LETTER OF CREDIT REIMBURSEMENT AGREEMENT
Between
PALOMINO PARK PUBLIC IMPROVEMENTS CORPORATION
WELLSFORD REAL PROPERTIES, INC.
and
COMMERZBANK AG, NEW YORK BRANCH
Relating to
Palomino Park Public Improvements Corp.
Assessment Lien Revenue Bonds Series 1995 - $14,755,000
Dated as of June 16, 2000
(Letter of Credit No. 150SBY0030064)
<PAGE>
TABLE OF CONTENTS
This Table of Contents is not a part of the Letter of Credit Reimbursement
Agreement and is for convenience only. The captions herein are of no legal
effect and do not vary the meaning or legal effect of any part of the Letter of
Credit Reimbursement Agreement.
Page
----
ARTICLE 1 DEFINITIONS..................................................2
Section 1.1 Definitions....................................................2
Section 1.2 Accounting Matters............................................14
Section 1.3 Interpretation................................................14
Section 1.4 Relation to Other Documents...................................14
Section 1.5 Time for Performance..........................................14
ARTICLE 2 REIMBURSEMENT, FEES AND PAYMENT PROVISIONS..................15
Section 2.1 Same Day Reimbursement........................................15
Section 2.2 Reimbursement of Liquidity Drawing Amounts and LC Loans.......15
Section 2.3 Limitation on Interest........................................16
Section 2.4 Remarketing of Pledged Bonds..................................16
Section 2.5 Transfer/Amendment Fee........................................17
Section 2.6 Costs, Expenses and Taxes.....................................18
Section 2.7 Issuance Fee..................................................19
Section 2.8 Letter of Credit Facing Fee...................................19
Section 2.9 Capital Adequacy..............................................19
Section 2.10 Method of Payment............................................20
Section 2.11 Maintenance of Accounts......................................20
Section 2.12 Cure.........................................................20
Section 2.13 Withholding..................................................20
Section 2.14 Reduction and Reinstatement of the Letter of Credit..........20
ARTICLE 3 CONDITIONS PRECEDENT........................................21
Section 3.1 Account Parties' Resolutions; Bylaws..........................21
Section 3.2 Guarantor's Resolutions.......................................21
Section 3.3 Account Parties' Organizational Documents.....................21
Section 3.4 Guarantor's Organizational Documents..........................21
Section 3.5 Regulatory Approvals..........................................21
Section 3.6 Officer's Certificates........................................22
Section 3.7 Opinions of Counsel...........................................22
Section 3.8 Related Documents.............................................22
Section 3.9 .........................................................22
Section 3.10 Compliance Certificate.......................................22
Section 3.11 Rating.......................................................22
<PAGE>
Page
----
Section 3.12 Account Parties Certificate(s)...............................22
Section 3.13 [Reserved....................................................22
Section 3.14 Payment of Fees and Expenses.................................23
Section 3.15 Financial Statements.........................................23
Section 3.16 Highlands Certificate(s).....................................23
Section 3.17 Remarketing Agent Certificate................................23
Section 3.18 Bond Trustee Certificate.....................................23
Section 3.19 Other Documents..............................................23
ARTICLE 4 REPRESENTATIONS AND WARRANTIES..............................23
Section 4.1 Corporate Authority, Etc......................................23
(1) Incorporation; Good Standing.............................23
(2) Authorization............................................24
(3) Enforceability...........................................24
Section 4.2 Governmental Approvals........................................24
Section 4.3 Title to Properties; Leases...................................24
Section 4.4 Financial Statements..........................................25
Section 4.5 No Material Changes...........................................25
Section 4.6 Franchises, Patents, Copyrights, Etc..........................25
Section 4.7 Litigation....................................................25
Section 4.8 No Materially Adverse Contracts, Etc..........................26
Section 4.9 Compliance with Other Instruments, Laws, Etc..................26
Section 4.10 Tax Status...................................................26
Section 4.11 No Event of Default..........................................26
Section 4.12 Holding Company and Investment Company Acts, Etc.............26
Section 4.13 Absence of UCC Financing Statements, Etc.....................27
Section 4.14 Noncontravention.............................................27
Section 4.15 Certain Transactions.........................................27
Section 4.16 Employee Benefit Plans.......................................27
Section 4.17 Regulations U and X..........................................28
Section 4.18 Environmental Compliance.....................................28
Section 4.19 Subsidiaries.................................................30
Section 4.20 Related Documents............................................30
Section 4.21 Property.....................................................30
Section 4.22 Brokers......................................................31
Section 4.23 Other Debt...................................................31
Section 4.24 Solvency.....................................................31
Section 4.25 Complete and Correct Information.............................31
Section 4.26 Public Improvements Liens....................................32
Section 4.27 Pledge of Pledged Bonds......................................32
Section 4.28 Security for Pledged Bonds...................................32
ARTICLE 5 AFFIRMATIVE COVENANTS.......................................32
Section 5.1 Compliance with Bond Indenture and Related Documents..........32
Section 5.2 Maintenance of Office.........................................32
<PAGE>
Section 5.3 Records and Accounts..........................................33
Section 5.4 Financial Statements, Certificates and Information............33
Section 5.5 Notices.......................................................35
(1) Defaults.................................................35
(2) Environmental Events.....................................35
(3) Notice of Litigation and Judgments.......................35
(4) [Reserved]...............................................36
(5) Location, Name and Business..............................36
(6) Highlands Indebtedness...................................36
Section 5.6 Existence; Maintenance of Properties..........................36
Section 5.7 Insurance.....................................................36
Section 5.8 Taxes.........................................................37
Section 5.9 Inspection of Properties and Books............................37
Section 5.10 Compliance with Laws, Contracts, Licenses, and Permits.......37
Section 5.11 Further Assurances...........................................38
ARTICLE 6 NEGATIVE COVENANTS..........................................38
Section 6.1 Amendments....................................................38
Section 6.2 Optional Redemption...........................................39
Section 6.3 Restrictions on Indebtedness..................................39
Section 6.4 Restrictions on Liens Etc.....................................40
Section 6.5 Restrictions on Investments...................................41
Section 6.6 Merger, Consolidation.........................................42
Section 6.7 Sale and Leaseback............................................42
Section 6.8 Compliance with Environmental Laws............................42
Section 6.9 Distributions.................................................44
Section 6.10 Asset Sales..................................................44
Section 6.11 [Reserved]...................................................44
Section 6.12 [Reserved] ..................................................44
Section 6.13 Restriction on Prepayment of Indebtedness....................44
Section 6.14 [Reserved]...................................................45
Section 6.15 Restrictions Upon Modes and Interest Periods for Bonds.......45
Section 6.16 Accounting Methods and Fiscal Year...........................45
Section 6.17 Financial Covenants of WRP...................................45
(1) Minimum Shareholder's Equity.............................45
(2) Consolidated EBITDA .....................................45
Section 6.18 Official Statement and Other Documents.......................45
Section 6.19 Remarketing..................................................45
Section 6.20 Substitute Credit Facility...................................46
Section 6.21 Remarketing Agent and Bond Trustee...........................46
ARTICLE 7 EVENTS OF DEFAULT...........................................46
Section 7.1 Events of Default.............................................46
Section 7.2 Rights and Remedies...........................................50
<PAGE>
ARTICLE 8 NATURE OF OBLIGATIONS; INDEMNIFICATION......................50
Section 8.1 Obligations Absolute..........................................50
Section 8.2 Continuing Obligation.........................................51
Section 8.3 Liability of the Bank.........................................51
Section 8.4 Indemnification...............................................52
Section 8.5 Telecopied Documents..........................................53
ARTICLE 9 ISSUANCE, TRANSFER, REDUCTION
OR EXTENSION OF LETTER OF CREDIT............................53
Section 9.1 Issuance......................................................53
Section 9.2 Transfer, Reduction and Reinstatement.........................53
ARTICLE 10 MISCELLANEOUS...............................................53
Section 10.1 Right of Setoff..............................................53
Section 10.2 Amendments and Waivers.......................................54
Section 10.3 No Waiver; Remedies..........................................54
Section 10.4 Notices......................................................54
Section 10.5 Severability.................................................56
Section 10.6 GOVERNING LAW................................................56
Section 10.7 Consent to Jurisdiction and Venue, Etc.......................56
Section 10.8 Headings.....................................................57
Section 10.9 Participation................................................57
Section 10.10 Issuing Branch of the Bank..................................57
Section 10.11 Counterparts................................................57
Section 10.12 Complete and Controlling Agreement..........................57
Section 10.13 WAIVER OF JURY TRIAL........................................57
Section 10.14 Assignability to Federal Reserve............................58
Section 10.15 Subrogation and Subordination...............................58
(1) Subrogation..................................................58
(2) Subordination................................................59
TESTIMONIUM...................................................................
