by way of stock dividend or stock split
or in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization or otherwise; provided, however, that
particular shares of Underlying Common Stock or particular Warrants shall cease
to be Eligible Securities when (i) such shares or Warrants, as the case may be,
shall have been disposed of in accordance with an effective registration
statement covering the sale of such shares or Warrants; (ii) such shares or
Warrants, as the case may be, have been distributed to the public pursuant to
Rule 144 (or any successor provision) under the Securities Act; or (iii) in the
case of a Warrant only, such Warrant has been transferred by the Initial Holder
to another Person (other than an Affiliate of the Initial Holder).
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Favorable Term" shall have the meaning set forth in Section 2.5.
"Holder" shall mean the holder of any Eligible Security.
"Initial Holder" shall have the meaning set forth in the first paragraph of
this Agreement.
"New Warrant Agreement" shall have the meaning set forth in the third
paragraph of this Agreement.
"New Warrants" shall mean the warrants issued by the Company pursuant to
the New Warrant Agreement, and any additional warrants issued in accordance with
the New Warrant Agreement.
"Old Warrants" shall mean the warrants issued by the Company pursuant to
the Warrant Agreement, and any additional warrants issued in accordance with the
Warrant Agreement.
"Original Term" shall have the meaning set forth in Section 2.5.
"Person" shall mean any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Piggyback Registration" shall have the meaning set forth in Section
2.2(a).
"Prospectus" shall mean the prospectus included in any Registration
Statement, as amended or supplemented by any prospectus supplement with respect
to the terms of the offering of any of the Eligible Securities covered by such
Registration Statement and by all other amendments and supplements to the
prospectus, including post-effective amendments and all material incorporated by
reference in such prospectus.
"Registration Demand" shall have the meaning set forth in Section 2.1(a).
Exhibit 4.43 Page 3
<PAGE>
"Registration Rights" shall mean the rights of Holders set forth in
Sections 2.1 and 2.2 to have Eligible Securities registered under the Securities
Act for sale under one or more effective Registration Statements.
"Registration Statement" shall mean any registration statement filed by the
Company under the Securities Act that covers any of the Eligible Securities,
including the Prospectus, any amendments and supplements to such Registration
Statement, including post-effective amendments, and all exhibits and all
material incorporated by reference in such registration statement.
"Representative" shall have the meaning set forth in Section 3.6(a), and
"Representative(s)" shall mean one or more Representatives.
"Saracen Members" shall have the meaning set forth in the
Wellsford/Whitehall Group LLC Agreement.
"Saracen Registration Rights Agreement" shall mean that certain
Registration Rights Agreement dated as of July 16, 1998, by and among Wellsford
Commercial Properties Trust, a Maryland real estate investment trust, and the
Saracen Members, as amended by that certain Amendment No. 1 to the Registration
Rights Agreement dated as of May ___, 1999, and as such agreement may be further
amended or modified from time to time.
"SEC" shall mean the Securities and Exchange Commission.
"SEC Reports" shall mean the annual and quarterly reports and the
information, documents, and other reports that the Company is required to file
with the SEC pursuant to Section 13(a) or 15(d) of the Exchange Act.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"selling holder" shall have the meaning set forth in Section 3.1.
"Shelf Registration" shall have the meaning set forth in Section 2.1(c).
"Shelf Registration Statement" shall have the meaning set forth in Section
2.1(c).
"Takedown" shall have the meaning set forth in Section 2.1(c)(ii).
"Underlying Common Stock" shall mean all shares of Common Stock either
issuable upon the exercise of the Warrants or previously issued upon the prior
exercise of the Warrants.
"underwriter" shall have the meaning set forth in Section 3.1.
"underwriting or agency agreement" shall have the meaning set forth in
Section 3.1.
"Warrant Agreement" shall have the meaning set forth in the second
paragraph of this Agreement.
Exhibit 4.43 Page 4
<PAGE>
"Warrants" shall mean any Old Warrants and any New Warrants and the term
"Warrant" shall mean any Old Warrant or any New Warrant.
"WCPT" shall have the meaning set forth in the Recitals to this Agreement.
Certain terms used principally in Articles 2 and 3 are defined in those
Sections.
ARTICLE 2
REGISTRATION RIGHTS
Section 2.1. Demand Registration.
-------------------
(a) At any time, each Holder shall have the right to request (each such
request, a "Registration Demand") that the Company file a registration statement
under the Securities Act in respect of all or any portion of such Holder's
Eligible Securities; provided that if any Holder shall request that a portion,
but not all, of its Eligible Securities be registered in accordance with this
Section 2.1 (including a requested Takedown pursuant to subsection (c)(ii)
below), such portion shall include not less than two hundred and fifty thousand
(250,000) shares of Eligible Common Stock (or such lesser number of such shares
having a market valuation of at least $5,000,000 as of the date the Registration
Demand is made, based on the Closing Price on such date). A Registration Demand
shall specify the number of shares of Eligible Common Stock (and, in the case of
a Registration Demand by the Initial Holder, the number of Warrants) that each
such Holder proposes to sell in the offering. If no Shelf Registration Statement
shall be effective as of the date of the Registration Demand, the demanding
Holders may elect to register such Eligible Securities in accordance with either
Section 2.1(c)(i) or Section 2.1(d). If a Shelf Registration Statement shall be
effective as of the date of the Registration Demand, then all demanding Holders
shall be deemed to have elected to register their Eligible Securities pursuant
to Section 2.1(c)(ii). The Holders may make in the aggregate two (2)
Registration Demands pursuant to Sections 2.1(c)(i) and 2.1(d) and four (4)
Registration Demands per year pursuant to an existing Shelf Registration
Statement pursuant to Section 2.1(c)(ii) for which the Company will pay and bear
all costs and expenses in accordance with Section 3.3 and thereafter the Holders
may make an unlimited number of Registration Demands for which such requesting
Holders shall pay and bear all costs and expenses.
(b) Upon receipt of a Registration Demand (other than a Takedown), the
Company shall give written notice thereof to all of the other Holders at least
thirty (30) days prior to the initial filing of a Registration Statement
relating to such Registration Demand. Each of the other Holders shall have the
right, within twenty (20) days after the delivery of such notice, to request
that the Company include all or a portion of such Holder's Eligible Securities
in such Registration Statement. Upon receipt of a Registration Demand that is a
Takedown, a representative of the selling holders shall give written notice
thereof to all of the other Holders at least three (3) Business Days prior to
the initial filing of a prospectus relating to such Registration Demand. Each of
the other Holders shall have the right, within one (1) Business Day after the
delivery of such notice, to request that the Company include all or a portion of
such Holder's Eligible Securities in such Registration Statement.
Exhibit 4.43 Page 5
<PAGE>
(c) (i) As promptly as practicable and in no event later than sixty (60)
days after the Company receives a Registration Demand electing to register
Eligible Securities pursuant to this paragraph (c), the Company shall file under
the Securities Act a "shelf" registration statement (the "Shelf Registration
Statement") providing for the registration and the sale on a continuous or
delayed basis of all the Eligible Securities, pursuant to Rule 415 under the
Securities Act and/or any similar rule that may be adopted by the SEC (the
"Shelf Registration"). The Company agrees to use its reasonable best efforts to
cause such Shelf Registration Statement to become or be declared effective as
soon as practicable but no later than 75 calendar days after the filing (the "75
Day Effective Date") and to keep such Shelf Registration continuously effective
for a period ending on the occurrence of the earlier of: (x) the third
anniversary of such Registration Demand and (y) notification by all of the
requesting Holders that such Holders have sold all of the Eligible Securities
owned by them. The Company further agrees to supplement or make amendments to
the Shelf Registration Statement and the prospectus included therein (x) as may
be necessary to effect and maintain the effectiveness of such Shelf Registration
Statement for the period set forth in the previous sentence and (y) as may be
required by the rules, regulations or instructions applicable to the
registration form used by the Company for such Shelf Registration or by the
Securities Act or rules and regulations thereunder for shelf registration. The
Company agrees to furnish to the Holders of the securities registered thereby
copies of any such supplement or amendment (but excluding any periodic reports
required to be filed with the SEC under the Exchange Act of 1934) so that the
Initial Holder, or if the Initial Holder is no longer a Holder, the Holders,
through the Representative(s), have a reasonable opportunity to comment thereon
prior to its being used and/or filed with the SEC.
(ii) As promptly as practicable after the Company receives a Registration
Demand from a Holder or Holders pursuant to which a Holder is deemed to have
elected to register Eligible Securities pursuant to an existing Shelf
Registration Statement (a "Takedown"), the Company shall, subject to the
Takedown Blackout Period described below, file a Prospectus with the SEC and
otherwise comply with the Securities Act and all rules, regulations and
instructions thereunder applicable to such Takedown. In the event that no
Prospectus or other filing is required nor any other action necessitating the
Company's participation is required to effect a sale of Eligible Securities
pursuant to an effective Shelf Registration Statement filed pursuant to Section
2.1(c)(i), each selling Holder agrees to provide the Company with at least three
(3) Business Days' notice of the proposed sale (which may or may not include the
amount of Eligible Securities to be registered) pursuant to the effective Shelf
Registration Statement; provided, however, that the Company shall, subject to
Section 2.3(g), have the right to postpone any such sale whether before or after
the filing of the applicable Prospectus or Shelf Registration Statement for a
reasonable period of time not to exceed ninety (90) days (a "Takedown Blackout
Period") if: (i) the Company determines in its good faith judgment that it
would, in connection with such sale, be required to disclose in such
Registration Statement (or any prospectus supplement to be used in connection
therewith) information not otherwise then required by law to be publicly
disclosed and (ii) either (x) in the good faith judgment of the Board of
Directors of the Company, such disclosure would adversely affect any material
corporate development or business transaction contemplated by the Company or (y)
the Company has a bona fide purpose for preserving as confidential such
information; provided further that the Takedown Blackout Period shall earlier
terminate upon the completion or abandonment of the relevant corporate
development or business transaction or upon public disclosure by the Company or
public
Exhibit 4.43 Page 6
<PAGE>
disclosure by the Company or public admission by the Company of such information
specified in (i) above.
(d) As promptly as practicable and in no event later than sixty (60) days
after the Company receives a Registration Demand electing to register Eligible
Securities pursuant to this Section 2.1(d), the Company shall file with the SEC
a Registration Statement, on any form that shall be available and appropriate
for the sale of the Eligible Securities in accordance with the intended method
of distribution thereof. The Company shall include in such Registration
Statement all of the Eligible Securities of such requesting Holders that such
Holders have requested to be included therein pursuant to Sections 2.1(a) and
2.1(b); provided, however, that, if the requested registration involves an
underwritten offering, the Eligible Securities to be registered may be reduced
if the managing underwriter delivers a notice (a "Cutback Notice") pursuant to
Section 2.1(g). The Company shall use its reasonable best efforts to cause each
such Registration Statement to be declared effective (and to obtain acceleration
of such effectiveness) as soon as practicable but no later than 75 days after
filing such Registration Statement and to keep such Registration Statement
continuously effective and usable for resale of such Eligible Securities, for a
period of one hundred eighty (180) days from the date on which the SEC declares
such Registration Statement effective or such shorter period as is necessary to
complete the distribution of the securities registered thereunder.
(e) The Initial Holder or, if the Initial Holder is not a selling holder,
the Representative(s) shall determine the method of distribution of Eligible
Securities pursuant to a Registration Demand.
(f) If a Registration Demand involves an underwritten offering, the
investment banker or investment bankers and manager or managers that will
administer such offering will be selected by the Initial Holder or, if the
Initial Holder is not a selling holder, the Representative(s); provided that the
Persons so selected shall be reasonably satisfactory to the Company.
(g) In the event that the proposed offering is an underwritten offering and
includes securities to be offered for the account of the Company (the "Company
Shares"), the provisions of this Section 2.1(g) shall be applicable if the
managing underwriter delivers a Cutback Notice stating that, in its opinion, the
aggregate number of shares of Eligible Common Stock, plus the Company Shares
proposed to be sold therein, exceeds the maximum number of shares specified by
the managing underwriter in such Cutback Notice that may be distributed without
adversely affecting the price, timing or distribution of the Common Stock being
distributed. If the managing underwriter delivers such Cutback Notice, the
number of shares of Eligible Common Stock requested to be registered and Company
Shares shall be reduced in the following order until the number of shares to be
offered has been reduced to the maximum number of shares specified by the
managing underwriter in the Cutback Notice: first, the Company Shares and
second, the Eligible Common Stock in proportion to the respective number of
shares of Eligible Common Stock that each Holder has requested to be registered.
(h) The Company will pay all Registration Expenses (as set forth in Section
3.3) in connection with a registration under this Section 2.1.
Exhibit 4.43 Page 7
<PAGE>
(i) No Registration Demand (other than a Takedown) may be made until the
expiration of six (6) months following the completion of the distribution of the
securities registered under any Registration Statement that has been filed and
has become effective pursuant to a prior Registration Demand.
(j) A Registration Demand will not be deemed satisfied (and will not count
for purposes of the limitations in Section 2.1(a)) (i) unless a registration
statement with respect thereto has become effective and has been kept
continuously effective for a period of at least 180 days (or such shorter period
which shall terminate when all Eligible Securities covered by such registration
statement have been sold), (ii) if, after it has become effective, such
registration is interfered with by any stop order, injunction or other order or
requirement of the SEC or other governmental agency or court for any reason not
attributable to the selling holders participating in such registration and has
not thereafter become effective, or (iii) if the conditions to closing specified
in the relevant underwriting or agency agreement entered into in connection with
such offering are not satisfied or waived, other than by reason of a breach of
such agreement by the selling holders participating in such offering or wilful
failure on the part of the selling holders participating in such offering.
Section 2.2. Piggyback Registration Rights.
-----------------------------
(a) If, at any time, the Company proposes to file a Registration Statement
with the SEC respecting an offering, whether primary, secondary or combined, of
any equity securities of the Company, the Company shall give written notice to
all Holders at least thirty (30) days prior to the initial filing of the
Registration Statement relating to each such offering. Such notice shall
specify, at a minimum, the number and the type of equity securities so proposed
to be registered, the proposed date of filing of such registration statement,
any proposed means of distribution of such securities, any proposed managing
underwriter or underwriters of such securities and a good faith estimate by the
Company of the proposed maximum offering price thereof, as such price is
proposed to appear on the facing page of such registration statement. Each
Holder shall have the right, within twenty (20) days after delivery of such
notice, to request in writing that the Company include not less than 50,000
shares of Eligible Common Stock (or such lesser amount as is then owned by such
Holder) in such Registration Statement (a "Piggyback Registration").
(b) In the event that the proposed offering is an underwritten offering
covering Company Shares, the provisions of this paragraph (b) shall be
applicable if the managing underwriter delivers a Cutback Notice stating that,
in its opinion, the aggregate number of shares of Eligible Common Stock and the
Company Shares that the Holders have requested to be registered, exceeds the
maximum number of shares specified by the managing underwriter in such Cutback
Notice that may be distributed without adversely affecting the price, timing or
distribution of the Common Stock being distributed. If the managing underwriter
delivers such Cutback Notice, the number of shares of Eligible Common Stock and
Company Shares requested to be included in such offering shall be reduced in the
following order until the number of shares to be offered has been reduced to the
maximum number of shares specified by the managing underwriter in the Cutback
Notice: first, the Eligible Common Stock in proportion to the respective number
of shares of Eligible Common Stock that each Holder has requested to be
registered and second, the Company Shares.
Exhibit 4.43 Page 8
<PAGE>
(c) No Piggy-Back Registration effected under this Section 2.2 shall be
deemed to have been effected pursuant to Section 2.1 hereof or shall release the
Company of its obligations to effect any Demand Registration upon request as
provided in Section 2.1.
(d) The Company will pay all Registration Expenses (as set forth in Section
3.3) in connection with a registration under this Section 2.2.
(e) The provisions of this Section 2.2 shall not be applicable in
connection with a transaction in which a registration statement is filed by the
Company on Form S-4 or S-8 or any successor or similar form or a registration
statement is filed by the Company that registers securities issued pursuant to a
DRIP.
Section 2.3. Company's Ability to Postpone Registration Rights.
--------------------------------------------------
(a) The Company shall have the right to postpone the filing of any
Registration Statement relating to a Demand Registration for a reasonable period
of time not to exceed ninety (90) days (the "Blackout Period") if: (i) the
Company determines in its good faith judgment that it would be required to
disclose in such Registration Statement information not otherwise then required
by law to be publicly disclosed and (ii) either (x) in the good faith judgment
of the Board of Directors of the Company, such disclosure would adversely affect
any material corporate development or business transaction contemplated by the
Company or otherwise would be materially harmful to the Company and its
stockholders or (y) the Company has a bona fide purpose for preserving as
confidential such information or; provided, however, that the Blackout Period
shall earlier terminate upon the completion or abandonment of the relevant
corporate development or business transaction or upon public disclosure by the
Company or public admission by the Company of such information specified in (i)
above.
(b) If at any time after the Company notifies the Holders of its intention
to file a Registration Statement that would trigger Piggyback Registration
Rights, the Board of Directors of the Company in good faith shall determine for
any reason not to effect such registration or to postpone such registration, the
Company shall (i) in the case of a determination not to effect such
registration, be relieved of its obligation to register any Eligible Securities
of Holders requesting inclusion in such registration, and (ii) in the case of a
determination to postpone such registration, be permitted to postpone
registering the Eligible Securities of Holders requesting inclusion in such
registration.
(c) After the expiration of any Blackout Period and without further request
from any Holder, the Company shall effect the filing of the relevant Demand
Registration and shall use its reasonable best efforts to cause any such Demand
Registration to be declared effective as promptly as practicable unless the
requesting Holder or Holders shall have, prior to the effective date of such
Demand Registration withdrawn in writing its initial request, in which case,
such withdrawn request shall not constitute a Registration Demand or reduce the
number of Registration Demands available under Section 2.1(a).
(d) Any request by a Holder for a Demand Registration which is subsequently
withdrawn prior to such Demand Registration becoming effective shall not
constitute a Registration Demand or reduce the number of Registration Demands
available under Section 2.1(a); provided,
Exhibit 4.43 Page 9
<PAGE>
however, that other than with respect to a withdrawal which is made as a result
of or after the expiration of any Blackout Period as specified in subsection (c)
above, the Holder or Holders, as appropriate, shall reimburse the Company for
all expenses relating to the preparation of such withdrawn Demand Registration.
(e) The Company shall as promptly as practicable notify the Holders of any
postponement pursuant to this Section 2.3 or Section 2.1(c)(ii), specifying the
reasons therefor.
(f) If the Company exercises its right to postpone the filing of any
Registration Statement pursuant to Section 2.3 or if the Company exercises its
right to postpone any Takedown pursuant to Section 2.1(c)(ii) and the Company
notifies any Holder of such postponement or if the Company gives the notice
described in Section 3.7(a), such Holder agrees to keep confidential the
exercise by the Company of its postponement right and any information related
thereto which is given to such Holder by the Company.
(g) Notwithstanding the provisions of this Section 2.3 or Section
2.1(c)(ii), the aggregate number of days (whether or not consecutive) during
which the Company may delay the effectiveness of the Registration Statement or
prevent offerings, sales or distributions by the Holders pursuant to this
Section 2.3 or Section 2.1(c)(ii) shall in no event exceed 120 days during any
12-month period. In addition, no such delay shall exceed such number of days
that the Company determines in good faith to be reasonably necessary.
Section 2.4. Holder Withdrawal Rights. The Company shall withdraw from
registration any Eligible Securities on request of a Holder. The Company shall
not be obligated to maintain the effectiveness of any Registration Statement if,
after any withdrawal of Eligible Securities by a Holder, the number of Eligible
Securities remaining subject to such Registration Statement represents less than
5% of the shares of Eligible Common Stock deemed outstanding, unless the Company
is also registering securities on such Registration Statement for its own
account.
Section 2.5. Other Registration Rights. In the event WCPT shall grant to
any of the Saracen Members the right to request that WCPT register any common
share of beneficial interest, par value $0.01, of WCPT pursuant to the terms and
provisions of the Saracen Registration Rights Agreement, and any registration
right granted therein (the "Favorable Term") is more advantageous to such
Saracen Member than the analogous term contained in this Agreement (the
"Original Term"), then any Holder of Eligible Securities entitled to exercise
any or all of the Registration Rights may elect, upon exercise thereof, that the
Favorable Term be applicable to such exercise in place of the Original Term.
ARTICLE 3
REGISTRATION PROCEDURES
Section 3.1. Covenants of the Company Applicable to All Registration
Statements. This Section 3.1 applies to all Registration Statements filed by the
Company and referred to in Section 2.1 and 2.2. The securities covered by each
such Registration Statement are referred to
Exhibit 4.43 Page 10
<PAGE>
as the "Registered Securities". Each underwriter (including any qualified
independent underwriter), agent, selling broker, dealer manager or similar
securities industry professional participating in any offering of the Registered
Securities is referred to as an "underwriter" or "agent" and any agreement
entered into with an underwriter or agent is referred to as an "underwriting or
agency agreement". In connection with each such registration, the Company
covenants with each Holder participating in such offering (each, a "selling
holder") and each underwriter or agent participating therein as follows:
(a) The Company will notify the selling holders and the managing
underwriter or agent, immediately, and confirm the notice in writing, (i) when
the Registration Statement or any pre-effective amendment, post-effective
amendment, prospectus or prospectus supplement is filed or when the Registration
Statement, or any post-effective amendment to the Registration Statement, shall
have become effective, (ii) of the receipt of any comments from the SEC, (iii)
of any request by the SEC or any state securities authority for additional
information or to amend the Registration Statement or amend or supplement the
Prospectus or any notification of an intention to proceed for that purpose, (iv)
of the issuance by the SEC of any stop order suspending the effectiveness of the
Registration Statement or of any order preventing or suspending the use of any
preliminary prospectus, or of the suspension of the qualification of the
Registered Securities for offering or sale in any jurisdiction, or of the
institution or threatening of any proceedings for any of such purposes, (v) if
at any time when a prospectus is required by the Securities Act to be delivered
in connection with sales of the Registered Securities the representations and
warranties of the Company contemplated by Section 3.1(i) cease to be true and
correct and (vi) of the existence of any fact that results or may result in the
Registration Statement, the Prospectus or any document incorporated therein by
reference containing an untrue statement of a material fact or omitting to state
a material fact required to be stated therein or necessary to make any statement
therein not misleading in light of the circumstances then existing.
(b) The Company will use its best efforts to prevent the issuance of any
stop order suspending the effectiveness of the Registration Statement or of any
order preventing or suspending the use of any preliminary prospectus and, if any
such order is issued, to obtain the lifting thereof at the earliest possible
moment.
(c) The Company will afford the Representative(s) and the managing
underwriters a reasonable opportunity, prior to its being filed with the SEC, to
comment on any Registration Statement, any amendment thereto, or any amendment
of or supplement to the Prospectus.
(d) The Company will furnish to each selling holder and to the managing
underwriter or agent, without charge, as many signed copies of the Registration
Statement (as originally filed) and of all amendments thereto, whether filed
before or after the Registration Statement becomes effective, copies of all
exhibits and documents filed therewith, including documents incorporated by
reference into the Prospectus, and signed copies of all consents and
certificates of experts, as such selling holder or the managing underwriter or
agent may reasonably request, and will furnish to the managing underwriter, for
each other underwriter participating in an underwritten offering, one conformed
copy of the Registration Statement as originally filed and of each amendment
thereto (including documents incorporated by reference into the Prospectus but
without exhibits).
Exhibit 4.43 Page 11
<PAGE>
(e) The Company will deliver to each selling holder and each underwriter or
agent participating in such offering, without charge, as many copies of each
preliminary prospectus as such selling holder or such underwriter or agent may
reasonably request, and the Company hereby consents to the use of such copies
for purposes permitted by the Securities Act. The Company will deliver to each
selling holder and each underwriter or agent participating in such offering,
without charge, from time to time during the period when the Prospectus is
required to be delivered under the Securities Act, such number of copies of the
Prospectus (as supplemented or amended) as such selling holder or such
underwriter or agent may reasonably request.
(f) The Company will comply with the Securities Act and the rules and
regulations of the SEC thereunder, the Exchange Act and the rules and
regulations of the SEC thereunder and any state securities laws or rules so as
to permit the completion of the distribution of the Registered Securities in
accordance with the intended method or methods of distribution contemplated in
the Prospectus. If at any time when a prospectus is required by the Securities
Act to be delivered in connection with sales of the Registered Securities any
event shall occur or condition shall exist as a result of which it is necessary,
in the opinion of counsel for the selling holders, counsel for the underwriters
or agents or counsel for the Company, to amend the Registration Statement or
amend or supplement the Prospectus in order that the Prospectus will not include
an untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein not misleading in the light of
the circumstances existing at the time it is delivered to a purchaser, or if it
shall be necessary, in the opinion of any such counsel, at any such time to
amend the Registration Statement or amend or supplement the Prospectus in order
to comply with the requirements of the Securities Act or the rules and
regulations of the SEC thereunder, the Company will promptly prepare and file
with the SEC, subject to Section 3.1(c), such amendment or supplement as may be
necessary to correct such untrue statement or omission or to make the
Registration Statement or the Prospectus comply with such requirements and will
promptly furnish each selling holder and underwriter or agent with a reasonable
number of copies of such amendment or supplement.
(g) The Company will use its best efforts, in cooperation with the selling
holders or the underwriters or agents, as the case may be, to register or
qualify the Registered Securities for offering and sale under the applicable
securities laws of such states and other jurisdictions as the selling holders or
the managing underwriter or agents, as the case may be, may designate and to
keep such registration or qualification in effect for so long as such
Registration Statement remains effective; provided, however, that the Company
shall not be obligated to file any general consent to service of process or to
qualify as a foreign corporation or as a dealer in securities in any
jurisdiction in which it is not so qualified or to subject itself to taxation in
respect of doing business in any jurisdiction in which it is not otherwise so
subject. The Company will file such statements and reports as may be required by
the laws of each jurisdiction in which the Registered Securities have been
qualified as above provided.
(h) The Company will effect the listing of the Registered Securities
covered by a Registration Statement on each national securities exchange on
which similar securities issued by the Company are then listed and make all
other necessary or appropriate filings with each such securities exchange.
Exhibit 4.43 Page 12
<PAGE>
(i) The Company shall make such representations and warranties to the
selling holders and the underwriters or agents, if any, in form, substance and
scope as are customarily made by issuers to underwriters in underwritten public
offerings.
(j) On the effective date of the Registration Statement or, in the case of
an underwritten offering, on the date of delivery of the Registered Securities
sold pursuant thereto, the Company shall cause to be delivered to the selling
holders and the underwriters or agents, if any, opinions of counsel for the
Company with respect to, among other things, the due incorporation and good
standing of the Company; the qualification of the Company to transact business
as a foreign corporation; the due authorization, execution and delivery of this
Agreement; the due authorization, execution, authentication and issuance, and
the validity and enforce ability, of the Warrants and/or the Eligible Common
Stock, as the case may be; the absence of material legal or governmental
proceedings involving the Company; the absence of a material breach by the
Company of, or a material default under, agreements binding the Company; the
absence of governmental approvals required to be obtained in connection with the
registration, offering and sale of the Warrants and/or Eligible Common Stock, as
the case may be; the compliance as to form of the Registration Statement and any
documents incorporated by reference therein with the requirements of the
Securities Act; the effectiveness of such Registration Statement under the
Securities Act; and a statement that, as of the date of the opinion and of the
Registration Statement or most recent post-effective amendment thereto, as the
case may be, nothing has come to the attention of such counsel which causes them
to believe that either the Registration Statement or the Prospectus included
therein, as then amended or supplemented, or the documents incorporated by
reference therein (in the case of such documents, in the light of the
circumstances existing at the time that such documents were filed with the
Commission under the Exchange Act), contained an untrue statement of a material
fact or omitted to state a material fact necessary to make the statements
therein not misleading (it being understood that such counsel need express no
opinion as to the financial statements and other financial data included therein
or omitted therefrom).
In the event that any broker-dealer registered under the Exchange Act shall
be an "affiliate" (as defined in Rule 2720(b)(1) of the NASD Rules (or any
successor provision thereto)) of the Company or has a "conflict of interest" (as
defined in Rule 2720(b)(7) of the NASD Rules (or any successor provision
thereto)) and such broker-dealer shall underwrite, participate as a member of an
underwriting syndicate or selling group or assist in the distribution of any
Registrable Securities covered by the Shelf Registration Statement, whether as a
holder of such Registrable Securities or as an underwriter, a placement or sales
agent or a broker or dealer in respect thereof, or otherwise, the Company shall
assist such broker-dealer in complying with the requirements of the NASD Rules,
including, without limitation, by (A) engaging a "qualified independent
underwriter" (as defined in Rule 2720(b)(15) of the NASD Rules (or any successor
provision thereto)) to participate in the preparation of the registration
statement relating to such Registrable Securities, to exercise usual standards
of due diligence in respect thereto and to recommend the public offering price
of such Registrable Securities, (B) indemnifying such qualified independent
underwriter to the extent of the indemnification of underwriters provided in
Section 5 hereof, and (C) providing such information to such broker-dealer as
may be required in order for such broker-dealer to comply with the requirements
of the NASD Rules.
Exhibit 4.43 Page 13
<PAGE>
(k) Immediately prior to the effectiveness of the Registration Statement
or, in the case of an underwritten offering, at the time of delivery of any
Registered Securities sold pursuant thereto, the Company shall cause to be
delivered to the selling holders and the underwriters or agents, if any, letters
from the Company's independent public accountants stating that such accountants
are independent public accountants with respect to the Company within the
meaning of the Securities Act and the applicable published rules and regulations
of the SEC thereunder, and otherwise in customary form and covering such
financial and accounting matters as are customarily covered by letters of the
independent public accountants delivered in connection with primary underwritten
public offerings.
(l) If the managing underwriter or agent so requests, the underwriting or
agency agreement shall set forth in full the provisions hereof relating to
covenants, registration expenses, lock-up agreements, indemnification and
contribution contained in this Article 8, with such changes therein as may be
agreed to by the managing underwriter or agent, the Company and the selling
holders.
(m) The Company shall deliver such documents and certificates as may be
requested by any selling holder or the underwriters or agents, if any, to
evidence compliance with Section 3.1(i) and with any customary conditions
contained in the underwriting or agency agreement, if any.
(n) The Company will make available for inspection by representatives of
the selling holders and the underwriters or agents participating in such
offering, any attorney or accountant retained by such selling holders or
underwriters or agents and, with respect to any private placement of Warrants or
Underlying Common Stock, upon notice to the Company, prospective purchasers, all
financial and other records, pertinent corporate documents and properties of the
Company, and cause the Company's officers, directors and employees to supply all
information reasonably requested by any such representative, underwriter or
agent, attorney or accountant in connection with the preparation of the
Registration Statement; provided, however, that any records, information or
documents that are designated by the Company in writing as confidential shall be
kept confidential by each such person (by, among other things, if so requested
by the Company, entering into a confidentiality agreement in form and substance
satisfactory to the Company) unless such records, information or documents
become part of the public domain through no fault of such person or unless
disclosure thereof is required by court or administrative order or the SEC
(including the federal securities law). Without limitation of the foregoing, the
Company will give the selling holders, their underwriters or agents and their
respective counsel, accountants and other representatives and agents the
opportunity to participate in the preparation of any prospectus or offering
circular included therein or filed with the SEC, and, to review all information
reasonably requested by each of them as shall be necessary or appropriate, in
the opinion of such holders' and such underwriters' respective counsel, to
conduct a reasonable investigation within the meaning of the Securities Act.
(o) The Company will make generally available to its security holders as
soon as practicable, but not later than forty-five (45) days after the close of
the period covered thereby (or ninety (90) days if such period is a fiscal
year), an earnings statement of the Company (in form complying with the
provisions of Rule 158 under the rules and regulations of the SEC under the
Securities Act), covering a period of twelve (12) months beginning after the
effective date of the
Exhibit 4.43 Page 14
<PAGE>
Registration Statement but not later than the first day of the Company's fiscal
quarter next following such effective date.
(p) The Company will enter into such customary agreements, including a
customary underwriting or agency agreement with the underwriters or agents, if
any, and take all other reasonable actions in connection with the offering in
order to expedite or facilitate the disposition of the Registered Securities.
(q) The Company will provide a transfer agent and registrar for all such
Eligible Securities covered by such registration statement not later than the
effective date of such registration statement.
(r) The Company will provide a CUSIP number for all Eligible Securities
being offered, not later than the effective date of the registration statement.
(s) The Company will take all such other commercially reasonable actions as
are necessary or advisable in order to expedite or facilitate the disposition of
such Eligible Securities.
(t) The Company shall cooperate with the selling holders and the
underwriters or agents participating in such offering to facilitate the timely
preparation and delivery of certificates representing such Registered Shares to
be sold, which certificates shall not bear any restrictive legends except as
required by law or the Articles of Incorporation or the Company's By-laws; and,
in the case of an underwritten offering, enable such Registered Shares to be in
such denominations and registered in such names as the managing underwriter or
underwriters may request in writing at least two business days prior to any sale
of the Registered Shares to the underwriters or agents participating in such
offering.
Section 3.2. Covenants of the Selling Holders.
---------------------------------
(a) Each selling holder shall use its best efforts to furnish to the
Company such information regarding the distribution of such Registered
Securities as is customarily requested from selling holders in underwritten
public offerings to the extent necessary to permit the Company to comply with
the Securities Act; provided, that the Company will not include in any
Registration Statement, Prospectus or prospectus supplement information
concerning or relating to any Holder or selling holder to which such Holder or
selling holder shall reasonably object (unless the inclusion of such information
is required by applicable law or the regulation of any securities exchange to
which the Company may be subject), and the Company will not file any
Registration Statement, Prospectus or amendment or supplement thereto to which
such Holder or selling holder shall reasonably object; provided that, if such
Holder or selling holder objected to a registration statement to be filed in
connection with a Piggyback Registration, such Holder or selling holder may
withdraw any or all of its Eligible Securities from such registration statement
and the Company may file such registration statement.
(b) Each selling holder agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section
3.1(a)(vi), such selling holder will forthwith discontinue the disposition of
its Registered Securities pursuant to the Registration
Exhibit 4.43 Page 15
<PAGE>
Statement until such selling holder's receipt of the copies of a supplemented or
amended Prospectus contemplated by Section 3.1(f), or until it is advised in
writing by the Company that the use of such Prospectus may be resumed. If the
Company shall give any such notice, the Company shall extend the period of time
during which the Company is required to keep the Registration Statement
effective and usable by the number of days during the period from the date of
receipt of such notice to the date when each selling holder of Registered
Securities covered by such Registration Statement either receives the copies of
a supplemented or amended Prospectus contemplated by Section 3.1(f) or is
advised in writing by the Company that the use of such Prospectus may be
resumed.
(c) No selling holders, as such, shall be required to make any
representation or warranty as to the accuracy or completeness of the
Registration Statement or otherwise relating to the offering (except solely as
to written information furnished to the Company by such selling holder expressly
for use in the Registration Statement).
Section 3.3. Registration Expenses.
----------------------
(a) The Company will pay and bear all costs and expenses incident to the
performance of its obligations under this Agreement with respect to each
registration pursuant to Section 2.1 or 2.2, including, without limitation:
(i) the preparation, printing and filing of the Registration Statement
(including financial statements and exhibits), as originally filed and as
amended, any preliminary prospectuses and the Prospectus and any amendments or
supplements thereto, and the cost of furnishing copies thereof to the selling
holders or the underwriters or agents, as the case may be;
(ii) the preparation, printing and distribution of any underwriting or
agency agreement, agreement among underwriters, selling agreements, certificates
representing the Registered Securities, any Blue Sky or legal investment survey
and other documents relating to the performance of and compliance with this
Agreement;
(iii) the fees and disbursements of the Company's counsel, accountants and
experts and the reasonable fees and disbursements of one counsel retained by the
selling holders pursuant to Section 3.3(b);
(iv) except as provided in Section 3.3(c), the fees and disbursements of
the underwriters or agents customarily paid by issuers or sellers of securities
and the reasonable fees and expenses of any special experts retained in
connection with the Registration Statement, but excluding underwriting discounts
and commissions and transfer taxes, if any;
(v) the qualification of the Registered Securities under applicable
securities laws in accordance with Section 3.1(g) and any filing for review of
the offering with the National Association of Securities Dealers, Inc.,
including filing fees and fees and disbursements of counsel for the selling
holders and the underwriters or agents, as the case may be, in connection
therewith, in connection with any Blue Sky or legal investment survey and in
connection with any reserve share program;
Exhibit 4.43 Page 16
<PAGE>
(vi) all fees and expenses incurred in connection with the listing, if any,
of any of the Registered Securities on any securities exchange pursuant to
Section 3.1(h); and
(vii) up to a 5% underwriting discount or commission payable to the
underwriters or agents in connection with the sale of the Registered Securities.
(b) In connection with the filing of each Registration Statement, the
Company will reimburse the selling holders for the reasonable fees and
disbursements of one firm of legal counsel, which shall be chosen by the Initial
Holder, or if the Initial Holder is not then a selling holder, the
Representative(s) and shall be reasonably satisfactory to the Company.
(c) Each selling holder will pay and bear all costs and expenses incident
to the delivery of the Registered Securities to be sold by it, including any
stock transfer taxes payable upon the sale of such Registered Securities to the
purchaser thereof and, to the extent not paid pursuant to Section 3.3(a)(vii)
above, any underwriting discounts or commissions payable to underwriters or
agents in connection therewith.
Section 3.4. Indemnification and Contribution.
---------------------------------
(a) In connection with each registration pursuant to Section 2.1 or 2.2,
the Company shall and hereby does indemnify and hold harmless each selling
holder of Eligible Securities, each underwriter or agent participating in such
offering, each person, if any, who controls any selling holder or any such
underwriter or agent within the meaning of Section 15 of the Securities Act, and
each officer, director, employee, agent, stockholder, member, partner or direct
or indirect owner of any of the foregoing (all of the foregoing being referred
to collectively as "Seller Parties" and individually as a "Seller Party"), as
follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of or based upon an untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement (or any amendment thereto), or the omission or alleged omission
therefrom of a material fact required to be stated therein or necessary to make
the statements therein not misleading or arising out of an untrue statement of a
material fact included in any preliminary or summary prospectus or the
Prospectus (or any amendment or supplement thereto or any document incorporated
therein by reference) or the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or investigation or proceeding by any governmental
agency or body, commenced or threatened, or of any claim whatsoever arising out
of or based upon any such untrue statement or omission, or any such alleged
untrue statement or alleged omission, if such settlement is effected with the
written consent of the Company, which shall not be unreasonably withheld or
delayed; and
Exhibit 4.43 Page 17
<PAGE>
(iii) against any and all expense whatsoever, as incurred (including fees
and disbursements of counsel chosen by the Seller Parties), reasonably incurred
in investigating, preparing, defending against or appealing any litigation, or
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission, to the extent that
any such expense is not paid under subparagraph (i) or (ii) above;
provided, however, that, with respect to any Seller Party, this indemnity does
not apply to any loss, liability, claim, damage or expense to the extent arising
out of an untrue statement or omission or alleged untrue statement or omission
made in reliance upon and in conformity with written information furnished to
the Company by such Seller Party, expressly for use in the Registration
Statement (or any amendment thereto), or any preliminary or summary prospectus
or the Prospectus (or any amendment or supplement thereto).
(b) Each selling holder agrees severally, and not jointly or jointly and
severally, to indemnify and hold harmless the Company, its directors, each of
its officers who signed a Registration Statement, each underwriter or agent
participating in such offering and the other selling holders, and each person,
if any, who controls the Company, any such underwriter or agent and any other
selling holder within the meaning of Section 15 of the Securities Act and each
officer, director, employee, agent, stockholder, member, partner or direct or
indirect owner of any of the foregoing, against any and all loss, liability,
claim, damage and expense described in the indemnity contained in Section
3.4(a), as incurred, but only with respect to untrue statements or omissions, or
alleged untrue statements or omissions, made in the Registration Statement (or
any amendment thereto), or any preliminary or summary prospectus or the
Prospectus (or any amendment or supplement thereto) in reliance upon and in
conformity with written information furnished to the Company by such selling
holder expressly for use in the Registration Statement (or any amendment
thereto), or any preliminary or summary prospectus or the Prospectus (or any
amendment or supplement thereto); provided, however, that the liability of any
selling holder under this Section 3.4(b) shall be limited to the amount of net
proceeds received by such selling holder in the offering giving rise to such
liability.
(c) Each indemnified party shall give prompt notice to each indemnifying
party of any action commenced against it in respect of which indemnity may be
sought hereunder, but failure to so notify an indemnifying party shall not
relieve the indemnifying party from any liability it may have under this
Agreement, except to the extent that the indemnifying party is materially
prejudiced thereby and shall not relieve the indemnifying party from any
liability it may have had to any indemnified party otherwise than under this
Section 3.4. In case any action or proceeding is brought against the indemnified
party and it shall notify the indemnifying party of the commencement thereof,
the indemnifying party shall be entitled to participate in, and, unless in the
reasonable judgment of the indemnified party a conflict may exist between the
indemnifying party and the indemnified party in respect of such claim or
proceeding, to assume the defense thereof, jointly with any other indemnifying
party so notified, with counsel reasonably satisfactory to the indemnified party
and, after notice from the indemnifying party to the indemnified party that it
so chooses, the indemnifying party shall not be liable for any legal or other
expenses subsequently incurred by the indemnified party in connection with the
defense thereof other than reasonable costs of investigation; provided, however,
that
Exhibit 4.43 Page 18
<PAGE>
(i) if the indemnifying party fails to take reasonable steps necessary to
defend diligently the claim within twenty (20) days after receiving notice from
the indemnified party that the indemnified party believes it has failed to do
so; or
(ii) if the indemnified party who is a defendant in any action or
proceeding which is also brought against the indemnifying party reasonably shall
have concluded that there may be one or more legal defenses available to the
indemnified party which are not available to the indemnifying party; or
(iii) if representation of both parties by the same counsel is otherwise
inappropriate under applicable standards of professional conduct, the
indemnified party shall have the right to assume or continue its own defense as
set forth above (but with no more than one firm of counsel for all indemnified
parties in each jurisdiction, except to the extent any indemnified party or
parties reasonably shall have concluded that there may be legal defenses
available to such party or parties which are not available to the other
indemnified parties or to the extent representation of all indemnified parties
by the same counsel is otherwise inappropriate under applicable standards of
professional conduct) and the indemnifying party shall be liable for any
reasonable expenses therefor. No indemnifying party shall, without the written
consent of the indemnified party, effect the settlement or compromise of, or
consent to the entry of any judgment with respect to, any pending or threatened
action or in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified party is an actual or potential party
to such action or claim) unless such settlement, compromise or judgment (A)
includes an unconditional release of the indemnified party from all liability
arising out of such action or claim and (B) does not include a statement as to
or an admission of fault, culpability or a failure to act, by or on behalf of
any indemnified party.
(d) If for any reason the forgoing indemnity is unavailable, or is
insufficient to hold harmless, an indemnified party, then each indemnifying
party shall contribute to the amount paid or payable by such indemnified party
as a result of any loss, liability, claim, damage or expense in such proportion
as is appropriate to reflect the relative benefits received by the indemnifying
party on the one hand and the indemnified party on the other from such offering
of securities. If, however, the allocation provided in the immediately preceding
sentence is not permitted by applicable law, or if the indemnified party failed
to give the notice required by subparagraph (c) above and the indemnifying party
is materially prejudiced thereby, then each indemnifying party shall contribute
to the amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the indemnifying party and the indemnified party as well as any other
relevant equitable considerations. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the indemnifying party or the indemnified
party and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such untrue statement or omission. The parties
hereto agree that it would not be just and equitable if contributions pursuant
to this subparagraph (d) were to be determined by pro rata allocation or by any
other method of allocation which does not take account of the equitable
considerations referred to in the preceding sentences of this subparagraph (d).
The
Exhibit 4.43 Page 19
<PAGE>
amount paid or payable in respect of any claim shall be deemed to include any
legal or other expenses incurred by such indemnified party in connection with
investigation or defending any such claim. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act or
the equivalent thereof under any applicable law) shall be entitled to
contribution from any person who was not guilty of such fraudulent misrepresen
tation. Notwithstanding anything in this subparagraph (d) to the contrary, no
indemnifying party (other than the Company) shall be required pursuant to this
subparagraph (d) to contribute any amount in excess of the net proceeds received
by such indemnifying party from the sale of securities in the offering to which
the losses, claims, damages or liabilities of the indemnified parties relate,
less the amount of any indemnification payment made pursuant to this
subparagraph (d).
(e) Any indemnity and reimbursement agreements contained herein shall be in
addition to any other rights to indemnification or contribution which any
indemnified party may have pursuant to law or contract. The indemnity and
contribution agreements contained in this Section 3.4 and the representations
and warranties of the Company referred to in Section 3.1(i) shall remain
operative and in full force and effect regardless of (i) any termination of any
underwriting or agency agreement, (ii) any investigation made by or on behalf of
the selling holders, the Company or any underwriter or agent or controlling
person or (iii) the consummation of the sale or successive resales of the
Registered Securities.
(f) The indemnification and contribution required herein shall be made by
periodic payments of the amount thereof during the course of the investigation
or defense, as and when bills are received or expense, loss, damage or liability
is incurred.
Section 3.5. Rule 144. The Company covenants that it will continue to file
on a timely basis the reports required to be filed by it under the Securities
Act and the rules and regulations of the SEC thereunder and the Exchange Act and
the rules and regulations of the SEC thereunder and it will take such further
action as any Holder of Eligible Securities may reasonably request, all to the
extent required from time to time to enable such Holder to sell Eligible
Securities without registration under the Securities Act within the limitation
of the exemptions provided by Rule 144 under the Securities Act, as such Rule
may be amended from time to time. Upon the request of any Holder of Eligible
Securities, the Company will deliver to such Holder a written statement as to
whether it has complied with such requirements.
Section 3.6. Participation in Underwritten Offerings. No Holder may
participate in any underwritten offering hereunder unless:
(a) Such Holder (other than the Initial Holder) executes a power of
attorney appointing one or more (up to three (3)) attorneys (each, a
"Representative") designated by the selling holders proposing to sell a majority
of the Eligible Securities proposed to be sold by all selling holders. Each such
Representative shall be authorized, on customary terms, to execute the
underwriting agreement on behalf of each selling holder and to otherwise act for
the selling holders in connection with the offering.
(b) Such Holder (other than the Initial Holder) directly through its
Representative, enters into an underwriting agreement with the Company, the
other selling
Exhibit 4.43 Page 20
<PAGE>
holders, any selling stockholders and the underwriters, which underwriting
agreement shall comply with the provisions of this Article 8.
(c) Such Holder executes all questionnaires and other documents required by
theunderwriting agreement to be executed by such Holder.
Section 3.7. Lock-Up Agreements.
------------------
(a) Provided that the Company, within 10 Business Days after receiving a
Registration Demand, has not given notice to the Holder making such Registration
Demand to the effect that it is unable to provide a "lock-up" as described in
this Section 8.7(a) because it intends to issue securities within the following
90 days, the Company agrees that it will not, directly or indirectly, sell,
offer to sell, grant any option for the sale of, or otherwise dispose of, any
share of Common Stock or securities convertible into or exchangeable or
exercisable for any share of Common Stock, other than any (i) such sale or
distribution of Common Stock upon exercise of Warrants in the case of any
registration pursuant to Section 7.l and (ii) Excluded Securities (as defined
below), for a period of ninety (90) days (or such shorter period as the managing
underwriter of such registration shall determine) from the effective date of any
Registration Statement pertaining to such Eligible Common Stock."Excluded
Securities" shall mean (1) options or other securities issued to employees or
directors of the Company, (2) securities issued in exchange for interests in
real property, (3) shares issued in connection with the Company's DRIP, (4)
securities issued upon conversion of convertible securities issued by the
Company and (5) non-convertible preferred stock of the Company and
non-convertible debt securities of the Company.
(b) Each Holder of Eligible Common Stock whose Eligible Common Stock is
covered by a Registration Statement filed pursuant to Sections 2.1 or 2.2 agrees
that it will not, directly or indirectly, sell, offer to sell, grant any option
for the sale of, or otherwise dispose of, any shares of Common Stock (other than
the Eligible Common Stock covered by such Registration Statement) or any
Warrants or other securities convertible into or exchangeable or exercisable for
Common Stock, for a period of ninety (90) days (or such shorter period as the
managing underwriter of such registration shall determine) days from the
effective date of the Registration Statement pertaining to such Eligible Common
Stock.
(c) The lock-up agreements set forth in Sections 8.7(a) and 8.7(b) shall be
subject to customary exceptions that may be contained in an underwriting
agreement if any such registration involves an underwritten offering.
ARTICLE 4
MISCELLANEOUS
Section 4.1. Notices. (a) Any notice, demand or delivery authorized by this
Agreement shall be in writing and shall be sufficiently given or made when
delivered or on the third
Exhibit 4.43 Page 21
<PAGE>
Business Day following the date sent by first-class mail, postage prepaid,
addressed to the Company or the Initial Holder as follows:
If to the Company: Wellsford Real Properties, Inc.
535 Madison Avenue
26th Floor
New York, New York 10022
Attention: President
If to the Initial Holder: W/W Group Holdings, L.L.C.
85 Broad Street
New York, New York 10036
Attention: Chief Financial Officer
or (iii) such other address as shall have been furnished to the party giving or
making such notice, demand or delivery.
Section 4.2. APPLICABLE LAW. THIS AGREEMENT AND ALL RIGHTS ARISING
HEREUNDER SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK.
Section 4.3. Persons Benefitting. This Agreement shall be binding upon and
inure to the benefit of any Holders (each of whom is an intended third party
beneficiary), the Company and their respective successors, assigns,
beneficiaries, executors and administrators. Nothing in this Agreement is
intended or shall be construed to confer upon any Person, other than the Company
and the Holders (and such successors, assigns, beneficiaries, executors and
administrators), any right, remedy or claim under or by reason of this Agreement
or any part hereof.
Section 4.4. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together constitute one and the same instrument.
Section 4.5. Headings. The descriptive headings of the several Sections of
this Agreement are inserted for convenience and shall not control or affect the
meaning or construction of any of the provisions hereof.
Section 4.6. Remedies. In the event of a breach by the Company or by a
holder of Eligible Securities, of any of their obligations under this Agreement,
each holder of Eligible Securities or the Company, as the case may be, in
addition to being entitled to exercise all rights granted by law, including
recovery of damages, will be entitled to specific performance of its rights
under this Agreement. The Company and each holder of Eligible Securities agree
that monetary damages would not be adequate compensation for any loss incurred
by reason of a breach by it of any of the provisions of this Agreement and
hereby further agrees that, in the event of any action for specific performance
in respect of such breach, it shall waive the defense that a remedy at law would
be adequate.
Exhibit 4.43 Page 22
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the day and year first above written.
WELLSFORD REAL PROPERTIES, INC.
By: /s/ Edward Lowenthal
--------------------
Name: Edward Lowenthal
Title: President
W/W GROUP HOLDINGS, L.L.C
By: /s/ Alan S. Kava
----------------
Name: Alan S. Kava
Title: Vice President
Exhibit 4.43 Page 23
<PAGE>
WHWEL REAL ESTATE LIMITED PARTNERSHIP
85 BROAD STREET
NEW YORK, NEW YORK 10004
May 28, 1999
Wellsford Real Properties, Inc.
535 Madison Avenue
16th Floor
New York, New York 10022
Ladies and Gentlemen:
We refer to the Limited Liability Company Operating Agreement (the "LLC
Agreement") of Wellsford/Whitehall Properties Group, L.L.C. ("Group") dated as
of the date hereof, among Wellsford Commercial Properties Trust ("WCPT"), WHWEL
Real Estate Limited Partnership ("WHWEL") and the other Members. Capitalized
terms used and not defined herein shall have the meanings set forth in the LLC
Agreement.
It is hereby agreed by WRP that, within twenty (20) Business Days after
WHWEL has delivered a written request to WRP, WRP will exchange shares of WRP
Common Stock for Excess Membership Units (as defined below) then held by WHWEL
or, at WRP's election, all or part of such Excess Membership Units shall be
exchanged for cash at the fair market value of the applicable number of shares
of WRP Common Stock as determined below.
For purposes of this letter agreement, "Excess Membership Units" shall mean
the Membership Units received by WHWEL in exchange for Capital Contributions
made to Group by WHWEL in excess of $50,000,000 up to $75,000,000, but not with
respect to any Membership Unit issued to WHWEL in exchange for Capital
Contributions made to Group by WHWEL in excess of $75,000,000. It is understood
and agreed that, as of the date hereof, WHWEL has funded Capital Contributions
to Group in amount equal to $67,139,043. The number of shares of WRP Common
Stock issued to WHWEL in exchange for each Excess Membership Unit shall be equal
to the quotient of (i) the Membership Unit Purchase Price (as defined below)
divided by (ii) the Closing Price (as defined in the Warrant Agreement) as of
the Trading Day (as defined in the Warrant Agreement) immediately prior to the
date the written request described above is delivered to WRP.
Exhibit 4.44 Page 1
<PAGE>
For purposes of this letter agreement "WRP Common Stock" shall mean the
common stock, par value $.01 per share, of WRP and any other stock of WRP into
which such common stock may be converted or reclassified (other than stock of
the Company into which unissued Common Stock has been reclassified) or that may
be issued in respect of, in exchange for, or in substitution of, such common
stock by reason of any stock splits, stock dividends, distributions, mergers,
consolidations, recapitalizations or other like events.
For purposes of this letter agreement, "Membership Unit Purchase Price"
shall mean the aggregate purchase price paid for all Excess Membership Units
held by WHWEL on the date of determination divided by the number of Excess
Membership Units held by WHWEL on such date.
This letter agreement and all rights arising hereunder shall be governed by
the internal laws of the State of New York.
This letter agreement may be executed in any number of counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
Exhibit 4.44 Page 2
<PAGE>
If the foregoing correctly reflects our understanding, please confirm your
acceptance by executing the enclosed counterpart of this letter agreement and
return it to the undersigned, whereupon it will become a binding agreement
between the parties hereto in accordance with its terms.
Very truly yours.
WHWEL REAL ESTATE LIMITED
PARTNERSHIP
By: WHATR Gen-Par, Inc.
By: /s/ Alan S. Kava
----------------
Name: Alan S. Kava
Title: Vice President
ACKNOWLEDGED AND AGREED
AS OF THE DATE FIRST ABOVE WRITTEN:
WELLSFORD REAL PROPERTIES, INC.
By: /s/ Edward Lowenthal
--------------------
Name: Edward Lowenthal
Title: President.
Exhibit 4.44 Page 3
<PAGE>
FIRST AMENDMENT TO MEZZANINE
LOAN AGREEMENT
THIS FIRST AMENDMENT TO MEZZANINE LOAN AGREEMENT (this "Amendment") made as
of this 28th day of May, 1999, by and among WELLSFORD/WHITEHALL PROPERTIES II,
L.L.C., a Delaware limited partnership ("Borrower"), WELLSFORD COMMERCIAL
PROPERTIES TRUST, a Maryland real estate investment trust ("WCPT"), WHWEL REAL
ESTATE LIMITED PARTNERSHIP ("WHWEL"), WELLSFORD REAL PROPERTIES, INC. ("WRPI"),
WHITEHALL STREET REAL ESTATE LIMITED PARTNERSHIP V ("Whitehall V"),WHITEHALL
STREET REAL ESTATE LIMITED PARTNERSHIP VI ("Whitehall VI"), WHITEHALL STREET
REAL ESTATE LIMITED PARTNERSHIP VII ("Whitehall VII"), WHITEHALL STREET REAL
ESTATE LIMITED PARTNERSHIP VIII ("Whitehall VIII"; WCPT, WHWEL, WRPI, Whitehall
V, Whitehall VI, Whitehall VII and Whitehall VIII are sometimes hereinafter
referred to collectively as "Guarantors"), WELLS AVENUE HOLDINGS L.L.C., a
Delaware limited liability company ("Member"), WASH MANAGER L.L.C., a Delaware
limited liability company ("Manager"), BANKBOSTON, N.A., individually ("BKB"),
GOLDMAN SACHS MORTGAGE COMPANY ("Goldman"), BHF-BANK AKTIENGESELLSCHAFT ("BHF"),
MORGAN STANLEY SENIOR FUNDING INC., ("Morgan Stanley"), and PAM CAPITAL FUNDING
LP ("PAM") (BKB, Goldman, BHF, Morgan Stanley and PAM are hereinafter, referred
to collectively as the "Banks"), and BANKBOSTON, N.A., as Agent for the Banks
(the "Agent").
W I T N E S E T H:
WHEREAS, Borrower, Agent and the banks a party thereto entered into that
certain Mezzanine Loan Agreement dated July 16, 1998 (the "Loan Agreement"); and
WHEREAS, Member, Manager, WCPT and WHWEL executed the Loan Agreement for
the purpose of being bound by Section 32 of the Loan Agreement; and
WHEREAS, Guarantors have executed and delivered to the Agent and the Banks
that certain Conditional Guaranty of Payment and Performance dated July 16, 1998
(the "Conditional Guaranty"); and
WHEREAS, WCPT and WHWEL have executed and delivered to the Agent and the
Banks that certain Indemnity and Guaranty Agreement dated July 16, 1998 (the
"Indemnity and Guaranty"); and
WHEREAS, WRPI, Whitehall V, Whitehall VI, Whitehall VII and Whitehall VIII
have executed and delivered to the Agent and the Banks that certain Indemnity
Agreement dated July 16, 1998 (the "Indemnity"; the Conditional Guaranty, the
Indemnity and Guaranty and the Indemnity are sometimes hereinafter referred to
collectively as the "Guaranty"); and
WHEREAS, Borrower has requested that Agent and the Banks modify and amend
certain terms and provisions of the Loan Agreement; and
Exhibit 10.461 Page 1
<PAGE>
WHEREAS, as a condition to such modification, Agent and the Banks have
required that Borrower, Member and Manager and Guarantors execute this
Amendment;
NOW, THEREFORE, for and in consideration of the sum of TEN and NO/100
DOLLARS ($10.00), and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto do hereby
covenant and agree as follows:
1. Definitions. All terms used herein which are not otherwise defined
herein shall have the meanings set forth in the Loan Agreement.
2. Modification of the Loan Agreement. Borrower, the Banks and Agent do
hereby modify and amend the Loan Agreement as follows:
(a) By deleting the entity name "The Goldman Sachs Group, L.P." appearing
in the definition of "Goldman Group," appearing on page 13 of Section 1.1 of the
Loan Agreement, and inserting in lieu thereof the words "The Goldman Sachs
Group, Inc.";
(b) By deleting in its entirety the third (3rd) sentence of Section 2.1 of
the Loan Agreement, appearing on page 23 thereof, and inserting in lieu thereof
the following:
"Notwithstanding anything herein to the contrary, in no event shall
the amount of the Loans advanced for purposes permitted under this
Agreement, other than the purposes contemplated by Section 5.6, exceed
$67,890,482.00, and in no event shall the Borrower be permitted to request
Loans after the Revolving Credit Termination Date except for amounts
requested pursuant to Section 5.6.";
(c) By inserting the following paragraphs as Section 5.6(i) of the Loan
Agreement as follows:
"(i) Notwithstanding anything in the definition of the term 'Tenant
Improvement Projects' or Section 5.6 to the contrary, Borrower may request
funds for disbursement from the Tenant Improvement Reserve for a Tenant
Improvement Project without the requirement that there be any Lease
requiring such Tenant Improvement Project upon the following terms and
conditions:
(i) Such Tenant Improvement Project shall be for base building
and/or generic tenant improvements to facilitate the leasing of such
Mortgaged Property;
(ii) Borrower may request disbursements from the Tenant
Improvement Reserve for
Exhibit 10.461 Page 2
<PAGE>
Tenant Improvement Projects for the Mortgaged Properties commonly
known as the Polaroid Buildings and Mountain Heights upon the
satisfaction of the terms of Section 5.6 (including without limitation
the approval of the Building Capital Project Budget); provided,
however, that the approval by the Majority Banks of a proposed Lease
which requires such Tenant Improvement Project shall not be required
nor shall there be required a Lease which requires such Tenant
Improvement Project;
(iii) With respect to the Mortgaged Property commonly known as
Morris Technology Center, upon the satisfaction of all other
conditions in this Section 5.6 (including without limitation the
approval of the Building Capital Project Budget), Borrower shall be
entitled to request disbursements from the Tenant Improvement Reserve
for Tenant Improvement Projects up to in the aggregate $100,000.00;
provided that the approval by the Majority Banks of a Lease which
requires such Tenant Improvement Project shall not be required nor
shall there be required a Lease which requires such Tenant Improvement
Project, and prior to the initial disbursement with respect to any
such Tenant Improvement Project, the Borrower shall provide to the
Agent evidence satisfactory to the Agent that Borrower has paid from
equity fifty percent (50%) of the amounts identified in the Building
Capital Project Budget for such Tenant Improvement Project; and
provided further that for the purposes of determining the Designated
Collateral Value of such Tenant Improvement Project, the historic cost
thereof shall be multiplied by 0.10 (in lieu of 0.15 as contemplated
by the definition of the term 'Designated Collateral Value'). At such
time as the Agent receives evidence satisfactory to Agent that a
tenant or tenants have executed Leases, approved by the Agent or the
Majority Banks to the extent required by this Agreement, for not less
than forty percent (40%) of the net rentable area of such Mortgaged
Property, the Borrower thereafter shall be entitled to request
disbursements for Tenant Improvement Projects upon satisfaction of the
requirements of the terms of Section 5.6 (including without limitation
the approval of the Building Capital Project Budget) upon delivery to
Agent of evidence satisfactory to Agent that Borrower has paid from
equity twenty-five percent (25%) of the
Exhibit 10.461 Page 3
<PAGE>
amounts identified in the Building Capital Project Budget for such
Tenant Improvement Project; provided that the approval by the Majority
Banks of a Lease requiring such Tenant Improvement Project shall not
be required nor shall there be required a Lease which requires such
Tenant Improvement Project. Thereafter Borrower shall be entitled to
request disbursement of funds from the Tenant Improvement Reserve with
respect to any Tenant Improvement Projects previously performed at
Morris Technology Center, subject to the terms and conditions of this
Agreement and the availability of funds in the Tenant Improvement
Reserve, as if Borrower had only been required to pay twenty-five
percent (25%) of such costs from equity, and the Designated Collateral
Value of such Tenant Improvement Projects shall be as set forth in the
definition of such term; and
(iv) With respect to the Mortgaged Property commonly known as
Point View, upon the satisfaction of all other conditions in Section
5.6 (including without limitation the approval of the Building Capital
Project Budget), Borrower shall be entitled to request disbursements
from the Tenant Improvement Reserve for Tenant Improvement Projects up
to in the aggregate $490,000.00; provided that the approval by the
Majority Banks of a Lease requiring such Tenant Improvement Project
shall not be required nor shall there be required a Lease which
requires such Tenant Improvement Project, and prior to the initial
disbursement with respect to any such Tenant Improvement Project, the
Borrower shall provide to the Agent evidence satisfactory to the Agent
that Borrower has paid from equity thirty percent (30%) of the amounts
identified in the Building Capital Project Budget for such Tenant
Improvement Project; and provided further that for the purposes of
determining the Designated Collateral Value of such Tenant Improvement
Project, the historic cost thereof shall be multiplied by 0.14 (in
lieu of 0.15 as contemplated by the definition of the term 'Designated
Collateral Value'). At such time as the Agent receives evidence
satisfactory to Agent that a tenant or tenants have executed Leases,
approved by the Agent or the Majority Banks to the extent required by
this Agreement, for not less than forty percent (40%) of the net
rentable area of such Mortgaged Property, the Borrower
Exhibit 10.461 Page 4
<PAGE>
thereafter shall be entitled to request disbursements for Tenant
Improvement Projects upon satisfaction of the requirements of the
terms of Section 5.6 (including without limitation the approval of the
Building Capital Project Budget) upon delivery to Agent of evidence
satisfactory to Agent that Borrower has paid from equity twenty-five
percent (25%) of the amounts identified in the Building Capital
Project Budget for such Tenant Improvement Project; provided that the
approval by the Majority Banks of a Lease requiring such Tenant
Improvement Project shall not be required nor shall there be required
a Lease which requires such Tenant Improvement Project. Thereafter
Borrower shall be entitled to request disbursement of funds from the
Tenant Improvement Reserve with respect to any Tenant Improvement
Projects previously performed at Point View. subject to the terms and
conditions of this Agreement and the availability of funds in the
Tenant Improvement Reserve, as if Borrower had only been required to
pay twenty-five percent (25%) of such costs from equity, and the
Designated Collateral Value of such Tenant Improvement Projects shall
be as set forth in the definition of such term.";
(d) By deleting the semicolon following the words "Majority Banks"
appearing in the last line of Section 8.1 (f) of the Loan Agreement, appearing
on page 74 thereof, and inserting in lieu thereof the following:
". Notwithstanding the foregoing requirement that any recourse
Indebtedness be subordinate to the Obligations, in connection with the
acquisition by Borrower of an approximately 98,000 square foot office
building in Howard County, Maryland, Borrower shall be permitted to execute
(a) a limited guaranty of non-recourse carve-outs (generally relating to a
misapplication of casualty or condemnation awards, misapplication of
security deposits and rents, fraud, environmental pollution, real estate
taxes, insurance premiums and claims made by tenants against the mortgage
lender arising out of a matter occurring prior to such lender obtaining
title to the collateral) and an environmental indemnity in connection with
the assumption of a $5,200,000.00 non-recourse first mortgage loan in favor
of IDS Life Insurance Company ('IDS'), and (b) a limited guaranty to the
sellers of such property (the 'Sellers') pursuant to which Borrower will
assume liability for amounts owed with respect to a purchase money loan not
to exceed $3,000,000.00 in connection with the acquisition of such property
in the event that (i) One Mall LLC ('One Mall'), Wellsford One Mall LLC ('
Wellsford One Mall') or Borrower files for protection under any relevant
chapter of the
Exhibit 10.461 Page 5
<PAGE>
Bankruptcy Code, acquiesces in any involuntary filing made by creditors
other than the Sellers against such parties seeking reorganization or
liquidation of such party, or if any transfer of control of their property
to the Sellers as described in clause (iii) below is set aside as a
preference in any such proceeding, (ii) One Mall defaults under the first
deed of trust to IDS and does not thereafter cooperate in a timely fashion
with the Sellers to facilitate the exercise by Sellers of their right to
cure such default on behalf of One Mall, and/or (iii) after an event of
default under the purchase money loan documents and the application of all
applicable notice and cure periods, any of One Mall, Wellsford One Mall or
the Borrower fails to cooperate with Sellers to allow Sellers to seek
control of the property through 'friendly' foreclosure, deed in lieu of
foreclosure, receivership or other legally permissible means (such
obligations described in (a) and (b) above are hereinafter referred to
collectively as the 'Recourse Obligations'). Borrower shall submit to Agent
the agreements evidencing such Recourse Obligations.";
(e) By inserting the word "or" at the end of Section 12.1 (v) of the Loan
Agreement, appearing on page 93 thereof, and inserting the following additional
paragraph as Section 12.1 (w) thereof:
"(w) The occurrence of any event which may give rise to any claim or
liability under any of the Recourse Obligations";
(f) By adding the language "unless waived by both Borrower and Agent"
immediately after (i) the figure $500,000,000 in Section 18.1 (e) of the Loan
Agreement and (ii) the figure $10,000,000 in Section 18.1(f) of the Loan
Agreement; and
(g) By adding the language "unless waived by Agent, WWP Members, WHWEL,
Whitehall Street Real Estate Limited Partnership V, Whitehall Street Real Estate
Limited Partnership VI, Whitehall Street Real Estate Limited Partnership VII and
Whitehall Street Real Estate Limited Partnership VIII" immediately after the
figure $10,000,000 in Section 18.8(b) of the Loan Agreement.
3. References to Loan Agreement. All references in the Loan Documents to
the Loan Agreement shall be deemed a reference to the Loan Agreement as modified
and amended herein.
4. Consent of Member, Manager and Guarantors. By execution of this
Amendment, Member, Manager and Guarantors hereby expressly consent to the
modifications and amendments relating to the Loan Agreement as set forth herein,
and Guarantors, Member and Manager hereby acknowledge, represent and agree that
the Guaranty and the other Loan Documents to which each is a party remain in
full force and effect and constitute the valid and legally binding obligation of
Guarantors, Member and Manager, enforceable against such Persons in accordance
with its terms, that the Guaranty and the other Loan Documents to which each is
a
Exhibit 10.461 Page 6
<PAGE>
party extend to and apply to the Loan Agreement as modified and amended, and
that the execution and delivery of this Amendment does not constitute, and shall
not be deemed to constitute, a release, waiver or satisfaction of Guarantors',
Member's or Manager's obligations under the Guaranty or the other Loan
Documents; provided, however, that except as provided above in this Paragraph 4
nothing herein is intended to nor shall anything herein be deemed to increase
the amounts or nature of the items for which any Guarantor is liable pursuant to
any such Guaranty.
5. Representations. Borrower, Guarantors, Member and Manager represent and
warrant to Agent and the Banks as follows:
(a) Authorization. The execution, delivery and performance of this
Amendment and the transactions contemplated hereby (i) are within the authority
of Borrower, Guarantors, Member and Manager, (ii) have been duly authorized by
all necessary proceedings on the part of such Persons, (iii) do not and will not
conflict with or result in any breach or contravention of any provision of law,
statute, rule or regulation to which any of such Persons is subject or any
judgment, order, writ, injunction, license or permit applicable to such Persons,
(iv) do not and will not conflict with or constitute a default (whether with the
passage of time or the giving of notice, or both) under any provision of the
operating agreement, articles of incorporation, bylaws or other charter
documents or any agreement or other instrument binding upon, any of such Persons
or any of its properties, and (v) do not and will not result in or require the
imposition of any lien or other encumbrance on any of the properties, assets or
rights of any such Persons (other than those in favor of Agent pursuant to the
terms of the Loan Documents).
(b) Enforceability. The execution and delivery of this Amendment are valid
and legally binding obligations of Borrower, Guarantors, Member and Manager
enforceable in accordance with the respective terms and provisions hereof,
except as enforceability is limited by bankruptcy, insolvency, reorganization,
moratorium or other laws relating to or affecting generally the enforcement of
creditors' rights and the effect of general principles of equity.
(c) Approvals. The execution, delivery and performance of this Amendment
and the transactions contemplated hereby do not require the approval or consent
of or filing with, any governmental agency or authority other than those already
obtained and the filing of the Security Documents in the appropriate records
office with respect thereto.
(d) Merger. As of the date hereof, The Goldman Sachs Group, L.P. has merged
with and into Goldman Sachs Group, Inc. substantially in the manner previously
disclosed to Agent.
6. No Default. By execution hereof, each of the Borrower, Guarantors,
Member and Manager certify that it is and will be in compliance with all of its
respective covenants under the Loan Documents after the execution and delivery
of this Amendment, and
Exhibit 10.461 Page 7
<PAGE>
that it is not in Default and no Event of Default has occurred and is continuing
with respect to its respective representations, warranties, covenants and other
obligations.
7. Waiver of Claims. Borrower, Guarantors, Member and Manager acknowledge,
represent and agree that Borrower, Guarantors, Member and Manager currently have
no defenses, setoffs, claims, counterclaims or causes of action of any kind or
nature whatsoever with respect to the Loan Documents, the administration or
funding of the Loans or with respect to any acts or omissions of Agent or any of
the Banks, or any past or present officers, agents or employees of Agent or any
of the Banks, and each of Borrower, Guarantors, Member and Manager does hereby
expressly waive, release and relinquish any and all such defenses, setoffs,
claims, counterclaims and causes of action, if any, as of the date hereof.
8. Ratification. Except as specifically hereinabove modified in writing and
set forth, all terms, covenants and provisions of the Loan Agreement remain
unaltered and in full force and effect, and the parties hereto that are also a
party to the Loan Agreement do hereby expressly ratify and confirm the Loan
Agreement as modified and amended herein. Nothing in this Amendment shall be
deemed or construed to constitute, and there has not otherwise occurred, a
novation, cancellation, satisfaction. release, extinguishment or substitution of
the indebtedness evidenced by the Notes or the other obligations of Borrower,
Guarantors, Member and Manager under the Loan Documents.
9. Counterparts. This Amendment may be executed in any number of
counterparts which shall together constitute but one and the same agreement.
10. Miscellaneous. This Amendment shall be construed and enforced in
accordance with the laws of the State of New York. This Amendment shall be
effective upon the execution hereof by Borrower, Guarantors, Member, Manager,
Agent and the Majority Banks and shall be binding upon and shall inure to the
benefit of the parties hereto and their respective permitted successors,
successors-in-title and assigns as provided in the Loan Agreement.
Exhibit 10.461 Page 8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have hereto set their hands and
affixed their seals as of the day and year first above written.
WELLSFORD/WHITEHALL PROPERTIES II,
L.L.C., a Delaware limited,
liability company
By: Wellsford Commercial
Properties Trust, a Maryland
real estate investment trust,
its manager
By: /s/ Ed Lowenthal
-----------------------------
Print/Type Name: Ed Lowenthal
Title:
WELLSFORD COMMERCIAL PROPERTIES
TRUST, a Maryland real estate
investment trust
By: /s/ Ed Lowenthal
----------------------------------
Print/Type Name: Ed Lowenthal
Title: President
[SEAL]
[Signatures Continue on Following Page]
Exhibit 10.461 Page 9
<PAGE>
WELLSFORD REAL PROPERTIES, INC., a
Maryland corporation
By: /s/ Ed Lowenthal
----------------------------------
Print/Type Name: Ed Lowenthal
Title: President
[Signatures Continue on Following Page]
Exhibit 10.461 Page 10
<PAGE>
WHWEL REAL ESTATE LIMITED
PARTNERSHIP
By: WHATR Gen-Par, Inc., General
Partner
By: Elizabeth Burbon
-----------------------------
Print/Type Name: Elizabeth Burbon
--------------------------------
Title: Vice President
--------------------------------
Attest: /s/ Elizabeth Burbon
--------------------------------
Print/Type Name: Elizabeth Burbon
--------------------------------
Title:Vice President
--------------------------------
WHITEHALL STREET REAL ESTATE
LIMITED PARTNERSHIP
By: WH Advisors. L.P. V
By: WH Advisors, Inc. V
By: /s/ Elizabeth Burdon
-----------------------------
Print/Type Name: Elizabeth Burdon
Title: Vice President
(Signatures Continue on Following Page)
Exhibit 10.461 Page 11
<PAGE>
WHITEHALL STREET REAL ESTATE
LIMITED PARTNERSHIP VI
By: WH Advisors, L.P. VI
By: WH Advisors Inc. VI
By: /s/ Elizabeth Burdon
-----------------------------
Print/Type Name: Elizabeth Burdon
-----------------------------
Title: Vice President
-----------------------------
WHITEHALL STREET REAL ESTATE
LIMITED PARTNERSHIP VII
By: WH Advisors, L.P. VII
By: WH Advisors, Inc. VII
By:/s/ Elizabeth Burdon
-----------------------------
Print/Type Name: Elizabeth Burdon
-----------------------------
Title: Vice President
WHITEHALL STREET REAL ESTATE
LIMITED PARTNERSHIP VIII
By: WH Advisors, L.P. VIII
By: WH Advisors, Inc. VIII
By: /s/ Elizabeth Burdon
-----------------------------
Print/Type Name: Elizabeth Burdon
-----------------------------
Title: Vice President
-----------------------------
(Signatures Continue on Following Page)
Exhibit 10.461 Page 12
<PAGE>
WELLS AVENUE HOLDINGS L.L.C., a
Delaware limited liability company
By: Wellsford/Whitehall Holdings,
L.L.C., a Delaware limited
liability company, its sole
member
By: Wellsford/Whitehall
Properties II, L.L.C., a
Delaware limited liability
company, its managing
member
By: Wellsford Commercial
Properties Trust,
Maryland real estate
Investment trust, its
manager
By: /s/ Ed Lowenthal
------------------------
Name: Ed Lowenthal
Title: President
[Signatures Continue on Following Page]
Exhibit 10.461 Page 13
<PAGE>
WASH MANAGER L.L.C., a Delaware limited
liability company
By: Wells Avenue Holdings L.L.C., a
Delaware limited liability company,
its sole member
By: Wellsford/Whitehall Holdings,
L.L.C., a Delaware limited
liability company, its sole
member
By: Wellsford/Whitehall
Properties II, L.L.C., a
Delaware limited liability
company, its managing
member
By: Wellsford Commercial
Properties Trust, a
Maryland real estate
investment trust, its
manager
By: /s/ Ed Lowenthal
---------------------------
Name: Ed Lowenthal
Title: President
[Signatures Continue on Following Page]
Exhibit 10.461 Page 14
<PAGE>
BANKBOSTON, N.A., a national
banking association, individually
and as Agent
By: /s/ Jay Johns
--------------------------------
Name: Jay Johns
Title: Vice President
[BANK SEAL]
[Signatures Continue on Following Page]
Exhibit 10.461 Page 15
<PAGE>
GOLDMAN SACHS MORTGAGE COMPANY, a New York
limited partnership, individually and as
Co-Arranger and Co-Syndication Agent
By: Goldman Sachs Real Estate
Funding Corp.,general partner
By: /s/ Robert R. Foley
------------------------------
Print/Type Name: Robert R. Foley
Title: Authorized Signatory
[Corporate Seal]
[Signatures Continue on Following Page]
Exhibit 10.461 Page 16
<PAGE>
BHF-BANK AKTIENGESELLSCHAFT
By:
Title:
By: /s/ Douglas S. Marron
--------------------------------
Title: Assistant Treasurer
[Signatures Continue on Following Page]
Exhibit 10.461 Page 17
<PAGE>
MORGAN STANLEY SENIOR FUNDING INC.
By:
Title:
[Signatures Continue on Following Page]
Exhibit 10.461 Page 18
<PAGE>
PAM CAPITAL FUNDING LP
By: Highland Capital Funding, L.P.
As collateral manager
By: /s/ James Dondero, CFA, CPA
--------------------------------
Title: President
Exhibit 10.461 Page 19
<PAGE>
EXECUTION VERSION
- --------------------------------------------------------------------------------
LIMITED LIABILITY COMPANY
OPERATING AGREEMENT
OF
WELLSFORD/WHITEHALL GROUP, L.L.C.
Dated as of May 28, 1999
- --------------------------------------------------------------------------------
Exhibit 10.50 Page 1
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I.
DEFINITIONS
-----------
1.1. Definitions ...........................................................2
1.2. Terms Generally ......................................................24
ARTICLE II.
THE COMPANY AND ITS BUSINESS
----------------------------
2.1. Company Name..........................................................24
2.2. Term..................................................................24
2.3. Filing of Certificate and Amendments..................................24
2.4. Purpose and Business; Powers; Scope of Members' Authority.............25
2.5. Principal Office; Registered Agent....................................25
2.6. Names and Addresses of Members........................................25
2.7. Representations and Warranties by the Company.........................25
2.8. Representations and Warranties by each Member.........................26
2.9. Indemnification.......................................................27
2.10. Post-Closing Adjustments..............................................28
ARTICLE III.
MANAGEMENT OF COMPANY BUSINESS;
-------------------------------
POWERS AND DUTIES OF THE
------------------------
MANAGER; MAJOR DECISIONS
------------------------
3.1. Management and Control................................................28
3.2. Enumeration of Specific Duties........................................29
3.3. No Authority to Hire Employees........................................32
3.4. Decisions Requiring Approval of the Management Committee..............32
3.5. Management Committee..................................................37
3.6. Limited Authorization.................................................41
3.7. Members Shall Not Have Power to Bind Company..........................41
3.8. Status as "Operating Company"; Participation in Management
by Members ...........................................................42
ARTICLE IV.
RIGHTS AND DUTIES OF MEMBERS
----------------------------
Exhibit 10.50 Page 2
<PAGE>
4.1. Use of Company Property...............................................42
4.2. Exclusivity; Other Activities of the Members..........................42
4.3. Indemnification with Respect to the Manager...........................47
4.4. Compensation of Members and Affiliates................................48
4.5. Investment Representations............................................48
4.6. Dealing with Members..................................................49
4.7. Designation of Tax Matters Member.....................................50
ARTICLE V.
CAPITAL CONTRIBUTIONS, LOANS
----------------------------
AND LIABILITIES
---------------
5.1. Capital Contributions and Capital Accounts of the Members.............51
5.2. Additional Capital Contributions......................................51
5.3. Failure to Fund Capital Contributions.................................52
5.4. Dilution for Failure to Fund Capital Calls............................53
5.5. Capital of the Company................................................54
5.6. Liability of Members..................................................54
5.7. Return of Capital Contribution........................................54
5.8. Calculation of Members' Percentage Interest, Series A Preferred
Percentage Interest ..................................................55
5.9. Issuance of Additional Membership Units...............................55
5.10. Arbitration...........................................................56
ARTICLE VI.
CAPITAL ACCOUNTS, PROFITS
-------------------------
AND LOSSES AND ALLOCATIONS
--------------------------
6.1. Capital Accounts......................................................56
6.2. Profits and Losses....................................................57
ARTICLE VII.
APPLICATIONS AND DISTRIBUTIONS
------------------------------
OF AVAILABLE CASH
-----------------
7.1. Applications and Distributions........................................64
7.2. Restoration of Excess Distributions...................................71
7.3. Liquidation...........................................................71
7.4. Repayment of Member Loans.............................................71
7.5. Revisions to Reflect Issuance of Additional Membership Interests......71
7.6. Initial Public Offering; Sale of Units................................71
ARTICLE VIII.
Exhibit 10.50 Page 3
<PAGE>
TRANSFER OF COMPANY INTERESTS
-----------------------------
8.1. Limitations on Assignments of Interests by Members....................73
8.2. Sale of Properties, the Company or its Subsidiaries...................74
8.2A Indemnification of Saracen............................................76
8.3. Conversion Right......................................................81
8.4. Certain Transfer Provisions...........................................83
8.5. Assignment Binding on Company.........................................84
8.6. Bankruptcy of a Member................................................84
8.7. Substituted Members...................................................85
8.8. Acceptance of Prior Acts..............................................85
8.9. Additional Limitations................................................85
8.10. Tag Along Rights......................................................85
ARTICLE IX.
MANAGER
-------
9.1. Removal of Manager....................................................86
9.2. Fees..................................................................87
ARTICLE X.
TERMINATION OF COMPANY;
-----------------------
LIQUIDATION AND DISTRIBUTION OF ASSETS
--------------------------------------
10.1. Dissolution and Termination...........................................87
10.2. Distribution Upon Liquidation.........................................88
10.3. Sale of Company Assets................................................89
ARTICLE XI.
BOOKS, RECORDS, BUDGETS AND REPORTS
-----------------------------------
11.1. Books of Account......................................................89
11.2. Availability of Books of Account......................................89
11.3. Financial Reports and Statements; Annual Budgets......................89
11.4. Accounting Expenses...................................................91
11.5. Bank Account..........................................................91
11.6. Fidelity Bonds and Insurance..........................................91
11.7. REPSYS Database.......................................................92
ARTICLE XII.
AMENDMENTS
----------
Exhibit 10.50 Page 4
<PAGE>
12.1. Amendments.............................................................92
ARTICLE XIII.
MISCELLANEOUS
-------------
13.1. Further Assurances....................................................93
13.2. Notices...............................................................93
13.3. Headings and Captions.................................................94
13.4. Variance of Pronouns..................................................94
13.5. Counterparts..........................................................94
13.6. GOVERNING LAW.........................................................94
13.7. Partition.............................................................94
13.8. Invalidity............................................................94
13.9. Successors and Assigns................................................94
13.10. Entire Agreement......................................................94
13.11. No Brokers............................................................95
13.12. Maintenance as a Separate Entity......................................95
13.13. Confidentiality.......................................................95
13.14. Power of Attorney.....................................................95
13.15. Time of the Essence...................................................96
13.16. No Third Party Beneficiaries..........................................96
13.17. Exculpation...........................................................96
13.18. Consent of Saracen....................................................97
Exhibit 10.50 Page 5
<PAGE>
EXHIBITS
EXHIBIT A Terms of Series A Preferred Membership Units
EXHIBIT B Form of Registration Rights Agreement
SCHEDULES
---------
SCHEDULE 1 Additional Members
SCHEDULE 2.6 Names and Addresses of Members
SCHEDULE 2.4A List of Properties
SCHEDULE 2.4B List of Subsidiaries
SCHEDULE 2.7A Representations and Warranties by the Company with respect
to the Properties
SCHEDULE 2.7B Representations and Warranties by the Company with respect
to the Subsidiaries
SCHEDULE 3.2(a)(vi) Approved Leases and Lease Documentation
SCHEDULE 5.1 Capital Contributions, Capital Accounts, Membership Units
and Series A Preferred Membership Units
SCHEDULE 7.1 Calculations of the Preferred Distribution Amount
Exhibit 10.50 Page 6
<PAGE>
LIMITED LIABILITY COMPANY OPERATING AGREEMENT
OF
WELLSFORD/WHITEHALL GROUP, L.L.C.
This LIMITED LIABILITY COMPANY OPERATING AGREEMENT is made and entered into
as of May 28, 1999 by and among WHWEL Real Estate Limited Partnership, a
Delaware limited partnership ("WHWEL"), Wellsford Commercial Properties Trust, a
Maryland real estate investment trust ("WCPT"), WXI/WWG Realty, L.L.C., a
Delaware limited liability company (the "Whitehall XI"), W/W Group Holdings,
L.L.C., a Delaware limited liability company ("Holding Co.") and the additional
Members set forth on Schedule 1 annexed hereto. Collectively, the additional
Members set forth on Schedule 1 annexed hereto shall be referred to herein as
"Saracen" or the "Saracen Members".
R E C I T A L S
---------------
WHEREAS, WHWEL and WCPT entered into that certain Limited Liability Company
Operating Agreement of Wellsford/Whitehall Properties, L.L.C., a Delaware
limited liability company ("WWP"), dated as of August 28, 1997, as amended by
Amendment No. 1 to the Limited Liability Company Operating Agreement of WWP,
dated as of December 31, 1997, and as further amended to reflect the addition of
Saracen as members of WWP by the Amended and Restated Limited Liability Company
Operating Agreement of WWP, dated as of May 15, 1998 (the "WWP Agreement");
WHEREAS, on July 16, 1998, the following transactions took place: (1) WCPT,
WHWEL and each of the Saracen Members contributed their undivided Interests in
WWP to Wellsford/Whitehall Properties II, L.L.C. ("WWP II") in exchange for
equivalent Interests in WWP II (the "WWP Contribution"), and (2) WWP merged with
and into Wellsford/Whitehall Holdings, L.L.C., a Delaware limited liability
company ("Holdings") and wholly owned subsidiary of WWP, with Holdings being the
surviving entity;
WHEREAS, contemporaneously with the execution of this Agreement, the
following transactions took place: (1) WCPT, WHWEL and each of the Saracen
Members contributed their undivided Interests in WWP II to the Company (the "WWG
Contribution") as shown in Schedule 5.1 in exchange for Interests in the
Company, and each became a Member of the Company, (2) Whitehall XI was admitted
as a Member of the Company and (3) Holding Co. contributed its 100% membership
interest in WXI/Mt. Bethel Road L.L.C., subject to the Assumed Financing, in
exchange for Interests in the Company as shown in Schedule 5.1 and became a
Member of the Company; and
WHEREAS, after giving effect to the transactions described above, the
Company will be the sole member of WWPII, which will continue to own, directly
or indirectly, all of the Properties set forth in Schedule 2.4A, and the Company
intends to continue the business and purpose of WWP II and acquire, hold,
develop, redevelop and operate real estate assets directly or indirectly through
one or more Subsidiaries.
Exhibit 10.50 Page 7
<PAGE>
NOW, THEREFORE, in order to carry out their intent as expressed above and
in consideration of the mutual agreements hereinafter contained, and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby covenant and agree as follows:
ARTICLE I.
DEFINITIONS
-----------
1.1. Definitions. As used in this Agreement and the Exhibits, Schedules and
Annexes hereto, the following terms shall have the meanings set forth below:
"Act" shall mean the Delaware Limited Liability Company Act (6 Del.
C.ss.18-101 et seq.), as amended from time to time.
"Additional Information Request" shall have the meaning set forth in
Section 4.2(c).
"Administration Fee" shall mean the administration fee, effective as of
January 1, 1999, in the amount of $600,000 per annum payable in four $150,000
installments quarterly in arrears to WRP for so long as WRP (or an Affiliate of
WRP) shall provide the services in connection with the administration of the
Company as described in Section 9.2.
"Affiliate" shall mean with respect to any Person (i) any other Person that
directly or indirectly through one or more intermediaries controls or is
controlled by or is under common control with such Person, (ii) any other Person
owning or controlling 10% or more of the outstanding voting securities of, or
other ownership interests in, such Person, (iii) any officer, director or member
of such Person and (iv) if such Person is an officer, director or member of any
company, the company for which such Person acts in any such capacity. For
purposes of this definition and Section 8.1(c), "control," when used with
respect to any Person, means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise, and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"agreed net fair market value" shall have the meaning set forth in Section
6.1(b).
"Agreement" shall mean this Limited Liability Company Operating Agreement,
as it may hereafter be amended or modified from time to time.
"Annual Capital Budget" shall have the meaning set forth in Section
11.3(c).
"Annual Operating Budget" shall have the meaning set forth in Section
11.3(c).
"Appointing Member" shall have the meaning set forth in Section 3.5(c).
"Approved Budget" shall mean, with respect to each Property, the Annual
Capital Budget and Annual Operating Budget for such Property for the Budget Year
in question, in each case which has been approved by the Management Committee.
Exhibit 10.50 Page 8
<PAGE>
"Arbitration" shall have the meaning set forth in Section 5.10.
"Asserted Deficiency" shall have the meaning set forth in Section
8.2A(a)(xiii).
"Asset Management Agreement" shall mean that certain Asset Management
Agreement dated as of May 15, 1998 between WWP and Saracen Partners, LLC.
"Assumed Financing" shall mean the loan made by (using the proceeds of a
loan in like amount from Goldman Sachs Group to Whitehall Street Real Estate
Limited Partnership XI), Whitehall Street Real Estate Limited Partnership XI to
WXI/Mt. Bethel Road L.L.C. pursuant to the Promissory Note dated as of March 18,
1999 of WXI/Mt. Bethel Road L.L.C. to Whitehall Street Real Estate Limited
Partnership XI.
"Available Cash" shall mean, for any fiscal period, the excess, if any, of
(A) the sum of (i) the amount of all cash receipts of the Company during such
period from whatever source, other than Capital Proceeds, and (ii) any cash
reserves of the Company existing at the start of such period (other than
reserves funded with Capital Proceeds) over (B) the sum of (i) all cash amounts
paid or payable (without duplication) in such period on account of expenses and
capital expenditures incurred in connection with the Company's business
(including, without limitation, general operating expenses, taxes and
amortization or interest on any debt of the Company) and (ii) such cash reserves
which may be required for the working capital and future needs of the Company in
an amount approved by the Management Committee or, failing such approval, in an
amount equal to the cash reserves of the Company existing at the start of such
period. Notwithstanding the foregoing, "Available Cash" for any fiscal period
shall be increased by the amount of any cash payment or reserve described in
clause (B) above that was made by the Company during such fiscal period to the
extent the Company had obtained Capital Proceeds for the payment of the related
expenditure.
"Back-to-Back Debt" shall mean any Indebtedness incurred by the Company
that (i) is issued exclusively to WCPT, (ii) is issued simultaneously with the
issuance by WCPT of Funding Debt that has identical terms (including principal
amount, interest rate, payment amounts and frequency, maturity date, covenants
and defaults) to the Back-to-Back Debt issued by the Company and (iii) is funded
by WCPT exclusively through the issuance of such Funding Debt.
"Bankruptcy" shall mean, with respect to the affected party, (i) the
adjudication that such party is bankrupt or insolvent, or the entry of a final
and nonappealable order for relief under Title 11 of the United States Code or
any other applicable federal or state bankruptcy or insolvency law, (ii) the
admission by such party of its inability to pay its debts as they mature, (iii)
the making by it of an assignment for the benefit of creditors, (iv) the filing
by it of a petition in bankruptcy or a petition for relief under Title 11 of the
United States Code or any other applicable federal or state bankruptcy or
insolvency law, (v) the expiration of sixty (60) days after the filing of an
involuntary petition under Title 11 of the United States Code, an application
for the appointment of a receiver for the assets of such party, or an
involuntary petition seeking liquidation, reorganization, arrangement or
readjustment of its debts under any other federal or state insolvency law,
PROVIDED that the same shall not have been vacated, set aside or stayed within
such sixty (60)-day period, (vi) the imposition of a judicial or statutory lien
on all or a substantial part of its assets unless such lien is discharged or
vacated or the enforcement thereof
Exhibit 10.50 Page 9
<PAGE>
stayed within sixty (60) days after its effective date, (vii) the filing by such
party of an answer or other pleading admitting or failing to contest the
material allegations of a petition filed against it in any proceeding of the
nature described in clause (iv) above, and (viii) the expiration of sixty (60)
days after the commencement of any stay referred to in clause (v) or (vi) above
provided that the subject of such stay shall not have been vacated or set aside
within such sixty (60)-day period.
"Book Value" with respect to any asset shall mean its adjusted basis for
federal income tax purposes, except that the initial Book Value of any asset
contributed by a Member to the Company shall be an amount equal to the fair
market value of such asset, as determined by the Managing Members (which shall
be $141,850,000, with respect to the Saracen Contributed Assets and $2,332,143
with respect to the Holding Co. Contributed Asset), and such Book Value shall
thereafter be adjusted in a manner consistent with Treasury Regulations Section
1.704-l(b)(2)(iv)(g) for revaluations pursuant to Section 6.1(b) and for the
Depreciation taken into account with respect to such asset.
"Budget Year" shall mean the period beginning on January 1, 1999 and ending
on December 31, 1999; and beginning January 1, 2000, "Budget Year" shall mean a
period beginning on January 1, 2000 and ending on December 31, 2000 and any
successive yearly period thereafter.
"Business Day" shall mean any day other than a Saturday, Sunday or any
other day on which banks in New York are required or permitted to be closed.
"Business Plan" shall mean, with respect to any Property, the master
business plan (which shall include the Annual Capital Budget, Annual Operating
Budget, the Leasing Plan and Marketing Plan) for such Property prepared annually
by the Manager and approved by the Management Committee, setting forth the
operating strategy and estimated receipts and expenditures for the period
covered by the Business Plan. The Business Plans may be amended or replaced from
time to time with the approval of the Management Committee.
"Capital Account" when used in respect of any Member shall mean the Capital
Account maintained for such Member in accordance with Section 6.1, as said
Capital Account may be increased or decreased from time to time pursuant to the
terms of Section 6.1. The Capital Account of each Member as of the date hereof
is set forth in Schedule 5.1.
"Capital Call" shall mean any written notice to one or more of the Managing
Members delivered in accordance with Section 5.2 hereof requesting a
contribution in cash to the Company, which notice shall state the total amount
of the required contributions by each such Managing Member and each such
Managing Member's pro rata share of such total.
Exhibit 10.50 Page 10
<PAGE>
"Capital Commitment" shall mean, with respect to each Managing Member and
Holding Co., the amount set forth opposite such Managing Member's name below
less the cumulative amounts actually funded, from time to time, by such Managing
Member after the date hereof:
Holding Co.: $ 9,372,183
WHWEL: $ 7,860,958
Whitehall XI: $ 78,172,930
WCPT: $ 20,047,458
-------------
Total: $ 115,453,529
To the extent any Interim Capital Contribution made by a Managing Member is
subsequently returned to such Managing Member pursuant to Section 7.1(b)(i)
within five (5) months of the date such Interim Capital Contribution was made
and in any event prior to December 31, 2000, the amount so returned shall be
added back to such Managing Member's outstanding Capital Commitment on the date
returned as if it had not been funded. It is understood and agreed that, in
connection with the potential acquisition of properties commonly known,
respectively, as 24 Federal Street, Boston, Massachusetts and 79 Milk Street,
Boston, Massachusetts, (i) WHWEL and WCPT have funded $2,700,000 and $300,000,
respectively, (ii) that Holding Co. will fund its entire Capital Commitment in
connection with the capital call for the amount to be paid by the Company in
connection with such acquisition and will, after such funding, have no further
Capital Commitment and that, for purposes of calculating the Funding Percentage
of each Managing Member, the total Capital Commitment noted above shall be
reduced by $9,372,183, and (iii) that WHWEL, Whitehall XI and WCPT shall fund
the remaining balance disproportionately so that the entire acquisition cost for
such properties is funded in accordance with their respective Funding Percentage
(with all amounts funded by Holding Co. being added, solely for purpose of this
clause (iii), to the amounts actually funded by Whitehall XI in determining the
amount to be funded by Whitehall XI in accordance with its Funding Percentage).
"Capital Contribution" when used with respect to any Member shall mean the
aggregate amount of capital contributed or deemed contributed by such Member to
the Company in accordance with Article V, including any "Interim Capital
Contribution" contributed (but not yet returned to the applicable Managing
Member pursuant to Section 7.1(b)(i)) by any Managing Member.
"Capital Event" means any of the following: (A) Shares or other capital
stock of WCPT are issued or sold in a public offering and are thereafter
publicly traded or (B) WCPT or the Company engages in (i) a merger (including a
triangular merger), consolidation or other combination with or into another
Person (or such Person's subsidiary) whose equity interests are publicly traded
or (ii) the direct or indirect sale, lease, exchange or other transfer of all or
substantially all of its assets in one transaction or a series of related
transactions with another Person (or such Person's subsidiary) whose equity
interests are publicly traded.
"Capital Proceeds" shall mean the net amount of cash proceeds of the
Company (including the net amount of cash proceeds received from an Affiliate)
from the occurrence of one or more of the following events: (i) a merger
(including a triangular merger), consolidation or other combination with or into
another Person, (ii) the direct or indirect sale, lease, exchange or other
disposition or transfer of any Property or Company Asset, (iii) an eminent
domain taking, insurance
Exhibit 10.50 Page 11
<PAGE>
recovery or condemnation award, (iv) any refinancing or borrowing by the Company
or its Affiliates, (v) any issuance of equity securities of the Company or its
Affiliates; and (vi) Capital Contributions.
"Capital Proceeds Distribution Amount" shall have the meaning set forth in
Section 7.1(k).
"Cause" shall mean (a) fraud, criminal felony indictment, gross negligence
or willful misconduct by WCPT, WRP or any of Jeffrey H. Lynford, Edward
Lowenthal, Gregory Hughes or Richard Previdi (or any successor occupying one or
more of the officer positions currently occupied by any of them in WCPT or WRP)
if such fraud, criminal felony indictment, gross negligence or willful
misconduct relates to any action or omission in connection with the business of
the Company or any of its Subsidiaries, (b) fraud or willful misconduct by any
Executive Officer of WCPT in connection with the business of the Company or any
Subsidiary that damages the Company or any Subsidiary or the value of any
Property or other asset of the Company or any Subsidiary in an amount of
$5,000,000 or more which has not been cured within forty-five (45) days of the
date WCPT has been given notice of such event, (c) failure of WCPT to fund any
Capital Call in accordance with Section 5.2(b) (but not Section 5.2(a)), (d) a
breach of Section 4.2 by WCPT or its Affiliate or (d) the occurrence of any
Bankruptcy with respect to WCPT or WRP.
"Certificate of Formation" shall mean the Certificate of Formation of the
Company filed with the State of Delaware on May 18, 1999, as the same may
hereafter be amended and/or restated from time to time.
"Closing" shall mean the transactions whereby the WWG Contribution, the
contribution of the Holding Co. Contributed Asset and the admission of WCPT,
WHWEL, Whitehall XI, Holding Co. and each Saracen Member to the Company as
Members is completed.
"Closing Date" shall mean the date hereof.
"Closing Date Proration" shall have the meaning set forth in Section 2.10.
"Code" shall mean the Internal Revenue Code of 1986, as amended, or any
corres ponding provision(s) of succeeding law.
"Combined Whitehall/WCPT Percentage Interest" shall mean the sum total of
the Percentage Interest of each Member of the Whitehall Group and of WCPT
collectively.
"Committee Representative" shall mean each individual appointed from time
to time by any Managing Member or any other Member pursuant to Section 3.5 or,
if applicable, pursuant to the Series A Terms, and "Committee Representatives"
shall mean all of such individuals, collectively.
"Common Distribution Amount" shall mean, for any calendar quarter, the
Distribution Amount plus the Capital Proceeds Distribution Amount, if any, for
and including such calendar quarter less all amounts paid under Section
7.1(b)(ii) for and including such calendar quarter.
Exhibit 10.50 Page 12
<PAGE>
"Company" shall mean Wellsford/Whitehall Group, L.L.C., a Delaware limited
liability company, as said Company may from time to time be hereafter
constituted.
"Company Assets" shall mean all right, title and interest of the Company in
and to all or any portion of the assets of the Company and any property (real or
personal) or estate acquired in exchange therefor or in connection therewith.
"Company Loss" shall have the meaning set forth in Section 2.9.
"Company Nonrecourse Debt" shall have the meaning set forth in Treasury
Regulation Section 1.704-2(i)(2).
"Confidential Information" shall have the meaning set forth in Section
4.2(g).
"Contributing Member" shall have the meaning set forth in Section 5.3.