--
SIGNATURES...................................................................S-1
BANK BOSTON CONSENTS.........................................................S-2
Exhibit A - Irrevocable Letter of Credit
<PAGE>
THIS LETTER OF CREDIT REIMBURSEMENT AGREEMENT (this "REIMBURSEMENT
AGREEMENT") is executed and entered into as of June 16, 2000, by and among
PALOMINO PARK PUBLIC IMPROVEMENT CORPORATION (the "BOND ISSUER"), a Colorado
nonprofit corporation, WELLSFORD REAL PROPERTIES, INC., ("WRP"), a Maryland
corporation (collectively, the Bond Issuer and WRP are referred to herein as
"ACCOUNT PARTIES"), and COMMERZBANK, AG, a banking corporation organized and
existing under the laws of The Federal Republic of Germany, acting by and
through its New York Branch (the "BANK"). All capitalized terms used herein and
not otherwise defined in connection with such use shall have the meanings set
forth in Article 1.
WHEREAS, (a) the Bond Issuer issued, at the request of Wellsford REIT and
its subsidiary, Park at Highlands, LLC, a Colorado limited liability company and
pursuant to the Bond Indenture, its "PALOMINO PARK PUBLIC IMPROVEMENTS CORP.
ASSESSMENT LIEN REVENUE BONDS SERIES 1995 - $14,755,000" (the "BONDS"), the
proceeds of which was used primarily to finance certain water, sewer, street and
park facilities for Park at Highlands Ranch, Phase I of which is owned by Park
at Highlands LLC, and (b) Park at Highlands LLC entered into the Assessment
Agreement and the Assessment and Lien to support repayment of the Bonds; and
WHEREAS, to enhance the marketability of the Bonds and to provide
additional security for the repayment of the Bonds, Account Party has requested
that the Bank issue the Letter of Credit to secure certain payments to be made
with respect to the Bonds in the amount of $15,773,702, of which (subject to the
terms of the Letter of Credit) $14,755,000 will be available to pay principal of
the Bonds either at maturity or upon redemption or acceleration thereof or to
pay the portion of the purchase price of Bonds representing the principal amount
thereof, and of which $1,018,702 (representing 210 days interest on the initial
outstanding principal amount of Bonds, calculated at a maximum interest rate of
12% per annum computed on the basis of a year of 365 days) will be available to
pay interest on the Bonds as interest becomes due or to pay the portion of the
purchase price of the Bonds representing the accrued interest thereon; and
WHEREAS, WRP succeeded from Wellsford REIT certain interests with respect
to the Bonds pursuant to the Assignment Agreement; and
WHEREAS, the Letter of Credit is issued to substitute the Irrevocable
Letter of Credit No. 967-95 issued by Dresdner Bank AG, New York Branch dated
December 20, 1995 pursuant to Section 5.15(b) of the Bond Indenture; and
WHEREAS, to secure its obligations to the Bank under this Reimbursement
Agreement and the Related Documents, Account Parties substantially concurrently
herewith are executing and delivering to the Bank the Pledge Agreement; and
WHEREAS, in order to further evidence and secure the obligations of Account
Parties to the Bank under this Reimbursement Agreement and the Related
Documents, WRP and the Bond Issuer concurrently herewith are each executing and
delivering to the Bank their Promissory Notes.
<PAGE>
NOW, THEREFORE, in consideration of the agreements set forth herein and in
order to induce the Bank to issue the Letter of Credit, the Bank and Account
Parties agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.1 DEFINITIONS. In addition to terms defined at other places in
this Reimbursement Agreement, the following defined terms are used throughout
this Reimbursement Agreement with the following meanings:
"ACCOUNT PARTIES" means the Bond Issuer and WRP collectively and jointly
and severally.
"ACCOUNTANT" means an independent certified public accountant or a firm of
independent certified public accountants, selected by WRP and satisfactory to
the Bank.
"AFFILIATE" means a corporation, partnership, joint venture, limited
liability company, limited liability partnership, association, business trust or
similar entity organized under the laws of the United States of America or any
state thereof which is directly or indirectly controlled by any Person. For
purposes of this definition, control means the power to direct the management
and policies of a Person through the ownership directly or indirectly of not
less than a majority of its voting securities or the right to designate or elect
not less than a majority of the members of its board of directors or other
governing board or body by law, contract or otherwise.
"ASSESSMENT AGREEMENT" means the Assessment Agreement dated as of December
1, 1995 by and between the Bond Issuer and Park at Highlands LLC, including such
amendments, modifications or supplements permitted pursuant to its terms and
Section 6.1.
"ASSESSMENT AND LIEN" means the Public Improvements Assessment and Lien
dated as of December 1, 1995 by and between the Bond Issuer and Park at
Highlands LLC, including such amendments, modifications or supplements permitted
pursuant to its terms and Section 6.1
"ASSET VALUE" means the purchase price of Real Estate (including
improvements) and ordinary related purchase transaction costs, without deduction
for depreciation. If the Real Estate is purchased as a part of a group of
properties, the Asset Value shall be calculated based upon a reasonable
allocation by WRP of the aggregate purchase price among all Real Estate
purchased in such transaction.
"ASSIGNMENT AGREEMENT" means that certain Assignment and Assumption
Agreement, dated as of May 30, 1997, by and between Wellsford REIT and WRP.
"BALANCE SHEET DATE" means "March 31, 2000".
<PAGE>
"BANK" means Commerzbank AG, a banking corporation organized and existing
under the laws of The Federal Republic of Germany, acting by and through its New
York Branch.
"BANKING ARRANGEMENTS" means the agreements of the Bank and Account Parties
set forth in this Reimbursement Agreement and the transactions contemplated
thereby, including, without limitation, (a) any commitment to extend credit, to
issue any letter of credit or other credit or liquidity facility, to purchase
any obligation of or for the benefit of and of the Account Parties, or to extend
any other financial accommodation, (b) any issuance, extension or maintenance of
any of the foregoing, and (c) any pledge, purchase or carrying of any obligation
of or for the benefit of any of the Account Parties.
"BASE RATE" means, at any time, the higher of (i) the Prime Lending Rate
and (ii) one half of one percent (0.5%) above the Federal Funds Effective Rate
(rounded upwards, if necessary, to the next one-eighth of one percent); any
change in the rate of interest payable hereunder resulting from a change in the
rates defined in this subsection (a) shall become effective as of the opening of
business on the day on which such change in the rate becomes effective.
"BOND INDENTURE" means the Trust Indenture dated as of September 1, 1995
between the Bond Issuer and the Bond Trustee, including such amendments,
modifications or supplements permitted pursuant to its terms and permitted
hereunder.
"BOND ISSUER" means Palomino Park Public Improvements Corporation, a
Colorado nonprofit corporation, and the issuer of the Bonds.
"BOND PURCHASE CONTRACT" means the Placement Agency Agreement dated as of
December 20, 1995 between the Bond Issuer and First Interstate Bank of Arizona,
including such amendments, modifications or supplements permitted pursuant to
its terms and Section 6.1.
"BOND TRUSTEE" means United States Trust Company of New York or its
permitted successor as trustee under the Bond Indenture and as permitted
hereunder.
"BONDS" means the Palomino Park Public Improvements Corp. Assessment Lien
Revenue Bonds Series 1995-$14,755,000.
"BUSINESS DAY" means any day other than (i) a Saturday or Sunday, (ii) a
day on which commercial banks in Denver, Colorado, New York, New York or the
city or cities in which are located the principal corporate trust offices of the
Bond Trustee and the Remarketing Agent and the office of the Bank at which
demands for payment under the Letter of Credit are to be presented are
authorized or required by law or executive order to close, or (iii) a day on
which the New York Stock Exchange is closed.
"CAPITAL IMPROVEMENT RESERVE" means as to any Person for any period, an
amount equal to fifteen cents ($0.15) multiplied by the weighted average of
rentable square footage of Real Estate owned by such Person and its Subsidiaries
during such period.
"CERCLA" has the meaning set forth in Section 4.18(1).
<PAGE>
"CLOSING DATE" means the date on which the executed Letter of Credit is
delivered to the Bond Trustee.
"CODE" means the Internal Revenue Code of 1986, as amended from time to
time, and all rules and regulations from time to time promulgated thereunder.
"COLLATERAL" has the meaning set forth in Section 4.29.
"COMPLIANCE CERTIFICATE" has the meaning set forth in Section 5.4(d).
"CONSOLIDATED EBITDA" means, with respect to any period, an amount equal to
the EBITDA of WRP and its Subsidiaries for such period, consolidated in
accordance with generally accepted accounting principles.
"CONSOLIDATED OPERATING CASH FLOW" means, with respect to any period, an
amount equal to the Operating Cash Flow of such Person and its Subsidiaries for
such period consolidated in accordance with generally accepted accounting
principles.
"CONSOLIDATED TOTAL ASSETS" means as to WRP, all assets of WRP and its
Subsidiaries determined on a consolidated basis in accordance with generally
accepted accounting principles. All Real Estate shall be valued on an
undepreciated cost basis.
"CONSOLIDATED TOTAL LIABILITIES" means all liabilities of WRP and its
Subsidiaries determined on a consolidated basis in accordance with generally
accepted accounting principles and all Indebtedness of WRP and its Subsidiaries,
whether or not so classified, excluding those certain contingent liabilities of
WRP and its Subsidiaries pursuant to (i) that certain Indemnity and Guaranty
Agreement ($300,000,000 Loan) dated as of July 16, 1998, from Wellsford
Commercial Properties Trust ("WCPT") and WHWEL Real Estate Limited Partnership
("WHWEL") in favor of Fleet National Bank (f/k/a BankBoston, N.A.), individually
and as Agent, and certain other lenders, (ii) that certain Conditional Guaranty
of Payment ($300,000,000 Loan) dated as of July 16, 1998, from WRP, WCPT, WHWEL,
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"), and Whitehall Street Real
Estate Limited Partnership VIII ("Whitehall VIII") in favor of Fleet National
bank (f/k/a BankBoston, N.A.), individually and as Agent , and certain other
lenders, (iii) that certain Indemnity and Guaranty Agreement ($75,000,000 Loan)
dated as of July 16, 1998, from WCPT and WHWEL in favor of Fleet National Bank
(f/k/a
<PAGE>
BankBoston, N.A.), individually and as Agent, and certain other lenders, (iv)
that certain Mezzanine Conditional Guaranty of Payment ($75,000,000 Loan) dated
as of July 16, 1998, from WRP, WCPT, WHWEL, Whitehall V, Whitehall VI, Whitehall
VII, and Whitehall VIII in favor of Fleet National Bank (f/k/a BankBoston,
N.A.), individually and as Agent, and certain other lenders, and (v) that
certain Nomura Conditional Guaranty of Payment ($75,000,000 Loan-Nomura
Properties) dated as of July 16, 1998, from WRP, WCPT, WHWEL, Whitehall V,
Whitehall VI, Whitehall VII, and Whitehall VIII in favor of Fleet National Bank
(f/k/a BankBoston, N.A.) individually and as Agent and certain other lenders, as
the same have been or may hereafter be modified or amended from time to time
(collectively, the Contingent Obligations") provided, however, it being
acknowledged and agreed that any Contingent Obligation that becomes liquidated
or is no longer contingent shall no longer be considered a Contingent Obligation
and shall no longer be excluded from the calculation of Consolidated Total
Liabilities.
"COUNSEL" means an attorney duly admitted to practice law before the
highest court of any state or the District of Columbia.