"Contribution Agreement" shall mean the Contribution Agreement dated as of
February 12, 1998, as amended by Amendment No. 1 to the Contribution Agreement
dated as of May 15, 1998, among WWP and the Saracen Current Owners (including
certain Affiliates of the Saracen Current Owners).
"Conversion Factor" shall mean 1.0; PROVIDED that, if WCPT (i) declares or
pays a dividend on its outstanding Shares in Shares or makes a distribution to
all holders of its outstanding Shares in Shares, or (ii) subdivides its
outstanding Shares, or (iii) combines its outstanding Shares into a smaller
number of Shares, the Conversion Factor shall be adjusted by multiplying the
Conversion Factor by a fraction, the numerator of which shall be the number of
Shares issued and outstanding on the record date for such dividend,
distribution, subdivision, combination, or other action (assuming for such
purposes that such dividend, distribution, subdivision, combination or other
action has occurred as of such time) and the denominator of which shall be the
actual number of Shares (determined without the above assumption) issued and
outstanding on the record date for such dividend, distribution, subdivision,
combination or other action. WHWEL's, Whitehall XI's, Holding Co.'s and
Saracen's agreement to the foregoing definition of "Conversion Factor" contained
herein is based upon the agreement of WCPT and WRP not to take any action which
would have a dilutive effect on the value of the Shares as compared to the value
of the Membership Units (so that the value of one Share would be less than the
value of one Membership Unit). In the event that any such action is nevertheless
taken by or on behalf of WCPT or its shareholders, the Conversion Factor set
forth in the first sentence of this definition shall be adjusted in the manner
set forth in the proviso in the first sentence of this definition or, if
otherwise applicable, in the same manner and in the same instances provided in
Article 6 of the Warrant Agreement (except that no such adjustment shall be made
if and to the extent that WCPT distributes to its shareholders amounts received
from the Company on account of its Interest or the Promote). Any adjustment to
the Conversion Factor shall become effective immediately after the effective
date of the event retroactive to the record date, if any, for the event giving
rise thereto, it being intended that (x) adjustments to the Conversion Factor
are to be made to avoid unintended dilution or anti-dilution as a result of
transactions in which Shares are issued, redeemed or exchanged without a
corresponding issuance, redemption or exchange of Membership Units and (y) if a
specified redemption date shall fall between the record date
Exhibit 10.50 Page 13
<PAGE>
and the effective date of any event of the type described above, that the
Conversion Factor applicable to such redemption shall be adjusted to take into
account such event.
"Conversion Right" shall have the meaning set forth in Section 8.3.
"Converted Units" shall mean the number of Series A Preferred Membership
Units outstanding times 1.34.
"Cumulative Distribution Amount" shall mean, for any calendar quarter, the
cumulative quarterly Distribution Amounts theretofore distributed during the
then current calendar year, plus the Distribution Amount for the quarter for
which the Cumulative Distribution Amount is being determined.
"Debtor Member" shall have the meaning set forth in Section 7.4.
"Declaration of Trust" shall mean the amended and restated declaration of
trust of WCPT filed with the State Department of Assessment and Taxation of the
State of Maryland on August 25, 1997, as the same may be restated and amended
from time to time.
"Deemed Value Per Membership Unit" shall mean $15.85 (fifteen dollars and
eighty-five cents); PROVIDED, HOWEVER, that the Deemed Value Per Membership Unit
may be changed at any time with the prior consent of the Management Committee,
provided that it may only be reduced below $15.85 if prior to giving effect to
such reduction the Company receives a fairness opinion with respect to the
fairness of the revised Deemed Value Per Membership Unit from any of Valuation
Research Corporation, Arthur Andersen LLP, PricewaterhouseCoopers LLP or other
independent, disinterested appraiser reasonably acceptable to the Saracen
Members; PROVIDED, FURTHER, that if a New Member acquires Membership Units, the
Deemed Value Per Membership Unit shall equal the (x) the sum of the cash plus
the agreed net fair market value of property contributed to the Company by the
Person who most recently became a New Member (including on such date), which
amount was solely attributable to the Membership Units issued and referred to in
clause (y) below, divided by (y) the total number of Membership Units issued to
such New Member in respect of such contributions. The parties intend for the
Deemed Value Per Membership Unit to be equal to $15.85 until the earlier of (i)
May 15, 2000 or (ii) the date on which any New Member unaffiliated with any
Members as of the date hereof acquires Membership Units.
"Default Rate" shall mean an interest rate equal to the lesser of (i) 15%
per annum and (ii) the maximum rate permitted by law.
"Depreciation" shall mean, with respect to any Fiscal Year, all deductions
attributable to depreciation or cost recovery with respect to Company Assets or
any assets of the Subsidiaries, including any improvements made thereto and any
tangible personal property located therein, or amortization of the cost of any
intangible property or other assets acquired by the Company, which have a useful
life exceeding one year, PROVIDED, however, that with respect to any Company
Asset or asset of the Subsidiaries whose tax basis differs from its Book Value
at the beginning of such Fiscal Year or other period, Depreciation shall be an
amount which bears the same ratio to such beginning Book Value as the
depreciation, amortization or other cost recovery deduction for such period with
respect to such asset for federal income tax purposes bears to its adjusted tax
basis as of the beginning of such Fiscal Year;
Exhibit 10.50 Page 14
<PAGE>
PROVIDED, however, that if the federal income tax depreciation, amortization or
other cost recovery deduction for such Fiscal Year is zero, Depreciation shall
be determined using any reasonable method selected by the Management Committee.
"Determination Date" shall have the meaning set forth in Section 7.6(b).
"Disclosure Materials" shall mean all written materials heretofore
delivered by WRP, WCPT, the Company, WWP, WWP II, Holdings, Rand or any of their
respective Affiliates, employees or agents or any other source to WHWEL,
Goldman, Sachs & Co or any of their respective employees, including, but not
limited to, Ronald L. Bernstein, Steven M. Feldman, Alan S. Kava, Angie Madison,
Todd A. Williams and Frederick Yee.
"Distribution Amount" shall have the meaning set forth in Section 7.1(a).
"End Date" shall have the meaning set forth in Section 8.2A(a)(i).
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"Executive Officer" shall mean, with respect to WCPT, any individual now or
hereafter occupying one or more of the following offices: Chairman, President,
Chief Financial Officer, Chief Operating Officer, Chief Executive Officer or
General Counsel, or any other individual employed by WCPT who has an annual
compensation of $100,000 or more.
"Extraordinary Transaction" shall mean, with respect to any Person, the
occurrence of one or more of the following events: (i) a merger (including a
triangular merger), consolidation or other combination with or into another
Person; (ii) the direct or indirect sale, lease, exchange or other transfer of
all or substantially all of its assets in one transaction or a series of related
transactions; (iii) any reclassification, recapitalization or change of its
outstanding equity interests (other than a change in par value, or from par
value to no par value, or as a result of a split, dividend or similar
subdivision); (iv) any issuance of equity securities of such Person in exchange
for assets (other than an issuance of securities for cash or an issuance of
securities pursuant to an employee benefit plan); (v) any change of control (as
defined below) of such Person or (vi) the adoption of any plan of liquidation or
dissolution of such Person. For purposes of this definition, "change of control"
with respect to any Person means (a) the acquisition by another Person of more
than 20% of the voting stock in such Person or (b) the change in membership of a
majority of such Person's board of directors.
"Failed Contribution" shall have the meaning set forth in Section 5.3.
"Fiscal Year" shall mean the fiscal year of the Company, which shall be the
calendar year; but upon termination of the Company, "Fiscal Year" shall mean the
period from the end of the last preceding Fiscal Year to the date of such
termination.
"Funded Portion" shall have the meaning set forth in Section 5.3.
Exhibit 10.50 Page 15
<PAGE>
"Funding Debt" shall mean any Indebtedness incurred by WCPT in compliance
with the terms and provisions of Section 4.2(e).
Exhibit 10.50 Page 16
<PAGE>
"Funding Percentage" shall mean, with respect to each Managing Member, such
Managing Member's pro rata share of the capital contribution required by a
Mandatory Capital Call or a Capital Call, as the case may be, determined by
dividing (x) the amount remaining for such Managing Member's Capital Commitment
by (y) the sum of the amounts remaining for the Capital Commitments of all of
the Managing Members ($106,081,275). The initial Funding Percentage for each
Managing Member as of the date hereof is as follows:
WHWEL: 7.41031%
Whitehall XI: 73.69150%
WCPT: 18.89819%
----------
Total: 100.00000%
"Goldman Sachs Group" shall mean The Goldman Sachs Group, Inc., a Delaware
corporation, and any successors and assigns to or of all or substantially all of
its business.
"Holding Co." shall have the meaning set forth in the first paragraph of
this Agreement.
"Holding Co. Contributed Asset" shall mean the 100% membership interest in
WXI/Mt. Bethel Road L.L.C.
"Holdings" shall have the meaning set forth in the third paragraph of this
Agreement.
"Hub Target Market" shall mean the Commonwealth of Massachusetts and the
States of Maine, New Hampshire, Rhode Island and Vermont.
"Income" shall have the meaning set forth in Section 2.10.
"Indebtedness" shall mean, with respect to any Person, (i) all indebtedness
and obligations of or assumed by such Person in respect of money borrowed
(including any indebtedness which is non-recourse to the credit of such Person
but which is secured by a Lien on any asset of such Person) or evidenced by a
promissory note, bond, debenture, letter of credit reimbursement agreement or
other written obligations to pay money for borrowed money; (ii) any indebtedness
or obligation of others secured by a Lien on any asset of such Person, whether
or not such indebtedness or obligation is assumed by such Person; (iii) any
guaranty, endorsement, suretyship or other undertaking pursuant to which such
Person may be liable on account of any obligation of any third party other than
a Subsidiary; (iv) indebtedness for the deferred purchase price of property or
services; (v) obligations of such Person incurred in connection with entering
into a Lease which, in accordance with generally accepted accounting principles,
should be capitalized; and (vi) the indebtedness or obligations of a partnership
or joint venture in which such Person is a general partner or joint venturer.
"Indemnified Parties" shall have the meaning set forth in Section 4.3(a).
"Institutional Lender" shall mean an Affiliate of any Member and/or any one
or more of the following other entities, PROVIDED that for any such other entity
to qualify as an Institutional Lender hereunder, such other entity, together
with its Affiliates, must have total assets of at least $5,000,000,000 and
stockholders' equity or net worth of at least $250,000,000 (or, in either case,
the equivalent thereof
Exhibit 10.50 Page 17
<PAGE>
in a foreign currency) as of the date the loan is made: a savings bank, a
savings and loan association, a commercial bank or trust company, an insurance
company subject to regulation by any governmental authority or body, a real
estate investment trust, a union, governmental or secular employees welfare,
benefit, pension or retirement fund, a pension fund property unit trust (whether
authorized or unauthorized), an investment company or trust, a merchant or
investment bank or any other entity generally viewed as an institutional lender.
In each of the foregoing cases, such Affiliate or other entity shall constitute
an Institutional Lender whether (i) acting for itself or (ii) as trustee, in a
fiduciary, management or advisory capacity or, in the case of a bank, as agent
bank, for any number of lenders, so long as in the case of clause (ii) the
day-to-day management decisions relating to the loan are either exercised by or
recommended by such Institutional Lender and, during the life of the loan, such
Institutional Lender shall only be removed from its clause (ii) capacity if it
is replaced by another Institutional Lender also so acting under clause (ii).
"Insurance Program" shall have the meaning set forth in Section 3.4.
"Interest" shall mean the entire interest of a Member in the Company at any
particular time, including the Percentage Interest and Series A Preferred
Percentage Interest of such Member, together with the right of such Member to
any and all benefits to which a Member may be entitled as provided in this
Agreement, together with the obligations of such Member to comply with all the
terms and provisions of this Agreement. The Interest of any Member may be
expressed as a number of Membership Units or Series A Preferred Membership
Units, or a combination thereof.
"Interim Capital Contribution" shall mean the portion of a Capital
Contribution made by any Managing Member that (x) is designated by the Manager
as an "Interim Capital Contribution" in the Capital Call for such Capital
Contribution and (y) is returned to such Managing Member pursuant to Section
7.1(b)(i) not later than the earlier to occur of (i) the date that is five (5)
months of the date such Capital Contribution is made and (ii) December 31, 2000;
PROVIDED, however, that (A) a portion of a Capital Contribution may be
designated as an Interim Capital Contribution only if proceeds of such Capital
Contribution are used in connection with the acquisition of one or more
Properties by the Company or one or more Subsidiaries of the Company, (B) no
amount in excess of eighty percent (80%) of any particular Capital Contribution
may be designated as an Interim Capital Contribution and (C) the fraction,
expressed as a percentage, obtained by dividing (1) the sum of (x) the amount of
any Capital Contribution made in connection with the acquisition of a Property
that is designated as an Interim Capital Contribution and the proceeds of which
are used to acquire a specific Property and (y) the amount of mortgage financing
incurred in connection with the acquisition by the Company or a Subsidiary of
such Property and secured by such Property by (2) the gross acquisition costs
paid for such Property may not exceed 80%. For the avoidance of doubt, unless a
Capital Contribution satisfies the foregoing parameters it shall not be
designated as an "Interim Capital Contribution" and shall not be returnable
pursuant to Section 7.1(b)(i) (and shall instead be returnable pursuant to
Section 7.1(b)(iii)), and unless a Capital Contribution that is properly
designated as an Interim Capital Contribution is returned pursuant to Section
7.1(b)(i) prior to the date specified in clause (y) of the first sentence of
this definition, such Capital Contribution shall cease to be designated as an
"Interim Capital Contribution" and shall cease to be returnable pursuant to
Section 7.1(b)(i) and shall instead be returnable pursuant to Section
7.1(b)(iii).
Exhibit 10.50 Page 18
<PAGE>
"Internal Rate of Return" shall mean, with respect to any Member, that such
Member has achieved an internal rate of return of a specified percentage per
annum, which shall occur when the total Capital Contributions (including Interim
Capital Contributions) made from time to time by such Member are returned to
such Member together with an annual return equal to such specified percentage
calculated commencing on the date such Capital Contributions (including Interim
Capital Contributions) are or were made (or deemed to be made as specified in
Schedule 5.1) and compounded annually to the extent not paid on a current basis,
taking into account the timing and amounts of all previous Capital Contributions
(including Interim Capital Contributions) by such Member to the Company and all
previous distributions by the Company to such Member under this Agreement (or
deemed to be made pursuant to this Agreement). For purposes of computing such
internal rate of return, (i) any Capital Contribution (including any Interim
Capital Contribution) made by such Member and any distribution of funds received
by such Member at any time during a month shall be deemed to be made or received
on the first day of such month, (ii) all capital contributions made by any
Managing Member and Saracen Member to either WWP or WWP II shall be deemed to
have been a Capital Contribution by such Member to the Company in the same
amount and as of the same date contributed to either WWP or WWP II, as
applicable, all as shown in Schedule 5.1, (iii) the contribution by Holding Co.
of the Holding Co. Contributed Asset shall be deemed to have been made as of the
Closing Date in an amount equal to the all-in acquisition cost of such asset
(excluding the amount of the Assumed Financing), as shown in Schedule 5.1 and
(iv) all distributions received by any Member from either WWP or WWPII shall be
deemed to have been received by such Member from the Company in the same amount
and as of the same date received from either WWP or WWP II, as applicable, all
as shown in Schedule 5.1. Notwithstanding anything to the contrary contained
herein, the WWP Contribution and WWG Contribution shall not be deemed to be a
Capital Contribution for purposes of computing such Internal Rate of Return.
"Investment Notice" shall have the meaning set forth in Section 4.2(c).
"IRS" shall mean the Internal Revenue Service.
"Leasing Plan" shall mean, with respect to any Property, the leasing
guidelines prepared by the Manager for each type of planned use of such Property
(E.G. commercial, industrial or retail) containing parameters for minimum rents,
tenant allowances, operating expense recaptures, financial condition of tenants,
free rent, lease assignments and assumptions, overages and tenant improvements
to the extent such information is available and pertinent.
"Lender Member" shall have the meaning set forth in Section 7.4.
"Lien" shall mean any lien, mortgage, charge, restriction, option, right of
first refusal or offer, contractual restriction on transfer, security interest,
tax lien, pledge, encumbrance, conditional sale or title retention arrangement,
or any other claim of any kind or nature against any Property securing any
Indebtedness, or any agreement to create or confer any of the foregoing, in each
case whether arising by agreement or under any statute or law or otherwise.
"Losses" shall have the meaning set forth in Section 6.2(a).
"Major Decisions" shall have the meaning set forth in Section 3.4.A.
Exhibit 10.50 Page 19
<PAGE>
"Management Committee" shall have the meaning set forth in Section 3.5
hereof.
"Manager" (i) shall mean WCPT upon the execution and delivery hereof, (ii)
except as set forth in clause (iii) below, if for any reason WCPT ceases to be
the Manager, shall thereafter mean another Person appointed by the Management
Committee or (iii) if WCPT ceases to be the Manager pursuant to Section 9.1,
shall thereafter mean another Person appointed by WHWEL and Whitehall XI.
"Managing Members" shall mean WCPT, WHWEL and Whitehall XI.
"Mandatory Capital Call" shall mean a Capital Call for any capital
contributions that would be required pursuant to Section 5.2(a).
"Marketing Member" shall have the meaning set forth in Section 8.2(a).
"Marketing Period" shall have the meaning set forth in Section 8.2(d).
"Marketing Plan" shall mean, with respect to any Property or appropriate
part thereof, the comprehensive plan for marketing and leasing the space in such
Property, which plan shall be submitted by the Manager to, and approved by, the
Management Committee.
"Member-Funded Debt" shall mean any non-recourse debt of the Company which
is loaned or guaranteed by any Member and/or is treated as Member non-recourse
debt with respect to a Member under Treasury Regulations Section 1.704-2(b)(4).
"Member Loan" shall mean any loan made by a Member to another Member
pursuant to Section 5.3(b).
"Members" shall mean WHWEL, WCPT, Saracen, Whitehall XI and Holding Co.
(for as long as such Persons are still members of the Company), their successors
and permitted assigns and any other members admitted to the Company in
accordance with Article VIII.
"Membership Capital Accounts" shall have the meaning set forth in Section
6.1(e).
"Membership Unit" shall mean a fractional, undivided share of the Interest
of all Members issued pursuant to Section 5.1 or Section 5.9 hereof, but shall
not include the Series A Preferred Membership Units. As of the date hereof,
there shall be considered to be 10,698,331 Membership Units outstanding. The
Management Committee may create and authorize the issuance of new membership
interests and may designate one or more new classes of membership interests and
establish the designations, preferences and relative, participating, optional or
other special rights, powers and duties of each class of membership interests.
The number of Membership Units owned by any Member may be expressed as such
Member's Percentage Interest. The Membership Units are not intended to be
characterized as "securities" for any purpose (including any securities laws).
"Minimum Gain" shall mean an amount equal to the excess of the principal
amount of debt, for which no Member is liable ("non-recourse debt"), secured by
Company Assets or any assets of its Subsidiaries, over the adjusted basis of
such Company Assets or assets of its Subsidiaries which
Exhibit 10.50 Page 20
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represents the minimum taxable gain which would be recognized by the Company if
the non-recourse debt were foreclosed upon and the Company Assets or any assets
of its Subsidiaries were transferred to the creditor in satisfaction thereof,
and which is referred to as "minimum gain" in Treasury Regulations Section
1.704-1(b)(4)(iv). A Member's share of Minimum Gain shall be determined pursuant
to the above-cited Treasury Regulations.
"Necessary Expenditure" shall mean, (i) to the extent Available Cash is not
sufficient to pay for any expenditure whether or not of a recurring nature (x)
that is necessary, in the reasonable discretion of either the Manager, WHWEL or
Whitehall XI, to preserve or protect the assets of the Company, including,
without limitation, real estate taxes, insurance payments, costs of restoring
the assets of the Company after a casualty or condemnation thereof, costs of any
capital expenditure necessary to protect the structural integrity of any asset
of the Company or human health or safety, utility costs, costs of compliance
with law, payments on or of contractual obligations and debts of the Company,
tenant improvements and leasing commissions, or (y) that is required to
effectuate or pay for any cost, expense or transaction provided for in an
Approved Budget and (ii) any obligation to fund the purchase price and other
costs of acquiring any Office Property, the acquisition of which has been
approved by the Management Committee.
"net equity" shall mean, with respect to an entity, the book value (before
depreciation) of such entity's assets less the liabilities of such entity, and,
with respect to any property, the book value (before depreciation) of such
property less the liabilities with respect to such property.
"New Member" shall mean any Member other than one of the Managing Members,
Saracen or Holding Co. Any New Member may be issued a new class of membership
interests with such classifications and designations as the Management Committee
shall determine.
"New Warrant Agreement" shall mean the Warrant Agreement dated as of the
date hereof between WRP and United States Trust Company of New York, as warrant
agent, as such agreement may be amended or restated from time to time.
"New WRP Warrants" shall mean the warrants that were originally to have
been issued to WHWEL by WRP pursuant to the New Warrant Agreement and, at the
direction of WHWEL, have been instead issued to Holding Co. as of the date
hereof.
"Nomura Loan" shall mean that certain loan made by Nomura Asset Corporation
to Wells Senior Holdings LLC in the original principal amount of $69,000,000.00
as evidenced by the documents and instruments described in Exhibit C to the
Contribution Agreement.
"Nomura Properties" shall mean, collectively, (x) each of the parcels of
land described on Exhibits B-1 through Exhibits B-5 annexed to the Contribution
Agreement and the improvements located on such land, and (y) the Dedham Place
Condominium Unit and all of the Appurtenant Interests (as such term is defined
in the Condominium Documents) relating to the Dedham Place Condominium Unit;
each of the foregoing being commonly known, respectively, as 333 Elm Street,
Norfolk, Massachusetts; 128 Technology Center, Westwood, Massachusetts; 201
University Avenue, Westwood, Massachusetts; 7/57 Wells Avenue, Newton
Massachusetts; 75/85/95 Wells Avenue, Newton, Massachusetts; and Dedham Place,
Dedham, Massachusetts.
Exhibit 10.50 Page 21
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"Non-Contributing Member" shall have the meaning set forth in Section 5.3.
"Non-Marketing Member" shall have the meaning set forth in Section 8.2(a).
"Non-Nomura Properties" shall mean, collectively, each of the parcels of
land described on Exhibits B-6 through Exhibits B-13 annexed to the Contribution
Agreement and the improvements located on such land, and commonly known as 74
Turner Street, Waltham, Massachusetts; 60 Turner Street, Waltham, Massachusetts;
70 Wells Avenue, Newton, Massachusetts; 100 Wells Avenue, Newton, Massachusetts;
150 Wells Avenue, Newton, Massachusetts; 160 Wells Avenue, Newton,
Massachusetts; and 2331 Congress Street, Portland, Maine.
"Non-Triggering Saracen Transfer" shall have the meaning set forth in
Section 8.2A(a)(ii).
"Notice of Conversion" shall mean a Notice of Conversion substantially in
the form of Exhibit D.
"Notional Contribution" shall have the meaning set forth in Section 5.4(b).
"Objection Notice" shall have the meaning set forth in Section 11.3(c).
"Offer Notice" shall have the meaning set forth in Section 8.3.
"Office Property" shall mean any office building property, including,
without limitation, a research and development facility or a mixed-use complex,
not less than 40% of the rentable square footage of which is used for offices
and/or research and development space.
"150 Mt. Bethel Road" shall mean the parcel of land and the improvements
located on such land, and commonly known as 150 Mt. Bethel Road, Warren, New
Jersey.
"Operational Decisions" shall have the meaning set forth in Section 3.4.B.
"Organizational Document" of a Person shall mean (i) with respect to a
corporation, such Person's certificate of incorporation and by-laws, and any
shareholder agreement, voting trust or similar arrangement applicable to any of
such Person's authorized shares of capital stock, (ii) with respect to a
partnership, such Person's certificate of limited partnership, partnership
agreement, voting trusts or similar arrangements applicable to any of its
partnership interests or (iii) with respect to a limited liability company, such
Person's certificate of formation, limited liability company agreement or other
document affecting the rights of holders of limited liability company interests.
"Payments" shall have the meaning set forth in Section 8.2A(a)(xiii).
"Percentage Interest" shall mean, with respect to any Member, the
percentage interest listed for each Member in Schedule 5.1 with respect to its
Membership Units, as the same may be adjusted pursuant to the terms of this
Agreement.
Exhibit 10.50 Page 22
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"Permitted Liens" shall mean (i) Liens for taxes and other similar charges
not yet due or Liens for taxes being contested in good faith by appropriate
proceedings for which adequate reserves have been established (and as to which
the property subject to such Lien is not yet subject to foreclosure, sale or
loss on account thereof); (ii) Liens in respect of property imposed by law
arising in the ordinary course of business such as materialmen's, mechanics',
warehousemen's and other like Liens; PROVIDED that such Liens secure only
amounts not yet due and payable or amounts being contested in good faith by
appropriate proceedings for which adequate reserves have been established (and
as to which the property subject to such lien is not yet subject to foreclosure,
sale or loss on account thereof); (iii) easements, rights-of-way, restrictions
(including zoning restrictions), defects or irregularities in title and other
similar charges or encumbrances not, in any material respect, interfering with
the ordinary conduct of business at the relevant property; (iv) leases or
subleases granted to others, whether existing now or hereafter entered into, in
the ordinary course of business; (v) any attachment or judgment lien, unless the
judgment it secures shall not, within thirty (30) days after the entry thereof,
have been discharged or execution thereof stayed pending appeal, or shall not
have been discharged within thirty (30) days after the expiration of any such
stay and (vi) any Lien set forth on Schedule B (or any equivalent schedule) as
an exception to the title insurance policies insuring the title of the Company
or any of its Subsidiaries in and to the Properties.
"Person" shall mean any individual, partnership, corporation, limited
liability company, trust or other legal entity.
"Plan Asset Regulation" shall mean the Department of Labor Regulation
ss.2510.3-101, as amended.
"Pledgee" shall have the meaning set forth in Section 8.1(b).
"Pledgor" shall have the meaning set forth in Section 8.1(b).
"Profits" shall have the meaning set forth in Section 6.2(a).
"Preferred Distribution" shall mean an amount equal to 6% per annum of the
Preferred Value, calculated on a cumulative basis for each calendar quarter
during a calendar year (i.e., from the first day of the year) through the end of
the calendar quarter for which the Preferred Distribution is being determined).
"Preferred Distribution Amount" shall mean, for any calendar quarter, an
amount equal to (A) the greater of (i) the Preferred Distribution and (ii) an
amount equal to (x) the Preferred Percentage times (y) the excess of Cumulative
Distribution Amount over all distributions made pursuant to Section
7.1(b)(ii)(A) of this Agreement in the current calendar year, less (B) all
distributions theretofore made pursuant to Section 7.1(b)(ii)(B) of this
Agreement with respect to the then current calendar year. For illustrative
purposes, an example of the manner in which the Preferred Distribution Amount is
calculated under various hypothetical assumptions is set forth in Schedule 7.1.
"Preferred Holders" shall have the meaning set forth in Section 3.5(c)(i).
Exhibit 10.50 Page 23
<PAGE>
"Preferred Limitation" shall mean, with respect to any calendar year, the
sum of the Unpaid Preferred Distribution (as of the first day of such calendar
year) and the Preferred Distribution Amount for such calendar year. The parties
agree that, for purposes of calculating the Preferred Limitation, the Cumulative
Distribution Amount shall be calculated based only on actual cash distributions
made pursuant to Section 7.1.
"Preferred Percentage" shall mean a fraction (expressed as a percentage),
the numerator of which is the number of Converted Units and the denominator of
which is the number of Total Units.
"Preferred Value" shall mean an amount equal to the product of $25 and the
number of Series A Preferred Membership Units outstanding.
"Promote" shall mean the aggregate distributions that would be made to the
Manager pursuant to Sections 7.1(c)(iii)(y), 7.1(c)(iv)(y), 7.1(d)(iii)(y),
7.1(d)(iv)(y), 7.1(e)(iii)(y), 7.1(e)(iv)(y), 7.1(f)(iii)(y), 7.1(f)(iv)(y),
7.1(g)(iii)(y), 7.1(g)(iv)(y), 7.1(h)(iii)(y) and 7.1(h)(iv)(y).
"Promote Payments" shall mean an amount, as determined from time to time,
equal to: (i) with respect to WHWEL, the sum of all amounts paid to the Manager
pursuant to Section 7.1(c)(iii)(y) or (iv)(y) and not returned to WHWEL pursuant
to Section 7.2; (ii) with respect to Whitehall XI, the sum of all amounts paid
to the Manager pursuant to Section 7.1(d)(iii)(y) or (iv)(y) and not returned to
Whitehall XI pursuant to Section 7.2; (iii) with respect to Holding Co., the sum
of all amounts paid to the Manager pursuant to Section 7.1(e)(iii)(y) or (iv)(y)
and not returned to Holding Co. pursuant to Section 7.2; and (iv) with respect
to WCPT, the sum of all amounts paid to the Manager pursuant to (A) Section
7.1(f)(iii)(y) or (iv)(y) and (B) Section 7.1(g)(iii)(y) or (iv)(y) and not
returned to WCPT pursuant to Section 7.2.
"Property" and "Properties" shall have the meanings set forth in Section
2.4(a).
"Property Loan" shall mean any bridge, permanent or construction financing
obtained by the Company or any of its Subsidiaries in accordance with the
provisions hereof relating to one or more Properties which may be secured by a
mortgage, or similar security in the nature of a mortgage, on such Properties,
and which is to be entered into for the purpose of financing or refinancing the
acquisition, construction, development, and/or operation of such Properties.
"publicly traded" means listed or admitted to trading on the New York Stock
Exchange, the American Stock Exchange or another national securities exchange or
designated for quotation on the NASDAQ National Market, or any successor to any
of the foregoing.
"Rand" shall have the meaning set forth in Section 3.5(c)(ii).
"recapture income" shall have the meaning set forth in the Code and the
applicable Treasury Regulations.
"Required Amortization" shall have the meaning set forth in Section
8.2A(a)(ii).
Exhibit 10.50 Page 24
<PAGE>
"Required Committee Approval" shall mean, with respect to any Major
Decision, the affirmative approval of no fewer than one Committee Representative
appointed by each of WHWEL and Whitehall XI and two Committee Representatives
appointed by WCPT, and with respect to any Operational Decision, the affirmative
approval of no fewer than one Committee Representative appointed by either WHWEL
or Whitehall XI and one Committee Representative appointed by WCPT. During a
Preferential Distribution Non-Payment (as defined in the Series A Terms),
"Required Committee Approval" shall mean, with respect to any Major Decision or
Operational Decision, the affirmative approval of a majority of Committee
Representatives then having voting, consent, approval or determination rights on
the Management Committee, PROVIDED, however, that during a Preferential
Distribution Non-Payment (as defined in the Series A Terms), any Major Decision
or Operational Decision which would require any Managing Member to make
additional Capital Contributions (other than pursuant to Section 5.2(a) below)
shall require the applicable Required Committee Approval referred to in the
immediately preceding sentence.
"Requisite Promote" shall mean an amount, as determined from time to time,
equal to:
(i) with respect to WHWEL, the sum of (a) 17.5% of the total distributions
distributed to WHWEL pursuant to Section 7.1(b) in excess of a 17.5% Internal
Rate of Return (but only with respect to any such distributions that, after
deducting the amount of the Promote Payments made by WHWEL, provide WHWEL with
an Internal Rate of Return of up to 22.5%), plus (b) 22.5% of the total
distributions distributed to WHWEL pursuant to Section 7.1(b) that, after
deducting the amount of the Promote Payments made by WHWEL, provide WHWEL with
an Internal Rate of Return in excess of 22.5%;
(ii) with respect to Whitehall XI, the sum of (a) 20% of the total
distributions distributed to Whitehall XI pursuant to Section 7.1(b) in excess
of a 15% Internal Rate of Return (but only with respect to any such
distributions that, after deducting the amount of the Promote Payments made by
Whitehall XI, provide Whitehall XI with an Internal Rate of Return of up to
25%), plus (b) 25% of the total distributions distributed to Whitehall XI
pursuant to Section 7.1(b) that, after deducting the amount of the Promote
Payments made by Whitehall XI, provide Whitehall XI with an Internal Rate of
Return in excess in excess of 25%;
(iii) with respect to Holding Co., the sum of (a) 20% of the total
distributions distributed to Holding Co. pursuant to Section 7.1(b) in excess of
a 15% Internal Rate of Return (but only with respect to any such distributions
that, after deducting the amount of the Promote Payments made by Holding Co.,
provide Holding Co. with an Internal Rate of Return of up to 25%), plus (b) 25%
of the total distributions distributed to Holding Co. pursuant to Section 7.1(b)
that, after deducting the amount of the Promote Payments made by Holding Co.,
provide Holding Co. with an Internal Rate of Return in excess in excess of 25%;
(iv) with respect to WCPT on account of the WCPT I Distributions, the sum
of (a) 17.5% of the total distributions distributed to WCPT pursuant to Section
7.1(b) in excess of a 17.5% Internal Rate of Return with respect to the WCPT
Phase I Capital Contributions (but only with respect to any such distributions
that, after deducting the amount of the Promote Payments made by WCPT, provide
WCPT with an Internal Rate of Return of up to 22.5% with respect to the WCPT
Phase I Capital Contributions), plus (b) 22.5% of the total distributions
distributed to
Exhibit 10.50 Page 25
<PAGE>
WCPT pursuant to Section 7.1(b) that, after deducting the amount of the Promote
Payments made by WCPT, provide WCPT with an Internal Rate of Return in excess of
22.5% with respect to the WCPT Phase I Capital Contributions; and
(v) with respect to WCPT on account of its WCPT II Distributions, the sum
of (a) 20% of the total distributions distributed to WCPT pursuant to Section
7.1(b) in excess of a 15% Internal Rate of Return with respect to the WCPT Phase
II Capital Contributions (but only with respect to any such distributions that,
after deducting the amount of the Promote Payments made by WCPT, provide WCPT
with an Internal Rate of Return of up to 25% with respect to the WCPT Phase II
Capital Contributions), plus (b) 25% of the total distributions distributed to
WCPT pursuant to Section 7.1(b) that, after deducting the amount of the Promote
Payments made by WCPT, provide WCPT with an Internal Rate of Return in excess in
excess of 25%.
"Rights" shall mean any rights, options, warrants or convertible or
exchangeable securities (or instruments exchangeable or convertible into any of
the foregoing) that in any case entitle the holder to subscribe for or purchase
or otherwise receive one or more Shares or any other securities or property of
WCPT.
"Rules" shall have the meaning set forth in Section 5.10.
"Sales Notice" shall have the meaning set forth in Section 8.2(a).
"Saracen" or "Saracen Members" shall mean the Members set forth on Schedule
1 annexed hereto, provided, however that, solely for purposes of Sections
4.2(f), 8.3, 8.10 and 12.1 hereof, Rand shall not be deemed a Saracen Member,
but shall have the rights set forth in said Sections.
"Saracen Closing" shall mean the transactions whereby WWP acquired certain
assets in exchange for cash, the assumption of certain liabilities, "Membership
Units" of WWP, "Series A Preferred Membership Units" of WWP and other good and
valuable consideration in accordance with the terms WWP Agreement and the terms
of the Contribution Agreement.
"Saracen Current Owners" shall mean Wells Avenue Senior Holdings LLC, 150
Wells Avenue Realty Trust, River Park Realty Trust, Seventy Wells Avenue LLC,
Newton Acquisition LLC I, Saracen Portland L.L.C., KSA Newton Acquisition
Limited Partnership II, KSA Newton Limited Partnership I and Dominic J.
Saraceno.
"Saracen Debt Reduction Event" shall have the meaning set forth in Section
8.2A(a)(iv).
"Saracen Gain" shall have the meaning set forth in Section 8.2A(a)(iii).
"Saracen Gain Recognition" shall have the meaning set forth in Section
8.2A(a)(iii).
"Saracen Indemnitee Member" shall have the meaning set forth in Section
8.2A(a)(iii).
"Section 8.2(c) Termination Date" shall have the meaning set forth in
Section 8.2(d).
Exhibit 10.50 Page 26
<PAGE>
"Series A Capital Accounts" shall have the meaning set forth in Section
6.1(e).
"Series A Preferred Membership Units" shall mean the Company's Series A 6%
Convertible Preferred Membership Units with a liquidation preference per unit
equal to $25, which shall have the rights, preferences and privileges as set
forth in the Series A Terms.
"Series A Preferred Percentage Interest" shall mean the percentage interest
listed for each Member in Schedule 5.1(h) with respect to its Series A Preferred
Membership Units, as the same may be adjusted pursuant to the terms of this
Agreement.
"Series A Terms" shall mean the terms of the Company's Series A 6%
Convertible Preferred Membership Units as set forth in Exhibit A annexed hereto.
"72 River Park Property" shall mean the parcel of land and the improvements
located on such land, and commonly known as 72 River Park, Needham,
Massachusetts.
"Share" shall mean a share of beneficial interest (or other comparable
equity interest) of WCPT. If there is more than one class or series of Shares,
the term "Shares" shall, as the context requires, be deemed to refer to the
class or series of Shares that correspond to the class or series of Membership
Interests for which the reference to Shares is made.
"Shares Amount" shall mean a number of Shares equal to the product of the
number of Membership Units offered for conversion times the Conversion Factor;
PROVIDED that, if WCPT, at any time, issues any Rights to the holders of Shares,
then the Shares Amount shall also include such Rights that a holder of that
number of Shares would have been entitled to receive.
"Specified Conversion Date" shall mean the tenth Business Day after receipt
by WCPT of a Notice of Conversion.
"Subject Asset" shall have the meaning set forth in Section 8.2(a).
"Subsidiary" shall mean any Person more than 50% owned, directly or
indirectly, by the Company and over which the Company has management control. No
Subsidiary may be a corporation without the consent of the Management Committee.
"Substituted Member" shall mean any Person admitted to the Company as a
Member pursuant to the provisions of Section 8.7.
"Tag Along Election Notice" shall have the meaning set forth in Section
8.10.
"Tag Along Notice" shall have the meaning set forth in Section 8.10.
"Tag Along Transaction" shall have the meaning set forth in Section 8.10.
"Target Territory" shall mean the Commonwealths of Massachusetts and
Virginia and the States of Connecticut, Delaware, Maine, Maryland, New
Hampshire, New Jersey, New York,
Exhibit 10.50 Page 27
<PAGE>
Pennsylvania, Rhode Island and Vermont, the greater metropolitan region
(including central business district and suburban markets) of Washington, D.C.
and each other greater metropolitan region (including central business district
and suburban markets) in which the Company and/or its Subsidiaries own one or
more Office Properties having a total purchase price of $15 million in the
aggregate.
"Tax Matters Member" shall mean Whitehall XI.
"Tax Liability Reserve Account" shall have the meaning set forth in Section
8.2A(c).
"Tax Returns" shall have the meaning set forth in Section 8.2A(a)(xi).
Exhibit 10.50 Page 28
<PAGE>
"Total Units" shall mean the number of Membership Units outstanding plus
the number of Converted Units.
"Transfer" shall have the meaning set forth in Section 8.1(a).
"Treasury Regulations" shall mean the regulations promulgated under the
Code, as such regulations are in effect on the date hereof.
"Unpaid Preferred Distribution" means, for any calendar quarter, an amount
determined as of the close of the preceding calendar year equal to (A) the sum
of the Preferred Distribution Amounts for such preceding calendar year and all
prior years, less (B) the sum of all distributions made pursuant to Section
7.1(b)(ii) of this Agreement with respect to such preceding calendar year and
all prior years, less (C) all distributions theretofore made pursuant to Section
7.1(b)(ii)(A) of this Agreement with respect to the then current year. As of the
date hereof, but subject to that certain letter agreement, dated as of the date
hereof, executed by the Company in favor of the Saracen Members, the amount of
the Unpaid Preferred Distribution is equal to zero ($0).
"Warrant Agreement" shall mean the Warrant Agreement dated as of August 28,
1997 between WRP and United States Trust Company of New York, as warrant agent,
as such agreement may be amended or restated from time to time.
"WCPT" shall have the meaning set forth in the first paragraph of this
Agreement.
"WCPT Amount" shall have the meaning set forth in Section 7.1(i).
"WCPT I Distributions" shall mean, as of any date, an amount equal to the
product of (x) the distributions made to WCPT, WHWEL, Whitehall XI and Holding
Co. pursuant to Section 7.1(b)(iii)(B) multiplied by (y) the quotient (expressed
as a percentage rounded up to the nearest one ten- thousandth (0.0001)) of the
WCPT I Percentage Interest divided by the Combined Whitehall/WCPT Percentage
Interest.
"WCPT II Distributions" shall mean, as of any date, an amount equal to the
product of (x) the distributions made to WCPT, WHWEL, Whitehall XI and Holding
Co. pursuant to Section 7.1(b)(iii)(B) multiplied by (y) the quotient (expressed
as a percentage rounded up to the nearest one ten-
Exhibit 10.50 Page 29
<PAGE>
thousandth (0.0001)) of the WCPT II Percentage Interest divided by the Combined
Whitehall/WCPT Percentage Interest.
"WCPT I Percentage Interest" shall mean the percentage obtained by dividing
(A) the number of Membership Units issued to WCPT as of the date hereof, plus
the number of Membership Units issued to WCPT after the date hereof in respect
of the WCPT Phase I Capital Contribution as of such date by (B) the total number
of Membership Units issued to WCPT as of such date.
"WCPT II Percentage Interest" shall mean the percentage obtained by
dividing (A) the number of Membership Units issued to WCPT after the date hereof
in respect of the WCPT Phase II Capital Contribution as of such date by (B) the
total number of Membership Units issued to WCPT as of such date.
"WCPT IPO" shall have the meaning set forth in Section 8.3(e).
"WCPT Phase I Capital Contributions" shall mean, as of any date, the sum of
$64,652,543, plus the product of (x) WCPT's total Capital Contributions funded
as of such date (excluding Capital Contributions funded prior to the date
hereof) multiplied by (y) 0.51615.
"WCPT Phase II Capital Contributions" shall mean, as of any date, the sum
of $300,000, plus the product of (x) WCPT's total Capital Contributions funded
as of such date multiplied by (y) 0.48385.
"Whitehall XI" shall have the meaning set forth in the first paragraph of
this Agreement.
"Whitehall Group" shall mean, collectively, WHWEL, Whitehall XI and Holding
Co., together with any assignees or transferees to the extent permitted
hereunder.
"Whitehall Registration Statement" shall have the meaning set forth in
Section 8.3(e).
"WHWEL" shall have the meaning set forth in the first paragraph of this
Agreement.
"WRP" shall mean Wellsford Real Properties, Inc., a Maryland corporation.
"WRP At-Market Shares" shall mean the shares of WRP issued to WHWEL
pursuant to the WRP Letter Agreement in exchange for Membership Units owned by
WHWEL.
"WRP Letter Agreement" shall mean the letter agreement, dated as of the
date hereof, between WHWEL and WRP concerning the conversion of WHWEL's
Membership Units into WRP At- Market Shares.
"WRP Shares" shall mean shares of common stock, $.01 par value per share,
of WRP.
"WRP Warrants" shall mean the warrants that were originally issued to WHWEL
by WRP pursuant to the Warrant Agreement, which have been assigned to Holding
Co. as of the date hereof.
Exhibit 10.50 Page 30
<PAGE>
"WWG Contribution" shall have the meaning set forth in the fourth paragraph
of this Agreement.
"WWP" shall have the meaning set forth in the second paragraph of this
Agreement.
"WWP II" shall have the meaning set forth in the third paragraph of this
Agreement.
"WWP Agreement" shall have the meaning set forth in the second paragraph of
this Agreement.
"WWP Contribution" shall have the meaning set forth in the third paragraph
of this Agreement.
1.2. Terms Generally. For all purposes of this Agreement, except as
otherwise expressly provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings assigned to them in
this Article and include both the plural and the singular;
(b) the words "herein," "hereof" and "hereunder" and other words of similar
import refer to this Agreement as a whole and not to any particular Article,
Section or other subdivision; and
(c) the words "including" and "include" and other words of similar import
shall be deemed to be followed by the phrase "without limitation."
ARTICLE II.
THE COMPANY AND ITS BUSINESS
----------------------------
2.1. Company Name. The business of the Company shall be conducted under the
name of "Wellsford/Whitehall Group, L.L.C." in the State of Delaware and under
such name or such assumed names as the Management Committee deems necessary or
appropriate to comply with the requirements of any other jurisdiction in which
the Company may be required to qualify.
2.2. Term. The term of the Company will commence on the date of this
Agreement and shall continue in full force and effect until December 31, 2045,
unless sooner terminated or dissolved as hereinafter provided.
2.3. Filing of Certificate and Amendments. The Manager shall (and shall
have the power and authority to) execute and file the Certificate of Formation
and any required amendments thereto and do all other acts requisite for the
constitution of the Company as a limited liability company pursuant to the laws
of the State of Delaware or any other applicable law and for enabling the
Company or its Subsidiaries to conduct business in each jurisdiction where the
Properties are located.
Exhibit 10.50 Page 31
<PAGE>
2.4. Purpose and Business; Powers; Scope of Members' Authority. (a) The
Company is organized primarily for the purpose of directly or indirectly
acquiring, owning, financing, managing, maintaining, operating, improving,
developing and selling real property (each real property owned by the Company or
one of its Subsidiaries, together with all improvements thereon and personal
property owned by the Company or its Subsidiary related thereto, a "Property",
and all properties collectively, the "Properties"). As of the date of hereof,
the Properties are those listed in Schedule 2.4A and the Subsidiaries are those
listed in Schedule 2.4B. Subject to the other terms and conditions of this
Agreement, the Company is empowered to do any and all acts and things necessary,
appropriate, proper, advisable, incidental to or convenient for the furtherance
and accomplishment of the purposes and business described herein and for the
protection and benefit of the Company and its Subsidiaries, including, without
limitation, full power and authority, directly or through its Subsidiaries, to
enter into, perform and carry out contracts of any kind, borrow money and issue
evidences of indebtedness whether or not secured by mortgage, deed of trust,
pledge or other lien, acquire, own, manage, improve and develop any Property,
and lease, sell, transfer and dispose of any Property. The Company will at all
times operate in a manner so as to be exempt from the provisions of the
Investment Company Act of 1940, as amended.
(b) Except as otherwise expressly and specifically provided in this
Agreement, no Member shall have any authority to bind or act for, or assume any
obligations or responsibility on behalf of, any other Member. Neither the
Company nor any Member shall, by virtue of executing this Agree ment, be
responsible or liable for any indebtedness or obligation of the other Members or
otherwise relating to any Property incurred or arising either before or after
the execution of this Agreement, except as to those joint responsibilities,
liabilities, indebtedness, or obligations expressly assumed by the Company as of
the date of this Agreement or incurred thereafter pursuant to and as limited by
the terms of this Agreement.
2.5. Principal Office; Registered Agent. The principal office of the
Company shall be 535 Madison Avenue, 26th Floor, New York, New York 10022. The
Company may change its place of business to such location or locations as may at
any time or from time to time be determined by the Management Committee. The
mailing address of the Company shall be c/o Wellsford Commercial Properties
Trust, 535 Madison Avenue, 26th Floor, New York, New York 10022, or such other
address as may be selected from time to time by the Management Committee. The
Company shall maintain a registered office at The Corporation Trust Company,
Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle County,
Delaware 19801. The name and address of the Company's registered agent is The
Corporation Trust Company, Corporation Trust Center, 1209 Orange Street,
Wilmington, New Castle County, Delaware 19801.
2.6. Names and Addresses of Members. The names and addresses of the Members
are as set forth on Schedule 2.6 hereto.
2.7. Representations and Warranties by the Company. To support the
valuation as of the date hereof of each Membership Unit at $15.85, the Company
hereby:
(a) represents and warrants to each of Whitehall XI and Holding Co. that
the representations and warranties in Schedule 2.7A are true and correct, as of
the dates set forth therein,
Exhibit 10.50 Page 32
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with respect to each of the Properties listed in Schedule 2.4A, each as
described in the Disclosure Materials;
(b) represents and warrants to each of Whitehall XI and Holding Co. that
the representations and warranties in Schedule 2.7B are true and correct, as of
the date hereof, with respect to the Company and each of the Subsidiaries listed
in Schedule 2.4B; and
(c) understands and acknowledges that each of Whitehall XI and Holding Co.
is relying on such representations and warranties in making its decision to
become a Member of the Company and contribute capital thereto.
The representations and warranties in this Section 2.7, Schedule 2.7A and
Schedule 2.7B shall survive until May 15, 2000.
2.8. Representations and Warranties by each Member.
(a) Each Member (other than each Saracen Member) hereby represents and
warrants to the other Members, as of the date hereof, that, with respect to
itself only, the following representations and warranties are true and correct:
(i) Such Member has been duly organized and is validly existing and in good
standing in the jurisdiction of its organization and is duly licensed or
qualified to transact business in each jurisdiction in which the nature of its
business activities or assets requires such licensing or qualification. Such
Member has the requisite power and authority to carry on its business as it is
now being, and is proposed to be, conducted.
(ii) This Agreement has been duly authorized, executed and delivered by
such Member and constitutes a legal, valid and binding obligation of such
Member, enforceable against such Member in accordance with its terms, except as
limited by bankruptcy, insolvency, receivership and similar laws affecting
creditors' rights from time to time in effect.
(iii) No order, permission, consent, approval, license, authorization,
registration or filing by or with any government agency having jurisdiction over
such Member or any other Person is required for the execution, delivery or
performance by such Member of this Agreement or any other document or instrument
to be executed and delivered by such Member (in its individual capacity or as a
partner, member or other equity holder of any other Person) in connection with
the Closing, except for such orders, permissions, consents, approvals, licenses,
authorizations, registrations and filings as have already been obtained, given
or made.
(b) Each Saracen Member, with respect to itself only, hereby represents and
warrants to the other Members, as of the date hereof, that this Agreement has
been duly executed and delivered by such Saracen Member and constitutes a legal,
valid and binding obligation of such Saracen Member, enforceable against such
Saracen Member in accordance with its terms, except as limited by bankruptcy,
insolvency, receivership and similar laws affecting creditors' rights from time
to time in effect.
Exhibit 10.50 Page 33
<PAGE>
(c) Holding Co. hereby represents and warrants to the other Members, as of
the date hereof, that the following representations and warranties are true and
correct:
(i) Holding Co. owns 100% of the legal and beneficial interest in the
Holding Co. Contributed Asset, free and clear of all Liens (other than the
Assumed Financing) and, after giving effect to the Closing, the Company will own
100% of the assets of the Holding Co. Contributed Asset.