"Debentures" means the 8.25% convertible junior suboridnated debentures
issued by WRP under that certain Indenture dated as of May 5, 2000 between WRP
and Wilmington Trust Company.
"DEED OF TRUST" means that certain Deed of Trust, Security Agreement,
Financing Statement, and Assignment of Leases from the Bond Issuer to The Public
Trustee of Douglas County, Colorado for the use of the Bond Trustee and the Bank
dated December 1, 1995, including such amendments, modifications or supplements
permitted pursuant to its terms and Section 6.1.
"DEED OF TRUST AMENDMENT" means the First Supplement to Deed of Trust dated
June 16, 2000.
"DEFAULT" means the occurrence of any event which with the giving of notice
or the passage of time or both would constitute an Event of Default.
"DEFAULT RATE" means the Base Rate plus two percent (2.00%) per annum. The
Default Rate shall change as and when the Base Rate changes.
"DEVELOPMENT" means The Park at Highlands Ranch, a master-planned
residential community in Denver, Colorado, comprising approximately 182 acres
planned for development in five phases.
"DISTRIBUTION" means the declaration or payment of any dividend or
distribution on or in respect of any shares of common stock or other equity
interests of WRP, other than dividends or distributions payable solely in equity
securities of such Person; the purchase, redemption, exchange or other
retirement of any shares of common stock or other equity interests of WRP,
directly or indirectly through a Subsidiary of such Person or otherwise; the
return of capital by WRP to its shareholders; or any other distribution on or in
respect of any shares of common stock or other equity interests of WRP.
"DISTRICT" means Highlands Ranch Metropolitan District No. 2, Douglas
County, Colorado, a quasi-municipal corporation organized under the laws of the
State of Colorado.
"DRAWING" means an Interest Drawing, a Principal Drawing, an Interest
Purchase Drawing or a Principal Purchase Drawing.
<PAGE>
"DRAWING DATE" has the meaning set forth in Section 2.1(l).
"EBITDA" means, with respect to any Person (or any asset of any Person) for
any period, an amount equal to the sum of (a) the Net Income of such Person (or
attributable to such asset) for such period plus (b) Taxes, depreciation,
amortization, interest expense, and any extraordinary or non-recurring losses
deducted in calculating such Net Income minus (c) any extraordinary or
non-recurring gains included in calculating such Net Income.
"ENVIRONMENTAL LAWS" has the meaning set forth in Section 4.18(1).
"EPA" has the meaning set forth in Section 4.18(2).
"EQUITY OFFERING" means the issuance and sale by WRP of any of its equity
securities.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and all rules and regulations from time to time
promulgated thereunder.
"ERISA AFFILIATE" means, with respect to any Person, any Person which is
treated as a single employer with such Person under ss. 414 of the Code.
"ERISA REPORTABLE EVENT" means a reportable event with respect to a
Guaranteed Pension Plan within the meaning of ss. 4043 of ERISA and the
regulations promulgated thereunder as to which the requirement of notice has not
been waived.
"EVENT OF DEFAULT" means any of the events defined as such in Section 7.1.
"EXPIRATION DATE" means the date on which the Letter of Credit terminates
or expires as described under paragraph 1 of the Letter of Credit.
"FEDERAL FUNDS EFFECTIVE RATE" means, for any day, the rate per annum,
equal to the weighted average of the rates of overnight federal funds
transactions with members of the Federal Reserve System arranged by federal
funds brokers as published for such day (or if such day is not a Business Day,
for the next preceding Business Day) by the Federal Reserve Bank of New York, or
if such rate is not so published for any day that is a Business Day, the average
of the quotations for such day on such transactions received by the Bank from
three (3) federal funds brokers of recognized standing selected by the Bank.
"FINAL LC LOAN PAYMENT DATE" has the meaning set forth in Section 2.2(l).
"FIXED RATE PERIOD" has the meaning assigned in the Bond Indenture.
"FUNDS FROM OPERATIONS" means, with respect to any Person for any fiscal
period, the net income (or deficit) of such Person computed in accordance with
generally accepted accounting principles, excluding financing costs and gains
(or losses) from debt restructuring and sales of property, plus depreciation and
amortization and other non-cash items.
<PAGE>
"GUARANTOR" means ERP Operating Limited Partnership, an Illinois limited
partnership.
"GUARANTY" means that certain Guaranty dated as of June 16, 2000 made by
the Guarantor in favor of the Bank.
"HAZARDOUS SUBSTANCE" has the meaning set forth in Section 4.18(2).
"HIGHLANDS" means Wellsford Park Highlands Corporation, a Colorado
corporation and a Subsidiary of WRP.
"IMPLIED RATING" means, with respect to a Person, the most recent rating
issued from time to time by the Rating Agencies as is applicable to such
Person's senior unsecured long-term debt, or if no such senior unsecured
long-term debt is outstanding, then the most recent rating issued from time to
time by the Rating Agencies as would hypothetically be applicable to such
Person's senior unsecured long-term debt (I.E., an implied rating).
"INDEBTEDNESS" means all obligations, contingent and otherwise, that in
accordance with generally accepted accounting principles should be classified
upon the obligor's balance sheet as liabilities, or to which reference should be
made by footnotes thereto, including in any event and whether or not so
classified (a) all debt and similar monetary obligations, whether direct or
indirect ( including, without limitation, any obligations evidenced by bonds,
debentures, notes or similar debt instruments and the obligations described in
Section 6.3(i); (b) all liabilities secured by any mortgage, pledge, security
interest, lien, charge or other encumbrance existing on property owned or
acquired subject thereto, whether or not the liability secured thereby shall
have been assumed; (c) all guarantees, endorsements and other contingent
obligations whether direct or indirect in respect of Indebtedness of others,
including any obligation to supply fund to or in any manner to invest directly
or indirectly in a Person, to purchase Indebtedness, or to assure the owner of
Indebtedness against loss through an agreement to purchase goods, supplies or
services for the purpose of enabling the debtor to make payment of the
indebtedness held by such owner or otherwise, and the obligation to reimburse
the issuer in respect of any letter of credit; (d) all obligations to purchase
under agreements to acquire, or otherwise to contribute money with respect to,
properties under "development" within the meaning of Section 6.11; (e) a
Person's pro rata share of any of the above-described obligations of its
unconsolidated affiliates; and (f) all amounts available to be drawn under
letters of credit, including but not limited to, the Letter of Credit.
"INDEMNIFIED PARTY" has the meaning set forth in Section 8.4.
"INDENTURE SUPPLEMENT" means that certain First Amendment to Trust
Indenture, dated as of May 30, 1997, between the Bond Issuer and the Bond
Trustee.
"INTEREST DRAWING" means a drawing under the Letter of Credit pursuant to
an Interest Drawing, as defined in the Letter of Credit, to pay interest on the
Bonds when due.
"INTEREST PAYMENT DATE" means the 1st day of each month.
<PAGE>
"INTEREST PURCHASE DRAWING" means the portion of a drawing under the Letter
of Credit pursuant to a Purchase Drawing, as defined in the Letter of Credit, to
pay the portion of the purchase price of Bonds representing accrued interest on
Bonds to be purchased. The Interest Purchase Drawing for each Purchase Drawing
is set forth in paragraph 3(b) of the certificate submitted for the Purchase
Drawing.
"INTEREST RATE PROTECTION AGREEMENT" means an interest rate swap, cap or
collar agreement or similar arrangement between any Person and a financial
institution providing for the transfer or mitigation of interest risks either
generally or under specific contingencies. For purposes hereof, the "exposure"
at any time of any Person under an Interest Rate Protection Agreement to which
such Person is a party shall be determined at such time in accordance with the
standard methods of calculating such exposure under similar arrangements as
prescribed from time to time by the Bank, taking into account the respective
termination provisions set forth therein, the notional principal amount and term
thereof and assuming that U.S. Treasury rates generally are equal to the per
annum rate of interest which the Bank at such time determines to be the lowest
U.S. Treasury rate likely to occur in the relevant period following such date.
"INVESTMENTS" means, with respect to any Person, all shares of capital
stock, evidences of Indebtedness and other securities issued by any other
Person, all loans, advances, or extensions of credit to, or contributions to the
capital of, any other Person, all purchases of the securities or business or
integral part of the business of any other Person and commitments and options to
make such purchases, all interest in real property, and all other investments;
provided, however, that the term "Investment" shall not include (i) equipment,
inventory and other tangible personal property acquired in the ordinary course
of business, or (ii) current trade and customer accounts receivable for services
rendered in the ordinary course of business and payable in accordance with
customary trade terms. In determining the aggregate amount of Investments
outstanding at any particular time: (a) the amount of any investment represented
as a guaranty shall be taken at not less than the principal amount of the
obligations guaranteed and still outstanding; (b) there shall be included as an
Investment all interest accrued with respect to indebtedness constituting and
Investment unless and until such interest is paid; (c) there shall be deducted
in respect of each such Investment any amount received as a return of capital
(but only by repurchase, redemption, retirement, repayment, liquidating dividend
or liquidating distribution); (d) there shall not be deducted in respect of any
Investment any amounts received as earnings on such Investment, whether as
dividends, interest or otherwise, except that accrued interest included as
provided in the foregoing clause (b) may be deducted when paid; and (e) there
shall not be deducted from the aggregate amount of Investments any decrease in
the value thereof.
"LC LOAN" has the meaning set forth in Section 2.2.
"LC LOAN ELIGIBILITY DATE" has the meaning set forth in Section 2.2
"LETTER OF CREDIT" means the Letter of Credit No. 150SBY0030064 issued by
the Bank dated June 16, 2000, including such amendments, modifications or
supplements permitted pursuant to its terms and Section 6.1.
<PAGE>
"LIENS" has the meaning set forth in Section 6.4.
"LIQUIDITY DRAWING" means a Drawing made pursuant to a Purchase Drawing on
the Letter of Credit, but only to the extent such amounts have not yet become an
LC Loan.
"MATERIAL SUBSIDIARY" means a Subsidiary of a Person whose net worth,
determined in accordance with generally accepted accounting principles
consistently applied, equals or exceeds 10% of the net worth of such Person.
"MOODY'S" means Moody's Investors Service, Inc. or its successors.
"NET INCOME (OR DEFICIT)" means, with respect to any Person (or any asset
of any Person) for any fiscal period, the net income (or deficit) of such Person
(or attributable to such asset), after deduction of all expenses, taxes and
other proper charges, determined in accordance with generally accepted
accounting principles.
"OFFICIAL STATEMENT" means collectively, the Preliminary Official Statement
and the Official Statement used in connection with the sale of the Bonds.
"OPERATING AGREEMENT" means the Operating Agreement dated December 1, 1995
by and between the Bond Issuer and the District, including such amendments,
modifications or supplement permitted pursuant to its terms and Section 6.1.
"PALOMINO ENTITIES" means Highlands, Red Canyon, Park at Highlands LLC, a
Colorado limited liability company, Silver Mesa at Palomino Park LLC, a Colorado
limited liability company, Green River at Palomino Park LLC, a Colorado limited
liability company and Gold Peak at Palomino Park LLC, a Colorado limited
liability company.
"PARTICIPANT(S)" means any bank(s) or other financial institution(s) which
may purchase a participation interest from the Bank in the Letter of Credit,
this Reimbursement Agreement and certain of the Related Documents pursuant to a
participation or similar agreement among the Bank and the Participant(s).
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
pursuant to Section 4002 of ERISA, or any successor thereto.
"PERMITTED LIENS" means liens, security interests and other encumbrances
permitted by Section 6.4.
"PERSON" means any natural person, corporation, partnership, association,
trust, joint venture, public body, limited liability company or other legal
entity.
"PHASE I OF THE DEVELOPMENT" means the first phase of the Development,
consisting of 456 units, a 30-acre park and the Public Improvements to be
constructed on the real property described on Exhibit A of the Assessment and
Lien.
"PLAN" has the meaning set forth in Section 4.16.
<PAGE>
"PLEDGE AGREEMENT" means the Bond Pledge and Security Agreement attached
hereto as Exhibit B dated as of the date hereof by and among Account Parties,
the Bank and the Bond Trustee, as custodian, including such amendments,
modifications or supplements permitted pursuant to its terms and Section 6.1.
"PLEDGED BONDS" means Bonds which have been purchased with the proceeds of
a Purchase Drawing on the Letter of Credit and are pledged to the Bank under the
Pledge Agreement.
"PRIME LENDING RATE" means the rate as announced by the Bank from time to
time as its prime lending rate, the Prime Lending Rate to change when and as
such prime lending rate changes. The Prime Lending Rate is a reference rate and
does not necessarily represent the lowest or best rate actually charged to any
customer. The Bank may make commercial loans or other loans at, above or below
the Prime Lending Rate.
"PRINCIPAL DRAWING" means a drawing under the Letter of Credit pursuant to
a Principal Drawing, as defined in the Letter of Credit, to pay principal of the
Bonds.
"PRINCIPAL PURCHASE DRAWING" means a drawing under the Letter of Credit
pursuant to a Purchase Drawing, as defined in the Letter of Credit, to pay the
portion of the purchase price of Bonds representing the principal amount of
Bonds to be purchased. The Principal Purchase Drawing for each Purchase Drawing
is set forth in paragraph 3(a) of the certificate submitted for such Purchase
Drawing.
"PROMISSORY NOTES" means the promissory notes of even date herewith
attached hereto as Exhibit C-1 and C-2 made by WRP and the Bond Issuer in favor
of the Bank, including such amendments, modifications or supplements permitted
pursuant to Section 6.1.