(ii) Except for the Assumed Financing and liabilities arising in the
ordinary course of business, Holding Co. has not created any liabilities of
WXI/Mt. Bethel Road, L.L.C. of any nature, whether matured or unmatured, fixed
or contingent, accrued or unaccrued, liquidated or unliquidated, whether due or
to be become due, regardless of whether the disclosure thereof otherwise would
be required by GAAP.
2.9. Indemnification.
(a) The Company shall indemnify each of Whitehall XI and Holding Co.
against, and hold each of Whitehall XI or Holding Co. harmless from, its ratable
share of any loss, liability, expense or damage incurred by the Company
including, without limitation, reasonable counsel fees and disbursements and
court costs (any such amount, a "Company Loss") accruing from or resulting by
reason of any breach or inaccuracy of the representations and warranties made by
the Company in Section 2.7, Schedule 2.7A and Schedule 2.7B; PROVIDED, however,
that the Company shall have no liability hereunder for any Company Loss unless
and until all Company Losses, taken together, exceed $500,000 in the aggregate
and then the Company shall have liability hereunder only for the amount by which
all Company Losses, taken together, exceed $500,000. For the purposes hereof,
the ratable share of Whitehall XI's or Holding Co.'s Company Loss shall be an
amount equal to the product of (x) the amount of such Company Loss times (y) the
Percentage Interest of Whitehall XI or Holding Co., respectively, on the date
that the claim is asserted. In lieu of a cash payment on account of such
indemnity, Whitehall XI and Holding Co. shall each be issued additional
Membership Units based on a value per Membership Unit to be determined by the
Management Committee (taking into account the Company Loss) so that, after
giving effect to such issuance of additional Membership Units, the value (taking
into account the Company Loss) of Membership Units owned by each of Whitehall XI
and Holding Co. is equal to the product of (i) the number of Membership Units
owned by Whitehall XI or Holding Co. (as applicable) immediately preceding such
issuance, multiplied by (ii) the Deemed Value Per Membership Unit in effect
immediately preceding such issuance. Whitehall XI or Holding Co. will notify the
Company of any claim hereunder, and the Company will notify Whitehall XI and
Holding Co., promptly after learning of an alleged Company Loss that could
entitle Whitehall XI or Holding Co. to indemnification hereunder. No
indemnification is given as to the fair market value of the "total assets" of
the Company on the date hereof or any time thereafter. For purposes hereof, in
the event any Subsidiary of the Company incurs a loss of the type described in
the definition of Company Loss above, the Company shall be deemed to have
incurred a Company Loss in an amount equal to the product of (i) the amount of
such loss so incurred by such Subsidiary and (ii) the Company's ownership
percentage in such Subsidiary on the date such loss is incurred. Neither
Whitehall XI nor Holding Co. may commence any action or proceeding or otherwise
make a claim for damages based upon a breach or inaccuracy of the
representations and warranties made by the Company after May 15, 2000; provided,
that this sentence shall not restrict Whitehall XI or Holding Co. from
prosecuting or otherwise pursuing a claim
Exhibit 10.50 Page 34
<PAGE>
for indemnification hereunder after such date with respect to any claim made (by
written notice to the Company setting forth, with reasonable specificity, such
claim and the grounds therefor) or proceeding or action commenced on or prior to
May 15, 2000.
2.10. Post-Closing Adjustments. The Company shall be entitled to receive,
and Holding Co shall pay to the Company if received by Holding Co. or any of its
Affiliates, all rents, receivables and other items of income (collectively,
"Income") with respect to 150 Mt. Bethel Road that is received prior to, on or
after the Closing Date that relates to any event or period after Closing,
PROVIDED that Holding Co. shall be entitled to receive, and the Company shall
pay to Holding Co., if received by the Company, all Income with respect to 150
Mt. Bethel Road owing by tenants or other Persons at 150 Mt. Bethel Road which
accrued prior to the Closing Date, unless and to the extent any amounts are then
due and payable by the payor of such income to the Company on account of any
period after the Closing and such payment is not specifically designated to be
applied to amounts owing which relate to events or periods prior to the Closing.
No later than thirty (30) days after the Closing, the Company and Holding Co.
shall collectively and jointly determine and calculate, with respect to 150 Mt.
Bethel Road, the apportionment, as of midnight of the Closing Date, of real
estate taxes, utilities and other expense items (but not items of Income, which
are to be allocated as provided in the preceding sentence) that are customarily
apportioned between buyers and sellers of real estate (collectively, the
"Closing Date Proration"). If the Closing Date Proration shall be a credit to
Holding Co., the Company shall remit to Holding Co. an amount equal to the
Closing Date Proration. If the Closing Date Proration shall be a credit to the
Company, Holding Co. shall remit to the Company an amount equal to the Closing
Date Proration.
ARTICLE III.
MANAGEMENT OF COMPANY BUSINESS;
POWERS AND DUTIES OF THE
MANAGER; MAJOR DECISIONS
------------------------
3.1. Management and Control.
(a) Except as otherwise specifically set forth in this Agreement,
including, without limitation, Sections 3.1(c), 3.2, 3.3, 3.4, 3.5 and 3.6, the
Manager shall have the right, power and authority to conduct the business and
affairs of the Company (whether for the Company itself or where the Company is
acting in its capacity as a direct or indirect member, partner or owner of any
Subsidiary) and to do all things necessary to carry on the business of the
Company, and is hereby authorized to take any action of any kind and to do
anything and everything the Manager deems necessary or appropriate in accordance
with the provisions of this Agreement and applicable law. The Manager shall have
the authority to carry out the Business Plan approved by the Management
Committee for each Property subject to the limitations therein and in the
Approved Budget.
(b) As long as WCPT shall be the Manager, WCPT agrees to cause experienced
and qualified personnel of WRP (or an Affiliate of WRP) to supervise the
business of the Company and to devote such time to the business of the Company
and its Subsidiaries as may be necessary to carry out the business and purpose
of the Company and its Subsidiaries in a prudent and efficient manner. Prior to
hiring or terminating any Executive Officer of WCPT, WCPT must first obtain
written consent of each of
Exhibit 10.50 Page 35
<PAGE>
WHWEL and Whitehall XI (or their respective Committee Representatives), which
consent shall not be unreasonably withheld or delayed; provided, however, that
the consent of WHWEL and Whitehall XI (or their respective Committee
Representatives) shall not be required in connection with terminating an
Executive Officer of WCPT who is also an Executive Officer of WRP.
(c) The Manager shall not, without the prior approval of the Management
Committee, take any action on behalf of or in the name of the Company (whether
for the Company itself or where the Company is acting in its capacity as a
direct or indirect member, partner or owner of any Subsidiary), or enter into
any commitment or obligation binding upon the Company, except for (i) actions
authorized under this Agreement and (ii) actions authorized by the Members or
the Management Committee in the manner set forth herein. The Manager shall
indemnify and hold harmless the Company, its Subsidiaries and the Members and
their Affiliates from and against any and all claims, demands, losses, damages,
liabilities, lawsuits and other proceedings, judgments and awards, and costs and
expenses (including but not limited to reasonable attorneys' fees) arising,
directly or indirectly, in whole or in part, out of any breach of the provisions
of this Section 3.1(c) by the Manager or its Affiliates.
(d) The Management Committee shall have the full and exclusive right, power
and authority to act on behalf of the Company (whether the Company is acting in
its own behalf or in its capacity as a direct or indirect member, partner or
owner of any Subsidiary) to the extent provided herein, including, without
limitation, Sections 3.4, 3.5 and 3.7.
3.2. Enumeration of Specific Duties. (a) Subject to the other provisions of
this Article III, the Manager shall have the right, power, authority and (to the
extent there are available funds from the Company or the appropriate Subsidiary)
duty, all at the Company's expense, to manage the day- to-day business of the
Company and the Subsidiaries and to implement the decisions made and the actions
authorized for and on behalf of the Company by the Management Committee,
including, without limitation, all of the following:
(i) applying for and using diligent efforts to obtain any and all necessary
consents, approvals and permits required for the occupancy and operation of each
Property;
(ii) supervising and managing the performance of all contractors performing
work (including construction) including direct observation, inspection and
supervision during the progress thereof; making final inspection of the
completed work and approving bills for payment; obtaining the necessary
receipts, releases, waivers, discharges and assurances to keep each Property
free from mechanics' and materialmen's liens and other claims;
(iii) paying, before delinquency and prior to the addition of interest or
penalties, all taxes, assessments and other impositions applicable to each
Property and other assets owned by the Company and its Subsidiaries, and
undertaking any action or proceeding seeking to reduce such taxes, assessments
or other impositions;
(iv) procuring all necessary insurance to the extent available at
commercially reasonable rates for the Company and its Subsidiaries in accordance
with the Insurance Program adopted by the Company from time to time pursuant to
clause (b) of the definition of
Exhibit 10.50 Page 36
<PAGE>
"Operational Decision" set forth in Section 3.4.B. below (provided that the
Manager shall increase any insurance coverage carried by the Company and its
Subsidiaries or procure any additional insurance coverage (whether or not
provided for in the Insurance Program) if required under the terms of any
Property Loan or if requested to do so by the Management Committee to the extent
it is commercially reasonable to do so); causing the Members to be named as
additional insureds on all liability policies maintained by the Company and its
Subsidiaries; delivering to the members of the Management Committee copies of
all insurance policies maintained by the Company and its Subsidiaries from time
to time, including renewals or replacements of any expiring policies prior to
the expiration thereof;
(v) verifying that appropriate insurance (including any required by the
terms of any Property Loan) is maintained by each contractor performing work on
a Property;
(vi) executing and delivering leases and other legal documents necessary to
carry out the business of the Company and its Subsidiaries (which legal
documents shall have first been approved by the Management Committee if its
approval is required pursuant to this Agreement, including, without limitation,
Section 3.4 below) PROVIDED that, the Management Committee shall be deemed to
have approved the legal documents and tenants in respect of the leases described
on Schedule 3.2(a)(vi);
(vii) demanding, receiving, acknowledging and instituting legal action for
recovery of any and all revenues, receipts and considerations due and payable to
the Company or its Subsidiaries, in accordance with prudent business practices;
(viii) keeping all books of account and other records of the Company and
its Subsidiaries and delivering all reports in the manner provided in Article XI
below and maintaining (or causing to be maintained) books of account and other
records of the Subsidiaries separate and distinct from the books and records of
the Company;
(ix) maintaining all funds of the Company in a Company bank account in the
manner provided in Article XI below, which funds shall not be commingled with
the funds of the Subsidiaries or any other Person, conducting any and all
banking transactions on behalf of the Company and adjusting and settling
checking, savings, and other accounts with such institutions as the Management
Committee shall deem appropriate;
(x) delivering to the Management Committee members copies of any notices
received from lenders, or other persons with whom the Company or its
Subsidiaries have material contractual obligations, alleging any material
deficiencies or defaults by the Company or its Subsidiaries under the said
contractual arrangements;
(xi) protecting and preserving the title and interests of the Company (and
its Subsidiaries) in the Properties and all other assets of the Company,
including keeping each Property and all other assets of the Company and its
Subsidiaries free from mechanics' and materialmen's liens;
Exhibit 10.50 Page 37
<PAGE>
(xii) coordinating the defense of any claims, demands, suits or legal
proceedings made or instituted against the Company (or its Subsidiaries) or the
Members (as members of the Company) by other parties, through legal counsel for
the Company engaged in accordance with the terms of this Agreement; giving the
members of the Management Committee prompt notice of the receipt of any material
claim or demand or the commencement of any suit or legal proceeding and, upon
request, promptly providing the members of the Management Committee all
information relevant or necessary thereto;
(xiii) monitoring and complying with (A) the terms and provisions of any
restrictive covenants or easement agreements affecting any Property or any
portion thereof, and any and all contracts entered into or assumed by the
Company (or its Subsidiaries), including, without limitation, the exceptions
noted in any title policy and (B) the terms and provisions of any note, mortgage
and other loan documents assumed or executed by the Company or any Subsidiary,
including any Property Loan documents;
(xiv) coordinating the marketing and leasing of each Property;
(xv) paying (or causing to be paid), prior to delinquency, all insurance
premiums, debts and other obligations of the Company and its Subsidiaries,
including amounts due under any loans to the Company or its Subsidiaries and
costs of construction, operation and maintenance of each Property;
(xvi) at Company expense (except as otherwise provided herein) and subject
to the provisions of this Agreement, operating, maintaining and otherwise
managing each Property in an efficient manner and at all times maintaining an
organization sufficient to enable it to carry out all of its duties, obligations
and functions as Manager under this Agreement, and rendering advice concerning
sales and rental values in the manner set forth in this Agreement;
(xvii) during the term of this Agreement, complying with all present and
future laws, ordinances, orders, rules, regulations and requirements of all
federal, state and municipal governments, courts, departments, commissions,
boards and officers, the requirements of any insurance policy (or any insurer
thereunder) covering any Property, any national or local Board of Fire
Underwriters, or any other body exercising functions similar to those of any of
the foregoing, which may be applicable to any Property and the operation and
management thereof, and, when appropriate and prudent to do so, contesting the
validity or application of any such law, ordinance, order, rule, regulation or
requirement;
(xviii) performing all other services reasonably necessary or required for
the ownership, development, maintenance, marketing and operation by the Company
or its Subsidiaries of each Property or otherwise required to be performed by
the Manager pursuant to this Agreement and not otherwise prohibited hereunder;
(xix) requesting the Management Committee's consent to any matter which the
Company (or any Subsidiary) has the right to consent to, waive or approve under
or with respect to the partnership agreement or other governing instrument of
any Subsidiary to the extent such matter would require the approval or consent
of the Management Committee hereunder;
Exhibit 10.50 Page 38
<PAGE>
(xx) delivering to each member of the Management Committee promptly upon
its receipt, copies of all (1) material summonses and complaints served on the
Company or any Subsidiary, (2) notices of default on any loan or other
indebtedness of the Company or any of its Subsidiaries or any material contract
to which the Company or any Subsidiary is a party and (3) notices of the
incurrence of or discovery by the Manager of any Lien against any Property
(other than a Permitted Lien);
(xxi) executing on behalf of the Company and filing the certificate of
formation, certificate of limited partnership or certificate of incorporation
for any Subsidiary of the Company (the formation of which has been approved by
the Management Committee) and any required amendments thereto and executing the
operating company agreement or limited partnership agreement or adopting by-laws
of any such Subsidiary and any required amendments thereto to the extent the
operative provisions of such agreement or by-laws or amendment has been approved
by the Management Committee; and doing all other acts requisite for the
constitution of such Subsidiary pursuant to the laws of the State of Delaware or
any other applicable law and for enabling such Subsidiary to conduct its
business in each jurisdiction where the Properties are located; and
(xxii) taking any action directed by the Management Committee (as evidenced
by a written consent thereof).
(b) The Manager shall devote such time to the Company, its Subsidiaries and
their respective businesses as shall be reasonably necessary to conduct the
business of the Company and its Subsidiaries in an efficient manner and to carry
out the Manager's responsibilities set forth in this Agreement. The Manager
shall act and carry out its duties hereunder with reasonable diligence and in a
prompt and businesslike manner, exercising such care and skill as a prudent
property manager with sophistication and experience in managing and developing
real estate assets like the Properties would exercise in dealing with its own
property. Provided that the Manager satisfies the standard of care, skill and
performance set forth in this paragraph (b), the Manager shall not be deemed to
be in default of its duties under this Section 3.2 with respect to its acts or
omissions in carrying out such duties.
3.3. No Authority to Hire Employees. The Company and its Subsidiaries shall
have no employees and the Manager shall have no authority to hire any employees
of the Company or its Subsidiaries. The Manager and/or WRP shall at its own
expense (subject to reimbursement as otherwise specifically provided in this
Agreement) maintain an organization sufficient to enable the Manager and/or WRP
to carry out all its duties, obligations and functions hereunder. Without
limiting the generality of the foregoing, the Manager and/or WRP shall maintain,
at the Company's (or the applicable Subsidiary's) expense, workers' compensation
insurance, employer's liability insurance, fidelity bonds for employees with
authority to sign checks or make withdrawals from Company and/or Subsidiary bank
accounts, and other appropriate insurance insuring the Company (and each
Subsidiary) against any loss due to embezzlement or other dishonest acts or
errors or omissions of any employees of the Company, the Manager and/or WRP or
any of its Affiliates.
3.4. Decisions Requiring Approval of the Management Committee.
Notwithstanding anything to the contrary in this Agreement, no act shall be
taken, sum expended, decision made or obligation incurred by the Company (in its
own behalf or in its capacity as a member, partner or other
Exhibit 10.50 Page 39
<PAGE>
equity holder of any Subsidiary) or the Manager with respect to a matter within
the scope of any of the Major Decisions or Operational Decisions, unless and
until the Required Committee Approval shall have been obtained pursuant to and
in accordance with this Section 3.4 and Section 3.5. The provisions of this
Agreement relating to the management and control of the business and affairs of
the Company shall also be construed to be fully applicable to the management and
control of each Subsidiary and any and all matters listed in part A below in
this Section 3.4 shall constitute Major Decisions for purposes hereof whether
such matter relates to the Company or any Subsidiary of the Company and any and
all matters listed in part B below in this Section 3.4 shall constitute
Operational Decisions for purposes hereof whether such matter relates to the
Company or any Subsidiary of the Company. In the event of any need for consent
of the Management Committee to any Major Decision or Operational Decision, the
Manager shall make such request of the Management Committee in writing and shall
provide each member of the Management Committee with any information reasonably
necessary for the Management Committee to make an informed decision. The Manager
shall use its reasonable efforts to keep the Management Committee informed of
the status of any matter regarding which the Manager intends to request the
Management Committee's consent under this Section 3.4.
A. The "Major Decisions" are:
(a) altering the nature of the business of the Company or its Subsidiaries
from the businesses permitted by Section 2.4(a);
(b) taking any action in contravention of, amending, modifying or waiving,
the provisions of this Agreement or the Certificate of Formation, or taking any
action in contravention of, amending, modifying or waiving the provisions of any
Organizational Documents for any Subsidiary;
(c) making a Capital Call except as permitted by Section 5.2;
(d) instituting proceedings to adjudicate the Company or any Subsidiary a
bankrupt, or consent to the filing of a bankruptcy proceeding against the
Company or any Subsidiary, or file a petition or answer or consent seeking
reorganization of the Company or any Subsidiary under the Federal Bankruptcy Act
or any other similar applicable federal or state law, or consent to the filing
of any such petition against the Company or any Subsidiary, or consent to the
appointment of a receiver or liquidator or trustee or assignee in bankruptcy or
insolvency of the Company or any Subsidiary or of its property, or make an
assignment for the benefit of creditors of the Company or any Subsidiary, or
admit the Company's or any Subsidiary's inability to pay its debts generally as
they become due;
(e) extending the term of the Company or any of its Subsidiaries beyond
December 31, 2045;
(f) approving any Annual Capital Budget, Annual Operating Budget or
Business Plan or modifying (or deviating from) any of the foregoing except to
the extent the Manager is so permitted by this Section 3.4);
Exhibit 10.50 Page 40
<PAGE>
(g) establishing any reserve for the Company in excess of $1 million (less
any reserves held by the Company's Subsidiaries other than Property-level
reserves) or establishing any Property-level reserves in excess of 0.5% of the
book value of the applicable Property (before depreciation);
(h) selecting or varying depreciation and accounting methods which would
have a material effect on the income, loss, gain or deduction of the Company or
any of its Subsidiaries and making any other decisions or elections with respect
to federal, state, local or foreign tax matters or other financial purposes;
(i) except as the Managing Members are each permitted by Section 8.2
hereof, directly or indirectly selling, transferring, assigning, hypothecating,
pledging or otherwise disposing of all or any portion of any Property or any
Subsidiary or any interest in any of the foregoing;
(j) extending credit, making loans or becoming or acting as a surety,
guarantor, endorser or accommodation endorser (or materially modifying any
obligations relating to the foregoing), except in connection with negotiating
checks or other instruments received by the Company (or any Subsidiary) and
except for immaterial amounts in the ordinary course of business;
(k) selecting the Company's or any Subsidiary's accountants and independent
auditors (unless such accountants or auditors are Ernst & Young); and approving
financial statements prepared by the Company's or any Subsidiary's auditors;
(l) making or agreeing to any material changes to the zoning of any
Property; and approving the material terms and provisions of any material
restrictive covenants or easement agreements (other than utility easements or
other non-material easements necessary for the operation or development of a
Property) or any material documents establishing a cooperative, condominium or
similar association or related entity affecting any Property or any portion
thereof;
(m) obtaining financing or refinancing for, or otherwise incurring any
Indebtedness or issuing any debt or equity securities (including Back-to-Back
Debt) of, the Company (or any Subsidiary) or any assets of the Company (or any
Subsidiary) including, without limitation, any Property Loan and any financing
of the operations of the Company (or any Subsidiary), except for unsecured loans
for working capital specifically set forth in an Approved Budget; placing or
suffering of any other Lien or encumbrance (other than leases permitted under
paragraph (a) of the definition of "Operational Decision" in this Section 3.4)
on or affecting any Property or any portion thereof or any other material
property or asset owned by the Company (or any Subsidiary) or selling any debt
securities of the Company or any Subsidiary in a public or private offering or
otherwise (or taking any action which has substantially the same effect or
commits the Company or any Subsidiary to any of the foregoing); approving any
document (including any amendment, supplement or other modification) containing
or evidencing any material modification of any term of any such financing,
refinancing or encumbrance which was
Exhibit 10.50 Page 41
<PAGE>
previously approved by the Management Committee; and approving the terms of a
workout of any such financing or refinancing with the lender thereof;
(n) approving the admission to the Company of a successor or a New Member
or removing any Member, designating or approving the classification of any new
class of Membership Units issued to a New Member (and establishing the
designations, preferences and relative, participating, optional or other special
rights, powers and duties of each class of Membership Units) or approving the
admission to any Subsidiary of a successor or an additional partner or member or
other equity owner;
(o) terminating and dissolving the Company (or causing or consenting to any
such action relating to a Subsidiary) except in accordance with Article X below;
(p) acquiring any land or other real property or any interest therein;
(q) making or approving any material change or modification to the
Marketing Plan applicable to any Property, it being agreed that it shall not be
deemed to be material if the proposed change (i) was necessitated by the
occurrence of an event which was not in the control of the Manager, (ii) relates
to a non-discretionary expenditure (e. g., taxes, utilities or insurance) or
(iii) would not cause either (1) more than a 5% increase in expenditures or
decrease in revenues from the line item in question set forth in the Approved
Budget (taking into account all other changes affecting such line item during
the same Budget Year not previously approved by the Management Committee);
provided that, the amount of such increase or decrease (together with all prior
increases in expenditures and decreases in revenues in such Approved Budget)
shall not exceed 2% of the total expenditures or revenues, as the case may be,
in the Approved Budget or (2) any Property Loan to be in default;
(r) modifying the material terms of (i) any loan documentation or (ii) any
other material agreement after the same has been approved by the Members or the
Management Committee (but only in the case of clause (ii) if the consent of the
Management Committee shall have been required as a condition to the Manager's
executing such other material agreement);
(s) except as each of the Managing Members is permitted by Section 8.2,
approving or entering into an Extraordinary Transaction with respect to the
Company or any Subsidiary or causing the Company (or any Subsidiary) to sell
ownership interests or other securities in a public or private offering or
otherwise (or taking any action which has substantially the same effect or
commits the Company or any Subsidiary to do any of the foregoing);
(t) taking any action or giving or withholding any consent, waiver or
approval or exercising any right that is specifically delegated to or requires
the approval of the Management Committee pursuant to the terms of this
Agreement; or
(u) forming any subsidiary of the Company (other than those listed in
Schedule 2.4B).
Exhibit 10.50 Page 42
<PAGE>
Notwithstanding anything herein to the contrary, the assumption of the
Assumed Financing by the Company and the execution and delivery by the Company
of the documentation related thereto shall be deemed to have been approved by
the Management Committee.
B. The "Operational Decisions" are:
(a) executing, modifying, accepting the surrender of or terminating any
lease or other arrangement involving the rental, use or occupancy of any
Property or any part thereof, except in accordance with the applicable Leasing
Plan; PROVIDED, however, that the Manager may modify a lease of all or any
portion of any Property if such lease would still satisfy the applicable Leasing
Plan as modified; and PROVIDED further, however, that the Manager may terminate
any lease (and bring eviction and legal proceedings against the tenant
thereunder) where the tenant has defaulted in its rent payments or is otherwise
in material default;
(b) approving an insurance program for the Company (and its Subsidiaries)
and each Property (the "Insurance Program");
(c) retaining legal counsel for the Company (or its Subsidiaries) in
connection with any major financing or other capital event (including a merger,
combination or public offering of the Company);
(d) taking any action in respect of any Property relating to environmental
matters other than to obtain environmental studies and reports and conduct (or
arrange for) evaluations and analyses thereof and other than to remediate any
environmental contamination or other similar matters as required by law if the
cost of such remediation would not exceed $250,000;
(e) settling an insurance claim or condemnation action involving a claim in
excess of Five Hundred Thousand Dollars ($500,000) or which, when added to all
other insurance or condemnation claims during a single calendar year, exceeds
One Million Dollars ($1,000,000);
(f) unless required pursuant to the terms of any ground lease or mortgage
encumbering any Property, deciding whether to repair or rebuild in case of
material damage to any of the improvements on such Property, or any part
thereof, arising out of a casualty or condemnation (except such emergency
repairs as may be necessary to protect such Property);
(g) making any expenditure or incurring any cost or obligation which, when
added to any other expenditure, cost or obligation of the Company (or its
Subsidiaries, as the case may be), either exceeds the applicable Approved Budget
applicable to the Budget Year when such expenditure was made or cost or
obligation was incurred or exceeds any line items specified in such Approved
Budget; PROVIDED, however, that the Manager may, without the approval of the
Management Committee, make expenditures or incur obligations in excess of an
Approved Budget if (i) the making of such expenditure or incurrence of such
obligation either (1) was necessitated by the occurrence of an event which was
not in the control of the Manager or (2) relates to a non-discretionary
expenditure (e.g., taxes, utilities and insurance), (ii) such expenditure or
obligation is within a 5% variance from the line item in question set forth in
such Approved Budget (taking into account all other expenditures in excess of
such line item during
Exhibit 10.50 Page 43
<PAGE>
the same Budget Year not previously approved by the Management Committee) and
the amount of all variances for such Budget Year (including the pending
variance) would not exceed 5% of the total expenditures in the Approved Budget
and (iii) such expenditure or obligation would not cause the applicable Property
Loan, if any, to be in default;
(h) giving or withholding any consent, waiver or approval or exercising any
right that the Company (or any Subsidiary) has the right to give, withhold or
exercise under or with respect to the Organizational Document of any Subsidiary
to the extent that the Management Committee would have the right to approve,
consent or exercise rights hereunder regarding such matter;
(i) entering into any property management, leasing, development or similar
agreement.
Notwithstanding anything to the contrary herein, the exercise by a
Marketing Member of its rights under Section 8.2 shall not require any approval
or other action of the Management Committee or any other Member.
3.5. Management Committee.
(a) A committee consisting of the Committee Representatives (the
"Management Committee") is hereby established and is granted the sole and
exclusive right, power and authority to make, approve or disapprove all Major
Decisions and Operational Decisions on behalf of the Company and its
Subsidiaries, and is hereby authorized to designate an authorized signatory to
execute and deliver on behalf of the Company (or to cause the Manager to so
execute and deliver) any and all such contracts, certificates, agreements,
instruments and other documents, and to take any such action, as the Management
Committee deems necessary or appropriate relating to Major Decisions and
Operational Decisions.
(b) The Manager shall cause such reports as the Management Committee shall
reasonably request to be prepared and delivered on a timely basis to the members
of the Management Committee. Unless and until a new Approved Budget shall be
established, the Company shall operate under the most recent Approved Budget.
The Manager may from time to time submit amendments to any Business Plan for the
approval of the Management Committee. The Management Committee will meet
promptly after the submission of a Business Plan or proposed amendment thereto
with the object of reaching some conclusion thereon within not later than thirty
(30) days after the submission of the same.
(c) (i) Two Committee Representatives shall be appointed by each of WHWEL
and Whitehall XI, and four (4) Committee Representatives shall be appointed by
WCPT (each of WHWEL, Whitehall XI and WCPT in such capacity, an "Appointing
Member") and each Committee Representative shall serve at the pleasure of the
Appointing Member that appointed such Committee Representative. Each Committee
Representative appointed by WCPT shall be an officer or employee of WCPT or WRP.
Each Committee Representative appointed by WHWEL or Whitehall XI shall be an
officer or employee of Goldman, Sachs & Co., Goldman Sachs Group or one of their
respective Affiliates. The Management Committee shall consist of the Committee
Representatives appointed by the Appointing Members, the Committee
Exhibit 10.50 Page 44
<PAGE>
Representatives, if any, appointed by the Saracen Members pursuant to Section
3.5(e)(vi), and the Committee Representatives, if any, appointed by the holders
of Series A Preferred Membership Units together with the holders of membership
interests ranking on a parity with the Series A Preferred Membership Units with
respect to distribution rights (collectively, the "Preferred Holders"), pursuant
to the Series A Terms. Each of WHWEL and Whitehall XI shall cease to be an
Appointing Member if all of the Members of the Whitehall Group, taken together,
cease to own, in the aggregate, Membership Units and/or Shares having an
aggregate original cost or fair market value, whichever is greater, of at least
$15 million (unless, at such time, the aggregate cost or fair market value,
whichever is greater, of WRP's Shares and/or Membership Units (excluding
Membership Units owned through WCPT) is also less than $15 million); in which
case, all decisions, consents and approvals to be made or given by the
Management Committee or the Manager hereunder shall be made exclusively by WCPT
and the Preferred Holders, if applicable. If WRP no longer owns Shares and/or
Membership Units (excluding Membership Units owned through WCPT) having an
aggregate original cost or fair market value, whichever is greater, of at least
$15 million (unless, at such time, the aggregate cost or fair market value,
whichever is greater, of the Membership Units and Shares of all of the Members
of the Whitehall Group, taken together, is also less than $15 million) then,
subject to Section 4.2(j) herein, all decisions, consents and approvals to be
made or given by the Management Committee or the Manager hereunder described in
Section 3.4A(i), (m), (p), (r) and (s) shall instead be made or given
exclusively by WHWEL and Whitehall XI, acting jointly, and, to the extent
provided in the Series A Terms and this Agreement, the Preferred Holders, if
applicable.
(ii) Each Appointing Member, the Saracen Members and the Preferred Holders
shall have the power to remove any Committee Representative appointed by it or
them and simultaneously to appoint a replacement Committee Representative by
delivering notice to the Company and to the other Members five (5) Business Days
in advance of such removal and appointment. Notwithstanding the foregoing, no
notice from Saracen or any of the Saracen Members purporting to remove William
F. Rand, III ("Rand") as a Committee Representative shall be effective unless
executed by Rand. Vacancies on the Management Committee shall be filled by the
Appointing Member, the Saracen Members or the Preferred Holders, as applicable,
that appointed the Committee Representative previously holding the position
which is then vacant. Each Appointing Member and, if applicable, the Preferred
Holders agrees that their respective appointed Committee Representatives shall
have the authority to act on behalf of such Appointing Member or the Preferred
Holders, if applicable, to effectuate the purposes of this Agreement and to
execute documents on their respective behalf (unless such Appointing Member or,
if applicable, the Preferred Holders provides to the Appointing Members and to
the Preferred Holders, if applicable, written notice to the contrary), except
that the Committee Representatives shall not have the authority to appoint
successor Committee Representatives. Each Appointing Member's Committee
Representatives (and such Committee Representatives appointed by the Preferred
Holders, if applicable) shall have the right to rely on the authority of the
Appointing Members' Committee Representatives (and such Committee
Representatives appointed by the Preferred Holders, if applicable) to act for
its designating Appointing Member, or Preferred Holders, as applicable, until
such time as it or they receive written notice from such Appointing Members, or
Preferred Holders, as applicable, that a Committee Representative has been
removed or its authority limited.
Exhibit 10.50 Page 45
<PAGE>
(iii) Except with respect to Rand's appointment as a Committee
Representative by Saracen, the individuals appointed as Committee
Representatives must always be Affiliates or employees of their respective
Appointing Member or their respective Affiliates. Such individuals shall cease
to be Committee Representatives and shall be immediately removed by their
respective Appointing Member (or the other Appointing Member if such Appointing
Member fails to do so) in the event such individuals cease to be so affiliated
with their respective Appointing Member.
(iv) The Committee Representatives effective as of the date hereof shall be
as follows:
WHWEL: Stuart M. Rothenberg and Steven M. Feldman
Whitehall XI: Ronald L. Bernstein and Todd A. Williams.
WCPT: Jeffrey H. Lynford, Edward Lowenthal, Gregory Hughes and Richard
Previdi.
Saracen: William F. Rand, III and Kurt W. Saraceno, which Committee
Representatives shall have been appointed pursuant to Section 3.5(e)(vi) below.
(d) The Management Committee shall act with respect to all matters (whether
to approve any Major Decision and any Operational Decision or to exercise any
other right (or to grant any consent or approval) accorded to the Management
Committee hereunder) by Required Committee Approval. Each Committee
Representative shall have one (1) vote on all matters that arise before the
Management Committee. For avoidance of doubt and notwithstanding anything to the
contrary herein, no matter may be approved and no action taken by the Management
Committee without Required Committee Approval.
(e)(i) The Management Committee shall meet regularly not less often than
quarterly. Special meetings of the Management Committee may be called by any
Committee Representative having a right to vote at such meeting on at least four
(4) Business Days' prior written notice of time and place of such meeting;
PROVIDED, however, that such notice requirement shall be deemed waived by any
Committee Representative who is present (in person or by telephone) at the
commencement of any such special meeting. Regular and special meetings may be
held at any place designated from time to time by the Manager, including
meetings by telephone conference. Six (6) Committee Representatives (at least
one of which shall have been appointed by each of WHWEL and Whitehall XI and two
of which shall have been appointed by WCPT) shall constitute a quorum for
Management Committee action with respect to any Major Decision and three (3)
Committee Representatives (at least one of which shall have been appointed by
each Appointing Member) shall constitute a quorum for Management Committee
action with respect to any Operational Decision, PROVIDED, however, that (x)
unless at least four (4) Business Days' prior written notice of the time and
place of any regular or special meeting is provided to the Committee
Representatives appointed by the Saracen Members pursuant to Section 3.5(e)(vi)
and, (y) during a Preferential Distribution Non-Payment (as defined in the
Series A Terms), unless (A) at least ten (10) Business Days' prior written
notice of the time and place of any regular meeting is provided to the Committee
Representatives appointed pursuant to Section 4 of the Series A Terms, or (B) at
least five (5) Business Days' prior written notice of the time and place of any
special meeting is provided to the
Exhibit 10.50 Page 46
<PAGE>
Committee Representatives appointed pursuant to Section 4 of the Series A Terms,
and at least two (2) Business Days prior to any special meeting such Committee
Representatives are provided with reasonably sufficient information and
documentation to enable them to adequately address the issues presented at the
special meeting, even if there are the required number of Committee
Representatives present to constitute a quorum for Management Committee action,
a quorum will not be deemed to be present at such meeting of the Management
Committee and the Management Committee shall not be authorized to take or
approve any action, unless one of the Committee Representatives appointed by the
Saracen Members pursuant to Section 3.5(e)(vi) and/or one of the Committee
Representatives appointed pursuant to Section 4 of the Series A Terms, as the
case may be, is present (in person or by telephone) at such meeting or consents
to such action by written consent. Notwithstanding the foregoing, in the event
one of the Committee Representatives appointed by the Saracen Members pursuant
to Section 3.5(e)(vi) and/or one of the Committee Representatives appointed
pursuant to Section 4 of the Series A Terms, as the case may be, is not present
at a meeting (in person or by telephone), the Management Committee shall be
deemed authorized to take or approve any action taken at such meeting if the
Saracen Members and/or such Committee Representatives ratify(ies) such action at
a subsequent meeting or in a written consent of the Management Committee (it
being understood and agreed that any decision by the Saracen Members and/or such
Committee Representative with respect to any such ratification may be made in
their or his or her sole discretion and that no Saracen Member of Committee
Representative shall be under any obligation to effect any such ratification).
.
(ii) Actions taken or approved by the Management Committee will be
evidenced by a written resolution prepared within ten (10) business days of a
meeting of the Management Committee by the Manager and approved in writing by
the Committee Representatives who were present at such meeting and who adopted
such resolutions.
(iii) Any action required or permitted to be taken at a meeting of the
Management Committee may be taken without a meeting if a written consent setting
forth the action so taken is signed by the Committee Representatives whose
approval is required to constitute the Required Committee Approval, PROVIDED,
however that the Appointing Members shall send by telecopy or by Federal Express
or other nationally recognized overnight courier service, a copy of the proposed
written consent to the Committee Representatives appointed by the Saracen
Members pursuant to Section 3.5(e)(vi) herein at least two (2) Business Days
prior to the earlier of (i) the effective date of such consent or (ii) the
execution by any Committee Representative of such written consent. In the event
of any action which is taken, or is to be taken pursuant to a written consent
and not pursuant to a vote at a duly called and authorized meeting of the
Management Committee, the Manager shall endeavor, in good faith, to solicit
input from all Committee Representatives prior to the execution by any Committee
Representative of such written consent. Such consent may be in one instrument or
in several instruments, and shall have the same force and effect as a vote of
such Committee Representatives. An action so taken shall be deemed to have been
taken at a meeting held on the effective date so certified. Copies of all such
written consents shall be sent to each Managing Member and to Saracen.
(iv) Each Committee Representative may authorize any other Committee
Representative to act for him or her by proxy on all matters in which a
Committee Representative is entitled to participate, including waiving notice of
any meeting, or voting or participating at a meeting. Every proxy must be signed
by the Committee Representative. No proxy shall be valid after the expiration of
Exhibit 10.50 Page 47
<PAGE>
eleven (11) months from the date thereof unless otherwise provided in the proxy.
Every proxy shall be revocable at the pleasure of the Committee Representative
executing it, such revocation to be effective upon the Company's receipt of
written notice thereof.
(v) All out-of-pocket expenses (including travel expenses) incurred by each
of the Committee Representatives in connection with their service on the
Management Committee shall be borne by the Company.
(vi) The Saracen Members have the right to appoint two (2) Committee
Representatives to attend and observe any and all quarterly and special meetings
of the Management Committee, which initial Committee Representatives are set
forth in Section 3.5(c)(iv). All Committee Representatives appointed by the
Saracen Members pursuant to this Section 3.5(e)(vi) shall be subject to the
prior written approval of the Management Committee, which approval shall not be
unreasonably withheld or delayed, PROVIDED, however that the Management
Committee hereby approves the appointment of Kurt W. Saraceno and William F.
Rand, III as the initial Committee Representatives appointed by the Saracen
Members. The Saracen Members' right to appoint Committee Representatives
pursuant to this Section 3.5(e)(vi) shall cease and the appointment of all
Committee Representatives previously appointed by Saracen shall be terminated
(A) if Saracen no longer owns Membership Units, Series A Preferred Membership
Units and/or Shares having an aggregate original cost or fair market value,
whichever is greater, of at least $5 million, or (B) upon the occurrence of a
Capital Event. Except as and to the extent set forth in this Agreement, such
Committee Representatives appointed by the Saracen Members shall have no voting,
consent, approval or determination rights on the Management Committee.
3.6. Limited Authorization. Any provision hereof to the contrary
notwithstanding, except for expenditures made and obligations incurred which
were (i) previously approved by the Management Committee, (ii) included in an
Approved Budget, or (iii) otherwise not required to be approved by the
Management Committee in accordance herewith, the Manager shall have no authority
to make any expenditure or incur any obligation or liability on behalf of the
Company or any Subsidiary. The Manager shall not expend more than the amount
which the Manager in good faith believes to be the fair and reasonable market
value at the time and place of contracting for any goods purchased or services
engaged on behalf of the Company or any Subsidiary. The Manager shall not enter
into any agreement or other arrangement for the furnishing to or by the Company
or any Subsidiary of goods or services with itself or any Person that is an
Affiliate of the Manager unless such agreement or arrangement has been approved
by the Management Committee. Notwithstanding anything to the contrary contained
herein, the Manager is hereby authorized to make expenditures for emergencies
(not to exceed $100,000 per Property per Fiscal Year) to the extent necessary to
protect a Property or the occupants thereof from damage or harm; PROVIDED that,
the Manager notifies the Management Committee in writing of any such expenditure
promptly after the incurrence thereof.
3.7. Members Shall Not Have Power to Bind Company. No Member shall transact
business for the Company nor shall any Member have the power or authority to
sign, act for or bind the Company, all of such powers being vested solely and
exclusively in the Manager and the Management Committee, PROVIDED that (i) each
Member of the Whitehall Group, acting alone, and WCPT, acting alone, shall have
the authority to sell or cause the sale of Properties, Subsidiaries of the
Company and/or the Company itself as set forth in Section 8.2, (ii) the Members
of the Whitehall Group shall have the authority to sell or cause the sale of
Properties, Subsidiaries of the Company and/or the Company itself
Exhibit 10.50 Page 48
<PAGE>
as set forth in Sections 8.2 and 9.1, and (iii) either WHWEL or Whitehall XI
shall have the right to appoint a new Manager as provided in Section 9.1.
3.8. Status as "Operating Company"; Participation in Management by Members.
The Company intends to operate its business in a manner so as to qualify as an
"operating company" for purposes of ERISA and the Plan Asset Regulation. For
purposes of ERISA and the Plan Asset Regulation, the Management Committee is
intended to be the functional equivalent of a board of directors of a
corporation incorporated under the laws of the State of Delaware. Each Managing
Member that has the right to appoint a Committee Representative to the
Management Committee shall have the right, directly or through its Committee
Representative on the Management Committee, to participate substantially in the
management and conduct of the Company (both in the Company's own behalf and in
the Company's capacity as the controlling member or partner in the
Subsidiaries). The Manager shall from time to time meet with the members of the
Management Committee to discuss the business and affairs of the Company or to
discuss any particular matter requested by a member of the Management Committee.
ARTICLE IV.
RIGHTS AND DUTIES OF MEMBERS
----------------------------
4.1. Use of Company Property. No Member shall make use of the funds or
property of the Company or any Subsidiary, or assign its rights to specific
Company property except as otherwise specifically permitted by this Agreement.
The Manager and the Management Committee can make use of the funds or property
of the Company or any Subsidiary but only for the business or benefit of the
Company.
4.2. Exclusivity; Other Activities of the Members. (a) (i) Notwithstanding
anything else to the contrary herein, as long as all of the Members of the
Whitehall Group, taken together, own Membership Units and/or Shares having an
aggregate original cost or fair market value, whichever is greater, of at least
$15 million, WCPT and any of its Affiliates (including WRP) shall not make any
investment in or otherwise acquire or own, directly or indirectly, any Office
Property located in North America, except (A) through its Interest in the
Company, (B) as otherwise permitted in this Sections 4.2, or (C) pursuant to an
acquisition in accordance with Section 8.2 herein. The direct or indirect
ownership by WCPT or any of its Affiliates (including WRP) of any indebtedness
or debt security which (1) is secured by one or more Office Properties, and (2)
when added to any senior and pari passu debt secured by such Office Property,
had a loan-to-value ratio in excess of ninety percent (90%) at the time of
origination shall constitute ownership of an Office Property by WCPT and a
breach of this Section 4.2(a). WCPT acknowledges that this covenant is a
material inducement to the Members of the Whitehall Group entering into this
Agreement and that a breach of this covenant shall constitute a material breach
of this Agreement entitling the Members of the Whitehall Group to exercise the
remedies provided elsewhere in this Agreement and at law or in equity (including
specific performance and injunctive relief).
(ii) Notwithstanding anything else to the contrary herein, at any time
after all of the Members of the Whitehall Group, taken together, cease to own
Membership Units and/or Shares having
Exhibit 10.50 Page 49
<PAGE>
an aggregate original cost or fair market value, whichever is greater, of at
least $15 million, and until such time as (A) Saracen no longer owns Membership
Units, Series A Preferred Membership Units and/or Shares having an aggregate
original cost or fair market value, whichever is greater, of at least $5
million, or (B) a Capital Event shall occur, neither WCPT nor any of its
Affiliates (including WRP, but in any event excluding any Member of the
Whitehall Group and any Affiliate of such Member) may make any investment in or
otherwise acquire or own, directly or indirectly, any Office Property located in
the Target Territory, except through its Interest in the Company or pursuant to
an acquisition in accordance with Section 8.2 herein. For purposes of the first
sentence of this Section 4.2(a)(ii), the direct or indirect ownership by WCPT or
any of its Affiliates (including WRP) of any indebtedness or debt security which
(1) is secured by one or more Office Properties, and (2) when added to any
senior and pari passu debt secured by such Office Property, had a loan-to-value
ratio in excess of ninety percent (90%) at the time of origination shall
constitute ownership of an Office Property by WCPT and a breach of this Section
4.2(a)(ii).
(b) If WCPT or its Affiliate shall have offered the opportunity to acquire
Office Properties in accordance with subparagraph (c) below and the Committee
Representatives appointed by WHWEL and Whitehall XI shall have declined not less
than five of such opportunities each having a purchase price of at least $15
million individually at any time since the later of (x) the first anniversary of
the date hereof and (y) the date twelve months prior to the date of
determination, then at any time thereafter an Affiliate of WCPT (but not WCPT
itself) may acquire Office Properties that have been offered to the Company
pursuant to subparagraph (c) and declined by the Committee Representatives
appointed by WHWEL and Whitehall XI.
(c) If an Affiliate of WCPT (including WRP) wishes to make any investment
in or otherwise acquire or own, directly or indirectly, any Office Property
prior to the end of the term of this Agreement, then in such instance, WCPT
shall provide written notice of such investment opportunity (an "Investment
Notice") to each Committee Representative appointed by WHWEL and Whitehall XI.
WCPT shall promptly provide to the Committee Representatives appointed by WHWEL
and Whitehall XI all such information and copies of documents in WCPT's (or its
Affiliate's) possession or reasonably available to WCPT (or its Affiliate)
concerning any such Office Property. At the request of any Committee
Representative appointed by WHWEL and Whitehall XI, WCPT shall deliver to WHWEL
and Whitehall XI copies of all additional information and documents concerning
such Office Property which are reasonably available to WCPT and are reasonably
necessary for WHWEL and Whitehall XI to evaluate whether such Office Property is
a suitable and desirable investment for the Company or one of its Subsidiaries,
including all third-party reports and internal analyses or investment memoranda.
The additional information and documents required to be provided to WHWEL and
Whitehall XI or each of their Committee Representatives pursuant to this Section
4.2(c) shall be provided at the Company's expense. An Affiliate of WCPT
(including WRP) may proceed with the investment in or acquisition of such Office
Property if, and only if, (i) such Affiliate is permitted to make such
investment or acquisition in accordance with the terms of 4.2(b) and (ii) within
15 Business Days after WCPT's delivery of an Investment Notice, or within 10
Business Days after the delivery of an Additional Information Request (as
defined below), WCPT shall not have received notice from any Committee
Representative appointed by WHWEL and Whitehall XI that either (x) the
investment in or other acquisition of the specified Office Property would be a
desirable investment for the Company or one of its Subsidiaries or (y) it
reasonably requires additional information to make the determination whether the
investment in or other acquisition of the specified Office Property would be a
desirable
Exhibit 10.50 Page 50
<PAGE>
investment for the Company or one of its Subsidiaries (an "Additional
Information Request"). No more than two (2) Additional Information Requests may
be made with respect to any investment opportunity. The fact that any
information or document contained in an Additional Information Request shall be
subject to a confidentiality agreement pursuant to which such information or
document may not be disclosed to WHWEL and Whitehall XI shall not render an
Additional Information Request unreasonable for purposes of clause (y) of the
immediately preceding sentence. If, within 30 days after delivery of an
Additional Information Request which contains a request for one or more
documents subject to a confidentiality agreement to which WCPT or one of its
Affiliates is bound, either (i) an appropriate modification or waiver of the
relevant confidentiality agreement is not obtained or (ii) the relevant part of
the Additional Information Request is not rescinded by WHWEL and Whitehall XI in
writing, neither WCPT nor any of its Affiliates may make any investment in or
otherwise acquire any interest in the relevant Office Property.
(d) If the Company or one of its Subsidiaries does not elect to invest in
or otherwise acquire an interest in any Office Property in accordance with
Section 4.2 (c) and the financial terms of the transaction relating to such
Office Property are later materially changed and, in the case of a change in
financial terms, are expected to materially enhance the economic return of the
Office Property, then the right of first refusal set forth in Section 4.2(c)
shall again apply to such Office Property (it being understood that the economic
return will be deemed to be "materially enhanced" in the event that either (i)
the projected internal rate of return increases by at least one percent (1%) or
(ii) the projected gross profits increase by at least $500,000.00 over the
expected life of the investment).
(e) Except as contemplated by this Agreement, WCPT has not entered into or
conducted and shall not directly or indirectly enter into or conduct any
business or own any assets other than through its Interest in the Company and
has not incurred or issued and shall not incur or issue any Indebtedness or
other liabilities or any debt or equity securities or Rights whatsoever without
the prior written consent of each of WHWEL and Whitehall XI (or their respective
Committee Representatives); PROVIDED that, WCPT may (i) issue additional Shares
to WRP if (x) all proceeds received by WCPT are contributed to the Company to
fund a Capital Call issued in accordance with Article V and (y) the price per
Share paid in cash by WRP to WCPT is equal to the price per Membership Unit paid
in cash by WCPT to the Company for such Capital Call and (ii) with the approval
of the Members of the Whitehall Group, issue Funding Debt if (x) the Company
issues Back-to-Back Debt with identical terms to such Funding Debt and (y) all
of the proceeds received by WCPT in connection with the issuance of such Funding
Debt are used to purchase such Back-to-Back Debt. WCPT has not entered into and
will not enter into a debt or equity financing unless, prior to entering into
such financing, WCPT has first given the Company an opportunity to enter into
such financing for the Company's account (rather than WCPT entering into such
financing) substantially in the manner specified in Section 4.2(c).