"PUBLIC IMPROVEMENTS" has the meaning assigned in the Bond Indenture.
"PURCHASE DRAWING" means a drawing under the Letter of Credit pursuant to a
Purchase Drawing, as defined in the Letter of Credit, to purchase Bonds that are
tendered or deemed tendered.
"RATE MODE" has the meaning assigned in the Bond Indenture.
"RATE PERIOD" means each Weekly Rate Period, Term Rate Period or Fixed Rate
Period, as applicable.
"RATING AGENCY" means Standard & Poor's, Moody's or any successor or
additional rating agency that rates the Bonds at the written request of the Bond
Issuer with the written consent of the Bank, which consent will not be
unreasonably withheld.
"RATING NOTICE" has the meaning set forth in Section 5.4(i).
"RCRA" has the meaning set forth in Section 4.18(1).
<PAGE>
"REAL ESTATE" means all real property at any time owned or leased (as
lessee or sublessee) by WRP or any of its Subsidiaries.
"RED CANYON" means Red Canyon at Palomino Park LLC, a Colorado limited
liability company.
"REIMBURSEMENT AGREEMENT" means this Letter of Credit Reimbursement
Agreement, including such amendments, modifications or supplements permitted
pursuant to Section 10.2..
"RELATED DOCUMENTS" means this Reimbursement Agreement, the Letter of
Credit, the Bond Indenture, the Remarketing Agreement, the Promissory Notes, the
Pledge Agreement, the Bonds, the Bond Purchase Contract, the Operating
Agreement, the Assessment Agreement, the Deed of Trust, the Assessment and Lien,
the Assignment Agreement, the Guaranty, the Indenture Supplement, and the Deed
of Trust Amendment, and, in each case, all exhibits, instruments or agreements
relating to each.
"RELEASE" has the meaning set forth in Section 4.18(3).
"REMARKETING AGENT" means the remarketing agent at the time serving as such
under the Remarketing Agreement on the date of this Reimbursement Agreement.
"REMARKETING AGREEMENT" means the Remarketing Agreement dated as of the
date hereof between the Bond Issuer and the Remarketing Agent, including such
amendments, modifications or supplements permitted pursuant to its terms and
Section 6.1.
"REVOLVING CREDIT AGREEMENT" has the meaning ascribed to it in the
Guaranty.
"SARA" has the meaning set forth in Section 4.18(1).
"SEC" means the federal Securities and Exchange Commission.
"SHAREHOLDER'S EQUITY" means, at any date, the total consolidated
shareholder's equity of WRP and its Subsidiaries, determined in conformity with
generally accepted accounting principles consistently applied.
"SHORT-TERM INVESTMENTS" means investments described in subsections (a)
through (g), inclusive, of Section 6.5. For all purposes of this Reimbursement
Agreement and the other Related Documents, the value of Short-Term Investments
at any time shall be the current market value thereof determined in a manner
reasonably satisfactory to the Bank.
"STANDARD & POOR'S" means Standard & Poor's Ratings Services, a division of
The McGraw-Hill Companies, Inc., or its successors.
"STATED AMOUNT" has the meaning given to such term in paragraph 2 of the
Letter of Credit.
<PAGE>
"SUBSIDIARY" means any corporation, association, partnership, trust,
limited liability company or other business or other legal entity of which the
designated parent shall at any time own directly or indirectly through a
Subsidiary or Subsidiaries at least a majority (by number of votes or
controlling interests) of the outstanding Voting Interests.
"TAXES" means all taxes, however denominated, including any interest,
penalties, or other additions to tax that may become due or payable in respect
thereof, imposed by any federal, territorial, state, local, or foreign
government or any agency or political subdivision of any such government, which
taxes shall include, without limiting the generality of the foregoing, all
income taxes or profit taxes (including, but not limited to, federal income
taxes and state income taxes), payroll and employee withholding taxes,
unemployment insurance, social security taxes, sales and use taxes, ad valorem
taxes, excise taxes, franchise taxes, gross receipt taxes, business license
taxes, occupation taxes, real and personal property taxes, stamp taxes,
environmental taxes, transfer taxes, workers' compensation, PBGC premiums and
other governmental charges, and other obligations of the same or of a similar
nature to any of the foregoing, which WRP is assessed, required to pay, withhold
or collect for any period.
"TERM RATE PERIOD" has the meaning assigned in the Bond Indenture.
"TEST PERIOD" means the period of four consecutive fiscal quarters ending
on the applicable date.
"VOTING INTEREST" means stock, partnership or similar ownership interests,
of any class or classes (however designated), the holders of which are at the
time entitled, as such holders, (a) to vote for the election of a majority of
the directors (or persons performing similar functions) of the corporation,
association, partnership, trust or other business entity involved, or (b) to
control, manage, or conduct the business of the corporation, partnership,
association, trust or other business entity involved.
"WEEKLY RATE PERIOD" has the meaning assigned in the Bond Indenture.
"WRP MATERIAL SUBSIDIARIES" means the Palomino Entities and Material
Subsidiaries of WRP.
"WRP REIMBURSEMENT AGREEMENT" means that certain Reimbursement Agreement
dated as of June 16, 2000 between the Bond Issuer and WRP, and all exhibits,
instruments or agreements relating thereto or contemplated thereby.
"WELLSFORD REIT" means Equity Residential Properties Trust, a Maryland real
estate investment trust formerly known as Wellsford Residential Property Trust
and the successor by merger dated May 30, 1997 of Equity Residential Properties
Trust with and into Wellsford Residential Property Trust.
"WRP" means Wellsford Real Properties, Inc., a Maryland corporation.
<PAGE>
"WRP CONSOLIDATED DEBT SERVICE" means for any period the sum of actual
interest expense and mandatory or scheduled principal payments due and payable
during such period with respect to the Indebtedness of WRP and its Subsidiaries
consolidated in accordance with generally accepted accounting principles,
consistently applied, excluding any balloon payments due upon maturity of any
indebtedness, amortized loan fees, capitalized interest, any interest charge
incurred by any entity in which WRP or any of its Subsidiaries has an interest
of less than 50%, or over which WRP or any of its Subsidiaries does not exercise
voting control and excluding any interest payable with respect to Debentures
issued to WRP Convertible Trust. For purposes of clarification, principal
payments of debt becoming due as a result of acceleration of such debt solely
due to the sale of a specific condominium will not counted as mandatory
principal payments for the purpose of calculating WRP Consolidated Debt Service.
"WRP Convertible Trust" means WRP Convertible Trust I, a business trust
established pursuant to the laws of Delaware.
SECTION 1.2 ACCOUNTING MATTERS. All accounting terms used herein without
definition shall be interpreted in accordance with generally accepted accounting
principles, and except as otherwise expressly provided herein all accounting
determinations required to be made pursuant to this Reimbursement Agreement
shall be made in accordance with generally accepted accounting principles.