(f) Subject to this Section 4.2 and any limitations set forth in any
agreement between WCPT (or any of its Affiliates) and any Saracen Member and/or
Rand (only so long as such limitations are applicable under such agreement; it
being specifically agreed that any such limitations contained in the Asset
Management Agreement are no longer applicable or effective), each of WRP (but
not WCPT), WHWEL, Whitehall XI, Holding Co. and Saracen and their respective
Affiliates may engage or invest in any other activity or venture or possess any
interest therein independently or with others. None of the Company, the Members,
the creditors of the Company or any other person having any interest in the
Company shall have (i) any claim, right or cause of action against any of the
Members or any other
Exhibit 10.50 Page 51
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Person employed by, related to or in any way affiliated with, any of the Members
by reason of any direct or indirect investment or other participation, whether
active or passive in any such activity or venture or interest therein, or (ii)
any right to any such activity or venture or interest therein or the income or
profits derived therefrom. Notwithstanding anything to the contrary herein, (A)
no Member of the Whitehall Group nor any Affiliate thereof nor any Person
related to or in any way affiliated with such Member shall have any duty or
obligation to disclose or offer to the Company or the Members, or obtain for the
benefit of the Company or the Members, any activity or venture or interest
therein, (B) except as otherwise specifically set forth in this Section 4.2,
neither WRP nor any of its Affiliates (other than WCPT) nor any other Person
related to or in any way affiliated with WRP (other than WCPT) shall have any
duty or obligation to disclose or offer to the Company or the Members, or obtain
for the benefit of the Company or the Members, any activity or venture or
interest therein, and (C) except as otherwise specifically set forth herein
(including, without limitation, in Section 4.2) and any limitations set forth in
any agreement between WCPT (or any of its Affiliates) and any Saracen Member
and/or Rand (only so long as such limitations are applicable under such
agreement; it being specifically agreed that any such limitations contained in
the Asset Management Agreement are no longer applicable or effective), neither
Saracen nor any of its Affiliates nor any other Person related to or in any way
affiliated with Saracen shall have any duty or obligation to disclose or offer
to the Company or the Members, or obtain for the benefit of the Company or the
Members, any activity or venture or interest therein. In addition, in the event
any investment opportunity is introduced to the Company and one or more of the
Committee Representatives appointed by WCPT declines such opportunity, then any
Member of the Whitehall Group or any affiliate of any such Member, shall be free
to pursue and acquire for its own account such opportunity, PROVIDED that the
economic terms are substantially similar to the economic terms previously
offered to the Company.
(g) Each Member of the Whitehall Group hereby agrees that, with respect to
any Office Property that has previously been offered to the Company by WCPT (or
its Affiliate) and that the Committee Representatives appointed by WHWEL and
Whitehall XI disapproved pursuant to subparagraph (c) above, (x) no Member of
the Whitehall Group nor any Affiliate of any such Member shall be permitted to
make any investment in or otherwise acquire or own, directly or indirectly, such
Office Property and (y) they shall keep confidential all information concerning
such Office Property that WCPT (or its Affiliate) provided to such Members of
the Whitehall Group (or any Affiliate of such Members) to the extent that such
information constitutes Confidential Information (as defined below). The
covenant set forth in clause (y) in the immediately preceding sentence shall
cease to be applicable to any information either to the extent it no longer
constitutes Confidential Information or more than two years has elapsed since
the date of delivery thereof to such Members of the Whitehall Group or any
Affiliate of such Members. For purposes of this subparagraph (g), "Confidential
Information" shall include all information furnished to such Members of the
Whitehall Group or any Affiliate of such Members by or on behalf of WCPT and/or
its Affiliates concerning an Office Property. Notwithstanding the foregoing, any
such information shall not constitute "Confidential Information" to the extent
it (i) is or becomes generally available to the public other than as a result of
a disclosure by any Member of the Whitehall Group or any Affiliate of such
Member in contravention of this Agreement, (ii) was already in the possession of
such Member of the Whitehall Group or any Affiliate of such Member prior to its
disclosure to such Member of the Whitehall Group or any Affiliate of such Member
by or on behalf of WCPT or its Affiliate, (iii) is or becomes available to such
Member of the Whitehall Group or any Affiliate of such Member from a source
(other than WCPT or its Affiliates) not bound, to the knowledge of such Member
of the Whitehall Group or any Affiliate of such Member, by any legal or other
Exhibit 10.50 Page 52
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obligation prohibiting the disclosure of Confidential Information by such source
to WCPT or its Affiliates or (iv) the Company or its Subsidiary acquires such
Office Property.
(h) Notwithstanding anything to the contrary set forth in this Agreement,
WRP or its Affiliates shall be entitled to acquire and own certain Office
Properties (i) that were acquired in connection with WRP's or its Affiliates'
acquisition of Value Property Trust, a Maryland real estate investment trust,
(ii) in accordance with the letter agreement dated the date hereof, among the
Company, WCPT, WHWEL, Whitehall XI, Saracen and WRP pursuant to which Affiliates
of WCPT may make certain entity-level investments and (iii) that may be acquired
in connection with WRP's or its Affiliate's foreclosure action or receipt of a
deed in lieu of foreclosure or any other exercise of its remedies under any
indebtedness or debt security originated by WRP or its Affiliate that is
permitted in this Section 4.2 (PROVIDED that WCPT shall not, without the prior
written consent of each of WHWEL and Whitehall XI (or their respective Committee
Representatives), provide any property or asset management services for any
asset so acquired).
(i) Except for activities conducted through the Company or any of its
Subsidiaries or as otherwise permitted pursuant to the other sections of this
Agreement, WCPT (or any of its Affiliate) shall not form another entity with any
Member of the Whitehall Group and/or any Affiliate of such Member or jointly
with any Member of the Whitehall Group and/or any Affiliate of such Member,
engage in, or make any investment in, or otherwise acquire or own, directly or
indirectly, any Office Property located in the Target Territory, as partners or
joint venturers (or in other similar relationships), without the prior written
consent of Saracen. This Section 4.2(i) shall not independently prevent WCPT (or
any of its Affiliates) or any Member of the Whitehall Group (or any Affiliate of
such Member) from individually, engaging in, or making an investment in, or
otherwise acquiring or owning, directly or indirectly, Office Property located
in the Target Territory, except as the same may be restricted pursuant to the
other provisions of this Agreement. Nothing contained herein shall limit WCPT
(or any of its Affiliates) from individually, or together with any Member of the
Whitehall Group (or any Affiliate of such Member) as partners or joint venturers
(or in other similar relationships), from engaging in, or making an investment
in, or otherwise acquiring or owning, directly or indirectly, any Office
Property located outside the Target Territory, PROVIDED that, if otherwise
restricted pursuant to the terms of this Agreement, WCPT obtains the prior
written consent of each of WHWEL and Whitehall XI (or their respective Committee
Representatives). Nothing in this Agreement shall preclude or limit the ability
of any Member of the Whitehall Group and any Affiliate of such Member to
purchase Office Properties either alone or in a partnership with another Person
(except WCPT as described above).
(j) Notwithstanding anything else to the contrary herein, if at any time
that the Committee Representatives on the Management Committee appointed by WCPT
do not have the power to vote to prevent the Company from making an investment
in or otherwise acquiring or owning, directly or indirectly, any Office Property
(unless only in the event such voting rights have been terminated solely because
WCPT has been terminated as Manager for Cause) and the Company desires to make
an investment in or otherwise acquire or own, directly or indirectly, any Office
Property located in the Hub Target Market, then until such time as (A) Saracen
no longer owns Membership Units, Series A Preferred Membership Units and/or
Shares having an aggregate original cost or fair market value, whichever is
greater, of at least $5 million, or (B) a Capital Event shall occur, the Company
shall provide an Investment Notice to Saracen. The Company may proceed with the
investment in or other acquisition of such Office Property in the Hub Target
Market only if within one (1) Business Day after the
Exhibit 10.50 Page 53
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Company's delivery of an Investment Notice to Saracen, the Company shall not
have received written notice from Saracen objecting to the investment in or
other acquisition of the specified Office Property located in the Hub Target
Market. If, in accordance with the immediately preceding sentence, the Company
may not make an investment in or otherwise acquire any Office Property in the
Hub Target Market, any Member of the Whitehall Group or any of Affiliate of such
Member, either alone or in partnership or joint venture with any other Person,
including, without limitation, WCPT and/or its Affiliates, may make such
investment in or otherwise acquire such Office Property.
(k) In the event a Marketing Member has caused the Company or its
Subsidiaries to complete sales pursuant to Section 8.2(a) of Subject Assets
having a total cost basis of $150 million or more, (i) WRP or any of its
Affiliates (including WCPT) shall be free to acquire any Office Property; if,
but only if, such Office Property shall not be located in the same greater
metropolitan region (including central business district and suburban markets)
as any Property then owned by the Company or any Subsidiary unless WRP or any of
its Affiliates (including WCPT) acquires such Office Property pursuant to
Section 8.2, and (ii) WRP shall be permitted to utilize personnel employed by
WCPT on a part-time basis to assist with the management of Office Properties
acquired in accordance with the preceding clause (i); PROVIDED that (A) the
costs of such employees, including salary, benefits and overhead, are fairly
allocated between WRP and the Company and (B) each of WHWEL and Whitehall XI (or
their respective Committee Representatives) shall approve the cost allocation
and reimbursement arrangements for such personnel, which approval shall not be
unreasonably withheld.
(l) In the event that the "total assets" of the Company as set forth on the
Company's consolidated balance sheets in accordance with generally accepted
accounting principles, consistently applied, have a total cost basis of less
than $150 million, (i) WRP or any of its Affiliates (including WCPT) shall be
free to acquire any Office Property and (ii) WRP and any Member of the Whitehall
Group shall be permitted to hire any individual then employed by WCPT to provide
management services for any Office Property acquired by WRP and any Member of
the Whitehall Group (it being understood that, so long as the Company owns
Properties having an aggregate cost basis of more than $150 million, neither WRP
nor any Member of the Whitehall Group shall be permitted to employ or solicit
the employment or consulting services of, any individuals employed by WCPT,
except (i) as permitted in paragraph (k) above, (ii) after the expiration of six
(6) months following the termination for any reason of such individual's
employment by WCPT, or (iii) after the expiration of three (3) months following
the termination for any reason of such individual's employment by WCPT if at the
time of such termination the "total assets" of the Company (determined as
provided in this clause l) have had, for a period of at least three (3) months,
a total cost basis of less than $250 million and more than $150 million.
4.3. Indemnification with Respect to the Manager. (a) None of the Manager,
its Affiliates or their respective officers, directors, trustees, employees,
representatives or agents (collectively, the "Indemnified Parties") shall be
liable, responsible or accountable in damages or otherwise to the Company, any
third party or to any Member for (i) any act performed or omission within the
scope of the authority conferred on the Indemnified Party by this Agreement
except for the gross negligence, fraud, breach of fiduciary duty or willful
misconduct of any Indemnified Party in carrying out its obligations hereunder,
(ii) the Indemnified Party's performance of, or failure to perform, any act on
the reasonable reliance on advice of legal counsel to the Company or (iii) the
negligence, dishonesty or bad faith of any agent, consultant or broker of the
Company selected, engaged or retained
Exhibit 10.50 Page 54
<PAGE>
in good faith and with reasonable prudence. In any threatened, pending or
completed action, suit or proceeding, each Indemnified Party shall be fully
protected and indemnified and held harmless by the Company against all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
proceedings, costs, expenses and disbursements of any kind or nature whatsoever
(including, without limitation, reasonable attorneys' fees, costs of
investigation, fines, judgments and amounts paid in settlement, actually
incurred by such Indemnified Party in connection with such action, suit or
proceeding) by virtue of its status as an Indemnified Party or with respect to
any action or omission taken or suffered in good faith, other than liabilities
and losses resulting from the gross negligence, fraud, breach of fiduciary duty
or willful misconduct of any Indemnified Party; PROVIDED, however, that the
Indemnified Parties shall not be so indemnified for any acts or omissions
determined to be in contravention of this Agreement. The indemnification
provided by this Section 4.3(a) shall be recoverable only out of the assets of
the Company, and no Member shall have any personal liability on account thereof.
(b) The Manager shall indemnify and hold the Company and the Members
harmless against all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, proceedings, costs, expenses, and disbursements of
any kind or nature whatsoever (including, without limitation, reasonable
attorneys' fees, costs of investigation, fines, judgments and amounts paid in
settlement, actually incurred by the Company in connection with any action, suit
or proceeding) resulting from the gross negligence, fraud, breach of fiduciary
duty or willful misconduct of the Manager.
4.4. Compensation of Members and Affiliates. Until the earlier of (i) such
time as all of the Members of the Whitehall Group, taken together, cease to own
Membership Units and/or Shares in WCPT having an aggregate original cost or fair
market value, whichever is greater, of at least $15 million and (ii) such time
as WCPT makes an initial public offering (and in connection with an initial
public offering by WCPT), the Company agrees that, to the extent the Company
seeks to retain an investment bank for any financial or related services with
respect to actions of the Company (including an initial public offering by
WCPT), the Company will retain Goldman, Sachs & Co. or one or more of its
Affiliates to provide such services; PROVIDED, that the foregoing requirement
shall not apply to the sale or financing of a single Property or to the sale or
financing of Properties having an aggregate book value of less than $50 million.
If Goldman, Sachs & Co. or such Affiliate agrees to accept any such engagement,
Goldman, Sachs & Co. and/or such Affiliate shall be entitled to receive its
customary indemnification, and fees and commissions at rates that are consistent
with the then prevailing rates for such services charged by similar quality
providers of such services, for acting in such capacity.
4.5. Investment Representations. (a) The Members each represent that they
are acquiring their interests as Members for their own account for investment
purposes only and not with a view to the distribution or resale thereof, in
whole or in part, and each agrees that it will not transfer, sell or dispose of
all or any portion of, or offer to transfer, sell, or dispose of all or any
portion of its interest as a Member, or solicit offers to buy from or otherwise
approach or negotiate in respect thereof with any person or persons whomsoever,
all or any portion of its Interest in any manner which would violate or cause
the Company or any Member to violate applicable federal or state securities
laws.
(b) Each Saracen Member (either alone or with his, her or its advisors)
have had a reasonable opportunity to ask questions of and receive information
and answers from a person or persons acting on behalf of the Company and its
Affiliates concerning the Company (and its Subsidiaries), the
Exhibit 10.50 Page 55
<PAGE>
Company's (and any of its Subsidiary's) Properties, the Company's (and any of
its Subsidiary's) financial and business condition and the acquisition of
Membership Units and Series A Preferred Membership Units, and, as each Saracen
Member may deem necessary, to verify any information provided to any Saracen
Member by the Company and its Affiliates and all such questions have been
answered and all such information has been provided to the full satisfaction of
each Saracen Member. Nothing contained in this Section 4.5(b) shall limit in any
way the representations and warranties of the Company set forth in the
Contribution Agreement.
(c) Each Saracen Member (either alone or with his, her or its advisors) has
sufficient knowledge and experience in financial, tax and business matters to
enable him, her or it to evaluate the merits and risks of an investment in the
Membership Units and Series A Preferred Membership Units. Each Saracen Member
has the ability to bear the economic risk of acquiring the Membership Units and
the Series A Preferred Membership Units. Each Saracen Member acknowledges that
(1) the transactions contemplated by this Agreement and the Contribution
Agreement involve complex tax consequences for each Saracen Member and each
Saracen Member is relying solely on the advice of his, her or its own tax
advisors in evaluating such consequences, and (2) neither the Company (including
any of its Affiliates), nor the Manager, nor the Management Committee has made
(or shall be deemed to have been made) any representations or warranties as to
the tax consequences of such transactions to any Saracen Member. Notwithstanding
the foregoing, the Company acknowledges its obligations pursuant to Section
6.1(e) and Section 8.2A herein.
(d) All information that each Member has provided to the Company concerning
himself or herself or itself and his, her or its financial position, including
any financial information requested by the Company, is correct and complete in
all material respects as of the date hereof.
(e) Each Saracen Member is not acquiring Membership Units or Series A
Preferred Membership Units as a result of or subsequent to any advertisement,
article, notice or other communication published in any newspaper, magazine or
similar media or broadcast over television or radio, or presented at any meeting
or seminar.
(f) Each Saracen Member is over 21 years of age, has adequate means of
providing for his or her current needs and personal contingencies and has no
need for liquidity of any investment in the Membership Units and the Series A
Preferred Membership Units.
(g) Each Saracen Member has (i) a net worth, when combined with the net
worth of that person's spouse, in excess of $1,000,000, or (ii) has had adjusted
gross income for calendar years 1996, 1997, 1998 and expects to have adjusted
gross income for calendar year 1999, of at least $200,000 for each such year.
(h) No Saracen Member (or any ultimate beneficial interest holder in a
Saracen Member that is a flow-through entity for tax purposes) is a "qualified
organization" within the meaning of Section 514(c)(9)(C) of the Code.
4.6. Dealing with Members. The fact that a Member, an Affiliate of a Member
or any officer, director, employee, partner, consultant or agent of a Member or
an Affiliate of a Member, is directly or indirectly interested in or connected
with any person, firm or corporation employed by the
Exhibit 10.50 Page 56
<PAGE>
Company to render or perform a service, or from or to whom the Company may buy
or sell any property or have other business dealings, shall not prohibit the
Company from employing such person, firm or corporation or from dealing with him
or it on customary terms and at competitive rates of compensation, and neither
the Company nor any of the Members shall have any rights in or to any income or
profits derived therefrom, PROVIDED, however that in the event any Member
provides a loan to the Company, such loan shall (i) be on commercially
reasonable terms, (ii) have a term of six (6) months or less and (iii) together
with all other loans from Members to the Company then outstanding, be in an
aggregate amount of less than 10% of the Book Value of all of the Company Assets
and the assets of the Subsidiaries.
4.7. Designation of Tax Matters Member. Whitehall XI, as long as it is a
Member, shall act as the Tax Matters Member of the Company, as provided in the
regulations pursuant to Section 6231 of the Code. Each Member hereby approves of
such designation and agrees to execute, certify, acknowledge, deliver, swear to,
file and record at the appropriate public offices such documents as may be
deemed necessary or appropriate to evidence such approval. To the extent and in
the manner provided by applicable Code sections and regulations thereunder, the
Tax Matters Member (a) shall furnish the name, address, profits interest and
taxpayer identification number of each Member to the IRS and (b) shall inform
each Member of administrative or judicial proceedings for the adjustment of
Company items required to be taken into account by a Member for income tax
purposes. The Tax Matters Member shall not enter into an agreement with the IRS
or any other taxing authority to extend the limitation period for assessment of
any federal, state or local income, franchise or unincorporated business tax of
any Member or owner thereof nor settle with the IRS or any other taxing
authority to disallow deductions or increase income from this Company with
respect to any Member, unless all of the Members shall have agreed thereto.
Exhibit 10.50 Page 57
<PAGE>
ARTICLE V.
CAPITAL CONTRIBUTIONS, LOANS
AND LIABILITIES
---------------
5.1. Capital Contributions and Capital Accounts of the Members.
(a) As of the date hereof, WCPT, WHWEL and each of the Saracen Members
hereby contributes to the Company each of their "Membership Units" in WWP II and
all of their right, title and interest in and to WWP II, to the Company and, in
exchange therefor, each shall receive such number of Membership Units, a
Percentage Interest and Capital Account as set forth in Schedule 5.1.
(b) As of the date hereof, each of the Saracen Members hereby contributes
each of their "Series A 6% Convertible Preferred Membership Units" in WWP II to
the Company and each shall receive therefor an equal number of Series A
Preferred Membership Units, a Series A Preferred Percentage Interest and a
Series A Capital Account, all as set forth in Schedule 5.1. The Company shall
cancel and terminate each of the "Series A 6% Convertible Preferred Membership
Units" of WWP II.
(c) As of the date hereof, Holding Co. hereby contributes the Holding Co.
Contributed Asset, subject to the Assumed Financing, and $122,744 in cash to the
capital of the Company and, in exchange therefor, shall receive such number of
Membership Units, a Percentage Interest and Capital Account as set forth in
Schedule 5.1. The contribution by Holding Co. to the Company (and/or one or more
of its Subsidiaries) of the Holding Co. Contributed Asset on the Closing Date
shall be made subject to the Assumed Financing and on the date of the Closing,
the Company and/or one or more of its Subsidiaries shall assume the Assumed
Financing. The Company shall repay the Assumed Financing no later than May 28,
1999.
5.2. Additional Capital Contributions
(a) If any of the Managing Members shall reasonably determine that funds
are required for a Necessary Expenditure, or in the event of a Preferential
Distribution Non-Payment (as defined in the Series A Terms), such Managing
Member shall have the right to make a Mandatory Capital Call describing the
amount and nature of the Necessary Expenditure or the aggregate amount of any
payment default pursuant to the Series A Terms, in which event each of the
Managing Members shall, within twenty (20) days after receipt of such Mandatory
Capital Call, fund a portion of the capital contribution required by such
Mandatory Capital Call (which portion shall be equal to such Member's Funding
Percentage multiplied by the amount of such Mandatory Capital Call).
Notwithstanding anything to the contrary herein, except for the payment of any
Preferential Distribution Non-Payment (as defined in the Series A Terms), no
Managing Member shall be required to contribute or lend any funds to the Company
(and no Mandatory Capital Call for a Necessary Expenditure may be issued to such
Member) pursuant to this Section 5.2 or otherwise (i) if such Member has fully
funded its Capital Commitment (whether or not the other Members have fully
funded their Capital Commitments), (ii) in response to a Capital Call made at
any time after December 31, 2000 (irrespective of the amounts previously
contributed) or (iii) at any time after an initial public offering of Shares by
WCPT.
Exhibit 10.50 Page 58
<PAGE>
(b) If the Management Committee shall have authorized a Capital Call, the
Manager shall make such Capital Call describing in brief detail the use of
proceeds of such Capital Call, in which event each of the Managing Members
shall, within (20) days after receipt of such Capital Call, fund a portion of
the capital contribution required by such Capital Call (which portion shall be
equal to such Member's Funding Percentage multiplied by the amount of such
Capital Call).
(c) Following receipt of a Capital Call in compliance with the requirements
of this Section 5.2, each of the Managing Members shall contribute to the
Company the amount applicable to such Member as set forth in the Capital Call
delivered pursuant to this Section 5.2 on the due date specified in such notice.
(d) Upon any conversion by a Saracen Member of any Series A Preferred
Membership Units into Membership Units, such Saracen Member shall have the right
to contribute up to $7,500.00 to the Company as an additional capital
contribution, PROVIDED, however, that such capital contribution shall be in
addition to and shall not reduce the conversion price payable in connection with
such conversion. In exchange for such capital contribution, Membership Units
shall be issued based upon the Deemed Value Per Membership Unit on the date of
such capital contribution. Notwithstanding the foregoing, in no event shall (i)
the aggregate amount of capital contributions made by all Saracen Members
pursuant to this Section 5.2(d) exceed $50,000.00, and (ii) Membership Units be
issued for more than $50,000.00 of capital contributions pursuant to this
Section 5.2(d).
(e) Notwithstanding anything contained in this Section 5.2 to the contrary,
Holding Co. will fund its Capital Commitment in the manner and amount described
in the definition of "Capital Commitment" contained herein in connection with
any capital contribution required for the potential acquisition of properties
commonly known, respectively, as 24 Federal Street, Boston, Massachusetts and 79
Milk Street, Boston, Massachusetts, after which Holding Co. shall have no
further Capital Commitment.
5.3. Failure to Fund Capital Contributions. If any Managing Member who is
required to fund a Capital Call fails to do so in the amount and within the time
required under Section 5.2(a) or (b), as applicable ("Non-Contributing Member"),
the Manager shall give notice of such failure to all other Managing Members
required to make such Capital Contribution, including a statement of the amount
of the Capital Contribution not funded by the Non-Contributing Member (such
amount is hereinafter referred to as the "Failed Contribution"), and the other
such Managing Members may fund all or part of such Failed Contribution (each
such funding Member is hereinafter referred to as a "Contributing Member"). If
more than one Managing Member desires to be a Contributing Member, each such
Member shall have the right to fund the amount the Non-Contributing Member(s)
failed to fund pro rata in proportion to the relative Percentage Interests of
such Contributing Members; PROVIDED that, if any such Contributing Member funds
less than its pro rata share, the other Contributing Members shall have the
right to fund an amount equal to the difference between such first Contributing
Member's pro rata share and the amount such first Member actually contributed
pursuant to this sentence, on a pro rata basis in proportion to the relative
Percentage Interests of such Contributing Members. Upon funding all or any part
of a Failed Contribution, any Contributing Member may elect the following
treatment for the portion (the "Funded Portion") of the Failed Contribution
funded by such Contributing Member:
Exhibit 10.50 Page 59
<PAGE>
(a) The Contributing Member may at any time (even after first electing to
proceed under paragraph (b) below) elect to treat the Funded Portion as a
capital contribution by such Contributing Member with the dilution provided for
in Section 5.4 below.
(b) The Contributing Member may elect to treat the Funded Portion as a loan
(a "Member Loan") by the Contributing Member to the Non-Contributing Member,
which Member Loan shall be treated as (i) a demand loan made by the Contributing
Member to the Non- Contributing Member (bearing interest at the Default Rate),
and (ii) as a Capital Contribution by the Non-Contributing Member. Any such loan
(to the extent of unpaid principal and interest) shall be recourse only to the
Non-Contributing Member's Interest and shall also be payable by the
Non-Contributing Member on demand of the Contributing Member and shall be repaid
(i) directly by the Company on behalf of the Non-Contributing Member to the
Contributing Member from funds otherwise distributable to the Non-Contributing
Member pursuant to Section 7.4 or (ii) upon the closing of the transactions
contemplated by Section 8.2 hereof. A Contributing Member may, by delivering a
notice to the Non-Contributing Member at any time prior to full repayment of
such Member Loan, elect to terminate such loan and have the Non- Contributing
Member's Percentage Interest diluted as set forth in Section 5.4, with the
entire outstanding principal and interest treated as the amount of the Failed
Contribution and the Capital Accounts of the Contributing and Non-Contributing
Members adjusted accordingly to reflect the outstanding amount of a Member Loan
as a Capital Contribution by the Contributing Member, not the Non-Contributing
Member. Repayment of any Member Loan shall be secured by the Non-Contributing
Member's Interest, and the Non-Contributing Member hereby grants a security
interest in such Interest to the Contributing Member who has advanced such
Member Loan and hereby irrevocably appoints such Contributing Member, and any of
its agents, officers or employees, as its attorneys-in-fact with full power and
authority to prepare and execute any documents, instruments and agreements,
including, but not limited to, any note evidencing the Member Loan, and such
Uniform Commercial Code financing statements, continuation statements, and other
security instruments as may be appropriate to perfect and continue such security
interest in favor of such Contributing Member.
Exhibit 10.50 Page 60
<PAGE>
5.4. Dilution for Failure to Fund Capital Calls. (a) If one or more
Contributing Members elect to treat the Funded Portion as a Capital Contribution
(including after electing to terminate a Member Loan pursuant to Section
5.3(b)), then the Percentage Interest of each such Contributing Member shall be
increased by a percentage equal to the quotient (rounded up to the nearest one
hundredth of one percent) obtained when (x) two times the remaining Funded
Portion funded by such Contributing Member is divided by (y) the sum of all
Members' Capital Contributions as of such date (including the remaining Funded
Portions funded).
(b) The Percentage Interest of the Non-Contributing Member shall be
decreased by the aggregate amount of the increase in the Percentage Interests of
all Contributing Members made pursuant to paragraph (a). On the date the
adjusted Percentage Interests are determined as provided in this Section 5.4(b),
each Member shall be considered as of such date, solely for purposes of further
calculations and adjustments of each Member's Percentage Interest, to have made
Capital Contributions equal to such Member's Percentage Interest, multiplied by
the total Capital Contributions made by all Members as of such date (such
product being referred to as the "Notional Contribution" of such Member). For
example, if (1) a Non-Contributing Member X has a Percentage Interest of 50% and
has a Failed Contribution of
Exhibit 10.50 Page 61
<PAGE>
$10 in respect of a $20 Capital Call, (2) Contributing Member A has a Percentage
Interest of 40% and contributes $8 in respect of such Capital Call plus its pro
rata share of the Non-Contributing Member's Failed Contribution (i.e., 40%
divided by 50% multiplied by the $10 Failed Contribution or $8) and, prior to
contributing any amount on account of the current Capital Call, Member A has
made common equity Capital Contributions of $392 ($40% of $980), (3)
Contributing Member B has a Member Percentage Interest of 10% and contributes $2
in respect of such Capital Call plus its pro rata share of the Non-Contributing
Member's Failed Contribution (i.e., 10% divided by 50% multiplied by the $10
Failed Contribution or $2), and prior to contributing any amount on account of
the current Capital Call, Member B has made common equity Capital Contributions
of $98 (10% of $980), and (4) the sum of all Members' common equity Capital
Contributions as of such date (including the current Capital Call of $20) is
$1,000, then (i) the Percentage Interest of Contributing Member A will be
increased to 41.6% (($392 + $8 + $16) / $1,000), FOR A NET INCREASE OF 1.6%,
(ii) the Percentage Interest of Contributing Member B will be increased to 10.4%
(($98 + $2 + $4) / $1,000), for a net increase of 0.4%, (iii) the Percentage
Interest of Non-Contributing Member X will be decreased by 2.0% (the sum of the
1.6% increase in A's Member Percentage Interest and the 0.4% increase in B's
Percentage Interest), (iv) the Capital Account of each Member shall be adjusted
to reflect the actual cash contributions made by such Member and (v) the
Notional Contribution as of the date of adjustment of Member A, Member B and
Member X, respectively, will be $416, $104 and $480.
(c) In order to give effect to the dilution of the Non-Contributing
Member's Percentage Interest as set forth above in this Section 5.4, a number of
the Non-Contributing Member's Membership Units corresponding to the Percentage
Interest forfeited under Section 5.4(a) shall be deemed to be assigned to the
Contributing Members pro rata to the relative amounts of their remaining Funded
Portions such that the percentage of all Membership Units then owned by each
such Contributing Member shall equal each such Contributing Member's Percentage
Interest (taking into account the additional Membership Units issued to the
Contributing Members pursuant to Section 5.9), and the Manager is hereby
authorized and directed to reflect such assignment on the books of the Company.
5.5. Capital of the Company. The capital of the Company shall be the sum of
the Members' Capital Contributions. Except as otherwise provided herein, no
Member shall be entitled to withdraw or receive any interest or other return on
its Capital Contribution.
5.6. Liability of Members. The Members shall not be bound by, nor be
personally liable for, the expenses, liabilities, indebtedness or obligations of
the Company or of any other Member. The liability of each Member shall be
limited solely to the amount of its Capital Contributions; PROVIDED, however,
that after a Member has received a distribution from the Company, such Member
may be liable to the Company for the amount of the distribution but only to the
extent provided by the Act. The Members shall not be required to contribute any
amounts in excess of the amounts set forth in Sections 5.1, and 5.2 hereof,
PROVIDED, however, that any Member's failure to fund a Capital Call made
pursuant to Section 5.2 shall be subject to the provisions of this Article V.
5.7. Return of Capital Contribution. Except as otherwise provided in this
Agreement, no Member shall have the right to withdraw as a Member or demand the
return of all or any part of its Capital Contribution until the Company has been
dissolved and terminated, or to demand or receive property other than cash in
return for its Capital Contribution. No Member shall be liable for the return of
the Capital Contribution of any other Member.
Exhibit 10.50 Page 62
<PAGE>
5.8. Calculation of Members' Percentage Interest, Series A Preferred
Percentage Interest. (a) At any time, a Member's Percentage Interest shall be
equal to the number of Membership Units owned by such Member at the date of
determination (after giving effect to any adjustments required by this
Agreement) divided by the aggregate number of Membership Units owned by all of
the Members at such date (after giving effect to any adjustments required by
this Agreement).
(b) At any time, a Member's Series A Preferred Percentage Interest shall be
equal to the number of Series A Preferred Membership Units owned by such Member
at the date of determination divided by the aggregate number of Series A
Preferred Membership Units owned by all of the Members at such date.
5.9. Issuance of Additional Membership Units. (a) The Manager is hereby
authorized and directed to cause the Company to issue to the Members the number
of Membership Units and Series A Preferred Membership Units as set forth in
Schedule 5.1.
(b) The Manager is hereby authorized and directed to cause the Company to
issue to any Member (including a New Member) that makes a Capital Contribution
to the Company (including a capital contribution made by a Contributing Member
in accordance with Section 5.3), the number of Membership Units equal to the
amount of such contributing Member's Capital Contribution divided by the Deemed
Value Per Membership Unit, PROVIDED, FURTHER that, if (i) all or any portion of
the Capital Contribution is made by any or all of the Managing Members, and a
third party is not making a Capital Contribution contemporaneously with any or
all of the Managing Members at the same price per Membership Unit and (ii) the
Deemed Value Per Membership Unit is less than the most recent price per
Membership Unit utilized to issue Membership Units to any Person (other than the
Managing Members), Saracen shall have the right for its own account, and not for
the account of any other party, to make a Capital Contribution in an amount
equal to the product of (x) the aggregate amount of the Capital Contributions
described in this Section 5.9(b) to be made by any or all of the Managing
Members and (y) its Percentage Interest immediately prior to such Capital
Contributions. In such instance, Saracen shall be given at least thirty (30)
days' prior written notice to make such Capital Contribution and if no Capital
Contribution is made by Saracen within such thirty (30) day period, the right to
make such Capital Contribution shall be deemed waived. Unless specifically
resolved otherwise by the Management Committee, any Membership Units issued
after the Closing Date shall have the same rights, powers and duties as the
Membership Units issued on the Closing Date; PROVIDED that, in any event, the
Management Committee may authorize the classification of multiple classes of
membership interests and may establish the designations, preferences and
relative, participating, optional or other special rights, powers or duties of
each class of membership interests, subject to the restrictions set forth in the
Series A Terms. Notwithstanding anything to the contrary herein, (i) Saracen
shall not be entitled to exercise its preemptive rights set forth herein to
acquire Membership Units at $15.85 per Membership Unit with respect to any
Capital Contributions made by each Managing Member and Holding Co. in an amount
up to such Member's Capital Commitment and (ii) Saracen hereby acknowledges that
it has no rights under this Section 5.9(b) as of the date hereof with respect to
any Capital Contributions made prior to the date hereof and hereby consents to
each of the Managing Members and Holding Co. making Capital Contributions from
time to time after the date hereof in such amounts determined in accordance with
each of their respective Capital Commitments in exchange for Membership Units
issued by the Company at a Deemed Value Per Membership Unit equal to $15.85 per
Membership Unit.
Exhibit 10.50 Page 63
<PAGE>
(c) The Manager is hereby authorized and directed to cause the Company to
issue Membership Units (i) to WRP as required in connection with the exercise of
the WRP Warrants or the New WRP Warrants in exchange for Membership Units, (ii)
to WCPT in connection with WHWEL's, Whitehall XI's, Holding Co.'s and Saracen's
exercise of their rights set forth in Section 8.3, (iii) to WRP in connection
with the exchange of Membership Units for WRP At-Market Shares and (iv) to
Saracen in connection with the conversion of the Series A Preferred Membership
Units.
5.10. Arbitration. Any matter arising pursuant to any provision hereunder
which specifies that such matter shall be resolved by arbitration and any other
dispute involving an alleged breach or violation of this Agreement (including,
without limitation, an alleged breach or violation by WCPT that would entitle
either WHWEL or Whitehall XI to remove WCPT as the Manager pursuant to Section
9.1) shall be submitted to arbitration ("Arbitration") in accordance with the
provisions of this Section 5.10. The party having the right to submit a matter
to Arbitration and exercising its rights to do so shall have the right to
request an arbitration which shall be conducted in accordance with the Rules of
Arbitration of the American Arbitration Association for a single arbitrator
arbitration (the "Rules") in New York, New York, or at such other location as
may be agreed between the parties. The Arbitration shall be conducted by a
single arbitrator chosen in accordance with the Rules, PROVIDED that, such
arbitrator shall be a person having at least ten (10) years experience in the
matter in dispute including valuing real estate. The determination of the
arbitrator shall be made within thirty (30) days following the appointment of
such arbitrator and shall be conclusive and binding upon the parties and
judgment upon the same may be entered in any court having jurisdiction thereof.
Each party shall pay the fees and expenses of the arbitrator as determined by
the arbitrator. The arbitrator shall not have the right to amend any provision
of this Agreement.
ARTICLE VI.
CAPITAL ACCOUNTS, PROFITS
AND LOSSES AND ALLOCATIONS
--------------------------
6.1. Capital Accounts.
(a) The Company shall maintain a Capital Account for each Member in
accordance with federal income tax accounting principles.
(b) The Capital Account of each Member shall be increased by (i) the amount
of any cash and the agreed net fair market value (as used herein, "agreed net
fair market value" of property shall mean the gross fair market value of the
property reduced by all liabilities encumbering the property) as of the date of
contribution of any property subsequently contributed as a Capital Contribution
to the capital of the Company by such Member and (ii) the amount of any Profits
allocated to such Member. The Capital Account of each Member shall be decreased
by (i) the amount of any Losses allocated to such Member and (ii) the amount of
distributions to such Member. In all respects, the Member's Capital Accounts
shall be determined in accordance with the detailed capital accounting rules set
forth in Treasury Regulation Section 1.704-1(b)(2)(iv) and shall be adjusted
upon the occurrence of certain events as provided in Treasury Regulation Section
1.704-1(b)(2)(iv)(f). The Members hereby agree that as of the date hereof, the
Capital Account of each Member shall be as set forth on Schedule 5.1.
Exhibit 10.50 Page 64
<PAGE>
(c) A transferee of all (or a portion) of an Interest shall succeed to the
Capital Account (or portion of the Capital Account) attributable to the
transferred Interest.
(d) It is the intention of the parties that a conversion pursuant to its
terms of a Series A Preferred Membership Unit into a Membership Unit be treated
for federal income tax purposes as a contribution of the Series A Preferred
Membership Unit to the Company in exchange for a Membership Unit and that any
such conversion be treated as an event requiring an adjustment to the Members'
Capital Accounts pursuant to Section 6.1(b) hereof and Treasury Regulation
Section 1.704-1(b)(2)(iv)(f).
(e) The Capital Account balances of the Members holding Series A Preferred
Membership Units (the "Series A Capital Accounts") shall be maintained
separately from the Capital Accounts of the Members holding Membership Units
(the "Membership Capital Accounts"). For purposes of maintaining Capital Account
balances as provided in subsection (b) above, the Series A Capital Accounts
shall be adjusted for allocations of Profits and Losses pursuant to Sections
6.2(d)(ii), 6.2(d)(iii) and 6.2(e)(iv) and for distributions made pursuant to
Section 7.1(b)(ii).
(f) Notwithstanding anything in this Agreement to the contrary, including
without limitation Articles VII and X hereof, no Member shall be required to pay
to the Company or to any other Member any deficit or negative balance which may
exist from time to time in such Member's Capital Account.
6.2. Profits and Losses.
(a) The profits and losses of the Company ("Profits" and "Losses") shall be
the net income or net loss (including capital gains and losses, income and gain
exempt from tax, and items of loss, deduction of expense not deductible from
Company income or capitalizable into the basis of Company property),
respectively, of the Company determined for each Fiscal Year in accordance with
the accounting method followed for federal income tax purposes except that (i)
in computing Profits and Losses, all depreciation and cost recovery deductions
shall be deemed equal to Depreciation and (ii) gain or loss on the sale or other
disposition of a Company Asset or an asset of a Subsidiary shall be determined
by reference to Book Value.
(b) Whenever a proportionate part of the Profits or Losses is allocated to
a Member, every item of income, gain, loss, deduction or credit entering into
the computation of such Profits or Losses or arising from the transactions with
respect to which such Profits or Losses were realized shall be credited or
charged, as the case may be, to such Member in the same proportion; PROVIDED,
however, that "recapture income", if any, shall be allocated to the Members who
were allocated the corresponding depreciation deductions.
(c) If any Member transfers all or any part of its Interest during any
Fiscal Year or its Interest is increased or decreased, Profits and Losses
attributable to such Interest for such Fiscal Year shall be apportioned between
the transferor and transferee ratably on a daily basis, provided in all events
that any apportionment described above shall be permissible under the Code and
applicable regulations thereunder.
(d) Profits shall be allocated each year among the Members as follows:
Exhibit 10.50 Page 65
<PAGE>
(i) First, among all the Members holding Membership Units, in proportion to
the amounts previously allocated pursuant to Section 6.2(e)(v) until the amounts
allocated pursuant to this Section 6.2(d)(i) in the current and all prior years
equals such amounts previously allocated pursuant to Section 6.2(e)(v) in the
current and all prior years.
(ii) Second, to the Saracen Members holding Series A Preferred Units, in
proportion to the amounts previously allocated pursuant to Section 6.2(e)(iv)
until the amount allocated pursuant to this Section 6.2(d)(ii) in the current
and all prior years equals such amounts previously allocated pursuant to Section
6.2(e)(iv) in the current and all prior years;
(iii) Third, to each Saracen Member holding Series A Preferred Units, an
amount equal to the aggregate amounts distributed and distributable pursuant to
Section 7.1(b)(ii) (assuming that the Company had received all the cash
attributable to the income being allocated) until the amounts allocated pursuant
to this Section 6.2(d)(iii) in the current and all prior years equals such
amounts previously distributed and distributable pursuant to Sections 7.1(b)(ii)
in the current and all prior years; PROVIDED, however, that in no event shall
amounts be allocated under this Section 6.2(d)(iii) in excess of the Preferred
Limitation;
(iv) Fourth, among all the Members holding Membership Units, in proportion
to the amounts previously allocated pursuant to Section 6.2(e)(iii) until the
amount allocated pursuant to this Section 6.2(d)(iv) in the current and all
prior years equals such amounts previously allocated pursuant to Section
6.2(e)(iii) in the current and all prior years.
(v) Fifth, to the Saracen Members holding Membership Units, in proportion
to their respective Percentage Interests, an amount equal to the product of (x)
their aggregate Percentage Interests, and (y) the remaining Profits of the
Company after taking into account Sections 6.1(d)(i) through (d)(iv) above; and
(vi) The balance of the Company's Profits shall be allocated as follows:
(I) The relative Percentage Interest of WHWEL to the combined Percentage
Interests of the Whitehall Group and WCPT multiplied by the balance of the
Company's Profits shall be allocated as follows:
(A) First, to WHWEL up to the amounts previously allocated pursuant to
Section 6.2(e)(ii)(I)(D) until the amount allocated pursuant to this Section
6.2(d)(vi)(I)(A) equals such amounts previously allocated pursuant to Section
6.2(e)(ii)(I)(D).
(B) Next, to WHWEL until the amount allocated pursuant to this Section
6.2(d)(vi)(I)(B) (and not reversed by Section 6.2(e)(ii)(I)(C)) equals such
amounts previously distributed and distributable pursuant to Section 7.1(c)(ii)
assuming that the Company had received all the cash attributable to the income
being allocated;
(C) Next, to WHWEL and the Manager in proportion to the aggregate amounts
distributed and distributable pursuant to Section 7.1(c)(iii) (assuming that the
Company had received all the cash attributable to the income being allocated)
Exhibit 10.50 Page 66
<PAGE>
until the amount allocated pursuant to this Section 6.2(d)(vi)(I)(C) (and not
reversed by Section 6.2(e)(ii)(I)(B)) equals such amounts previously distributed
and distributable pursuant to Section 7.1 (c)(iii);
(D) Thereafter, to WHWEL and the Manager in proportion to the aggregate
amounts distributed and distributable pursuant to Section 7.1(c)(iv) (assuming
that the Company had received all the cash attributable to the income being
allocated) until the amount allocated pursuant to this Section 6.2(d)(vi)(I)(D)
(and not reversed by Section 6.2(e)(ii)(I)(A)) equals such amounts previously
distributed and distributable pursuant to Section 7.1(c)(iv);
(II) The relative Percentage Interest of Whitehall XI to the combined
Percentage Interests of the Whitehall Group and WCPT multiplied by the balance
of the Company's Profits shall be allocated as follows:
(A) First, to Whitehall XI up to the amounts previously allocated pursuant
to Section 6.2(e)(ii)(II)(D) until the amount allocated pursuant to this Section
6.2(d)(vi)(II)(A) equals such amounts previously allocated pursuant to Section
6.2(e)(ii)(II)(D);
(B) Next, to Whitehall XI until the amount allocated pursuant to this
Section 6.2(d)(vi)(II)(B) (and not reversed by Section 6.2(e)(ii)(II)(C)) equals
such amounts previously distributed and distributable pursuant to Section
7.1(d)(ii) assuming the Company had received all the cash attributable to the
income being allocated;
(C) Next, to Whitehall XI and the Manager in proportion to the aggregate
amounts distributed and distributable pursuant to Section 7.1(d)(iii) (assuming
that the Company had received all the cash attributable to the income being
allocated) until the amount allocated pursuant to this Section 6.2(d)(vi)(II)(C)
(and not reversed by Section 6.2(e)(ii)(II)(B)) equals such amounts previously
distributed and distributable pursuant to Section 7.1(d)(iii);
(D) Next, to WHWEL and the Manager in proportion to the aggregate amounts
distributed and distributable pursuant to Section 7.1(d)(iv) (assuming that the
Company had received all the cash attributable to the income being allocated)
until the amount allocated pursuant to this Section 6.2(d)(vi)(II)(D) (and not
reversed by Section 6.2(e)(ii)(II)(A)) equals such amounts previously
distributed and distributable pursuant to Section 7.1(d)(iv);
(III) The relative Percentage Interest of Holding Co. to the combined
Percentage Interests of the Whitehall Group and WCPT multiplied by the balance
of the Company's Profits shall be allocated as follows:
(A) First, to Holding Co. up to the amounts previously allocated pursuant
to Section 6.2(e)(ii)(III)(D) until the amount allocated pursuant to this
Section 6.2(d)(vi)(III)(A) equals such amounts previously allocated pursuant to
Section 6.2(e)(ii)(III)(D);
(B) Next, to Holding Co. until the amount allocated pursuant to this
Section 6.2(d)(vi)(III)(B) (and not reversed by Section 6.2(e)(ii)(III)(C))
equals such amounts previously distributed and distributable pursuant to Section
7.1(e)(ii) assuming that the Company had received all the cash attributable to
the income being allocated;
Exhibit 10.50 Page 67
<PAGE>
(C) Next, to Holding Co. and the Manager in proportion to the aggregate
amounts distributed and distributable pursuant to Section 7.1(e)(iii) (assuming
that the Company had received all the cash attributable to the income being
allocated) until the amount allocated pursuant to this Section
6.2(d)(vi)(III)(C) (and not reversed by Section 6.2(e)(ii)(III)(B)) equals such
amounts previously distributed and distributable pursuant to Section
7.1(e)(iii);
(D) Next, to Holding Co. and the Manager in proportion to the aggregate
amounts distributed and distributable pursuant to Section 7.1(e)(iv) (assuming
that the Company had received all the cash attributable to the income being
allocated) until the amount allocated pursuant to this Section
6.2(d)(vi)(III)(D) (and not reversed by Section 6.2(e)(ii)(III)(A)) equals such
amounts previously distributed and distributable pursuant to Section 7.1(e)(iv);
(IV) The relative Percentage Interest of WCPT to the combined Percentage
Interests of the Whitehall Group and WCPT multiplied by the balance of the
Company's Profits shall be allocated as follows:
(A) First, to WCPT up to the amounts previously allocated pursuant to
Section 6.2(e)(ii)(IV)(D) until the amount allocated pursuant to this Section
6.2(d)(vi)(IV)(A) equals such amounts previously allocated pursuant to Section
6.2(e)(ii)(IV)(D);
(B) Next, to WCPT until the amount allocated pursuant to this Section
6.2(d)(vi)(IV)(B) (and not reversed by Section 6.2(e)(ii)(IV)(C)) equals such
amounts previously distributed and distributable pursuant to Sections 7.1(f)(ii)
and 7.1(g)(ii) assuming that the Company had received all the cash attributable
to the income being allocated;
(C) Next, to WCPT and the Manager in proportion to the aggregate amounts
distributed and distributable pursuant to Sections 7.1(f)(iii) and 7.1(g)(iii)
(assuming that the Company had received all the cash attributable to the income
being allocated) until the amount allocated pursuant to this Section
6.2(d)(vi)(IV)(C) (and not reversed by Section 6.2(e)(ii)(IV)(B)) equals such
amounts previously distributed and distributable pursuant to Sections
7.1(f)(iii) and 7.1(g)(iii);
(D) Next, to WCPT and the Manager in proportion to the aggregate amounts
distributed and distributable pursuant to Sections 7.1(f)(iv) and 7.1(g)(iv)
(assuming that the Company had received all the cash attributable to the income
being allocated) until the amount allocated pursuant to this Section
6.2(d)(vi)(IV)(D) (and not reversed by Section 6.2(e)(ii)(IV)(A)) equals such
amounts previously distributed and distributable pursuant to Sections 7.1(f)(iv)
and 7.1(g)(iv).
(e) Losses shall be allocated each year among the Members as follows:
(i) First, among the Members holding Membership Units, in proportion to the
amounts previously allocated pursuant to Sections 6.2(d)(v) and (vi) until the
amount allocated pursuant to this Section 6.2(e)(i) equals such amounts
previously allocated pursuant to Sections 6.2(d)(v) and (vi); such amount
allocable to the Members, other than the Saracen Members, to be further
allocated among them as set forth in Section 6.2(e)(ii) below.
Exhibit 10.50 Page 68
<PAGE>
(ii) The allocation among the Members described in Section 6.2(e)(i), other
than the Saracen Members, shall be as follows:
(I) The relative Percentage Interest of WHWEL to the combined Percentage
Interests of the Whitehall Group and WCPT multiplied by the Losses allocable
pursuant to Section 6.2(e)(i) to the Members other than the Saracen Members
shall be allocated as follows:
(A) First, to WHWEL and the Manager in proportion to the amounts previously
allocated pursuant to Section 6.2(d)(vi)(I)(D) until the amount allocated
pursuant to this Section 6.2(e)(ii)(I)(A) equals such amounts previously
allocated pursuant to Section 6.2(d)(vi)(I)(D);
(B) Next, to WHWEL and the Manager in proportion to the amounts previously
allocated pursuant to Section 6.2(d)(vi)(I)(C) until the amount allocated
pursuant to this Section 6.2(e)(ii)(I)(B) equals such amounts previously
allocated pursuant to Section 6.2(d)(vi)(I)(C);
(C) Next, to WHWEL until the amount allocated pursuant to this Section
6.2(e)(ii)(I)(C) equals such amounts previously allocated pursuant to Section
6.2(d)(vi)(I)(B); and
(D) Thereafter, to WHWEL; and
(II) The relative Percentage Interest Whitehall XI to the combined
Percentage Interests of the Whitehall Group and WCPT multiplied by the Losses
allocated pursuant to Section 6.2(e)(i) to the Members other than the Saracen
Members shall be allocated as follows:
(A) First, to Whitehall XI and the Manager in proportion to the amounts
previously allocated pursuant to Section 6.2(d)(vi)(II)(D) until the amount
allocated pursuant to this Section 6.2(e)(ii)(II)(A) equal such amounts
previously allocated pursuant to Section 6.2(d)(vi)(II)(D);
(B) Next, to Whitehall XI and the Manager in proportion to the amounts
previously allocated pursuant to Section 6.2(d)(vi)(II)(C) until the amount
allocated pursuant to this Section 6.2(e)(ii)(II)(B) equal such amounts
previously allocated pursuant to Section 6.2(d)(vi)(II)(C);
(C) Next, to Whitehall XI until the amount allocated pursuant to this
Section 6.2(e)(ii)(II)(C) equals such amounts previously allocated pursuant to
Section 6.2(d)(vi)(II)(B); and
(D) Thereafter, to Whitehall XI.
(III) The relative Percentage Interest of Holding Co. to the combined
Percentage Interests of the Whitehall Group and WCPT multiplied by the Losses
allocated pursuant to Section 6.2(e)(i) to the Members other than the Saracen
Members shall be allocated as follows:
(A) First, to Holding Co. and the Manager in proportion to the amounts
previously allocated pursuant to Section 6.2(d)(vi)(III)(D) until the amount
allocated pursuant to this Section 6.2(e)(ii)(III)(A) equals such amounts
previously allocated pursuant to Section 6.2(d)(vi)(III)(D);
Exhibit 10.50 Page 69
<PAGE>
(B) Next, to Holding Co. and the Manager in proportion to the amounts
previously allocated pursuant to Section 6.2(d)(vi)(III)(C) until the amount
allocated pursuant to this Section 6.2(e)(ii)(III)(B) equals such amounts
previously allocated pursuant to Section 6.2(d)(vi)(III)(C);
(C) Next, to Holding Co. until the amount allocated pursuant to this
Section 6.2(e)(ii)(III)(C) equals such amounts previously allocated pursuant to
Section 6.2(d)(vi)(III)(B); and
(D) Thereafter, to Holding Co.
(IV) The relative Percentage Interest of WCPT to the combined Percentage
Interests of the Whitehall Group and WCPT multiplied by the Losses allocated
pursuant to Section 6.2(e)(i) to the Members other than the Saracen Members
shall be allocated as follows:
(A) First, to WCPT and the Manager in proportion to the amounts previously
allocated pursuant to Section 6.2(d)(vi)(IV)(D) until the amount allocated
pursuant to this Section 6.2(e)(ii)(IV)(A) equals such amounts previously
allocated pursuant to Section 6.2(d)(vi)(IV)(D);
(B) Next, to WCPT and the Manager in proportion to the amounts previously
allocated pursuant to Section 6.2(d)(vi)(IV)(C) until the amount allocated
pursuant to this Section 6.2(e)(ii)(IV)(B) equals such amounts previously
allocated pursuant to Section 6.2(d)(vi)(IV)(C);
(C) Next, to WCPT until the amount allocated pursuant to this Section
6.2(e)(ii)(IV)(C) equals such amounts previously allocated pursuant to Section
6.2(d)(vi)(IV)(B); and
(D) Thereafter, to WCPT.
(iii) Next, to the Members holding Membership Units, an amount required to
reduce their positive Membership Capital Account balances to zero, in proportion
to the respective required amounts.
(iv) Next, to the Saracen Members holding Series A Preferred Membership
Units, an amount required to reduce their positive Series A Capital Account
balances to zero, in proportion to the respective required amounts.
(v) Any remaining Losses shall be allocated among all Members holding
Membership Units in proportion to their respective Percentage Interests.
(f) Notwithstanding Sections 6.2(d) and (e) hereof,
(i) For federal income tax purposes but not for purposes of crediting or
charging Capital Accounts, depreciation or gain or loss realized by the Company
with respect to any property that was contributed to the Company or that was
held by the Company at a time when the Book Value of the Company Assets and the
assets of the Subsidiaries was adjusted pursuant
Exhibit 10.50 Page 70
<PAGE>
to the third sentence of Section 6.1(b) shall, in accordance with the
"traditional method" under Section 704(c) of the Code and Treasury Regulation
Section 1.704-1(b)(2)(iv)(d) and (f), be allocated among the Members in a manner
which takes into account the differences between the adjusted basis for federal
income tax purposes to the Company of its interest in such property and the fair
market value of such interest at the time of its contribution or revaluation.
(ii) If there is a net decrease in the Minimum Gain of the Company during a
taxable year (including any Minimum Gain attributable to Member-Funded Debt),
each Member at the end of such year shall be allocated, prior to any other
allocations required under this Article VI, items of gross income for such year
(and, if necessary, for subsequent years) in the amount and proportions
described in Treasury Regulation Sections 1.704-2(g) and 1.704-2(i)(4).
(iii) Notwithstanding the allocations provided for in Sections 6.2(d) and
(e), no allocation of an item of loss or deduction shall be made to a Member to
the extent such allocation would cause or increase a deficit balance in such
Member's Capital Account as of the end of the taxable year to which such
allocation relates. If any Member receives an adjustment, allocation or
distribution that causes or increases such a deficit balance, taking into
account the rules of Treasury Regulation Sections 1.704-1(b)(2)(ii)(d)(4), (5)
and (6), such Member shall be allocated (after taking into account any
allocations made pursuant to Section 6.2(f)(ii)) items of income and gain in an
amount and manner to eliminate the Member's Capital Account deficit attributable
to such adjustment, allocation or distribution as quickly as possible. For
purposes of this Section 6.2(f)(iii), there shall be excluded from a Member's
deficit Capital Account balance at the end of a taxable year of the Company (a)
such Member's share, determined in accordance with Section 704(b) of the Code
and Treasury Regulation Section 1.704-2(g) of Minimum Gain (PROVIDED that, in
the case of Minimum Gain attributable to Member-Funded Debt, such Minimum Gain
shall be allocated to the Member or Members to whom such debt is attributable
pursuant to Treasury Regulation Section 1.704-2(i)), and (b) the amount that
such Member is obligated to restore to the Company under Treasury Regulation
Section 1.704-1(b)(2)(ii)(c).
(iv) Notwithstanding the allocations provided for in subsection (ii) of
this Section 6.2(f) and Sections 6.2(d) and (e), if there is a net increase in
Minimum Gain of the Company during a taxable year of the Company that is
attributable to Member-Funded Debt, then first Depreciation, to the extent the
increase in such Minimum Gain is allocable to depreciable property, and then a
proportionate part of other deductions and expenditures described in Section
705(a)(2)(B) of the Code, shall be allocated to the lending or guaranteeing
Member (and to joint lenders or guarantors in proportion to their relative
obligations), PROVIDED that the total amount of deductions so allocated for any
year shall not exceed the increase in Minimum Gain attributable to such
Member-Funded Debt in such year.
(v) Any special allocation under Sections 6.2(f)(ii) through (iv) shall be
taken into account in computing subsequent allocations of Profits and Losses of
any item thereof pursuant to this Article VI so that the net amount of any items
so allocated and the Profits, Losses and all items thereof allocated to each
Member pursuant to this Article VI shall, to the extent permis sible under
Section 704(b) of the Code and the Treasury Regulations promulgated thereunder,
be equal to the net amount that would have been allocated to each Member
pursuant to this Article VI if such special allocation had not occurred.
Exhibit 10.50 Page 71
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(vi) It is intended that prior to a distribution of the proceeds from a
liquidation of the Company pursuant to Section 10.2(vi) hereof, the positive
Capital Account balance of each Member shall be equal to the amount that such
Member would receive if liquidation proceeds were distributed in accordance with
Section 7.1. Accordingly, notwithstanding anything to the contrary in this
Section 6.2, to the extent permissible under Sections 704(b) and 514(c)(9) of
the Code and the Treasury Regulations promulgated thereunder, Profits and Losses
and, if necessary, items of gross income and gross deductions, of the Company
for the year of liquidation of the Company (or, if the liquidation spans more
than one year, each such year) shall be allocated among the Members so as to
bring the positive Capital Account balance of each Member as close as possible
to the amount that such Member would receive if liquidation proceeds were
distributed in accordance with Section 7.1.
(vii) Appropriate adjustments shall be made to the provisions of this
Section 6.2 if a New Member is admitted to the Company.
(viii) The Members agree that in the absence of any special allocations or
adjustments to the Capital Accounts made by the Internal Revenue Service, their
respective Capital Account balances (other than with respect to the Series A
Preferred Membership Units) should be in the ratio of their respective number of
Membership Units, and, accordingly, notwithstanding anything to the contrary in
Section 6.2(d), to the extent permissible under Sections 704(b) and 514(c)(9) of
the Code and the Treasury Regulations promulgated thereunder, for purposes of
maintaining Capital Account balances, book income, gain and loss from the sale
of Company Assets and the assets of the Subsidiaries shall be allocated, in a
manner that brings the Member's Capital Account balances into the ratio of their
respective number of Membership Units as quickly as possible.
(ix) To the extent any payments are made pursuant to Sections 7.1(i),
7.1(j), 7.1(k), 7.1(l), 7.1(m), 7.1(n) and 7.2 then, to the extent permissible
under Sections 704(b) and 514(c)(9) of the Code and the Treasury Regulations
promulgated thereunder, appropriate adjustments shall be made to the allocation
of Profits and Losses under Sections 6.2(d) and (e) among the Members, other
than the Saracen Members, so that the cumulative Profits and Losses allocated to
such Members equals, as nearly as possible, the amount of distributions received
by each Member, after taking into account all payments made pursuant to Section
7.1(i), 7.1(j), 7.1(k), 7.1(l), 7.1(m), 7.1(n) and 7.2.
ARTICLE VII.
APPLICATIONS AND DISTRIBUTIONS
OF AVAILABLE CASH
-----------------
7.1. Applications and Distributions.
(a) Distributions shall be made by the Manager to the Members of all or a
portion of Available Cash as determined by the Management Committee (such
amount, the "Distribution Amount") in accordance with Section 7.1(b) through (g)
within thirty (30) days after the end of each quarter of each
Exhibit 10.50 Page 72
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Fiscal Year. The Members acknowledge and agree, notwithstanding anything in this
Agreement to the contrary, that the Company shall make distributions to all
Members in accordance with this Section 7.1 in an amount at least sufficient (i)
to pay the amounts to Saracen set forth in Section 7.1(b)(ii) below and (ii),
when it has Available Cash to do so, to provide WCPT the amount that WCPT would
be required to distribute to its shareholders, on account of taxable income of
the Company allocable to WCPT, so that WCPT is able to satisfy the distribution
requirements of a real estate investment trust with respect to such taxable
income.
(b) The Distribution Amount and the Capital Proceeds Distribution Amount,
if any, shall be distributed as follows:
(i) First, but only with respect to, and to the extent of, any Capital
Proceeds Distribution Amount derived from a third-party mortgage financing or
refinancing relating to a Property acquired with the proceeds of a corresponding
specified Interim Capital Contribution, to each Managing Member pro rata (in
proportion to the unreturned Interim Capital Contributions made by such Managing
Member) until each such Managing Member shall have received, taking into account
the amount of all prior distributions under this Section 7.1(b)(i), the full
amount of all Interim Capital Contributions made by such Managing Member through
the date of distribution;
(ii) Second, in an aggregate amount equal to the sum of (A) the Unpaid
Preferred Distribution, if any, plus (B) the Preferred Distribution Amount, pro
rata to each Saracen Member, in proportion to its relative Series A Preferred
Percentage Interests; and
(iii) Third, in an aggregate amount equal to the Common Distribution
Amount, pro rata and on a pari passu basis, (A) to each Saracen Member, an
amount equal to each Saracen Member's Percentage Interest multiplied by the
Common Distribution Amount and (B) to Whitehall XI, WHWEL, Holding Co. and WCPT
an amount equal to their combined Percentage Interests multiplied by the Common
Distribution Amount which amount shall be distributed to Whitehall XI, WHWEL,
Holding Co. and WCPT in accordance with Section 7.1(c) through (g),
respectively.
(c) A portion of the total amount distributed to WHWEL, Whitehall XI,
Holding Co. and WCPT pursuant to Section 7.1(b)(iii)(B) above equal to the
product of such amount multiplied by the quotient (expressed as a percentage
rounded up to the nearest one ten-thousandth (0.0001)) of the Percentage
Interest of WHWEL divided by the Combined Whitehall/WCPT Percentage Interest
shall be further distributed as follows:
(i) First, to WHWEL until WHWEL shall have received, taking into account
the amount of all prior distributions under this Section 7.1(c)(i), the full
amount of all Capital Contributions made by WHWEL through the date of
distribution (it being understood and agreed that as of the date hereof such
Capital Contributions shall be deemed to be the aggregate amount shown for WHWEL
in Schedule 5.1);
Exhibit 10.50 Page 73
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(ii) Second, to WHWEL until WHWEL shall have received, taking into account
the timing and amount of all prior contributions and distributions, an Internal
Rate of Return equal to 17.5% per annum;
(iii) Third, (x) 82.5% to WHWEL and (y) 17.5% to the Manager (subject to
Section 7.1(L)), until WHWEL shall have received, taking into account the timing
and amount of all prior contributions and distributions, an Internal Rate of
Return equal to 22.5% per annum; and
(iv) Thereafter, (x) 77.5% to WHWEL and (y) 22.5% to the Manager (subject
to Section 7.1(L)).
(d) A portion of the total amount distributed to Whitehall XI, WHWEL,
Holding Co. and WCPT pursuant to Section 7.1(b)(iii)(B) above equal to the
product of such amount multiplied by the quotient ((expressed as a percentage
rounded up to the nearest one ten-thousandth (0.0001)) of the Percentage
Interest of Whitehall XI divided by the Combined Whitehall/WCPT Percentage
Interest shall be further distributed as follows:
(i) First, to Whitehall XI until Whitehall XI shall have received, taking
into account the amount of all prior distributions under this Section 7.1(d)(i),
the full amount of all Capital Contributions made by Whitehall XI through the
date of distribution;
(ii) Second, to Whitehall XI until Whitehall XI shall have received, taking
into account the timing and amount of all prior contributions and distributions,
an Internal Rate of Return equal to 15% per annum;
(iii) Third, (x) 80% to Whitehall XI and (y) 20% to the Manager (subject to
Section 7.1(m)), until Whitehall XI shall have received, taking into account the
timing and amount of all prior contributions and distributions, an Internal Rate
of Return equal to 25% per annum; and
(iv) Thereafter, (x) 75% to Whitehall XI and (y) 25% to the Manager
(subject to Section 7.1(m)).
(e) A portion of the total amount distributed to Holding Co., WHWEL,
Whitehall XI and WCPT pursuant to Section 7.1(b)(iii)(B) above equal to the
product of such amount multiplied by such amount by the quotient ((expressed as
a percentage rounded up to the nearest one ten-thousandth (0.0001)) of the
Percentage Interest of Holding Co. divided by the Combined Whitehall/WCPT
Percentage Interest shall be further distributed as follows:
(i) First, to Holding Co. until Holding Co. shall have received, taking
into account the amount of all prior distributions under this Section 7.1(e)(i),
the full amount of all Capital Contributions made by Holding Co. through the
date of distribution (it being understood and agreed that as of the date hereof
such Capital Contributions shall be deemed to be the aggregate amount shown for
Holding Co. in Schedule 5.1);
Exhibit 10.50 Page 74
<PAGE>
(ii) Second, to Holding Co. until Holding Co. shall have received, taking
into account the timing and amount of all prior contributions and distributions,
an Internal Rate of Return equal to 15% per annum;
(iii) Third, (x) 80% to Holding Co. and (y) 20% to the Manager (subject to
Section 7.1(n)), until Holding Co. shall have received, taking into account the
timing and amount of all prior contributions and distributions, an Internal Rate
of Return equal to 25% per annum; and
(iv) Thereafter, (x) 75% to Holding Co. and (y) 25% to the Manager (subject
to Section 7.1(n)).
(f) The total amount equal to the WCPT I Distributions shall be further
distributed as follows:
(i) First, to WCPT until WCPT shall have received, taking into account the
amount of all prior distributions under this Section 7.1(f)(i), the full amount
of all Capital Contributions made by WCPT through the date of distribution (it
being understood and agreed that for the purposes of this Section 7.1(f), as of
the date hereof, the total amount of WCPT Phase I Capital Contributions made by
WCPT shall be deemed to be the aggregate amount shown for WCPT in Schedule 5.1);
(ii) Second, to WCPT until WCPT shall have received, taking into account
the timing and amount of all prior contributions and distributions, an Internal
Rate of Return equal to 17.5% per annum with respect to the WCPT Phase I Capital
Contributions;
(iii) Third, (x) 82.5% to WCPT and (y) 17.5% to the Manager, until WCPT
shall have received, taking into account the timing and amount of all prior
contributions and distributions, an Internal Rate of Return equal to 22.5% per
annum with respect to the WCPT Phase I Capital Contributions; and
(iv) Thereafter, (x) 77.5% to WCPT and (y) 22.5% to the Manager.
(g) The total amount equal to the WCPT II Distributions shall be further
distributed as follows:
(i) First, to WCPT until WCPT shall have received, taking into account the
amount of all prior distributions under this Section 7.1(g)(i), the full amount
of all WCPT Phase II Capital Contributions made by WCPT through the date of
distribution;
(ii) Second, to WCPT until WCPT shall have received, taking into account
the timing and amount of all prior contributions and distributions, an Internal
Rate of Return equal to 15% per annum with respect to the WCPT Phase II Capital
Contributions;
(iii) Third, (x) 80% to WCPT and (y) 20% to the Manager, until WCPT shall
have received, taking into account the timing and amount of all prior
contributions and distributions,
Exhibit 10.50 Page 75
<PAGE>
an Internal Rate of Return equal to 25% per annum with respect to the WCPT Phase
II Capital Contributions; and
(iv) Thereafter, (x) 75% to WCPT and (y) 25% to the Manager.
(h) If and to the extent applicable, an amount equal to the Percentage
Interest of each New Member multiplied by the Common Distribution Amount shall
be further distributed as follows:
(i) First, to such New Member until such New Member shall have received the
full amount of all Capital Contributions made by such New Member through the
date of distribution;
(ii) Second, to such New Member until such New Member shall have received,
taking into account the timing and amount of all prior contributions and
distributions, an Internal Rate of Return equal to a percentage to be approved
by the Management Committee;
(iii) Third, (x) a percentage to be approved by the Management Committee to
such New Member and (y) a percentage to be approved by the Management Committee
to the Manager, until such New Member shall have received, taking into account
the timing and amount of all prior contributions and distributions, an Internal
Rate of Return equal to a percentage to be approved by the Management Committee;
and
(iv) Thereafter, (x) a percentage to be approved by the Management
Committee to such New Member and (y) a percentage to be approved by the
Management Committee to the Manager.
(i) If WCPT is entitled to receive payments pursuant to Section 7.1(h)(iii)
or (iv) or pursuant to Section 7.6 (from any Member other than any Member of the
Whitehall Group, it being acknowledged that WCPT (or any other Manager) shall
not be entitled to any such Promote from Saracen) on account of any Promote,
then all such amounts entitled to be received by WCPT, after subtracting any
allocation by WCPT of any portion of the Promote as incentive compensation to
officers and employees of WCPT (the "WCPT Amount"), shall instead be distributed
as follows: (A) to WCPT and WHWEL for distribution in accordance with Section
7.1(c), an amount equal to the product of the WCPT Amount multiplied by the
quotient (expressed as a percentage rounded up to the nearest one ten-
thousandth (0.0001)) of the Percentage Interest of WHWEL divided by the Combined
Whitehall/WCPT Percentage Interest, (B) to WCPT and Whitehall XI for
distribution in accordance with Section 7.1(d), an amount equal to the product
of the WCPT Amount multiplied by the quotient (expressed as a percentage rounded
up to the nearest one ten-thousandth (0.0001)) of the relative Percentage
Interest of Whitehall XI divided by the Combined Whitehall/WCPT Percentage
Interest, (C) to WCPT and Holding Co. for distribution in accordance with
Section 7.1(e), an amount equal to the product of the WCPT Amount multiplied by
the quotient (expressed as a percentage rounded up to the nearest one
ten-thousandth (0.0001)) of the Percentage Interest of Holding Co. divided by
the Combined Whitehall/WCPT Percentage Interest, (D) to WCPT and Manager for
distribution in accordance with Section 7.1(f), an amount equal to the product
of the WCPT Amount multiplied by the quotient (expressed as a percentage rounded
up to the nearest one ten-thousandth (0.0001)) of the WCPT I Percentage Interest
divided by the Combined Whitehall/WCPT Percentage Interest and (E) to WCPT and
Exhibit 10.50 Page 76
<PAGE>
Manager for distribution in accordance with Section 7.1(g), an amount equal to
the product of the WCPT Amount multiplied by the quotient (expressed as a
percentage rounded up to the nearest one ten-thousandth (0.0001)) of the WCPT II
Percentage Interest divided by the Combined Whitehall/WCPT Percentage Interest.
Except as provided in the immediately preceding sentence, Whitehall XI, WHWEL,
Holding Co., Saracen and any other New Member acknowledge and agree that,
notwithstanding their existing or future direct or indirect ownership of Shares,
(i) they shall not have any direct or indirect interest in the Promote payable
to WCPT pursuant to this Agreement, (ii) WCPT shall structure the receipt of the
Promote or enter into one or more transactions, so that none of WHWEL, Whitehall
XI, Holding Co., Saracen nor any other New Member will have any direct or
indirect interest therein, including, without limitation, by distributing or
causing the distribution of the proceeds of or assigning its right to receive
all or any portion of the Promote to an Affiliate of or Person(s) employed by
WCPT and not to WCPT itself, (iii) WHWEL, Whitehall XI, Holding Co., Saracen,
any other New Member and the Company will cooperate with WCPT, its Affiliates
and their respective shareholders, in good faith, but without additional costs
to WHWEL, Whitehall XI, Holding Co., Saracen, any other New Member or the
Company, to accomplish the foregoing, and (iv) WCPT (or any other Manager) shall
only be entitled to receive the Promote under and pursuant to Sections
7.1(c)(iii)(y), 7.1(c)(iv)(y), 7.1(d)(iii)(y), 7.1(d)(iv)(y), 7.1(e)(iii)(y),
7.1(e)(iv)(y), 7.1(f)(iii)(y), 7.1(f)(iv)(y), 7.1(g)(iii)(y), 7.1(g)(iv)(y),
7.1(h)(iii)(y) and 7.1(h)(iv)(y).
(j) Notwithstanding the terms of Sections 7.1(c), 7.1(d), 7.1(e), 7.1(f),
7.1(g) or 7.1(h), if WCPT shall cease to be the Manager, then, unless the
election described in the proviso of this sentence is made, all distributions
that would otherwise have been made pursuant to (A) Sections 7.1(c)(iii) (y) or
7.1(c)(iv)(y) shall be made to WHWEL instead of the Manager, (B) Sections
7.1(d)(iii)(y) or 7.1(d)(iv)(y) shall be made to Whitehall XI instead of the
Manager, (C) Sections 7.1(e)(iii)(y) or 7.1(e)(iv)(y) shall be made to Holding
Co. instead of the Manager, (D) Sections 7.1(f)(iii)(y) or 7.1(f)(iv)(y) shall
be made to WCPT instead of the Manager, (E) Sections 7.1(g)(iii)(y) or
7.1(g)(iv)(y) shall be made to WCPT instead of the Manager, and (F) Sections
7.1(h)(iii)(y) or 7.1(h)(iv)(y) shall be made to the New Member instead of the
Manager; PROVIDED, HOWEVER, that if WCPT is removed as Manager pursuant to
Section 9.1, WHWEL and Whitehall XI shall have the right, in their sole and
absolute discretion, to appoint a successor Manager (which may be Members or
Affiliates of Members and who shall provide substantially the same services as
the Manager hereunder) and to have all or a portion (as WHWEL and Whitehall XI
shall determine) of the amounts distributable pursuant to Sections
7.1(c)(iii)(y), 7.1(c)(iv)(y), 7.1(d)(iii)(y), 7.1(d)(iv)(y), 7.1(e)(iii)(y),
7.1(e)(iv)(y), 7.1(f)(iii)(y), 7.1(f)(iv)(y), 7.1(g)(iii)(y), 7.1(g)(iv)(y),
7.1(h)(iii)(y) and 7.1(h)(iv)(y) distributed to such successor.
(k) Distributions shall be made by the Manager to the Members of all or any
portion of Capital Proceeds as determined by the Management Committee (such
amount, the "Capital Proceeds Distribution Amount") in accordance with Section
7.1(a) in such amounts and at such time(s) as determined by the Management
Committee in its sole discretion, PROVIDED, however, that such Capital Proceeds
Distribution Amount shall not be made unless at least thirty (30) days' prior
written notice of the approximate amount of such Capital Proceeds Distribution
Amount has been delivered to the Preferred Holders; PROVIDED, further, that any
Capital Proceeds Distribution Amount distributable pursuant to Section 7.1(b)(i)
from a third-party mortgage financing or refinancing relating to a particular
Property which has been acquired with the proceeds of a corresponding specified
Interim Capital Contribution with respect to such Property that, at the time of
such distribution, continues to qualify as
Exhibit 10.50 Page 77
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an Interim Capital Contribution, shall not require such thirty (30) days' prior
written notice specified in the preceding clause.
(l) In connection with any Distribution, if the Manager is entitled to
receive payments pursuant to Section 7.1(c)(iii)(y) or 7.1(c)(iv)(y), but
Whitehall XI shall have not received, taking into account the timing and amount
of all prior contributions and distributions, an Internal Rate of Return equal
to 15% per annum with respect to its Capital Contributions pursuant to Section
7.1(d), then an amount, not to exceed 50% of the amount otherwise to be
distributed to the Manager pursuant to Sections 7.1(c)(iii)(y) and
7.1(c)(iv)(y), if any, shall be distributed to Whitehall XI, until Whitehall XI
shall have received, taking into account the timing and amount of all prior
contributions and distributions, an Internal Rate of Return equal to 15% per
annum with respect to their Capital Contributions.
(m) In connection with any Distribution, if the Manager is entitled to
receive payments pursuant to Sections 7.1(d)(iii)(y), 7.1(d)(iv)(y),
7.1(e)(iii)(y) or 7.1(e)(iv)(y) but WHWEL shall have not received, taking into
account the timing and amount of all prior contributions and distributions, an
Internal Rate of Return equal to 15% per annum with respect to its Capital
Contributions pursuant to Section 7.1(c), then an amount, not to exceed 45% of
the amount otherwise to be distributed to the Manager pursuant to Sections
7.1(d)(iii)(y), 7.1(d)(iv)(y), 7.1(e)(iii)(y) or 7.1(e)(iv)(y), if any, shall be
distributed to WHWEL, until WHWEL shall have received, taking into account the
timing and amount of all prior contributions and distributions, an Internal Rate
of Return equal to 15% per annum with respect to its Capital Contributions.
(n) In connection with any Distribution, if the Manager is entitled to
receive payments made pursuant to Section 7.1(c)(ii)(y) or 7.1(c)(iv)(y), but
Holding Co. shall have not received, taking into account the timing and amount
of all prior contributions and distributions, an Internal Rate of Return equal
to 15% per annum with respect to its Capital Contributions pursuant to Section
7.1(e), then an amount, not to exceed 50% of the amount otherwise to be
distributed to the Manager pursuant to Sections 7.1(c)(iii)(y) or 7.1(c)(iv)(y),
if any, shall be distributed to Holding Co. until Holding Co. shall have
received, taking into account the timing and amount of all prior contributions
and distributions, an Internal Rate of Return equal to 15% per annum with
respect to its Capital Contributions.
(o) Although the terms of this Section 7.1 contemplate distributions being
made under paragraph (b) and then under paragraphs (c), (d), (e), (f), (g), (h)
and (i) of this Section 7.1, the parties intend for the calculations required by
such paragraphs to be made simultaneously and for the funds to be distributed
simultaneously in accordance with such paragraphs in a single distribution
rather than in seriatim.
(p) WCPT acknowledges and agrees that 50% of all amounts received by the
Manager pursuant to Sections 7.1(c)(iii)(y), 7.1(c)(iv)(y), 7.1(f)(iii)(y), and
7.1(f)(iv)(y), and 55% of all amounts received by the Manager pursuant to
Sections 7.1(d)(iii)(y), 7.1(d)(iv)(y), 7.1(e)(iii)(y), 7.1(e)(iv)(y),
7.1(g)(iii)(y), 7.1(g)(iv)(y), 7.1(h)(iii)(y), and 7.1(h)(iv)(y) shall be paid
to employees, officers and other personnel of WCPT and shall not be distributed
to WRP (it being understood and agreed that any amounts that are, pursuant to
clause (l), clause (m) or clause (n) of this Section 7.1 distributed to WHWEL,
Whitehall XI, or Holding Co., as the case may be, rather than the Manager shall
be deemed to constitute payments that, in compliance with this clause (p) could
be distributed by WCPT
Exhibit 10.50 Page 78
<PAGE>
to WRP rather than paid to employees, officers or other personnel of WCPT). Any
amendments to, or departures from, the foregoing provisions shall be deemed to
be a Major Decision for purposes of this Agreement.
7.2. Restoration of Excess Distributions. Subject to Section 7.3:
If any Promote Payments to the Manager have previously been made and,
subsequently, the Internal Rate of Return for any of WHWEL, Whitehall XI,
Holding Co. and WCPT is reduced as a result of a Capital Contribution being made
pursuant to Section 5.2 or otherwise, then the parties hereto shall make
appropriate adjustments to the amounts previously distributed or paid to them
(and the Manager shall return all or a portion of such Promote Payments to such
Member from whom such Promote Payment was received) to the extent necessary so
that the balance of such Promote Payments retained by the Manager (after giving
effect to such adjustments) does not exceed the Requisite Promote applicable to
such Member, taking into account (x) such reduction in such Member's Internal
Rate of Return, (y) the timing and amount of all Capital Contributions made by,
and all the Common Distribution Amounts received by, such Member and (z) the
Promote Payments previously received by the Manager and not yet returned to such
Member pursuant to this Section 7.2.
7.3. Liquidation. In the event of the sale or other disposition of all
Properties owned by the Company and its Subsidiaries, the Company shall be
dissolved and the proceeds of such sale or other disposition shall be
distributed to the Members in liquidation as provided in Article X.
7.4. Repayment of Member Loans. If any Member shall be a borrower under one
or more Member Loans (a "Debtor Member"), then any distributions that would
otherwise be payable to such Debtor Member pursuant to Section 7.1, 7.2 or 10.2
shall instead be paid to the Member or Members which made such Member Loans
(each, a "Lender Member"), first to pay any accrued interest (at the Default
Rate) and then to pay the principal amount thereof, until such Member Loans
(including any accrued and unpaid interest) shall be repaid in full. In the
event there are two or more Lender Members with respect to any Debtor Member,
distributions under this Section 7.4 shall be made PRO RATA to each Lender
Member in proportion to the relative principal amount of Member Loans (including
accrued and unpaid interest) that such Lender Member has outstanding as a
percentage of total outstanding Member Loans made to such Debtor Member by all
Lender Members. Any amounts distributed pursuant to this Section 7.4 shall for
all other purposes of this Agreement be treated as if distributed to the Debtor
Member.
7.5. Revisions to Reflect Issuance of Additional Membership Interests.
Subject to Section 12.1 herein, in the event that the Company issues additional
membership interests pursuant to Section 5.9 hereof with rights, preferences or
privileges different from those issued on the date hereof, the Manager shall
make such revisions to this Article VII as it deems necessary to reflect the
issuance of such additional membership interests and any special rights, duties
or powers with respect thereto.
7.6. Initial Public Offering; Sale of Units. (a) In the event of a public
offering of Shares by WCPT and provided that WCPT shall be acting as the Manager
at the time of such offering, each Member and WRP agree to take all actions
necessary or appropriate at no cost or expense to the Saracen Members, and
without any impact on the rights or amounts to be received by the Saracen
Members, including, without limitation, amending any Organizational Document of
WCPT and the
Exhibit 10.50 Page 79
<PAGE>
Company (including this Agreement) in order that the Manager receives additional
compensation (either in cash, or if the Managing Members agree, in the form of
Membership Units or otherwise) equal in value to the Promote that the Manager
would have received if all of the Company Assets and the assets of the
Subsidiaries were sold for a price equal to the total valuation of the Company
(implied by reference to the public offering price of the shares sold by WCPT)
and the proceeds of such sale were distributed pursuant to Section 10.2. If, in
connection with a public offering of WCPT, WCPT, WHWEL, Whitehall XI and Holding
Co. are restricted from selling their Membership Units or Shares until a
specified lock-up period has lapsed after such offering, then the Promote
payable to WCPT under this subparagraph (a) shall be calculated and paid to WCPT
promptly after such lock-up period expires. WHWEL, with respect to any Promote
that would be received by the Manager pursuant to Section 7.1(c), Whitehall XI,
with respect to any Promote that would be received by the Manager pursuant to
Section 7.1(d) and Holding Co., with respect to any Promote that would be
received by Manager pursuant to Section 7.1(e), agree to pay to the Manager or
its designee contemporaneously with the closing of the public offering (or on
the day after expiration of any lock-up as described in the immediately
preceding sentence) such amount of the Promote in cash or, if WCPT, WHWEL,
Whitehall XI, Holding Co. and WRP agree otherwise, in the form of Membership
Units or otherwise and based upon the relative Percentage Interests of WCPT,
WHWEL, Whitehall XI and Holding Co. Without in any way limiting the restrictions
contained in Article 8, each Member of the Whitehall Group agrees not to
distribute its Membership Units or Shares to any of its constituent partners
prior to payment of the Promote payable under this subparagraph (a). Any
Membership Units to be received by the Manager pursuant to this subparagraph (a)
shall not be newly issued Membership Units but shall be Membership Units
beneficially owned by the Members of the Whitehall Group. Each Member and WRP
will work together in good faith to achieve the optimal tax consequences for
WCPT; PROVIDED, that there is no adverse impact on the other Members.
(b) Unless the full Promote has already been, or is due to be, paid to
Manager under subparagraph (a), in the event that any Member of the Whitehall
Group, to the extent permitted under this Agreement, either sells (or otherwise
disposes of) all or any of its Membership Units to a third-party or converts all
or any of its Membership Units into Shares or WRP Shares, any Member of the
Whitehall Group, as the case may be, shall pay to the Manager on the
Determination Date (as defined below) an amount equal to the amount of the
Promote that would have been payable to the Manager if the proceeds received by
any Member of the Whitehall Group, (or the cash value thereof as of the
Determination Date if such proceeds are not cash) were received by any Member of
the Whitehall Group, pursuant to a distribution of Available Cash among all
Members (other than Saracen) pursuant to Sections 7.1(c), (d), (e), (f) and (g).
For purposes of this subparagraph (b), the "Determination Date" shall be the
date of the relevant sale, disposition or conversion of the Membership Units;
provided that, if the Shares or WRP Shares received by any Member of the
Whitehall Group, as the case may be, upon conversion of any Membership Units are
subject to any "lock-up" agreement prohibiting the sale of such Shares or WRP
Shares for a specified period, the "Determination Date" shall mean the date upon
which such lock-up period expires.
(c) Upon payment of all amounts (whether in cash, Shares, WRP Shares,
Membership Units or other consideration) due to the Manager pursuant to this
Section 7.6 in respect of the sale, disposition or conversion of any Membership
Units, no further amounts shall be payable to the Manager pursuant to this
Section 7.6 or Sections 7.1(c)(iii)(y), 7.1(c)(iv)(y), 7.1(d)(iii)(y),
7.1(d)(iv)(y), 7.1(e)(iii)(y), 7.1(e)(iv)(y), 7.1(f)(iii)(y), 7.1(f)(iv)(y),
7.1(g)(iii)(y), 7.1(g)(iv)(y), 7.1(h(iii)(y) and
Exhibit 10.50 Page 80
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7.1(h)(iv)(y) or any successor provision to any of the foregoing in respect of
any such sold, disposed of or converted Membership Units or in respect of any
subsequent sale, transfer or other disposition of the proceeds from or
consideration received on account of any such sale, disposition or conversion of
Membership Units.
ARTICLE VIII.
TRANSFER OF COMPANY INTERESTS
-----------------------------
8.1. Limitations on Assignments of Interests by Members.
(a) Except as provided in Section 8.1(b) and Section 8.2, no Member shall
Transfer (as hereinafter defined) all or any portion of its Interest or permit
such a Transfer or contract to do so, without the consent of each of the
Managing Members (which consent may be withheld in such Managing Member's sole
discretion for any reason or no reason) and in strict compliance with the
provisions of this Article VIII. As used herein "Transfer" of an Interest means,
with respect to any Member, any transfer, sale, pledge, hypothecation,
encumbrance, assignment or other disposition of any portion of the Interest of
such Member or the proceeds thereof (whether voluntarily, involuntarily, by
operation of law or otherwise). Notwithstanding the foregoing, a transfer, sale,
pledge, hypothecation, encumbrance, assignment or other disposition of ownership
interests in WCPT (including by virtue of an Extraordinary Transaction but
excluding any transfer of up to 6,000 shares of WCPT issued to holders other
than WRP on or about August 28, 1997) shall constitute a "transfer" of WCPT's
Interest and shall be subject to the provisions of this Article VIII. Any
purported Transfer in violation of this Article VIII shall be void ab initio,
and shall not bind the Company, and the Members making such purported transfer,
sale or assignment shall indemnify and hold the Company and the other Members
harmless from and against any federal, state or local income taxes, or transfer
taxes, including without limitation, transfer gains taxes, arising as a result
of, or caused directly or indirectly by, such purported Transfer. The giving of
any consent to a Transfer in any one or more instances shall not limit or waive
the need for such consent in any other or subsequent instances.
(b) Subject to compliance with the remaining provisions of this Article
VIII and with Section 4.2 and notwithstanding anything to the contrary set forth
in Section 8.1(a) above, each of WCPT, WHWEL, Whitehall XI, Holding Co. and
Saracen may, from time to time and without any consent or approval, pledge or
otherwise grant a security interest in all or part of such Member's Interest to
an Institutional Lender to secure a loan made to such Member (a "Pledgor") by
such Institutional Lender (a "Pledgee"); provided that, (i) such pledged
Interest may not be transferred to the Pledgee by foreclosure, assignment in
lieu thereof or other enforcement of such pledge, and (ii) WCPT, WHWEL,
Whitehall XI, Holding Co. and Saracen may pledge only their respective economic
interests in the Company and no other rights hereunder. In addition,
notwithstanding anything to the contrary set forth herein, (A) WHWEL shall have
the right at any time to transfer all or any part of its Interest without the
prior consent of any Member (including WCPT and the Manager) pursuant to Section
8.3, in connection with the exchange of its Membership Units for the WRP
At-Market Shares, or in connection with the exercise of any of the WRP Warrants
and/or the New WRP Warrants, (B) Whitehall XI shall have the right at any time
to transfer all or any part of its Interest without the prior consent of any
Member (including WCPT and the Manager) pursuant to Section 8.3 or in connection
with the exercise of any
Exhibit 10.50 Page 81
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of the WRP Warrants and/or the New WRP Warrants, (C) Holding Co. shall have the
right at any time to transfer all or any part of its Interest without the prior
consent of any Member (including WCPT and the Manager) pursuant to Section 8.3,
(D) any Saracen Member shall have the right at any time to transfer all or any
part of his or her Interest without the prior consent of any Member (i) pursuant
to Section 8.3, (ii) to another Saracen Member, PROVIDED that such transfer
shall not result in Dominic J. Saraceno having a Percentage Interest (assuming
for purposes of determining Dominic J. Saraceno's Percentage Interest pursuant
to this Section 8.1(b) only, all of his outstanding Series A Preferred
Membership Units were converted into Membership Units at the conversion price
set forth in the Series A Terms) equal to or greater than 10% or (iii) pursuant
to a transfer for a tax or estate planning purpose only, by inter vivos gift or
sale to an entity or trust or pursuant to any applicable laws of descent;
provided that at all times the voting control of such entity or trust is held by
and the decisions of such entity or trust are made solely by such Member (or, if
applicable, by any executor) and (E) WHWEL, Whitehall XI and Holding Co. shall
have the right at any time to transfer all or any part of its Interest without
prior consent of any Member (including WCPT and the Manager) to any Affiliate of
Goldman Sachs Group.
(c) At all times prior to an initial public offering by WCPT, any one or
more of Whitehall Street Real Estate Limited Partnership V, Whitehall Street
Real Estate Limited Partnership VII and/or any other Affiliate of Goldman Sachs
Group meeting the requirements of clause (i) of the definition of "Affiliate"
shall control WHWEL.
(d) At all times prior to an initial public offering by WCPT, any one or
more of Whitehall XI, WHWEL and/or any other Affiliate of Goldman Sachs Group
meeting the requirements of clause (i) of the definition of "Affiliate" shall
control the Holding Co.
8.2. Sale of Properties, the Company or its Subsidiaries.
(a) At any time after the date hereof, any Marketing Member may from time
to time and on one or more separate occasions (1) require the Company or any
Subsidiary to sell any or all of the Properties, (2) require the Company to sell
any or all of the Subsidiaries or (3) sell the Company as a whole, in one or
more bona fide transactions to a Person not Affiliated with the Marketing
Member; PROVIDED that, the Marketing Member has first delivered a written notice
(a "Sales Notice") to the Non- Marketing Member in accordance with Section
8.2(b). For the purposes of this Section 8.2, any Property, any Subsidiary or
the Company which is the subject of a Sales Notice is referred to as a "Subject
Asset". The term "Marketing Member" shall mean any Member of the Whitehall Group
or WCPT (provided such Person is still an Appointing Member) who shall deliver a
Sales Notice in accordance with this Section 8.2; PROVIDED that if both any
Member of the Whitehall Group and WCPT shall deliver a Sales Notice with respect
to the same Subject Asset, the party who delivered a Sales Notice first shall be
the Marketing Member with respect thereto and the other party shall be the Non-
Marketing Member. If any Member of the Whitehall Group shall have delivered a
Sales Notice in accordance with this Section 8.2, then WCPT shall be the
"Non-Marketing Member", and if WCPT shall have delivered be a Sales Notice in
accordance with this Section 8.2, then the Members of the Whitehall Group shall
be the "Non-Marketing Member".
(b) In the event a proposed sale involves a Subject Asset having a total
cost basis (as set forth on the Company's consolidated balance sheet) of
$50,000,000 or more, the Marketing Member shall deliver a Sale Notice to the
Non-Marketing Member at least forty-five (45) days prior to the
Exhibit 10.50 Page 82
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commencement of the Marketing Period. In the event a proposed sale involves a
Subject Asset having a total cost basis (as set forth on the Company's
consolidated balance sheet) of less than $50,000,000, the Marketing Member shall
deliver a Sale Notice to the Non-Marketing Member at least thirty (30) days
prior to the commencement of the Marketing Period. During such forty-five
(45)-day or thirty (30)-day period, as the case may be, the Marketing Member and
the Non-Marketing Member shall discuss in good faith (on a non-exclusive basis)
the terms by which the Non-Marketing Member would be willing to purchase the
Subject Asset and possibly the terms by which the Non-Marketing Member would
consider the purchase of the Marketing Member's entire Interest in the Company.
(c) In the event the Non-Marketing Member agrees to purchase the Subject
Asset, the Marketing Member shall have the full right, power and authority
(acting alone) to execute, deliver and perform any and all documentation and to
take any and all other action, on behalf of the Company, any Subsidiary and, in
the case of a sale of the Company, of the Members required or desirable to
consummate the sale of the Subject Asset on such terms and conditions as the
Marketing Member shall determine in its discretion, and each Member hereby
consents to the Marketing Member's exercise of such right, power and authority
and hereby agrees to execute, deliver and perform, any and all documents,
agreements and instruments, and to take any other actions as may be required or
desirable for the purpose of consummating such sale of the Subject Asset.
(d) (i) In the event a binding agreement is not executed between the
Marketing Member and the Non-Marketing Member during the forty-five (45)-day or
thirty (30)-day period (as applicable) specified in Section 8.2(b) or (ii) in
the event a proposed sale of the Subject Asset under Section 8.2(c) fails to
close for any reason other than due to a default by the Marketing Member by the
thirtieth (30th) day after the scheduled closing date for the sale of such
Subject Asset specified in such binding agreement (the "Section 8.2(c)
Termination Date"), the Marketing Member shall be free to market the Subject
Asset upon such terms the Marketing Member deems necessary to consummate a sale
of the Subject Asset during a one hundred eighty (180)-day period (the
"Marketing Period"), commencing on the first day after the expiration of the
forty-five (45)-day or thirty (30)-day period (as applicable) specified in
Section 8.2(b) or upon the earlier of (i) the first day after the date on which
a purchase agreement entered into in accordance with Section 8.2(c) is
terminated or (ii) the Section 8.2(c) Termination Date; PROVIDED that the
Marketing Member shall not sell the Subject Asset to a Person that is an
Affiliate of the Marketing Member. The Marketing Member shall have full right,
power and authority (acting alone) to execute, deliver and perform any and all
documentation and to take any and all other action, on behalf of the Company,
any Subsidiary and, in the case of a sale of the Company, of the Members
required or desirable to consummate the sale of the Subject Asset on such terms
and conditions as the Marketing Member shall determine in its discretion, and
each Member hereby consents to the Marketing Member's exercise of such right,
power and authority and hereby agrees to execute, deliver and perform, any and
all documents, agreements and instruments, and to take any other actions as may
be required or desirable for the purpose of consummating such sale of the
Subject Asset.
(e) In the event the Marketing Member markets the Subject Asset pursuant to
paragraph (d) above and the proposed sale fails to close for any reason during
the Marketing Period, each of WCPT and each Member of the Whitehall Group shall
continue to have the right, from time to time, to exercise any of the rights
granted thereto under this Section 8.2; PROVIDED, however, that the Member who
was the last Marketing Member shall not have the right to deliver a Sales Notice
to the Non- Marketing Member with respect to the Subject Asset that was subject
to the last Sales Notice delivered to such Non-
Exhibit 10.50 Page 83
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Marketing Member until the thirtieth (30th) day after the expiration of the
Marketing Period.
(f) In the event WCPT is the Non-Marketing Member and acquires a Subject
Asset pursuant to this Section 8.2, (i) such purchase shall not be deemed a
violation of Section 4.2 and (ii) WCPT shall be free to engage third parties to
provide property and asset management services for such Subject Asset.
(g) Any one or more Members of the Whitehall Group may exercise any of the
rights granted under this Section 8.2 to the Whitehall Group.
8.2A Indemnification of Saracen. (a) The Company shall indemnify Saracen as
and when required in this Section 8.2A. The Company acknowledges and agrees that
this Section 8.2A is a material inducement to the Saracen Members entering into
this Agreement, without which the Saracen Members would be unwilling to enter
into this Agreement.
(i) Except only as and to the extent set forth in this Section 8.2A(a)
below, in the event the Company shall cause or permit to occur or exist (a) any
Saracen Gain Recognition (as hereinafter defined) (x) on or before the
expiration of a nine (9) year period following May 15, 1998 (the last day of
such period, hereafter, the "End Date") with respect to all or any of the Nomura
Properties or the 72 River Park Property and (y) on or before the expiration of
a five (5) year period following the May 15, 1998 with respect to all or any of
the Non-Nomura Properties or (b) any Saracen Debt Reduction Event (as
hereinafter defined) on or before the End Date, then the provisions in Sections
8.2A(v), (vi), (vii), (viii), (ix) and (x) shall apply.
(ii) Notwithstanding anything in this Section 8.2A to the contrary, Section
8.2A(a)(i) above and Sections 8.2A(a)(v) through (x) below shall not apply to
(x) any Saracen Gain Recognition caused by any affirmative action taken by any
Saracen Member before, on or after May 15, 1998 with respect to any Interest of
any Saracen Member (any such transfer, a "Non-Triggering Saracen Transfer")
which triggers any Saracen Gain Recognition, but only if and to the extent of
the Saracen Gain Recognition which is caused by such Non-Triggering Saracen
Transfer, (y) any Saracen Gain Recognition or Saracen Debt Reduction Event which
results (i) from the partial, periodic amortization of the Nomura Loan during
the period from May 15, 1998 through the End Date, but only as and to the extent
such amortization is required in connection with any applicable regularly
scheduled payment of principal and interest pursuant to the documents evidencing
the Nomura Loan as of May 15, 1998 ("Required Amortization"), such amortization
not to include any voluntary or involuntary payments of principal (other than
Required Amortization) on or before the End Date, whether in connection with any
default, casualty, condemnation or otherwise, or (ii) from any payment of
principal on or after the End Date, or (z) any recognition of income or gain by
any Saracen Member as a result of or in connection with the Saracen Closing.
(iii) For purposes of this Section 8.2A, the term "Saracen Gain" shall mean
any "built-in gain" (within the meaning of Treasury Regulation Section
1.704-3(a)(3)(ii)) that exists immediately following the Saracen Closing with
respect to any of the Nomura Properties, the 72 River Park Property or the
Non-Nomura Properties (after taking into account any step-up in basis with
respect to such properties arising in connection with the Saracen Closing), as
such "built-in gain" may be
Exhibit 10.50 Page 84
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reduced from time to time under Treasury Regulations Section 1.704-3. For
purposes of Section 8.2A, the term "Saracen Gain Recognition" means (x) any
recognition of Saracen Gain by any Saracen Member, including a permitted
transferee pursuant to Section 8.1(b)(B) (individually or collectively, as the
case may be, hereafter a "Saracen Indemnitee Member"), with respect to the
Nomura Properties or the 72 River Park Property at any time commencing on May
15, 1998 and ending on or before the End Date, and (y) any recognition of
Saracen Gain by a Saracen Indemnitee Member with respect to the Non- Nomura
Properties at any time during the five (5) year period commencing on May 15,
1998.
(iv) For purposes of this Section 8.2A, the term "Saracen Debt Reduction
Event" shall mean the recognition of taxable income by any Saracen Indemnitee
Member as a result of the failure, for any reason whatsoever, of the Company to
have outstanding an amount of Non-Recourse Liabilities such that each Saracen
Indemnitee Member is allocated (pursuant to Section 752 of the Code and the
Treasury Regulations issued thereunder) an amount of such liabilities at least
equal to the amount by which such Saracen Indemnitee Member's (outside) tax
basis in his Interest would be negative but for allocations of Non-Recourse
Liabilities to such Member (pursuant to Section 752 of the Code and the Treasury
Regulations thereunder), in order to prevent such Member from recognizing
taxable income as a result of a reduction in the amount of debt allocable to
such Member; provided, however, that the amount of liabilities required to be
allocated to all Saracen Indemnitee Members in the aggregate shall not exceed
$50,000,000, reduced over time with respect to each applicable Saracen
Indemnitee Member (w) by the aggregate amount of additions to such Saracen
Indemnitee Member's (outside) tax basis in his Interests attributable to all
prior Saracen Gain Recognition events and Saracen Debt Reduction Events, (x) by
the aggregate amount of Required Amortization as allocated entirely among the
Saracen Indemnitee Members, (y) by all payments of principal on the Nomura Loan
made after the End Date as allocated entirely among the Saracen Indemnitee
Members, (z) the aggregate amount of additions to such Saracen Indemnitee
Member's (outside) tax basis in its Interests attributable to all taxable income
recognized by reason of a Non-Triggering Saracen Transfer taken by such Saracen
Indemnitee Member, (aa) by any reductions in the amount of Non-Recourse
Liabilities allocable to such Saracen Indemnitee Member by reason of any
adjustments to Capital Accounts or the number of Membership Units or Series A
Preferred Membership Units pursuant to Section 5.1(l) hereof, and (bb) after the
expiration of a five (5) year period after May 15, 1998 but only if there shall
have been a Capital Event, by an amount equal to the amount by which such
Saracen Indemnitee Member's (outside) tax basis in his Interest would be
negative but for allocations of Non-Recourse Liabilities to such Member
(pursuant to Section 752 of the Code and the Treasury Regulations thereunder),
as of the day before May 15, 1998 determined solely with respect to the
Non-Nomura Properties (without duplication for any amounts taken into account
under clauses (w), (x), (y), (z) and (aa) above).