SECTION 1.3 INTERPRETATION. All words used herein shall be construed to be
of such gender or number as the circumstances require. Reference to any document
means such document as amended or supplemented from time to time as permitted
under Section 6.1 and in accordance with the terms of such document.
SECTION 1.4 RELATION TO OTHER DOCUMENTS. Nothing in this Reimbursement
Agreement shall be deemed to amend, or to relieve any Account Party of any of
its obligations under, any Related Document. To the extent any provision of this
Reimbursement Agreement conflicts with any provision of any other Related
Document to which any Account Party or the Bank are parties, the provisions of
this Reimbursement Agreement shall control.
SECTION 1.5 TIME FOR PERFORMANCE. Time is of the essence to this
Reimbursement Agreement and the performance of obligations hereunder.
Notwithstanding the immediately preceding sentence, whenever any obligation
hereunder shall be stated to be due on a day which is not a Business Day, such
obligation shall be due on the next succeeding Business Day (provided that if
the obligation involves the payment of money upon which interest is accruing,
then the payment made on the next succeeding Business Day shall include interest
through such next succeeding Business Day).
ARTICLE 2
REIMBURSEMENT, FEES AND PAYMENT PROVISIONS
SECTION 2.1 SAME DAY REIMBURSEMENT. The Account Parties jointly and
severally agree to pay the Bank for the following:
(1) Subject to the provisions of Section 2.2 relating to Liquidity
Drawing Amounts and LC Loans, the Bank shall be reimbursed for all amounts
advanced by the Bank in connection with a Drawing under the Letter of
Credit by [2:00 p.m.], New York time, on the same day as the Drawing is
made under the Letter of Credit and honored by the Bank (a "DRAWING DATE");
and
(2) To the extent permitted by law all amounts required to be
reimbursed to the Bank pursuant to the foregoing clause (1) of this Section
2.1 shall bear interest at the Base Rate for three days from the date such
amounts are required to be reimbursed, and thereafter at the Default Rate
until paid in full. Such amounts shall be due and payable on demand.
SECTION 2.2 REIMBURSEMENT OF LIQUIDITY DRAWING AMOUNTS AND LC LOANS. The
Account Parties agree that they shall reimburse the Bank for amounts drawn under
Liquidity Drawings (the "Liquidity Drawing Amounts") in accordance with the
following provision of this Section 2.2:
(1) At the written request of both Account Parties received by the
Bank no later than 8:00 a.m. New York time on the Business Day next
succeeding the Drawing Date (the "LC Loan Eligibility Date") stating that
no Default exists and is continuing or would result from the conversion of
a Liquidity Drawing into an LC Loan as set forth herein and that the
representations and warranties contained in Article IV of this
Reimbursement Agreement are true and correct on and as of the date of such
conversion as if made on and as of such date, and requesting a conversion
to an LC Loan as set forth herein, to the extent not repaid in full,
including interest thereon in accordance with Clause (2) of Section 2.1,
Liquidity Drawings may be converted into a short-term loan under this
Reimbursement Agreement (an "LC Loan"). From and after the LC Loan
Eligibility Date and until the LC Loans have been repaid in full, the LC
Loans shall bear interest at the Base Rate plus one and one-quarter percent
(1.25%) for the period commencing on the LC Loan Eligibility Date and ended
fourteen days following the Drawing Date for the Liquidity Drawing that
became such LC Loan, at the Base Rate plus one and one-half percent (1.5%)
for the next fourteen days thereafter, and at the Base Rate plus one and
three-quarters percent (1.75%) for the next fourteen days thereafter (the
"Final LC Loan Payment Date"). Interest on such LC Loans shall be payable
in arrears on the earlier of each Interest Payment Date or the applicable
Final LC Loan Payment Date. On the Final LC Loan Payment Date for any LC
Loan, such LC Loan shall be immediately due and payable in full, including
all accrued and unpaid interest. LC Loans may be prepaid in accordance with
Section 2.4. Any Liquidity Drawing that is not
<PAGE>
converted into an LC Loan in accordance with this Section 2.2(1) shall be
due and payable at the time, and bear interest at the rate set forth in
Section 2.1.
(2) Notwithstanding the foregoing, all unreimbursed Liquidity Drawings
and LC Loans shall be accelerated and become immediately due and payable on
the first to occur of the end of the Final LC Loan Interest Period (for LC
Loans only) and the Expiration Date. To the extent permitted by law, any
unreimbursed Liquidity Drawings or LC Loan, and any interest accruing
thereon, that are not paid when due thereafter shall bear interest at the
Default Rate. While held by or for the benefit of the Bank, the Pledged
Bonds shall bear interest at the Base Rate plus one and three-quarters
percent (1.75%).
SECTION 2.3 LIMITATION ON INTEREST. Notwithstanding anything in this
Reimbursement Agreement to the contrary, all agreements between the Account
Parties and the Bank, whether now existing or hereafter arising and whether
written or oral, are hereby limited so that in no contingency, whether by reason
of acceleration of the maturity of any of the obligations to the Bank hereunder
or under any Related Document or otherwise, shall the interest contracted for,
charged or received by the Bank exceed the maximum amount permissible under
applicable law. If, from any circumstance whatsoever, interest would otherwise
be payable to the Bank in excess of the maximum lawful amount, the interest
payable to the Bank shall be reduced to the maximum amount permitted under
applicable law; and if from any circumstance the Bank shall ever receive
anything of value deemed interest by applicable law in excess of the maximum
lawful amount, an amount equal to any excessive interest shall be applied to the
reduction of the principal balance of the obligations to the Bank hereunder or
under the Related Documents (including the period of any renewal or extension
thereof) so that the interest thereon for such full period shall not exceed the
maximum amount permitted by applicable law. This section shall control all
agreements between the Account Parties and the Banks.
SECTION 2.4 REMARKETING OF PLEDGED BONDS. As security for the amounts owed
to the Bank in order to reimburse the Bank for amounts drawn under the Letter of
Credit and interest thereon pursuant to Sections 2.1 and 2.2, Account Parties
have granted to the Bank, pursuant to the Pledge Agreement, security interests
in all of its right, title and interest in and to the Pledged Bonds. Account
Parties shall take such further steps and execute such further documents as the
Bank may from time to time request in order to more fully evidence, perfect and
protect such security interests. Account Parties shall have the right to effect
a release of Pledged Bonds from such pledge and security interest by paying or
prepaying portions of the unreimbursed Liquidity Drawing Amounts and/or unpaid
LC Loans in accordance with the following provisions:
(1) Account Parties shall cause the Bond Trustee to provide the Bank
with at least one (1) Business Day's prior written notice or telephonic
notice (confirmed in writing) of: (a) Account Parties' intent to pay or
prepay any Liquidity Drawing Amounts or LC Loans; (b) the principal amount
of Pledged Bonds to be released and the amounts of the required payment or
prepayment as determined pursuant to clause (2) of this Section 2.4 (with
separate designation of the principal, interest and other amounts to be
<PAGE>
included in the payment and/or prepayment); and (c) the particular
Liquidity Drawing Amounts and/or LC Loans which are to be prepaid and the
particular Pledged Bonds to be released. The written notice required by
this clause (1) shall be in the form of Exhibit I to the Letter of Credit.