(v) In the event of any Saracen Gain Recognition or Saracen Debt Reduction
Event which is otherwise prohibited or restricted pursuant to this Section
8.2A(a), concurrently with the consummation of the transaction or other event or
circumstance which results in such Saracen Gain Recognition or Saracen Debt
Reduction Event, as the case may be, the Company shall pay to the applicable
Saracen Indemnitee Members, in addition to any amounts otherwise distributable
under Article VII (or, if applicable, Article X) hereof, an amount equal to the
amounts described in Sections 8.2A(a)(vi) through (x) below.
(vi) (A) In the case of any Saracen Gain Recognition at or before the
expiration of a five (5) year period after May 15, 1998, the aggregate federal,
state and local income taxes (determined
Exhibit 10.50 Page 85
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in accordance with Section 8.2A(x)) payable by each Saracen Indemnitee Member on
the pro rata amount of Saracen Gain recognized by such Saracen Indemnitee Member
as a result of the Saracen Gain Recognition, as such Saracen Gain is reduced,
without duplication, by items (w), (x), (y) and (z) described in Section
8.2A(viii).
(B) In the case of any Saracen Debt Reduction Event at or before the
expiration of a five (5) year period after May 15, 1998, the aggregate federal,
state and local income taxes (determined in accordance with Section 8.2A(x))
payable by each Saracen Indemnitee Member on the pro rata amount of taxable
income recognized by such Saracen Indemnitee Member as a result of the Saracen
Debt Reduction Event, as such taxable income is reduced, without duplication, by
items (w), (x), (y), (z), (aa) and (bb) described in Section 8.2A(iv).
(vii) (A) In the case of any Saracen Gain Recognition after the expiration
of a five (5) year period after May 15, 1998, but prior to the End Date, and
subject to Section 8.2A(a)(ix), an amount representing the present value of the
aggregate federal, state and local income taxes (determined in accordance with
Section 8.2A(x)) payable by each Saracen Indemnitee Member, on the pro rata
amount of Saracen Gain recognized by such Saracen Indemnitee Member as a result
of the Saracen Gain Recognition, as such Saracen Gain is reduced, without
duplication, by items (w), (x), (y) and (z) described in Section 8.2A(viii),
determined as if such taxes were payable on the End Date and calculated using a
10% discount rate.
(B) In the case of any Saracen Debt Reduction Event after the expiration of
a five (5) year period after May 15, 1998, but prior to the End Date, and
subject to Section 8.2A(a)(ix), an amount representing the present value of the
aggregate federal, state and local income taxes (determined in accordance with
Section 8.2A(x)) payable by each Saracen Indemnitee Member, on the pro rata
amount of taxable income recognized by such Saracen Indemnitee Member as a
result of the Saracen Debt Reduction Event, as such taxable income is reduced,
without duplication, by items (w), (x), (y), (z), (aa) and (bb) described in
Section 8.2A(iv), determined as if such taxes were payable on the End Date and
calculated using a 10% discount rate.
(viii) For purposes of Section 8.2A(a)(vi) and (vii) above and
notwithstanding anything therein to the contrary, the amount required to be paid
a result of any Saracen Gain Recognition with respect to any particular
Property, other than amounts to be paid on account of the "gross-up" pursuant to
Section 8.2A(x), shall equal the amount of aggregate federal, state and local
income taxes (determined in accordance with Section 8.2A(x)) then payable with
respect to the amount of Saracen Gain with respect to such Property at the time
of the Saracen Gain Recognition, reduced over time with respect to each
applicable Saracen Indemnitee Member, (w) by an amount equal to $4,000,000 times
a fraction, the numerator of which is the Book Value of such Property and the
denominator of which is the aggregate Book Values of all Saracen Contributed
Properties, in each case as Book Value is determined immediately after the
Saracen Closing, (x) by the pro rata amount of Saracen Gain previously taken
into account by such Saracen Indemnitee Member (or any predecessor in interest)
under Sections 8.2A(a)(vi) and (vii) as a result of any Saracen Gain
Recognition, (y) by the amount of any Saracen Gain reportable as taxable income
by such Saracen Indemnitee Member (or any predecessor in interest) as a result
of any Non-Triggering Saracen Transfer, and (z) any increase in basis of such
Property under Code Section 754, which is attributable to a sale, exchange or
other disposition of an Interest by such Saracen Indemnitee Member (or any
predecessor or successor hereof); the death of such Saracen Indemnitee Member
(or any
Exhibit 10.50 Page 86
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predecessor or successor thereof); or a distribution of property to such Saracen
Indemnitee Member (or any predecessor or successor thereof).
(ix) In addition, and notwithstanding the foregoing in the case of any
Saracen Gain Recognition or Saracen Debt Reduction Event that occurs after the
expiration of a five (5) year period after May 15, 1998, but on or before the
expiration of a seven (7) year period after May 15, 1998, the Company shall,
concurrently with the consummation of the transaction or other event or
circumstance which results in such Saracen Gain Recognition or Saracen Debt
Reduction Event, make a loan to each Saracen Indemnitee Member providing for (A)
a principal amount equal to the amount by which the aggregate federal, state and
local income taxes payable by such Member as a result of such Saracen Gain
Recognition or Saracen Debt Reduction Event, as the case may be, exceeds the
amount reimbursed by the Company pursuant to Section 8.2A(a)(vi) and (vii)
above; (B) an interest rate equal to 10% per annum or, in the case of a Saracen
Gain Recognition or Saracen Debt Reduction Event that arises in connection with
an event which is not within the reasonable control of the Company, an interest
rate equal to 12% per annum, which interest shall accrue until maturity, with
all such amounts compounding annually; (C) maturity on the End Date; and (D)
prepayment at any time without premium or penalty.
(x) Any reimbursement by the Company under this Section 8.2A shall be
increased by an amount (the "gross-up") to take into account any tax liability
that would be incurred by the Saracen Indemnitee Member arising from the receipt
or accrual of such reimbursement payment without regard to the gross-up. That
is, the gross-up amount does not take into account any tax liability that would
be incurred by the Saracen Indemnitee Member arising from the receipt or accrual
of the gross-up payment itself. In computing the amount of any tax reimbursement
payment or gross-up, such Member shall be deemed to be subject to federal, state
and local income tax at the highest effective tax rate imposed on income of
residents of Boston, Massachusetts then in effect but taking into account all
applicable capital gains tax rates and giving effect to all federal income tax
savings attributable to deductions for all state and local taxes payable
hereunder in connection with a Saracen Gain Recognition and a Saracen Debt
Reduction Event, and such payments shall be made without regard to or reduction
for any items of loss, deduction or credit to which such Member may be entitled
under applicable law, other than such deductions for all state and local taxes
payable hereunder.
(xi) The Saracen Members agree to furnish to the Company copies of all
1996, 1997 and 1998 federal and state income tax returns of the Saracen Current
Owners relating to the Saracen Properties ("Tax Returns") as soon as practicable
following the filing thereof with the tax authorities. However, any failure by
any Saracen Member to comply with the requirements of this Section 8.2A(a)(xi)
shall not constitute a default and will not affect or otherwise limit the
Company's liability or obligations under this Section 8.2A(a).
(xii) After the expiration of the End Date and only if no Capital Event
shall have occurred before, on or after the End Date, the Company shall
reasonably cooperate with the holders of the Saracen Membership Units and the
Series A Preferred Membership Units to reduce or eliminate the amount of income
that would otherwise be recognized by them by reason of a Saracen Debt Reduction
Event, including by permitting such holders to guarantee certain obligations of
the Company or to agree to a limited obligation to restore deficits in their
capital accounts, provided and to the extent that doing so would not then impose
(x) any adverse income tax consequences on any other Member or the Company, or
(y) any economic cost on any other Member or the Company. Notwithstanding the
foregoing, in no
Exhibit 10.50 Page 87
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event shall the Company or the Management Committee have any duty to incur new
or additional financing or to refrain from refinancing or satisfying any
existing indebtedness of the Company as a result of this Section 8.2(A)(a)(xii),
and neither the Company nor the Management Committee shall incur any liability
in the event that the Company does not comply with the terms of this Section
8.2(A)(a)(xii) at any time.
(xiii) Amounts required to be paid or loaned by the Company to one or more
Saracen Indemnitee Members pursuant to this Section 8.2A (collectively,
"Payments") shall be paid or loaned concurrently with the consummation of the
transaction or other event or circumstance which causes such amounts to become
payable. Within thirty (30) days following the receipt by a Saracen Indemnitee
Member of a Payment, such Saracen Indemnitee Member can send a written notice to
the Company containing a computation of what such Saracen Indemnitee Member
considers to be correct amount of Payments and specifying the resulting
deficiency (the "Asserted Deficiency"). Upon receipt by the Company of such a
notice within said thirty (30) day period, there shall be no distributions of
cash to any Member pursuant to Section 7.1(a-2) unless and until the Company
shall, at its option, either (i) pay the Asserted Deficiency to such Saracen
Indemnitee Member, (ii) establish a reserve account in an amount equal to the
Asserted Deficiency, or (iii) resolve the dispute in a manner agreed to, in
writing, by such Saracen Indemnitee Member.
(xiv) If there is any change in the provisions of the Code or Treasury
Regulations which would cause any Payments to become payable hereunder, each of
the Saracen Indemnitee Members shall reasonably cooperate with the Company to
reduce or eliminate any such Payments to the maximum extent possible, provided
and to the extent that doing so would not then impose (x) any adverse income tax
consequences to any Saracen Indemnitee Member, or (y) any economic cost on any
Saracen Indemnitee Member and provided, further, that any failure of the Saracen
Indemnitee Members to comply with the requirements of this Section 8.2A(xiv)
shall not constitute a default and will not affect or otherwise limit the
Company's liability or obligations under this Section 8.2A(a).
(xv) This Section 8.2A(a) shall be binding upon all successors and assigns
of the Company, including, without limitation, any successor as a result of a
merger (including a triangular merger), consolidation or other combination with
or into another Person (or such Person's Subsidiary), or otherwise.
(b) Nothing contained in this Section 8.2A shall prohibit the Company from
(A) paying down the principal of any Company indebtedness, (B) refinancing any
such indebtedness with one or more mortgage loans, (C) selling or otherwise
transferring all or any portion of or interest in all or any of its Properties,
or (D) taking any other action with respect to the Company, its business or its
Properties, PROVIDED, however, that the Company shall, in any such event, comply
with the provisions set forth in Section 8.2A.
(c) If the "total assets" of the Company as set forth on the Company's
consolidated balance sheets in accordance with generally accepted accounting
principles, consistently applied, is less than $200 million, and the Company's
net equity is less than 200% of the applicable Tax Liability for such year as
set forth on Schedule 8.2A(c) annexed hereto, the Company shall establish a
reserve account (the "Tax Liability Reserve Account") in an amount equal to the
difference between (i) 200% of the applicable Tax Liability for such year as set
forth on Schedule 8.2A(c) annexed hereto and (ii) the then
Exhibit 10.50 Page 88
<PAGE>
current net equity of the Company. The determination of the "total assets" of
the Company, (as set forth on the Company's consolidated balance sheets in
accordance with generally accepted accounting principles, consistently applied),
and the Company's net equity and the applicable deposit, if any, in the Tax
Liability Reserve Account, shall be made within forty-five (45) days after the
end of each fiscal quarter of the Company, PROVIDED, however, if at any time the
Company reasonably and in good faith determines that based upon the immediately
preceding sentence an additional deposit or a decrease in the Tax Liability
Reserve Account is required, such adjustment shall be made immediately. If any
event occurs which decreases the Tax Liability for any specified year, as set
forth on Schedule 8.2A(c) annexed hereto, the Management Committee shall amend
such Schedule 8.2A(c) immediately to reflect the then current Tax Liability for
such year. The Company's obligations under this Section 8.2A(c) shall cease if
Shares or other capital stock of WCPT are issued or sold in a public offering or
WCPT or the Company engages in (i) a merger (including a triangular merger),
consolidation or other combination with or into another Person (or such Person's
subsidiary) whose equity interests are publicly traded or (ii) the direct or
indirect sale, lease, exchange or other transfer of all or substantially all of
its assets in one transaction or a series of related transactions with another
Person (or such Person's subsidiary) whose equity interests are publicly traded.
Schedule 8.2(A)(c) is intended to be utilized solely for purposes of this
Section 8.2(A)(c) and no inference is intended for, and Schedule 8.2(A)(c) shall
have no affect on, the computations of any Payments pursuant to Section
8.2(A)(a) hereof.
8.3. Conversion Right. (a) At any time and from time to time after WCPT
shall have Shares or other capital stock issued to the public in a public
offering or shall engage in an Extraordinary Transaction, WHWEL, Whitehall XI,
Holding Co., Saracen and Rand shall each have the right (the "Conversion Right")
to require WCPT to convert part or all of its Membership Units into Shares, with
such conversion to occur on the Specified Conversion Date and at a conversion
price equal to and in the form of the Shares Amount. Any such Conversion Right
shall be exercised pursuant to a Notice of Conversion delivered to WCPT. Each of
WHWEL, Whitehall XI, Holding Co., Saracen and Rand may exercise the Conversion
Right from time to time after WCPT shall have Shares or other capital stock
issued to the public in a public offering or shall engage in an Extraordinary
Transaction, without limitation as to frequency, with respect to part or all of
the Membership Units that it owns, as selected by WHWEL, Whitehall XI, Holding
Co., Saracen and/or Rand, as applicable. If the Shares Amount is not a whole
number of Shares, WHWEL, Whitehall XI, Holding Co., Saracen and/or Rand, as
applicable, shall be paid (i) that number of Shares which equals the nearest
whole number less than such amount plus (ii) an amount of cash which WCPT
determines, in its reasonable discretion, to represent the fair value of the
remaining fractional Share which would otherwise be payable to WHWEL, Whitehall
XI, Holding Co., Saracen and/or Rand, as applicable. WHWEL, Whitehall XI,
Holding Co., Saracen and/or Rand, as applicable, shall have no right with
respect to any Membership Units so converted to receive any distributions paid
after the Specified Conversion Date with respect to such Membership Units. Any
permitted successor or permitted assignee of WHWEL, Whitehall XI, Holding Co.,
Saracen or Rand may exercise WHWEL's rights, Whitehall XI's rights, Holding
Co.'s rights, Saracen's rights or Rand's rights, respectively, pursuant to this
Section 8.3. In connection with any exercise of such rights by such permitted
successor or permitted assignee of WHWEL, Whitehall XI, Holding Co., Saracen or
Rand, the Shares Amount shall be paid by WCPT directly to such permitted
successor or permitted assignee and not to WHWEL, Whitehall XI, Holding Co.,
Saracen or Rand. WHWEL, Whitehall XI, Holding Co., Saracen and/or Rand, as
applicable, and WCPT acknowledge that WHWEL, Whitehall XI, Holding Co., Saracen
and Rand are not "Excepted Holders" (as defined in Section 7.1 of the
Declaration of Trust) and that, unless either becomes an "Excepted Holder",
WHWEL's, Whitehall XI's, Holding Co.'s, Saracen's
Exhibit 10.50 Page 89
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or Rand's Conversion Right may be limited. Therefore, WHWEL, Whitehall XI,
Holding Co., Saracen and/or Rand, as applicable, and WCPT agree to cooperate in
good faith to cause WHWEL, Whitehall XI, Holding Co., Saracen and Rand to become
"Excepted Holders" before the Conversion Right is exercised or to deliver to
WHWEL, Whitehall XI, Holding Co., Saracen and/or Rand, as applicable, cash
instead of Shares upon such exercise equal in amount to the fair market value of
the Shares that would otherwise have been delivered, but for the fact that
WHWEL, Whitehall XI, Holding Co., Saracen and/or Rand, as applicable, is not an
"Excepted Holder". Subject to the foregoing, in the event that WHWEL, Whitehall
XI, Holding Co., Saracen and/or Rand, as applicable, exercises its Conversion
Rights before an initial public offering of WCPT, (i) any Shares received by
WHWEL, Whitehall XI, Holding Co., Saracen and/or Rand, as applicable, pursuant
to such exercise may not, prior to an initial public offering of WCPT, be
transferred unless WHWEL, Whitehall XI, Holding Co., Saracen and/or Rand, as
applicable, first offers WRP the opportunity to purchase such Shares in
accordance with the following sentence and (ii) WHWEL, Whitehall XI, Holding
Co., Saracen and/or Rand, as applicable, will remain obligated hereunder
(including without limitation with respect to WHWEL and Whitehall XI only, its
obligations in Section 5.2) until an initial public offering of WCPT occurs
(upon which WHWEL, Whitehall XI, Holding Co., Saracen and/or Rand, as
applicable, will have no further obligations hereunder except with respect to
any Interest it then owns). If WHWEL, Whitehall XI, Holding Co., Saracen and/or
Rand desire to sell any or all of their respective Shares to any Person that is
not an Affiliate of WHWEL, Whitehall XI, Holding Co., Saracen or Rand, as
applicable, WHWEL, Whitehall XI, Holding Co., Saracen and/or Rand, as
applicable, shall, not less than ten (10) Business Days prior to any such sale,
notify WRP in writing (the "Offer Notice") of such intended sale setting forth
in such Offer Notice the number of Shares which WHWEL, Whitehall XI, Holding
Co., Saracen and/or Rand, as applicable, intend to sell and the aggregate
purchase price therefor and if WRP either has not notified WHWEL, Whitehall XI,
Holding Co., Saracen or Rand, as applicable, in writing within ten (10) Business
Days of receipt of the Offer Notice that it wishes to purchase such Shares on
terms and conditions identical to those set forth in the Offer Notice, WHWEL,
Whitehall XI, Holding Co., Saracen or Rand, as applicable, may sell to a
non-Affiliate the number of Shares set forth in the Offer Notice for a price not
less than the aggregate purchase price set forth therein. If WRP notifies WHWEL,
Whitehall XI, Holding Co., Saracen or Rand, as applicable, in writing within ten
(10) Business Days of receipt of the Offer Notice that it accepts the offer in
the Offer Notice for all of the Shares described therein, WRP shall pay to
WHWEL, Whitehall XI, Holding Co., Saracen or Rand, as applicable, the aggregate
purchase price set forth in the Offer Notice not later than ten (10) Business
Days after delivery to WHWEL, Whitehall XI, Holding Co., Saracen or Rand, as
applicable, of its notice of acceptance of the offer set forth in the Offer
Notice and WHWEL, Whitehall XI, Holding Co., Saracen or Rand, as applicable,
shall deliver to WRP the requisite Shares free and clear of all Liens.
(b) All Membership Units delivered for conversion shall be delivered to
WCPT free and clear of all Liens, and, notwithstanding anything contained herein
to the contrary, WCPT shall not be under any obligation to acquire Membership
Units which are or may be subject to any Lien.
(c) If any Member of the Whitehall Group converts all of its Membership
Units pursuant to the terms of this Section 8.3 at any time prior to an initial
public offering by WCPT, until an initial public offering by WCPT, such Member
of the Whitehall Group (but not its successors or assigns unless such successor
or assign is an Affiliate of such Member of the Whitehall Group) shall be
entitled to all of the same rights and powers with respect to the management and
governance of WCPT that the Members of the Whitehall Group have been granted
under this Agreement and WCPT shall take such
Exhibit 10.50 Page 90
<PAGE>
further actions as may be necessary (including by classifying its board of
directors and amending its Declaration of Trust and other organizational
documents) to give effect to this provision. Upon full implementation of such
documentation as is necessary to grant such Member of the Whitehall Group such
rights and powers, the Committee Representatives appointed by either WHWEL or
Whitehall XI shall no longer serve on the Management Committee and all rights
and obligations of such Member of the Whitehall Group with respect to the
Company shall terminate.
(d) Upon conversion by any Member of the Whitehall Group (or its permitted
successor or permitted assign) of all or any of its Membership Units pursuant to
the terms of this Section 8.3, such Member of the Whitehall Group (or such
permitted successor or assign) shall receive demand and piggyback registration
rights with respect to the Shares received in such conversion, which
registration rights shall be exercisable after any Shares of WCPT become
publicly traded (subject to any lock-up agreement entered into by such Member of
the Whitehall Group) and shall be no less favorable to the Members of the
Whitehall Group than the registration rights granted with respect to WRP Shares
pursuant to the Warrant Agreement. Promptly upon the request of any Member of
the Whitehall Group, WCPT shall enter into a separate registration rights
agreement with each Member of the Whitehall Group in form and substance no less
favorable to the Members of the Whitehall Group than the Warrant Agreement (or,
if more favorable, than those granted to WRP at the time of the initial public
offering of WCPT).
(e) Upon conversion by Saracen or Rand, as applicable, (or their permitted
successors or permitted assigns) of all or any of its Membership Units pursuant
to the terms of this Section 8.3, Saracen or Rand, as applicable, (or such
permitted successors or assigns) shall receive registration rights with respect
to the Shares or other capital stock of WCPT received in such conversion, as set
forth in the form of Registration Rights Agreement annexed hereto as Exhibit B
and which Registration Rights Agreement shall be executed by Saracen and WCPT on
May 15, 1998. In addition, and without in any way limiting the registration
rights to be granted to Saracen and Rand under such Registration Rights
Agreement, if WCPT offers Shares or other capital stock in an initial public
offering (a "WCPT IPO") or within one year after the WCPT IPO, WCPT files a
registration statement pursuant to which WHWEL, Whitehall XI and/or Holding Co.
may offer its Shares or other capital stock of WCPT to the public (the
"Whitehall Registration Statement"), in either such instance, Saracen and Rand
shall be given 30 days' advance notice of such event and shall have the right to
participate in such offering on the same terms and conditions made available to
WHWEL, Whitehall XI and/or Holding Co., PROVIDED, that, the number of Shares or
other capital stock of WCPT to be registered on behalf of Saracen and/or Rand,
as applicable, in the WCPT IPO or in the Whitehall Registration Statement, as
the case may be, shall be less than or equal to (i) the aggregate number of
Shares or other capital stock of WCPT owned by Saracen or Rand, as applicable,
multiplied by (ii) a fraction, the numerator of which is the number of Shares or
other capital stock of WCPT owned by WHWEL, Whitehall XI and/or Holding Co.,
collectively, which are to be registered in the WCPT IPO or the Whitehall
Registration Statement, as the case may be, and the denominator of which is the
aggregate number of Shares or other capital stock of WCPT owned by WHWEL,
Whitehall XI and/or Holding Co, collectively.
8.4. Certain Transfer Provisions. The following provisions shall apply to a
purchase by a Non-Triggering Party of any Subject Property or Subject
Subsidiary:
Exhibit 10.50 Page 91
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(a) The purchase price shall be paid in cash, by wire transfer of the funds
to the accounts of the Company or the applicable Subsidiary. All transfer costs
(including transfer taxes and attorneys' fees) shall be borne by the Company
(unless the Offer provided otherwise) and there shall be an adjustment of the
purchase price at closing to reflect a proration of any accrued income and
expenses, excluding non-cash items. Within forty-five (45) days after the
closing, the Non-Triggering Party shall direct the independent accountants for
the Company to complete an audit of such Members' proration and such independent
accountants shall deliver their audit report to the Members. If such audit
report shall adjust such proration, the party in whose favor such adjustment is
made shall promptly be paid by the other party the amount of such adjustment.
(b) On payment of the purchase price, the Non-Triggering Party shall, with
respect to each Company and/or Subsidiary debt, obligation and claim against the
Company and/or a Subsidiary for which the Company, a Subsidiary or any Member
(or any guarantor affiliated therewith or which delivered the guaranty on behalf
of such Person) is or may be personally liable with respect to the Subject
Property or Subject Subsidiary, at the option of the Non- Triggering Party
either (i) obtain a release of the Company, any applicable Subsidiary and each
Member (and any guarantor affiliated therewith or which delivered the guaranty
on behalf of such Person) from all liability, direct or contingent, from holders
of such debt, obligation or claim or (ii) cause such indebtedness, obligation or
claim to be paid in full at the closing, or (iii) deliver to the Company, any
applicable Subsidiary and each Member, an agreement in form and substance
reasonably satisfactory to the Company, such Subsidiary and each Member, which
satisfaction may require a creditworthy guarantor, to defend, indemnify and hold
the Company, such Subsidiary and each Member (and any guarantor affiliated
therewith or which delivered the guaranty on behalf of such Person) harmless
from any actions, including attorneys' fees and costs of litigation, claims or
loss arising from such debt, obligation or claim. In no event shall such
indemnity apply to liabilities resulting from the breach by any Member of its
obligations under this Agreement. This subparagraph (b) shall not apply to any
debt, obligation or claim which is fully insured by public liability insurer(s)
reasonably acceptable to the Company, any applicable Subsidiary and each Member.
8.5. Assignment Binding on Company. No assignment or transfer of all or any
part of the Interest of a Member permitted to be made under this Agreement shall
be binding upon the Company unless and until a duplicate original of such
assignment or instrument of transfer, duly executed and acknowledged by the
assignor or transferor, has been delivered to the Company, and such instrument
evidences (i) the written acceptance by the assignee of all of the terms and
provisions of this Agreement, (ii) the assignees representation that such
assignment was made in accordance with all applicable laws and regulations and
(iii) the unanimous consent of all of the Managing Members to the transfer of
the Interest unless such Transfer is pursuant to the last sentence of Section
8.1(b).
8.6. Bankruptcy of a Member. In the event a Member becomes subject to a
Bankruptcy, the trustee or receiver of the estate shall have all the rights of a
Member for the purpose of settling or managing the estate and such power as such
Member possessed to assign all or any part of the Interests and to join with the
assignee thereof in satisfying conditions precedent to such assignee becoming a
Substituted Member; PROVIDED, HOWEVER, in such event, such Member shall cease to
be an Appointing
Exhibit 10.50 Page 92
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Member for purposes of Article III. The Company shall not be dissolved or
terminated by reason of the Bankruptcy, removal, dissolution or admission of any
Member.
8.7. Substituted Members. (a) Members who assign all their Interests
pursuant to an assignment or assignments permitted under this Agreement shall
cease to be Members of the Company except that unless and until a Substituted
Member is admitted in his stead, the assigning Member shall not cease to be a
Member of the Company under the Act and shall retain the rights and powers of a
member under the Act and hereunder, provided that such assigning Member may,
prior to the admission of a Substituted Member, assign its economic interest in
the Interest, to the extent otherwise permitted under this Article VIII,
including, without limitation, Section 8.5. Any Person who is an assignee of any
of the Interests of a Member and who has satisfied the requirements of Sections
8.1 and 8.5 shall become a Substituted Member only when (i) the Manager has
entered such assignee as a Member on the books and records of the Company, which
the Manager is hereby directed to do upon satisfaction of such requirements, and
(ii) such assignee shall have paid all reasonable legal fees and filing costs in
connection with the substitution as Member.
(b) Any Person who is an assignee of all or any portion of the Interest of
a Member but who does not become a Substituted Member and desires to make a
further assignment of any such Interest, shall be subject to all the provisions
of this Article VIII to the same extent and in the same manner as any Member
desiring to make an assignment of the Interest.
8.8. Acceptance of Prior Acts. Any person who becomes a Member, by becoming
a Member, accepts, ratifies and agrees to be bound by all actions duly taken
pursuant to the terms and provisions of this Agreement by the Company prior to
the date it became a Member and, without limiting the generality of the
foregoing, specifically ratifies and approves all agreements and other
instruments as may have been executed and delivered on behalf of the Company
prior to said date and which are in force and effect on said date, PROVIDED,
however, that nothing contained in this Section 8.8 shall limit or effect any of
the representations, warranties, covenants and other agreements and obligations
of the Company under the Contribution Agreement.
8.9. Additional Limitations. Notwithstanding anything contained in this
Agreement, no Transfer shall be made and any Member shall have the right to
prohibit and may refuse to accept any Transfer unless (i) registration is not
required under the Securities Act of 1933, as amended, in respect of such
transaction; and (ii) such assignment or transfer does not violate any
applicable federal or state securities, real estate syndication, or comparable
laws. Any Member may elect prior to any Transfer to require an opinion of
counsel with respect to any of the foregoing matters.
8.10. Tag Along Rights. If WCPT and the Whitehall Group together shall
desire to sell or transfer, in one transaction or one or more series of related
transactions, to a bona fide prospective third-party purchaser, unaffiliated
with WCPT and/or the Whitehall Group, any part or all of their Membership Units
owned by them, then Managing Members shall provide Saracen and Rand with 30
days' advance written notice of the pending sale (a "Tag Along Notice"), which
Tag Along Notice shall contain the terms and conditions of the proposed sale or
transfer. Saracen and/or Rand may elect to participate in such transaction (a
"Tag Along Transaction") as an additional selling or transferring party by
delivering a written notice thereof (a "Tag Along Election Notice") to Managing
Members within five (5) Business Days after delivery of such Tag Along Notice. A
Tag Along Election Notice shall specify
Exhibit 10.50 Page 93
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the number of Membership Units which Saracen and/or Rand, as applicable, wishes
to sell or transfer in such transaction, which number may include a number of
Membership Units previously received as a result of a conversion of Series A
Preferred Membership Units into Membership Units pursuant to the Series A Terms,
and shall in the aggregate, be less than or equal to (i) the aggregate number of
Membership Units which Managing Members proposed to sell or transfer in such
transaction, multiplied by (ii) a fraction, the numerator of which is the number
of Membership Units owned by Saracen and/or Rand, as applicable, and the
denominator of which is the aggregate number of Membership Units owned by WCPT,
the Whitehall Group and Saracen and/or Rand, if applicable. If Saracen and/or
Rand shall elect to sell or transfer Membership Units in such transaction, the
aggregate number of Membership Units to be sold or transferred in such
transaction shall be increased by the number of Membership Units Saracen and/or
Rand, as applicable, elects to sell or transfer or, in the sole discretion of
Managing Members, the aggregate number of Membership Units to be sold or
transferred by Managing Members shall be reduced pro rata, so that the aggregate
number of Membership Units to be sold or transferred to such third-party by
Saracen and/or Rand, Managing Members shall remain equal to the aggregate number
of Membership Units which Managing Members originally proposed to sell or
transfer in such transaction. Participation by Saracen and/or Rand in the
offering of Membership Units pursuant to this Section 8.10 shall be at a price
per Membership Unit equal to the price being offered to Managing Members and on
terms identical to those terms being offered to Managing Members. In connection
with such sale or transfer, WCPT, the Whitehall Group and Saracen and/or Rand
shall execute and deliver, in a timely manner, any and all documents, agreements
and instruments reasonably necessary to sell or transfer their respective
Membership Units.
ARTICLE IX.
MANAGER
-------
9.1. Removal of Manager. (a) Either WHWEL or Whitehall XI may in its sole
discretion elect, by ten (10) days' prior written notice, to remove WCPT as the
Manager for Cause. Thereupon, WCPT shall cease to be an Appointing Member and
either WHWEL or Whitehall XI may appoint a new Manager. Nothing herein shall be
deemed to limit the indemnification obligations under Section 4.3 if WCPT is
removed as Manager of the Company, and this Section 9.1 shall not constitute a
waiver of exculpation from claims by, or indemnification from, the Company with
respect to any matter arising prior to the removal of WCPT.
(b) Notwithstanding anything to the contrary herein, the Members of the
Whitehall Group may deliver a Sales Notice to WCPT at any time upon the removal
of WCPT as Manager pursuant to Section 9.1(a) and require the Company to sell
any and all of the Properties (or sell the Subsidiary(ies) owning such
Property(ies)), and may sell the Company as a whole, in one or more transactions
to a Third Party in the manner provided in Sections 8.2 and 8.4, without having
to first offer the Property(ies), the Subsidiary(ies) or the Company to WCPT. If
WCPT shall notify the Company in writing that it disputes any of the grounds for
its removal as Manager (setting forth in such notice WCPT's grounds for such
dispute) no later than fifteen (15)
Exhibit 10.50 Page 94
<PAGE>
days after receipt of any Sales Notice delivered to WCPT in accordance with the
immediately preceding sentence, the Managing Members shall submit the subject
matter of WCPT's notice for binding arbitration as provided in Section 5.10 no
later than fifteen (15) days after receipt of the foregoing notice from WCPT. If
the arbitrator shall rule that WCPT may be removed as Manager pursuant to this
Agreement, the Company shall sell any and all of the Properties (or the
Company's Subsidiary(ies)) as selected by the Members of the Whitehall Group in
one or more transactions to Third Parties, and WHWEL and Whitehall XI shall also
have the full and exclusive right, power and authority on behalf of all Members
to sell the Company itself to such a Third Party.
9.2. Fees. (a) Except as provided in this Section 9.2 and elsewhere in this
Agreement (including the provisions of Articles VI and VII regarding
distribution, payments and allocations to which it may be entitled), the Manager
shall not be compensated for its services as manager of the Company.
Notwithstanding the foregoing, the Manager (for so long as the Manager is WCPT)
shall be paid the Administration Fee on a quarterly basis in arrears and shall
be reimbursed, on a monthly basis, for all expenses that it incurs relating to
the ownership and operation of or for the benefit of, the Company (including
without limitation, (i) expenses relating to the ownership of interests in and
the management and operation of the Company and its Subsidiaries and (ii)
compensation of WCPT officers and employees to the extent they devoted
substantially all of their working time to the business of the Company and its
Subsidiary(ies). The Members acknowledge that all such expenses of the Manager
are deemed to be for the benefit of the Company. Such reimbursement shall be in
addition to any reimbursement made as a result of indemnification pursuant to
Section 4.3(a) hereof. The Members acknowledge that the payment of the
Administration Fee to the Manager is in consideration for services to be
performed by WRP relating to the functions typically performed by a President, a
Chief Executive Officer and a Chief Financial Officer and certain back office
functions. The Members further acknowledge that of the Administration Fee
payable to the Manager, the sum of $100,000 is allocated to the functions of
each of the President, Chief Executive Officer and Chief Financial Officer and
that in the event an individual is hired by WCPT to perform such duties,
responsibilities and obligations customarily assigned to each such office on a
full-time basis, the Administration Fee shall be reduced by a corresponding sum
of $100,000 (e.g., if an individual is hired to be a full-time Chief Financial
Officer of WCPT, the Administration Fee shall automatically be reduced by
$100,000).
(b) In exchange for performing certain management services with respect to
150 Mt. Bethel Road, WCPT shall receive from Whitehall XI an asset management
fee equal to the product of (i) 0.002739% multiplied by (ii) the number of days
from and including the date of acquisition of 150 Mt. Bethel Road to and
excluding the Closing Date multiplied by (iii) $7,881,740.
ARTICLE X.
TERMINATION OF COMPANY;
LIQUIDATION AND DISTRIBUTION OF ASSETS
--------------------------------------
10.1. Dissolution and Termination.
(a) The Company shall be dissolved and liquidated only upon the occurrence
of any of the following:
(i) December 31, 2045;
Exhibit 10.50 Page 95
<PAGE>
(ii) the sale or other disposition of all of the Company Assets and the
assets of the Subsidiaries and receipt of the final payment of any installment
obligation received as a result of any such sale or disposition;
(iii) the written consent of all Managing Members;
(iv) any event which makes it unlawful for the Company's business to be
continued; or
(v) the issuance of a decree by any court of competent jurisdiction that
the Company be dissolved and liquidated.
Upon dissolution, the Company shall promptly wind up its affairs and shall
promptly be liquidated and a certificate of cancellation of the Company's
Certificate of Formation, as required by law, shall be filed.
(b) In the event of the dissolution and liquidation of the Company, its
business activities shall promptly be wound up, any amounts due from the Members
shall be collected, its debts and liabilities shall be paid and its remaining
assets, if any, shall be distributed as set forth in Section 10.2 below.
Dissolution shall be effective on the date of the occurrence of an event set
forth in Section 10.1(a) but the Company shall not terminate until all of the
Company Assets and the assets of the Subsidiaries have been liquidated and the
proceeds distributed in accordance with the provisions of this Article X.
Notwithstanding the dissolution of the Company, prior to the termination of the
Company as aforesaid, the business of the Company and the affairs of the Members
as such, shall continue to be governed by this Agreement.
10.2. Distribution Upon Liquidation. Upon dissolution of the Company, the
Manager or other Members, as provided in this Agreement, or if there shall be
none, a duly appointed trustee or liquidator as provided in this Agreement,
shall promptly proceed with the liquidation of the Company, its Subsidiaries and
the Company Assets and the proceeds of such liquidation shall be applied and
distributed in the following order of priority:
(i) to the payment of expenses of the liquidation;
(ii) to the payment of debts and liabilities of the Company, in order of
priority as provided by law, other than debts or liabilities owed to Members;
(iii) to the setting up of any reserves that the Manager or such trustee or
liquidator, as the case may be, shall determine are reasonably necessary for any
contingent or unforeseen liabilities or obligations of the Company or the
Members (in their respective capacity as Members);
(iv) to the payment of other debts and liabilities of the Company owed to
Members (including amounts payable to Saracen under Section 8.2A); and
Exhibit 10.50 Page 96
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(v) except to the extent otherwise provided in Section 7.4, to the Members
in accordance with their respective Capital Account balances after allocation of
Profits and Losses for the period ending immediately prior to such distribution.
10.3. Sale of Company Assets.
(a) As expeditiously as possible, the Manager, or any such trustee or
liquidator, shall pay all Company liabilities, establish the reserves and make
the distributions provided for in Section 10.2. Except as agreed by the
Management Committee, no Member shall have the right to demand or receive
property other than cash upon liquidation, and the Management Committee, or any
such trustee or liquidator, shall, in any event, have the power to sell Company
Assets and the assets of the Subsidiaries for cash as necessary to provide for
the payment of all Company liabilities and the establishment of reserves.
(b) In connection with the sale by the Company and reduction to cash of its
assets, although the Company has no obligation to offer to sell any property to
the Members, any Member or any Affiliate of any Member may bid on and purchase
any Company Assets and the assets of the Subsidiaries. If the Manager, or any
such trustee or liquidator, determines that an immediate sale of part or all of
the Company Assets and the assets of the Subsidiaries would cause undue loss to
the Members, the Manager, or any such trustee or liquidator, may, with the
written consent of the Management Committee, defer liquidation of and withhold
from distribution for a reasonable time any assets of the Company (except those
necessary to satisfy the Company's current obligations).
ARTICLE XI.
BOOKS, RECORDS, BUDGETS AND REPORTS
-----------------------------------
11.1. Books of Account. At all times during the continuance of the Company,
the Manager shall keep or cause to be kept true and complete books of account in
which shall be entered fully and accurately each transaction of the Company.
Such books shall be kept on the basis of the Fiscal Year in accordance with the
accrual method of accounting, and shall reflect all Company transactions in
accordance with generally accepted accounting principles. In addition, the
Manager shall cause each Subsidiary to keep all books of account and other
records of such Subsidiary separate and distinct from the books and records of
the Company and with the standards set forth in this Section 11.1.
11.2. Availability of Books of Account. All of the books of account
referred to in Section 11.1, together with an executed copy of this Agreement
and the Certificate of Formation, and any amendments thereto and any other books
and financial records of the Company, shall at all times be maintained at the
principal office of the Company or such other place in the State of New York as
the Manager may designate in writing to the Members, and upon reasonable notice
to the Manager, shall be open to the inspection and examination of the Members
or their representatives during reasonable business hours.
11.3. Financial Reports and Statements; Annual Budgets.
Exhibit 10.50 Page 97
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(a) The Manager shall prepare or cause the Company's independent
accountants to prepare (under the oversight of the Manager), on an accrual
basis, all federal, state and local tax returns required to be filed. The
Manager (or, if pursuant to the preceding sentence the tax returns are prepared
by the independent accountants, such preparer) shall submit the returns and
completed IRS Schedules K-1 to each member of the Management Committee for
review and approval and the Manager shall deliver such approved K-1 to each
Member no later than ten (10) days prior to the due date of the returns, but in
no event later than March 1st of each year. Each Member shall notify the other
Members upon receipt of any notice of tax examination of the Company by federal,
state or local authorities.
(b) For each Fiscal Year, the Manager shall send to each Person who was a
Member at any time during such Fiscal Year, within sixty (60) days after the end
of such Fiscal Year, an annual report of the Company including an annual balance
sheet, profit and loss statement, a statement of cash flow and a statement of
changes in Member's capital, all as prepared in accordance with generally
accepted accounting principles consistently applied and audited by the Company's
independent public accountants, which shall be Ernst & Young, unless another
"Big Five" independent public accountants of recognized standing is selected by
the Management Committee, and a statement showing allocations to the Members of
taxable income, gains, losses, deductions and credits, as prepared by such
accountants. For each quarter, the Manager shall send to each Person who was an
Managing Member at any time during such quarter, within forty-five (45) days
after the end of such quarter, quarterly financial statements of the Company
including a quarterly balance sheet, profit and loss statement, a statement of
cash flow and a statement of changes in Member's capital, all as prepared in
accordance with generally accepted accounting principles consistently applied.
In addition, the Manager shall send (i) to each Managing Member within fifteen
(15) days after the end of each month of each Fiscal Year a monthly report
setting forth such financial and operating information as such Managing Member
shall reasonably request, and (ii) to each Member, such other information
concerning the Company and reasonably requested by such Member as is necessary
for the preparation of such Member's federal, state and local income or other
tax returns.
(c) (i) On or before the November 1st immediately preceding the
commencement of each Budget Year of the Company, the Manager shall submit to the
Management Committee for its approval (1) an annual capital budget for each
Property (an "Annual Capital Budget"), in such form as the Management Committee
shall have approved, for such Budget Year setting forth the Manager's estimates
reasonably itemized of all receipts and expenditures in respect of capital
transactions relating to such Property for such year (including expenditures for
alterations incident to space leases to be recovered as rent from tenants) and
(2) an annual operating budget for such Property (an "Annual Operating Budget"),
in such form as the Management Committee shall have approved, for such year
setting forth the Manager's estimates reasonably itemized of all income and
expenses relating to such Property for such year and establishing reserves and
working capital for such Property. The Annual Operating Budget shall also
contain (x) a schedule of space that is vacant and space leases expiring during
such year (including the square footage thereof) and (y) the Leasing Plan for
such year, maximum tenant improvement allowances, maximum obligations on lease
takeovers and any other criteria for leases that may be executed without the
specific approval of the Management Committee. Not later than twenty (20) days
after receipt of a proposed Annual Capital Budget or Annual Operating Budget,
the Management Committee shall either approve the Annual Capital Budget and
Annual Operating Budget or shall deliver a notice (an "Objection Notice") to the
Manager stating that the Management Committee objects to any information
contained in or omitted from such proposed Annual Capital Budget or Annual
Exhibit 10.50 Page 98
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Operating Budget and setting forth the objections with reasonable specificity.
With respect to such proposed Annual Capital Budget or Annual Operating Budget
as to which no Objection Notice is delivered prior to such twentieth (20th) day,
the proposed Annual Capital Budget or Annual Operating Budget will be deemed to
have been accepted and consented to by the Management Committee and shall be
deemed an "Approved Budget." If the Objection Notice is timely delivered, the
Manager and the Management Committee shall endeavor in good faith to reach an
agreement as to the Annual Capital Budget or Annual Operating Budget.
(ii) If the Management Committee shall consider for adoption a proposed
Annual Capital Budget for any Budget Year and shall fail to adopt it in its
entirety because of disagreement as to one or more line items although the
Management Committee shall agree on other line items, then such proposed Annual
Capital Budget, exclusive of the items as to which there is disagreement, shall
be deemed adopted as the Annual Capital Budget for such Budget Year (and to such
extent shall be deemed to be the Approved Budget for such Budget Year); PROVIDED
that, if any item or project is approved as part of the Approved Capital Budget
for one Budget Year but is not completed within such Budget Year, the unexpended
portion of such Approved Capital Budget relating to such item or project shall
be carried over to the following Budget Year and deemed approved. If the
Management Committee shall consider for adoption a proposed Annual Operating
Budget for any Budget Year and shall fail to adopt it in its entirety, then the
Annual Operating Budget for the immediately preceding year shall be deemed
adopted as the Annual Operating Budget for such year except that any specific
line items agreed to in the proposed Annual Operating Budget shall control (and
to such extent shall be deemed to be the Approved Budget for such Budget Year).
11.4. Accounting Expenses. All out-of-pocket expenses payable to Persons
who are not Affiliated with any Member in connection with the keeping of the
books and records of the Company and the preparation of audited or unaudited
financial statements and federal and local tax and information returns required
to implement the provisions of this Agreement or required by any governmental
authority with jurisdiction over the Company shall be borne by the Company as an
ordinary expense of its business.
11.5. Bank Account. The Company shall within 10 days after the date hereof
arrange to maintain (and shall cause each Subsidiary which owns a Property to
maintain) its bank deposits in segregated accounts held for the Company's (or
such Subsidiary's) business, which accounts shall, to the extent reasonably
practicable, be interest-bearing. All funds of the Company and each applicable
Subsidiary shall be promptly deposited in the appropriate segregated account.
The Manager from time to time shall authorize signatories for such accounts and
withdrawals or checks in excess of $100,000 shall require the signature of
Jeffrey H. Lynford, Edward Lowenthal or Gregory Hughes.
11.6. Fidelity Bonds and Insurance. The Company will obtain fidelity bonds
with reputable surety companies, covering all persons having access to the
Company's (or any Subsidiary's) funds, indemnifying the Company (or such
Subsidiary) against loss resulting from fraud, theft and dishonest and other
wrongful acts of such persons. The Company shall carry or cause to be carried on
its behalf and on its Subsidiaries' behalf all property, liability and workers'
compensation insurance as shall be required under applicable mortgages, leases,
agreements, and other instruments and statutes, but in any event in the amounts
and with the insurers required by the Insurance Program.
Exhibit 10.50 Page 99
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11.7. REPSYS Database. The Manager understands that the Members of the
Whitehall Group have developed a database for monitoring their investments
called "REPSYS", and hereby agrees to reasonably cooperate with such Members of
the Whitehall Group in providing data relating to the Properties that are
required for such database.
ARTICLE XII.
AMENDMENTS
----------
12.1. Amendments (a) Amendments may be made to this Agreement from time to
time by the Manager with only the written consent of each of the Managing
Members, PROVIDED, HOWEVER that each of Saracen or Rand (acting on his own
behalf and not as a Saracen Member), as applicable shall have the right to
consent to any amendment that shall (i) reduce Saracen's or Rand's, as
applicable, Capital Accounts with respect to its Membership Units, Series A
Preferred Membership Units, Percentage Interest or Series A Preferred Percentage
Interest (except (A) in the case of the inclusion of additional Members in
accordance with this Agreement, (B) due to a Capital Contribution(s) made by
Members or New Members in accordance with this Agreement, (C) pursuant to the
Contribution Agreement, or (D) pursuant to a conversion or redemption of Series
A Preferred Membership Units in accordance with the Series A Terms), (ii)
require Saracen or Rand, as applicable, to make any additional Capital
Contribution, (iii) create any liability for Saracen or Rand, as applicable,
other than the liability they have under this Agreement as of May 15, 1998, (iv)
modify the rights, priority, preferences and privileges of the Series A
Preferred Membership Units except as permitted pursuant to the Series A Terms,
(v) adversely affect or limit in any way Saracen's or Rand's, as applicable,
rights pursuant to Section 3.5, PROVIDED, HOWEVER, that (A) the appointment or
election of additional Committee Representatives having the right to attend and
observe meetings of the Management Committee, (B) the appointment or election of
additional Committee Representatives having voting, consent, approval or
determination rights on the Management Committee or (C) amendments to the
definition of Required Committee Approval (other than Required Committee
Approval during a Preferential Distribution Non- Payment) shall not be deemed to
adversely affect or limit in any way Saracen's or Rand's rights pursuant to
Section 3.5 PROVIDED, that such additional Committee Representatives are not
appointed by, or representatives of, either Managing Member or their respective
Affiliates, (vi) modify Saracen's or Rand's, as applicable, rights and/or
obligations as set forth in Sections 4.2, 5.2(d), 8.2A, 13.17 and this Section
12.1, (vii) modify the definitions of Target Territory and/or Hub Target Market
only by reducing the size of the Target Territory and/or Hub Target Market, as
applicable, (viii) adversely affect Saracen's rights under Articles VI and VII
with respect to any Saracen Member, including Rand, except as a result of other
amendments or modifications permitted pursuant to this Section 12.1(a) or the
Series A Terms, (ix) modify Saracen's or Rand's, as applicable, transfer or
pledge rights pursuant to Section 8.1(b), (x) modify the terms and conditions of
Saracen's or Rand's, as applicable, conversion right pursuant to Section 8.3 and
(xi) modify the terms and conditions of Section 13.9 or 13.18 as they relate to
Saracen or Rand, as applicable. In making any amendments, there shall be
prepared and filed for recordation by the Manager such documents and
certificates as shall be required to be prepared and filed. Promptly after the
execution of any amendments or restatements, the Manager shall provide copies
thereof to all Members.
Exhibit 10.50 Page 100
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(b) Each Saracen Member by execution and delivery of this Agreement,
irrevocably constitutes and appoints the Manager and the Chairman, President,
Secretary, Treasurer, Chief Financial Officer and Chief Operating Officer of the
Manager as his or her true and lawful attorney-in-fact with full power and
authority, in such Saracen Member's name, place, and stead only to execute,
acknowledge and deliver such certificates, instruments, documents and agreements
as are necessary to make any and all amendments of this Agreement which
amendments do not require the consent of Saracen as set forth in Section
12.1(a), PROVIDED, however, that such power shall only be exercised by the
Manager and/or the Chairman, President, Secretary, Treasurer and Chief Operating
Officer of the Manager, if and only if, the Manager delivers written notice of
the documents which are to be executed under this power of attorney to Saracen
five (5) Business Days in advance of the date such documents are to be executed.
The appointment by each Saracen Member of the Manager and the aforesaid officers
of the Manager as attorney-in-fact shall be deemed to be a power coupled with an
interest, and shall survive, and not be affected by the subsequent bankruptcy,
death, incapacity, disability, adjudication of incompetence or insanity, or
dissolution of any Saracen Member hereby giving such power. As a condition to
the transfer by a Saracen Member of any or all of such Saracen Member's
Interest, the foregoing power of attorney shall be granted by the transferee of
such Saracen Member's Interest.
ARTICLE XIII.
MISCELLANEOUS
-------------
13.1. Further Assurances. Each party to this Agreement agrees to execute,
acknowledge, deliver, file and record such further certificates, amendments,
instruments and documents, and to do all such other acts and things, as may be
required by law or as, in the reasonable judgment of the Management Committee,
may be necessary or advisable to carry out the intent and purpose of this
Agreement.
13.2. Notices. Unless otherwise specified in this Agreement, all notices,
demands, elections, requests or other communications that any party to this
Agreement may desire or be required to give hereunder shall be in writing and
shall be given by hand, by depositing the same in the United States mail, first
class postage prepaid, certified mail, return receipt requested, by facsimile
transmission with delivery of an original thereafter by any other method
provided by this Section 13.2, or by a recognized overnight courier service
providing confirmation of delivery, addressed as follows:
(a) To the Company, c/o Wellsford Commercial Properties Trust, 535 Madison
Avenue, 26th Floor, New York, New York 10022, or at such other address as may be
designated by the Manager upon written notice to all of the Members; and
(b) To the Members at their respective addresses set forth in Section 2.6
herein. Each Member shall have the right to designate another address or change
in address by written notice to the Company in the manner prescribed herein.
All notices given pursuant to this Section 13.2 shall be deemed to have been
given (i) if delivered by hand on the date of delivery or on the date delivery
was refused by the addressee, (ii) if delivered by United States mail or by
overnight courier, on the date of delivery as established by the return receipt
or courier service confirmation (or the date on which the return receipt or
Exhibit 10.50 Page 101
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courier service confirms that acceptance of delivery was refused by the
addressee) or (iii) if delivered by facsimile, on the date of delivery thereof.
13.3. Headings and Captions. All headings and captions contained in this
Agreement and the table of contents hereto are inserted for convenience only and
shall not be deemed a part of this Agreement.
13.4. Variance of Pronouns. All pronouns and all variations thereof shall
be deemed to refer to the masculine, feminine or neuter, singular or plural, as
the identity of the person or entity may require.
13.5. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original and all of which, when
taken together, shall constitute one Agreement.
13.6. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO CONFLICT OF LAW PROVISIONS
THEREOF.
13.7. Partition. The Members hereby agree that no Member nor any
successor-in- interest to any Member shall have the right, while this Agreement
remains in effect, to have the property of the Company partitioned, or to file a
complaint or institute any proceeding at law or in equity to have the property
of the Company partitioned, and each Member, on behalf of himself, his
successors, representatives, heirs and assigns, hereby waives any such right.
13.8. Invalidity. Every provision of this Agreement is intended to be
severable. The invalidity and unenforceability of any particular provision of
this Agreement in any jurisdiction shall not affect the other provisions hereof,
and this Agreement shall be construed in all respects as if such invalid or
unenforceable provision were omitted.
13.9. Successors and Assigns. This Agreement shall be binding upon the
parties hereto and their respective successors, executors, administrators, legal
representatives, heirs and permitted legal assigns and shall inure to the
benefit of the parties hereto and, except as otherwise provided herein, their
respective successors, executors, administrators, legal representatives, heirs
and permitted legal assigns. No Person other than the parties hereto and their
respective successors, executors, administrators, legal representatives, heirs
and permitted legal assigns, shall have any rights or claims under this
Agreement.
13.10. Entire Agreement. This Agreement, together with all Exhibits,
Schedules, and Annexes hereto and all letter agreements executed by the Company,
the Managing Members and/or their respective Affiliates on the Initial Closing
Date and the date hereof (which are incorporated herein by this reference),
supersedes all prior agreements among the parties with respect to the subject
matter hereof and contains the entire agreement among the parties with respect
to such subject matter. This instrument may not be amended, supplemented or
discharged, and no provisions hereof may be modified or waived, except expressly
by an instrument in writing signed by the Manager and each Member and, in the
case of an amendment, modification or supplement, in compliance with Section
12.1. No waiver of
Exhibit 10.50 Page 102
<PAGE>
any provision hereof by any party hereto shall be deemed a waiver by any other
party nor shall any such waiver by any party be deemed a continuing waiver of
any matter by such party. No amendment, modification, supplement, discharge or
waiver hereof or hereunder shall require the consent of any person not a party
to this Agreement.
13.11. No Brokers. Each of the parties hereto warrants to each other that
there are no brokerage commissions or finders' fees (or any basis therefor)
resulting from any action taken by such party or any Person acting or purporting
to act on its behalf in connection with entering into this Agreement. Each
Member agrees to indemnify and hold harmless each other Member for all costs,
damages or other expenses arising out of any misrepresentation made in this
Section 13.11.
13.12. Maintenance as a Separate Entity. The Company shall maintain books
and records and bank accounts separate from those of its Affiliates; shall at
all times hold itself out to the public as a legal entity separate and distinct
from any of its Affiliates (including in its leasing activities, in entering
into any contract, in preparing its financial statements, and in its stationery
and on any signs it posts), and shall cause its Affiliates to do the same and to
conduct business with it on an arm's-length basis; shall not commingle its
assets with assets of any of its Affiliates; shall not guarantee any obligation
of any of its Affiliates; shall cause its business to be carried on by the
Manager and shall keep minutes of all meetings of the Members and the Management
Committee.
13.13. Confidentiality. Each Member agrees not to disclose or permit the
disclosure of any of the terms of this Agreement or of any information relating
to the Company's assets or business, provided that such disclosure may be made
(a) to any person who is a Member, officer, director or employee of such Member
or counsel to, accountants of, investment bankers for or consultants to, such
Member or the Company solely for their use and on a need-to-know basis, (b) with
the prior consent of the other Members, (c) pursuant to a subpoena or order
issued by a court, arbitrator or governmental body, agency or official or in
order to comply with any law, rule or regulation (including the rules and
regulations of the Securities and Exchange Commission, the American Stock
Exchange and any other applicable national securities exchange), (d) in
connection with and to the extent necessary to sell or market any Property in
accordance with this Agreement, or (e) to any lender or investor providing
financing to the Company.
In the event that a Member shall receive a request to disclose any of the
terms of this Agreement under a subpoena or order, such Member shall (i)
promptly notify the other Members thereof, (ii) consult with the other Members
on the advisability of taking steps to resist or narrow such request and (iii)
if disclosure is required or deemed advisable, cooperate with any of the other
Members in any attempt it may make to obtain an order or other assurance that
confidential treatment will be accorded those terms of this Agreement that are
disclosed.
13.14. Power of Attorney.
(a) Each Member does irrevocably constitute and appoint the Manager, with
full power of substitution, as its true and lawful attorney, in its name, place
and stead, to execute, acknowledge, swear to, deliver, record and file, as
appropriate and in accordance with this Agreement (i) the original Certificate
of Formation and all amendments thereto required or permitted by law or the
provisions of this Agreement, (ii) all certificates and other instruments
requiring execution by the
Exhibit 10.50 Page 103
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Members or any of them and deemed necessary or advisable by the Manager to
qualify or continue the Company as a limited liability company in the
jurisdictions where the Company may be conducting its operations, (iii) all
instruments, agreements or documents that the Management Committee so directs
pursuant to Section 3.5(e) and (iv) all conveyances and other instruments deemed
necessary or advisable by the Manager to effect the dissolution and termination
of the Company in accordance with this Agreement. Nothing contained in this
Section 13.14 shall empower the Manager to take any action requiring the consent
of the Management Committee or any Member(s) hereunder unless such consent is
first obtained.
(b) The powers of attorney granted pursuant to this Section 13.14 are
coupled with an interest and shall be irrevocable and survive and not be
affected by the subsequent death, incapacity, disability, Bankruptcy or
dissolution of the grantor; may be exercised by the Manager either by signing
separately as attorney-in-fact for each Member or by the Manager acting as
attorneys-in-fact for all of them; and shall survive the delivery of an
assignment by a Member of the whole or any fraction of its Interest, except
that, where the whole of such Member's Interest has been assigned or diluted in
accordance with this Agreement, the power of attorney of the assignor shall
survive the delivery of such assignment for the sole purpose of enabling the
Manager to execute, acknowledge, swear to, deliver, record and file any
instrument necessary or appropriate to effect such substitution. In the event of
any conflict between this Agreement and any document, instrument, conveyance or
certificate executed or filed by the Manager pursuant to such power of attorney,
this Agreement shall control.
(c) In addition to the foregoing, each of WHWEL, Whitehall XI and WCPT are
hereby irrevocably constituted and appointed, with full power of substitution,
as the true and lawful attorney of the Manager and each Member of the Company to
execute, acknowledge, swear to, deliver, record and file any and all
instruments, agreements and other documents (in the name, place and stead of the
Manager and each such Member and the Company) and to take any and all such other
actions as may be necessary or desirable to carry out the provisions of Sections
8.2 and 8.3.
13.15. Time of the Essence. Time is of the essence in the performance of
each and every term of this Agreement.
13.16. No Third Party Beneficiaries. The right or obligation of the Manager
or Management Committee to call for any capital contribution or of any Member to
make a capital contribution or otherwise to do, perform, satisfy or discharge
any liability or obligation of any Member hereunder, or to pursue any other
right or remedy hereunder or at law or in equity provided, shall not confer any
right or claim upon or otherwise inure to the benefit of any creditor or other
third party having dealings with the Company, it being understood and agreed
that the provisions of this Agreement shall be solely for the benefit of, and
may be enforced solely by, the parties hereto and their respective successors
and assigns except as may be otherwise agreed to by the Company in writing with
the prior written approval of the Management Committee.
13.17. Exculpation. The parties agree that the individuals executing this
Agreement on behalf of WCPT and each Member of the Whitehall Group have done so
in their respective capacities as officers or trustees of such Members (or, in
the case of each Member of the Whitehall Group, the general partner of such
Member) and not individually, and none of the direct or indirect partners,
trustees, officers or shareholders of either such Member shall be bound or have
any personal liability
Exhibit 10.50 Page 104
<PAGE>
hereunder. Each Member shall look solely to the Interest of the other Members
for satisfaction of any liability of such other Member in respect of this
Agreement and will not seek recourse or commence any action against any of the
direct or indirect partners, trustees, officers or shareholders of such other
Member or any of their personal assets for the performance or payment of any
obligation hereunder. The foregoing shall also apply to any future documents,
agreements, understandings, arrangements and transactions between the parties
hereto.
13.18. Consent of Saracen. Whenever the consent, approval, determination or
decision of Saracen is required pursuant to any of the terms of this Agreement,
including to amend or waive any provisions of this Agreement, such consent,
approval, determination or decision shall be deemed given by, and binding on,
each of the respective Saracen Members if the Company obtains the written
consent, approval or decision of Kurt W. Saraceno or any other Person designated
in writing by a majority of Saracen's Percentage Interest (assuming for purposes
of determining Saracen's Percentage Interest pursuant to this Section 13.18, all
of the outstanding Series A Convertible Preferred Membership Units were
converted into Membership Units at the conversion price set forth in the Series
A Terms), which Person must be approved by the Management Committee which
approval shall not be unreasonably withheld or delayed, and each of the Saracen
Members hereby irrevocably agrees that Kurt W. Saraceno, or such other Person
designated by the Saracen Members, shall have the power and authority to grant
any such written consent or approval, or make any such determination or
decision, on behalf of, and as the duly authorized agent and representative of,
such respective Persons. Each Saracen Member by execution and delivery of this
Agreement, irrevocably constitutes and appoints Kurt W. Saraceno or any other
Person designated in writing by a majority of Saracen's Percentage Interest
(assuming for purposes of determining Saracen's Percentage Interest pursuant to
this Section 13.18, all of the outstanding Series A Convertible Preferred
Membership Units were converted into Membership Units at the conversion price
set forth in the Series A Terms), which Person must be approved by the
Management Committee which approval shall not be unreasonably withheld or
delayed, as his or her true and lawful attorney-in- fact with full power and
authority in such Saracen Member's name, place, and stead only to execute,
acknowledge and deliver such certificates, instruments, documents and agreements
as are necessary or appropriate to make any and all amendments or restatements
of this Agreement which amendments or restatements do explicitly require the
consent of Saracen as set forth in Section 12.1(a). The appointment by each
Saracen Member of Kurt W. Saraceno or such other Person as designated above as
attorney-in- fact shall be deemed to be a power coupled with an interest, and
shall survive, and not be affected by the subsequent bankruptcy, death,
incapacity, disability, adjudication of incompetence or insanity, or dissolution
of any Saracen Member hereby giving such power. As a condition to the transfer
by a Saracen Member of any or all of such Saracen Member's Interest, the
foregoing power of attorney shall be granted by the transferee of such Saracen
Member's Interest.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
[SIGNATURE PAGE FOLLOWS]
Exhibit 10.50 Page 105
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
WHWEL REAL ESTATE LIMITED PARTNERSHIP
By: WHATR Gen-Par, Inc., General Partner
By: /s/ Elizabeth M. Burban
-----------------------
Name: Elizabeth M. Burban
Title: Vice President
WELLSFORD COMMERCIAL PROPERTIES TRUST
By: /s/ Edward Lowenthal
--------------------
Name: Edward Lowenthal
Title: President
WXI/WWG REALTY, L.L.C.
By: /s/ Elizabeth M. Burban
-----------------------
Name: Elizabeth M. Burban
Title: Vice President
W/W GROUP HOLDINGS, L.L.C.
By: /s/ Elizabeth M. Burban
-----------------------
Name: Elizabeth M. Burban
Title: Vice President
Exhibit 10.50 Page 106
<PAGE>
/s/ DOMINIC J. SARACENO
---------------------------
DOMINIC J. SARACENO
/s/ KURT W. SARACENO
-----------------------
KURT W. SARACENO
/s/ WILLIAM F. RAND, III
---------------------------
WILLIAM F. RAND, III
/s/ INGEBORG E. SARACENO
--------------------------
INGEBORG E. SARACENO
/s/ HEIDI A. SARACENO-LAWLOR
------------------------------
HEIDI A. SARACENO-LAWLOR
/s/ LEAS A. SARACENO
----------------------
LEAS A. SARACENO
/s/ STEPHEN DAVIS
-------------------
STEPHEN DAVIS
/s/ EDWARD WERRNER
--------------------
EDWARD WERNER
/s/ CARLETON G. TARPINIAN
---------------------------
CARLETON G. TARPINIAN
/s/ GEORGE MCLAUGHLIN, III
--------------------------
GEORGE MCLAUGHLIN, III
Exhibit 10.50 Page 107
<PAGE>
The undersigned has executed this Agreement solely for purposes of Sections 3.3,
4.2, 7.6 and 9.2.
WELLSFORD REAL PROPERTIES, INC.
By: /s/ Edward Lowenthal
--------------------
Name: Edward Lowenthal
Title: President
Exhibit 10.50 Page 108
<PAGE>
THE COMMONWEALTH OF MASSACHUSETTS
County ss.: , 1999
- ----------------- ----
Then personally appeared the above-named Dominic J. Saraceno , and
acknowledged the foregoing instrument to be his free act and deed, before me,
-----------------------
Notary Public
My Commission Expires:
THE COMMONWEALTH OF MASSACHUSETTS
County ss.: , 1999
- ----------------- ----
Then personally appeared the above-named Kurt W. Saraceno , and
acknowledged the foregoing instrument to be his free act and deed, before me,
-----------------------
Notary Public
My Commission Expires:
THE COMMONWEALTH OF MASSACHUSETTS
County ss.: , 1999
- ----------------- ----
Then personally appeared the above-named William F. Rand, III, and
acknowledged the foregoing instrument to be his free act and deed, before me,
-----------------------
Notary Public
My Commission Expires:
Exhibit 10.50 Page 109
<PAGE>
THE COMMONWEALTH OF MASSACHUSETTS
County ss.: , 1999
- ----------------- ----
Then personally appeared the above-named Ingeborg E. Saraceno, and
acknowledged the foregoing instrument to be her free act and deed, before me,
-----------------------
Notary Public
My Commission Expires:
THE COMMONWEALTH OF MASSACHUSETTS
County ss.: , 1999
- ----------------- ----
Then personally appeared the above-named Heidi A. Saraceno-Lawlor, and
acknowledged the foregoing instrument to be her free act and deed, before me,
-----------------------
Notary Public
My Commission Expires:
THE COMMONWEALTH OF MASSACHUSETTS
County ss.: , 1999
- ----------------- ----
Then personally appeared the above-named Leas A. Saraceno, and acknowledged
the foregoing instrument to be her free act and deed, before me,
-----------------------
Notary Public
My Commission Expires:
Exhibit 10.50 Page 110
<PAGE>
THE COMMONWEALTH OF MASSACHUSETTS
County ss.: , 1999
- ----------------- ----
Then personally appeared the above-named Stephen Davis, and acknowledged
the foregoing instrument to be his free act and deed, before me,
-----------------------
Notary Public
My Commission Expires:
THE COMMONWEALTH OF MASSACHUSETTS
County ss.: , 1999
- ----------------- ----
Then personally appeared the above-named Edward Werner, and acknowledged
the foregoing instrument to be his free act and deed, before me,
-----------------------
Notary Public
My Commission Expires:
THE COMMONWEALTH OF MASSACHUSETTS
County ss.: , 1999
- ----------------- ----
Then personally appeared the above-named Carleton G. Tarpinian, and
acknowledged the foregoing instrument to be his free act and deed, before me,
-----------------------
Notary Public
My Commission Expires:
Exhibit 10.50 Page 111
<PAGE>
THE COMMONWEALTH OF MASSACHUSETTS
County ss.: , 1999
- ----------------- ----
Then personally appeared the above-named George McLaughlin, III, and
acknowledged the foregoing instrument to be his free act and deed, before me,
-----------------------
Notary Public
My Commission Expires:
Exhibit 10.50 Page 112
<PAGE>
EXHIBIT A
Terms of Series A Preferred Membership Units
Exhibit 10.50 Page 113
<PAGE>
EXHIBIT B
Form of Registration Rights Agreement
Exhibit 10.50 Page 114
<PAGE>
SCHEDULE 1
Additional Members
1. Dominic J. Saraceno
2. Kurt W. Saraceno
3. William F. Rand, III
4. Ingeborg B. Saraceno
5. Heidi A. Saraceno-Lawlor
6. Leas A. Saraceno
7. Stephen Davis
8. Edward Werner
9. Carleton G. Tarpinian
10. George McLaughlin, III
Exhibit 10.50 Page 115
<PAGE>
SCHEDULE 2.6
Names and Addresses of Members
WHWEL Real Estate Limited Partnership
c/o Whitehall Street Real Estate
Limited Partnership VII
85 Broad Street, 19th Floor
New York, New York 10004
Attention: Chief Financial Officer
Wellsford Commercial Properties Trust
535 Madison Avenue, 26th Floor
New York, New York 10022
Attention: President
Saracen
c/o Saracen Companies, Inc.
57 Wells Avenue
Newton Centre, MA. 02159
Attn: Mr. Kurt W. Saraceno
WXI/WWG Realty, L.L.C.
85 Broad Street, 19th Floor
New York, New York 10004
Attention: Chief Financial Officer
W/W Group Holdings, L.L.C.
85 Broad Street, 19th Floor
New York, New York 10004
Attention: Chief Financial Officer
Exhibit 10.50 Page 116
<PAGE>
SCHEDULE 2.4A
List of Properties
Exhibit 10.50 Page 117
<PAGE>
SCHEDULE 2.4B
List of Subsidiaries
Wellsford/Whitehall Properties II, L.L.C.
Wellsford/Whitehall Holdings, L.L.C.
Wells Avenue Holdings, L.L.C.
Wells Avenue Senior Holdings LLC
WASH Manager L.L.C.
WEL/WH Convention Managers, L.L.C.
WXI/Mt. Bethel Road, L.L.C.
Exhibit 10.50 Page 118
<PAGE>
SCHEDULE 2.7A
Representations and Warranties with respect to the Properties
- -------------------------------------------------------------
Exhibit 10.50 Page 119
<PAGE>
SCHEDULE 2.7B
Representations and Warranties with respect to the Subsidiaries
- ---------------------------------------------------------------
1. CONSENTS AND APPROVALS. No order, permission, consent, approval,
license, authorization, registration or filing by or with any government agency
having jurisdiction over any Subsidiary is required for the consummation of the
Closing or the execution, delivery or performance of any document or instrument
to be executed and delivered by any Subsidiary in connection with the Closing,
except for such orders, permission, consents, approvals, licenses,
authorizations, registrations and filings as have already been obtained, given
or made.
2. NO VIOLATION. The consummation of the Closing does not and will not
(including with the giving of notice, lapse of time or both) (i) violate,
conflict with, result in a breach of any of the provisions of or constitute a
default under (1) the organizational documents of any Subsidiary, (2) any bond,
note or other evidence of indebtedness, indenture, mortgage, deed of trust, loan
agreement or similar instrument by which any Subsidiary or any of its assets is
subject or bound, (3) any lease or any other agreement or contract by which any
Subsidiary or any of its assets is subject or bound, (4) any applicable statute,
law, order, rule or regulation of any court or governmental agency having
jurisdiction over any Subsidiary or any of its assets or (5) any term or
provision of any judgment, decree, order, statute, writ, injunction, rule or
regulation of any arbitrator, court or governmental authority binding on any
Subsidiary or any of its assets or (ii) result in the creation of any Lien upon
any assets of such Subsidiary.
3. INTENTIONALLY OMITTED.
4. OWNERSHIP. (i) The Company owns 100% of the legal and beneficial
interest in WWPII, (ii) WWP II owns 100% of the legal and beneficial interest in
Holdings, (iii) Holdings owns the fee interest in all of the Properties (other
than the Nomura Properties and Holdings' interest in 105 Challenger Road,
Ridgefield Park, New Jersey, which interest is held pursuant to a long-term
ground lease), (iv) Holdings owns 100% of the legal and beneficial interest in
Wells Avenue Holdings, LLC, (v) Wells Avenue Holdings, LLC owns 100% of the
legal and beneficial interest in Wash Manager LLC, (vi) Wells Avenue Holdings,
LLC and Wash Manger LLC, collectively, own 100% of the legal and beneficial
interest in Wells Avenue Senior Holdings, LLC, and (vii) Wells Avenue Senior
Holdings, LLC owns the fee interest in the Nomura Properties, and in each case
free and clear of all Liens except for Liens securing the Indebtedness set forth
in Schedule B-7.
5. LITIGATION. Other than as set forth on Schedule B-5, no Subsidiary is a
party to any legal action, suit, arbitration, inquiry or proceeding (and, to the
knowledge of the Company, no investigation in respect of any such party is
pending) before any court, governmental authority or arbitrator and, to the
knowledge of the Company, no such action, suit, proceeding or investigation is
threatened, except in each case as would not have a material adverse effect on
any of the Properties or the value thereof.
6. CONDITION OF SUBSIDIARIES. None of the Subsidiaries has filed (and none
of such entities is contemplating filing) any petition seeking or acquiescing in
any reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any law relating to bankruptcy or
insolvency, nor has any such petition been filed against any such party. No
general assignment of any assets of any Subsidiary has been made for the benefit
of creditors, and no receiver, master, liquidator or trustee has been appointed
for any such party or any of their assets. None of the Subsidiaries is insolvent
and the consummation of the Closing will not render any such party insolvent.
7. INDEBTEDNESS. Except as set forth in Schedule B-7, none of the
Subsidiaries and none of the Properties shall be subject to any Indebtedness.
8. NON-IMPUTATION. As of the Closing Date, none of the Subsidiaries has any
knowledge of a defect in title that would allow the title insurance company
insuring any Property as of the Closing to deny coverage of such defect based on
knowledge of the insured.
Exhibit 10.50 Page 120
<PAGE>
SCHEDULE 3.2(a)(vi)
Approved Leases and Lease Documentation
NONE
Exhibit 10.50 Page 121
<PAGE>
SCHEDULE 5.1
Capital Accounts, Capital Contributions, Membership Units and Series A Preferred
Membership Units
Exhibit 10.50 Page 122
<PAGE>
SCHEDULE 7.1
Calculations of the Preferred Distribution Amount
Under the terms of the Series A Convertible Preferred Units ("Preferred
Units"), the Preferred Holders are entitled to a distribution equal to the
greater of (A) 6% or (B) the distribution to the Preferred Holders assuming a
full conversion of the Preferred Units. A 6% distribution equates to $1.50 per
Preferred Unit. The 760,000 Preferred Units outstanding, with a value of
$19,000,000, are convertible at 1.34 Membership Units per Preferred Unit, or
convertible into a total of 1,018,400 Membership Units.
Example: Assuming that for the entire 1999 calendar year there are 10,344,734
Membership Units (before any conversion), and that the total distribution
available to the Membership Units and the Preferred Units (i.e., the "Cumulative
Distribution Amount" for the quarter ending December 31, 1999) is $6,340,000.
The comparison of the two hypothetical distributions that the Preferred Units
would be entitled to for 1999 under the definition of "Preferred Distributions
Amounts" are shown below. Assuming no conversion of the Preferred Units, the
distribution that the holders of the Membership Units and the Preferred Holders
would receive are shown in (A). On an "as converted" basis, the distribution per
Preferred Unit is as shown in (B) below:
(A) Membership Unit distribution $ 5,200,000
Preferred Unit distribution (6%) 1,140,000 (1)
-----------
Total without conversion $ 6,340,000
===========
(B) Membership Units 10,344,734
"Converted Units" 1,018,400 (2)
-----------
"Total Units" 11,363,134 (3)
===========
Total available for distribution $ 6,340,000 (4)
"Preferred Percentage" 8.9623% (5)
"As converted" Preferred Unit
distribution $ 568,209 (6)
(C) The greater of (1) and (6) is (1), so the Preferred
Unit distribution is made in the amount of (1), or $1,140,000.
(5) This amount equals the amount in (2) divided by the amount in (3).
(6) This amount equals the amount in (4) multiplied by the percentage in (5).
Exhibit 10.50 Page 123
<PAGE>
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of May 3, 1999, between WELLSFORD REAL PROPERTIES,
INC., a Maryland corporation with offices at 535 Madison Avenue, New York, New
York 10022 (the "Company"), and RODNEY F. DU BOIS, an individual residing at 32
Rip Road, Hanover, New Hampshire 03755 (the "Executive").
WHEREAS, the Company desires to employ the Executive and the Executive
desires to be employed by the Company.
IT IS AGREED:
1. Duties. (a) During the term of the Executive's employment hereunder the
Executive shall serve and the Company shall employ the Executive as Vice
Chairman of the Board and Chief Operating Officer to perform (i) such executive
or administrative services for the Company consistent with those of a Vice
Chairman of the Board as may be assigned to the Executive by the Chairman of the
Board and the directors of the Company and (ii) such services consistent with
those of a Chief Operating Officer for companies engaged in similar activities
in the real estate business, as may reasonably be assigned to the Executive by
the Chairman of the Board, President or Chief Executive Officer of the Company.
The Executive hereby accepts such employment and agrees to perform such
services.
(b) The Executive shall devote such time, attention and energies during
business hours to the performance of his duties hereunder as is necessary to
properly carry out the responsibilities of his office, provided, however, that
the amount of time devoted to his duties shall not exceed 140 days per annum.
(c) The Executive shall cooperate with the Company, including taking such
medical examinations as the Company reasonably shall deem necessary, if the
Company shall desire to obtain medical, disability or life insurance with
respect to the Executive. Where reasonably possible, the Company shall cooperate
with the Executive's request to have such examinations performed by the
Executive's personal physician or another physician reasonably acceptable to the
Executive.
(d) The Executive shall work out of the Company's business offices located
in Hanover, New Hampshire but shall undertake such reasonable business travel as
may be necessary to perform his duties under this Agreement, including without
limitation, traveling to the Company's New York offices (for which the Executive
shall be reimbursed pursuant to Section 4 below for costs and expenses incurred
in connection therewith); provided, that the Executive's business travel shall
not, in the aggregate, exceed10 days in any given month.
2. Employment Term. This Agreement shall commence on May 3, 1999 and
shall continue in effect through May 2, 2001.
Exhibit 10.87 Page 1
<PAGE>
3. Compensation. For all services rendered by the Executive pursuant to
this Agreement:
(a) The Company shall pay to the Executive (i) an annual base salary
consisting of $200,000 per annum ("Cash Compensation") and (ii) 20,000
restricted shares ("Restricted Shares") of common stock, $.01 par value per
share, of the Company, to be issued to the Executive on the date hereof,
provided that one-eighth of such Shares shall vest quarterly on the second day
of each August, November, February and May during the term of this Agreement and
the Shares shall be subject to the other terms and conditions set forth in that
certain Restricted Share Grant Letter Agreement (the "Restricted Share
Agreement") entered into between Executive and the Company as of the date
hereof. All Cash Compensation shall be paid bi- weekly or at such other regular
intervals, not less frequently than monthly, as the Company may establish from
time to time for executive employees of the Company.
(b) In addition to the compensation set forth in subsection 3(a) above, the
Executive shall be awarded such bonus for each calendar year or partial calendar
year of his employment hereunder as the Board of Directors of the Company shall
determine in their sole discretion. In determining such bonus, the Executive
understands that the directors will consider, without limitation, the following
factors with respect to the applicable calendar year or partial calendar year:
the Company's financial performance, business performance and growth during such
period; Executive's responsibilities as an officer of the Company (including his
participation in transactions of particular financial or business significance
to the Company) during such period; the total compensation package paid to
executive officers having similar responsibilities as the Executive who are
employed by entities which are similar to the Company; and such other factors as
the directors may deem appropriate in their sole discretion. Such bonus may
consist of cash; grants of Shares; options to purchase Shares; loans to purchase
Shares; share appreciation rights (whether independent of or in conjunction with
awards of options); and such other awards as the directors in their sole
discretion may deem appropriate and which they believe are in furtherance of the
growth of long-term stockholder value of the Company.
Exhibit 10.87 Page 2
<PAGE>
(c) As of the date hereof, the Executive shall be granted options (the
"Options") to purchase 100,000 Shares. Options with respect to 50,000 Shares
shall vest on each of December 15, 1999 and December 15, 2000. The Options shall
have an exercise price of $10.06 per share and other terms and conditions
substantially similar to those set forth in the options then most recently
granted generally to executive officers of the Company, as more specifically set
forth in those certain Share Option Agreements (the "Share Option Agreements")
to be entered into between the Executive and the Company as of the date hereof.
To the greatest extent reasonably possible, the Company shall use its best
efforts to ensure that the options granted to the Executive qualify as incentive
stock options. Consistent with the qualification of the Options as incentive
stock options, the Options shall have an exercise period equal to the shorter of
10 years from the date hereof or 90 days after the date of termination of
Executive's employment with the Company. Notwithstanding the foregoing, in the
event that (i) the Executive's employment with the Company is terminated for
reasons other than for Cause (as defined below), (ii) the Executive continues to
serve as a member of the Company's Board of Directors and (iii) the Executive
does not exercise all of the Options within 90 days of such termination, all
unexercised Options shall automatically, without any action, be converted into
non-qualified stock options generally having the same terms and conditions as
are set forth in the Share Option Agreements except that such Options shall be
exercisable by the Executive during the remainder of the period that ends on the
shorter of 10 years from the date hereof or 5 years from the date that the
Executive ceases to serve as a director.
4. Expenses. (a) The Company shall reimburse the Executive for all out-of-
pocket expenses actually and necessarily incurred by him in the conduct of the
business of the Company against reasonable substantiation submitted with respect
thereto.
(b) Unless the provisions of subsection 4(c) below shall apply, the Company
shall reimburse the Executive for all legal fees and related expenses (including
the costs of experts, evidence and counsel) paid by the Executive as a result of
(i) the termination of Executive's employment (including all such fees and
expenses, if any, incurred in contesting or disputing any such termination of
employment), (ii) the Executive seeking to obtain or enforce any right or
benefit provided by this Agreement or by any other plan or arrangement
maintained by the Company under which the Executive is or may be entitled to
receive benefits, (iii) the Executive's hearing before the directors as
contemplated in subsection 6(c) of this Agreement or (iv) any action taken by
the Company against the Executive; provided, however, that the Company shall
reimburse the legal fees and related expenses described in this subsection 4(b)
only if and when a final judgement has been rendered in favor of the Executive
and all appeals related to any such action have been exhausted.
(c) The Company shall pay all legal fees and related expenses (including
the costs of experts, evidence and counsel) incurred by the Executive as they
become due as a result of (i) the termination of Executive's employment
(including all such fees and expenses, if any, incurred in contesting or
disputing any such termination of employment), (ii) the Executive seeking to
obtain or enforce any right or benefit provided by this Agreement or by any
other plan or arrangement maintained by the Company under which the Executive is
or may be entitled to
Exhibit 10.87 Page 3
<PAGE>
receive benefits, (iii) the Executive's hearing before the directors as
contemplated in subsection 6(c) of this Agreement or (iv) any action taken by
the Company against the Executive, unless and until such time that a final
judgement has been rendered in favor of the Company and all appeals related to
any such action have been exhausted; provided, however, that the circumstances
set forth above occurred on or after a change in control of the Company.
(d) For purposes of this Agreement, a "change in control of the Company"
shall be deemed to occur if:
(i) there shall have occurred a change in control of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of Regulation
14A promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as in effect on the date hereof, whether or not the Company is
then subject to such reporting requirement, provided, however, that there shall
not be deemed to be a "change in control" of the Company if immediately prior to
the occurrence of what would otherwise be a "change in control" of the Company
(A) the Executive is the other party to the transaction (a "Control Event") that
would otherwise result in a "change in control" of the Company or (B) the
Executive is an executive officer, trustee, director or more than 5% equity
holder of the other party to the Control Event or of any entity, directly or
indirectly, controlling such other party,
(ii) the Company merges or consolidates with, or sells all or substantially
all of its assets to, another company (each, a "Transaction"), provided,
however, that a Transaction shall not be deemed to result in a "change in
control" of the Company if (A) immediately prior thereto the circumstances in
(i)(A) or (i)(B) above exist, or (B) (1) the shareholders of the Company,
immediately before such Transaction own, directly or indirectly, immediately
following such Transaction in excess of fifty percent (50%) of the combined
voting power of the outstanding voting securities of the corporation or other
entity resulting from such Transaction (the "Surviving Corporation") in
substantially the same proportion as their ownership of the voting securities of
the Company immediately before such Transaction and (2) the individuals who were
members of the Company's Board of Directors immediately prior to the execution
of the agreement providing for such Transaction constitute at least a majority
of the members of the board of directors or the board of trustees, as the case
may be, of the Surviving Corporation, or of a corporation or other entity
beneficially directly or indirectly owning a majority of the outstanding voting
securities of the Surviving Corporation, or
(iii) the Company acquires assets of another company or a subsidiary of the
Company merges or consolidates with another company (each, an "Other
Transaction") and (A) the shareholders of the Company, immediately before such
Other Transaction own, directly or indirectly, immediately following such Other
Transaction 50% or less of the combined voting power of the outstanding voting
securities of the corporation or other entity resulting from such Other
Transaction (the "Other Surviving Corporation") or (B) the individuals who were
members of the Company's Board of Directors immediately prior to the execution
of the agreement providing for such Other Transaction constitute less than a
majority of the members of the board of directors or the board of trustees, as
the case may be, of the Other Surviving Corporation, or of a corporation or
other entity beneficially directly or indirectly owning a majority of the
Exhibit 10.87 Page 4
<PAGE>
outstanding voting securities of the Other Surviving Corporation, provided,
however, that an Other Transaction shall not be deemed to result in a "change in
control" of the Company if immediately prior thereto the circumstances in (i)(A)
or (i)(B) above exist.
5. Benefits. The Executive shall be entitled to such paid vacation time
each year and such other medical and other benefits as are afforded from time to
time to all executive employees of the Company. The Company shall indemnify the
Executive in the performance of his duties pursuant to the bylaws of the Company
and to the fullest extent allowed by applicable law, including, without
limitation, legal fees.
6. Earlier Termination. (a) If the Executive shall die during the term of
this Agreement, this Agreement shall be deemed to have been terminated as of the
date of the Executive's death, and the Company shall pay to the legal
representative of the Executive's estate all monies due hereunder prorated
through the last day of the month during which the Executive shall have died.
(b) If the Executive shall fail, because of illness or incapacity, to
render the services contemplated by this Agreement for six consecutive months or
for shorter periods aggregating nine months in any calendar year, the Company
may determine (as set forth in subsection (d) below) that the Executive has
become disabled. If within thirty (30) days after the date on which written
notice of such determination is given to the Executive, the Executive shall not
have returned to the continuing full-time performance of his duties hereunder,
this Agreement and the employment of the Executive hereunder shall be deemed
terminated and the Company shall pay to the Executive all monies due hereunder
prorated through the last day of the month during which such termination shall
occur.
(c) The Company, by written notice to the Executive specifying the reason
therefor, may terminate this Agreement for Cause as determined pursuant to
subsection (d) below. As used herein, "Cause" shall be defined as actions by the
Executive which constitute (i) fraud, illegal or willful misconduct or dishonest
conduct, (ii) a breach of any duties, responsibilities or obligations hereunder
or (iii) habitual abuse of drugs or alcohol. In such event, the Executive shall
be paid the Executive's full base salary through the date of termination at the
rate in effect at the time notice of termination is given and the Company shall
thereafter have no further obligations to this Executive under this Agreement.
(d) A determination of disability or Cause shall be made in the reasonable
and sole discretion of the Company's Chairman of the Board of the Company. The
Company's Board of Directors shall, upon request of the Executive, review the
decision of whether the Executive has become disabled or has been discharged,
released or terminated for Cause and the Board of Directors shall confirm,
modify or reverse such determination in its sole discretion.
(e) The Company or Executive may terminate this Agreement if any change in
control of the Company occurs.
Exhibit 10.87 Page 5
<PAGE>
7. Compensation Upon Termination Upon a Change in Control. (a)If after a
change in control of the Company the Executive's employment shall be terminated
(i) by the Company other than for Cause or (ii) by the Executive, then (w) the
Company shall pay the Executive, not later than the date of termination, all
Cash Compensation payable to the Executive under this Agreement through the
Termination Date, including compensation for accrued vacation time, (x) the
Company shall pay the Executive 2.99 times the "base amount" (the "Base Amount")
within the meaning of sections 280G(b)(3) and 280G(d) of the Internal Revenue
Code of 1986, as amended (the "Code"), and any applicable temporary or final
regulations promulgated thereunder, or its equivalent as provided in any
successor statute or regulation, (y) all Restricted Shares granted to the
Executive hereunder shall immediately vest in accordance with the terms and
conditions of the Restricted Share Agreement and (z) all Options granted to the
Executive hereunder shall immediately vest and be exercisable in accordance with
the terms of the Share Option Agreements dated as of the date hereof. If Section
280G of the Code (and any successor provisions thereto) shall be repealed or
otherwise be inapplicable, then the Base Amount payable under clause (x) above
shall equal 2.99 times the average of the Executive's annual compensation during
the term of this Agreement. For purposes of determining annual compensation in
the preceding sentence, compensation payable to the Executive by the Company
shall include every type and form of compensation includible in Executive's
gross income in respect of his employment by the Company (including, without
limitation, all income reported on an Internal Revenue Service Form W-2),
compensation recognized as a result of the Executive's exercise of stock options
or sale of the stock so acquired and including, without limitation, any annual
bonus payments previously paid to such Executive. For purposes of calculating
the Base Amount within the meaning of Sections 280G(b)(3) and 290G(d) of the
Code and annual compensation in the second preceding sentence, any income of the
Executive that constitutes a "parachute payment" within the meaning of Section
280G(b)2) of the Code shall not be taken into account in making such
calculations.
(b) To the extent any benefits to be granted to the Executive hereunder
constitute a "parachute payment" within the meaning of Section 280G(b)(2) of the
Code, and the Executive would otherwise be liable for an excise tax pursuant to
Code Section 4999, there shall be a reduction in the benefits payable or
available to the Executive hereunder such that the total parachute payments will
be less than three (3) times the Executive's Base Amount with the result that
the excise tax under Code Section 4999 will not be payable; provided, however,
that such reduction shall occur only if the Executive shall realize a greater
after tax economic benefit by making such reduction than if no reduction were
made.
(c) The Executive shall not be required to mitigate the amount of any
payment provided for in this Section 7 by seeking other employment or otherwise,
nor shall the amount of any payment or benefit provided for in this Section 7 be
reduced by any compensation earned by him as the result of employment by another
employer or by retirement benefits after the date of termination, or otherwise,
except as specifically provided in this Section 7.
Exhibit 10.87 Page 6
<PAGE>
8. Protection of Confidential Information; Non-Competition.
(a) The Executive acknowledges that (i) the Company will suffer substantial
damage which will be difficult to compute if the Executive violates any of the
provisions of this Section 8, and (ii) the provisions of this Agreement are
reasonable and necessary for the protection of the business of the Company.
(b) The Executive agrees that he will not at any time, either during the
term of this Agreement or thereafter, divulge to any person, firm or corporation
any material information obtained or learned by him during the course of his
employment with the Company, with regard to the operational, financial, business
or other affairs of the Company, its officers or directors, except (i) in the
course of performing his duties hereunder, (ii) with the Chairman of the Board's
or President's express written consent; (iii) to the extent that any such
information is in the public domain other than as a result of the Executive's
breach of any of his obligations hereunder; or (iv) where required to be
disclosed by court order, subpoena or other government process.
(c) Upon termination of his employment with the Company, or any time the
Company may so request, the Executive will promptly deliver to the Company all
memoranda, notes, records, reports, manuals, drawings, blueprints, software and
other documents (and all copies thereof) relating to the business of the Company
and all property associated therewith, which he may then possess or have under
his control.
(d) For the longer of (i) 1 year from the date hereof or (ii) the term of
this Agreement (including any remaining portion of the stated term of this
Agreement following the termination of the Executive's employment by the
Executive or by the Company for Cause, unless such termination occurs after a
change in control of the Company), and provided the Executive's employment has
not been terminated by the Company without Cause, the Executive without the
prior written permission of the Chairman of the Board or President shall not in
the United States, its territories or possessions, directly or indirectly, (i)
enter into the employ of or render any services to any person, firm or
corporation engaged in any competitive business; (ii) engage in any competitive
business for his own account; (iii) become associated with or interested in any
competitive business as an individual, partner, shareholder, creditor, director,
officer, principal, agent, employee, director, consultant, advisor or in any
other relationship or capacity; (iv) employ or retain, or have or cause any
other person or entity to employ or retain, any person who was employed or
retained by the Company while the Executive was employed by the Company; or (v)
solicit, interfere with, or endeavor to entice away from the Company any of its
customers or sources of supply. However, nothing in this Agreement shall
preclude the Executive from investing his personal assets in the securities of
any corporation or other business entity which is engaged in a competitive
business if such securities are traded on a national stock exchange or in the
over-the-counter market and if such investment does not result in his
beneficially owning, at any time, more than 1% of the publicly-traded equity
securities of such competitor. A competitive business shall not include any
publicly owned enterprise engaged in such a business outside of the geographic
regions and states in which the Company operates at the time of the termination
of this Agreement.
Exhibit 10.87 Page 7
<PAGE>
(e) If the Executive commits a breach of any of the provisions of
subsection (b) or (d) above, the Company shall have the right and remedy to have
the provisions of this Agreement specifically enforced by any court having
equity jurisdiction, it being acknowledged and agreed by the Executive that the
services being rendered hereunder to the Company are of a special, unique and
extraordinary character and that any such breach or threatened breach will cause
irreparable injury to the Company and that money damages will not provide an
adequate remedy to the Company. Each of the rights and remedies enumerated in
this subsection (e) shall be independent of the other, and shall be severally
enforceable, and such rights and remedies shall be in addition to, and not in
lieu of, any other rights and remedies available to the Company under law or
equity.
(f) If any provision of subsection (b) or (d) is held to be unenforceable
because of the scope, duration or area of its applicability, the tribunal making
such determination shall have the power to modify such scope, duration, or area,
or all of them, and such provision or provisions shall then be applicable in
such modified form.
9. Governing Law; Arbitration. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of New York,
without regard to New York's conflicts of law principles. Any dispute or
controversy arising under this Agreement, or out of the interpretation hereof,
or based upon the breach hereof, shall be resolved by arbitration held at the
offices of the American Arbitration Association in the City of New York in
accordance with the rules and regulations of such association prevailing at the
time of the demand for arbitration by either party hereto, and the decision of
the arbitrator or arbitrators shall be final and binding upon both parties
hereto, provided, however, that the arbitrator or arbitrators shall only have
the power and authority to interpret, and not to modify or amend, the terms and
provisions hereof. Judgment upon an award rendered by the arbitrator or
arbitrators may be entered in any court having jurisdiction thereof.
Notwithstanding anything contained in this Section 9, either party shall have
the right to seek preliminary injunctive relief in any court in the City of New
York in aid of, and pending the final decision in, the arbitration proceeding.
10. Entire Agreement. This Agreement sets forth the entire agreement of the
parties and is intended to supersede all prior employment negotiations,
understandings and agree ments. No provision of this Agreement may be waived or
changed, except by a writing signed by the party to be charged with such waiver
or change.
11. Successors; Binding Agreement. This Agreement shall inure to the
benefit of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees.
12. Notices. All notices provided for in this Agreement shall be in
writing, and shall be deemed to have been duly given when delivered personally
to the party to receive the same, when given by telex, telegram or mailgram, or
when mailed first class postage prepaid, by registered or certified mail, return
receipt requested, addressed to the party to receive the same at his or its
address above set forth, or such other address as the party to receive the same
shall have
Exhibit 10.87 Page 8
<PAGE>
specified by written notice given in the manner provided for in this Section 12.
All notices shall be deemed to have been given as of the date of personal
delivery, transmittal or mailing thereof.
13. Severability. If any provision in this Agreement is determined to be
invalid, it shall not affect the validity or enforceability of any of the other
remaining provisions hereof.
Exhibit 10.87 Page 9
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
WELLSFORD REAL PROPERTIES, INC.
By: /s/ Edward Lowenthal
----------------------------------
Name: Edward Lowenthal
Title: President
EXECUTIVE:
/s/ Rodney F. Du Bois
----------------------------------
Rodney F. Du Bois
Exhibit 10.87 Page 10
<PAGE>
August 19, 1999
Mr. James J. Burns
390 Dogwood Lane
Manhasset, NY 11030
Dear Jim:
We are pleased to confirm your agreement to join Wellsford Real Properties, Inc.
as a Senior Vice President and Chief Accounting Officer, effective October 1,
1999. Your base salary will be at the annual rate of $200,000, and you will be
eligible for a management bonus at the discretion of the Compensation Committee.
The current guideline for a management bonus for your position is 50% of base
compensation, prorated of course for any partial calendar year during which the
term of your employment commences or terminates. Salaries for all employees are
reviewed each December, and yours would be reviewed as part of that regular
process, beginning in December 2000. Bonuses are considered at the end of each
calendar year and paid early the following year, and frequently are paid in a
combination of vested stock and cash. While the final decision rests with the
Committee, we will recommend at least a guideline bonus to the Committee your
first year, and of course the Committee may consider more generous grants
depending on individual and company performance.
You will be entitled to all of the employee benefit plans available generally to
our employees, and in addition we will stipulate that you will be entitled to
five weeks vacation per annum (which is more than our norm), preserving the
vacation period you now have at E & Y. At your election you may continue your E
& Y health coverage, and the Company will reimburse you for what its
contribution would have been towards the coverage you decline.
In the event you are terminated without cause, you will be entitled to receive
the amount of salary you would have received had your employment continued until
September 30, 2001 at your then current rate of salary, less any salary payments
previously made to you. This employment commitment will be deemed to
automatically extend in one year increments as of September 30, 2001 and each
September thereafter until September 2003 unless notice is given to you by the
Company, or to the Company by you, at least 90 days prior to such anniversary
date, that one party or the other does not wish to continue the commitment.
We will recommend to the Wellsford Board of Directors at its next regular
meeting the granting of options on 50,000 shares of Wellsford Real Properties,
Inc. common stock, vesting in equal increments over five years and exercisable
at the fair market value of such common stock on the date of grant. In the event
of a "change of control" (as defined by the Company for other senior officers),
any of these shares which were not vested would become vested.
It is a pleasure to welcome you to our Company, and I look forward to working
with you!
Yours sincerely,
/s/ Rodney F. Du Bois
- ---------------------
Rodney F. Du Bois
Vice Chairman
Agreed and accepted:
/s/ James J. Burns 8/25/99
--------------------- ---------
James J. Burns Date
cc: Jeffrey H. Lynford, Chairman
Edward Lowenthal, President
Exhibit 10.88 Page 1
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES OF THE REGISTRANT
The following is a list of subsidiaries of the registrant with the respective
state of organization as of December 31, 1999:
Subsidiary State
---------- -----
Wellsford Real Properties, Inc................. Maryland
Wellsford Capital.............................. Maryland
Wellsford Capital Properties, L.L.C............ Delaware
Wellsford Finance, Inc......................... Maryland
Wellsford Broomfield, L.L.C.................... Colorado
Belford Capital Holdings, L.L.C................ Delaware
Belford Capital Management, L.L.C.............. Delaware
Belford Capital Group, L.L.C................... Delaware
BPC Company, L.L.C............................. Delaware
Wellsford CRC Holding Corp..................... Maryland
Creamer Realty Consultants..................... New York
Creamer Vitale Wellsford L.L.C................. Delaware
Wellsford Sonterra L.L.C....................... Arizona
Wellsford Park Highlands Corp.................. Colorado
Park at Highlands L.L.C........................ Colorado
Red Canyon at Palomino Park L.L.C.............. Colorado
Silver Mesa at Palomino Park L.L.C............. Colorado
Green River at Palomino Park L.L.C............. Colorado
Palomino Park Telecom L.L.C.................... Colorado
Palomino Park Public Improvements Corp......... Colorado
Parkside Cafe at Palomino Park, Inc............ Colorado
Wellsford Commercial Properties Trust.......... Maryland
Wellsford/Whitehall Group, L.L.C.............. Delaware
Wellsford Ventures, Inc........................ Maryland
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheets and consolidated statements of operation and is
qualified in its entirety by reference to such documents.
</LEGEND>
<CIK> 0001038222
<NAME> WELLSFORD REAL PROPERTIES, INC.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 43,206,958
<SECURITIES> 0
<RECEIVABLES> 37,259,587
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 166,166,098
<DEPRECIATION> (6,584,328)
<TOTAL-ASSETS> 366,331,326
<CURRENT-LIABILITIES> 0
<BONDS> 119,314,929
0
0
<COMMON> 192,223
<OTHER-SE> 229,498,990
<TOTAL-LIABILITY-AND-EQUITY> 366,331,326
<SALES> 0
<TOTAL-REVENUES> 30,170,043
<CGS> 0
<TOTAL-COSTS> 12,401,939
<OTHER-EXPENSES> 7,125,876
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,398,630
<INCOME-PRETAX> 10,810,801
<INCOME-TAX> 1,950,000
<INCOME-CONTINUING> 8,860,801
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,860,801
<EPS-BASIC> 0.43
<EPS-DILUTED> 0.43
</TABLE>