(2) As a condition to release of Pledged Bonds for the Bank's pledge
and security interests, the Bank shall receive a payment in an amount equal
to the sum of:
(a) The amount of the Liquidity Drawings (irrespective of whether
such amounts then constitute Liquidity Drawing Amounts or LC Loans)
under the Letter of Credit made in connection with the purchase of
such Pledged Bonds, to the extent not previously paid;
(b) Interest pursuant to Sections 2.1 and 2.2 on the sums
described in clause (a) above to the date of such payment, to the
extent not previously paid; and
(c) Any other amounts due and payable under this Reimbursement
Agreement as of the date of such payment, to the extent not previously
paid.
(3) No amounts received by the Bank pursuant to clause (2) of this
Section 2.4 shall be applied against LC Loans until all unreimbursed
Liquidity Drawing Amounts have been reimbursed to the Bank in full,
together with any other amounts required to be paid with respect thereto
pursuant to the said clause (2). As among outstanding Liquidity Drawing
Amounts, payments received pursuant to clause (2) of this Section 2.4 shall
be applied against Liquidity Drawing Amounts (and unpaid accrued interest
thereon) in order based upon the time that the Liquidity Drawing Amounts
have been outstanding, starting with those Liquidity Drawing Amounts that
have been outstanding the longest.
(4) Upon payment to the Bank of the sums described in clause (2) of
this Section 2.4, and acknowledgment by the Bank of the receipt thereof,
the Bank or designated agent shall deliver to the Bond Trustee (to the
extent that the payment is on account of the remarketing of the Bonds, or
for delivery to the Bond Issuer, to the extent that the payment is on
account of a payment or prepayment of Liquidity Drawing Amounts or LC Loans
other than in connection with a remarketing of Bonds) a principal amount of
Pledged Bonds equal to the principal amount of Liquidity Drawings made in
connection with the purchase of the Bonds, and said Pledged Bonds shall be
deemed released from the pledge and security interests under the Pledge
Agreement.
SECTION 2.5 TRANSFER/AMENDMENT FEE; DRAWING FEE.
(1) Upon each transfer of the Letter of Credit in accordance with its
terms, Account Parties agree to pay to the Bank the sum of $1,000 plus the
Bank's actual costs and expenses associated with such transfer (and interest on
such costs and expenses from the date expended by the Bank to the date
reimbursed by Account Parties at the interest rate specified in Section 2.2),
payable on the date of such transfer. Upon each amendment of the Letter of
Credit,
<PAGE>
this Reimbursement Agreement or any of the Related Documents, the Account
Parties shall pay to the Bank such amendment fees, plus the Bank's actual costs
and expenses associated with such amendment (and interest on such costs and
expenses from the date expended by the Bank to the date reimbursed by Account
Parties at the interest rate specified in Section 2.2), payable on the effective
date of such amendment, as shall be agreed upon by the Account Parties and the
Bank at such time; provided, however, that no amendment fee shall be payable by
Account Parties solely by reason of a reduction in the Stated Amount of the
Letter of Credit.
(2) Account Parties agree to pay a drawing fee (the "Drawing Fee") to the
Bank on each Drawing Date in the amount of $150 for each Drawing made on such
Drawing Date.
SECTION 2.6 COSTS, EXPENSES AND TAXES. (1) Account Parties agree to pay on
demand all costs and expenses in connection with the preparation, execution,
delivery and administration of this Reimbursement Agreement, the Related
Documents and any other documents which may be delivered in connection with this
Reimbursement Agreement and the Related Documents, including, without
limitation, the fees and out-of-pocket expenses of counsel for the Bank with
respect thereto and with respect to advising the Bank as to its rights and
responsibilities under this Reimbursement Agreement and the Related Documents
and all costs and expenses, if any, in connection with the enforcement of this
Reimbursement Agreement, the Related Documents and such other documents which
may be delivered in connection with this Reimbursement Agreement. In addition,
Account Parties shall pay any and all stamp and other taxes and fees payable or
determined to be payable in connection with the execution, delivery, filing and
recording of this Reimbursement Agreement, the Related Documents and such other
documents and agrees to save the Bank harmless from and against any and all
liabilities with respect to or resulting from any delay in paying or omission to
pay such taxes and fees.
(2) Notwithstanding anything herein to the contrary, if any future
applicable law or any amendment or modification of present applicable law which
expression, as used herein, includes statutes, rules and regulations thereunder
and legally binding interpretations thereof by any competent court or by any
governmental or other regulatory body or official with appropriate jurisdiction
charged with the administration or the interpretation thereof and requests,
directives, instructions and notices at any time or from time to time hereafter
made upon or otherwise issued to the Bank by any central bank or other fiscal,
monetary or other authority (whether or not having the force of law), shall: (a)
subject the Bank to any tax, levy, impost, duty, charge, fee, deduction or
withholding of any nature with respect to this Reimbursement Agreement, the
other Related Documents, or the Banking Arrangements (other than taxes based
upon or measured by the income or profits of the Bank), or (b) materially change
the basis of taxation (except for changes in taxes on income or profits) of
payments to the Bank of the principal of or the interest on any Drawings or LC
Loans or any other amounts payable to the Bank under this Reimbursement
Agreement or the other Related Documents, or (c) impose or increase or render
applicable any special deposit, reserve, assessment, liquidity, capital adequacy
or other similar requirements (whether or not having the force of law) against
assets held by, or deposits in or for the account of, or Drawings or LC Loans
by, or the Letters of Credit from, or commitments of the Bank beyond those in
effect as of the date hereof, or (d) impose on the Bank
<PAGE>
any other conditions or requirements with respect to this Reimbursement
Agreement, the other Related Documents, the LC Loans, any Drawings, the Letter
of Credit, or any class of loans or commitments of which any of the same forms a
part; and the result of any of the foregoing is: (i) to increase the cost to the
Bank of making, funding, issuing, renewing, extending or maintaining any of the
LC Loans, any Liquidity Drawing Amounts, the Letter of Credit or any Banking
Arrangements hereunder, or (ii) to reduce the amount of principal, interest or
other amount payable to the Bank hereunder on account of any Banking
Arrangements hereunder or any of the LC Loans, Liquidity Drawing Amounts or
Letters of Credit, or (iii) to require such Bank to make any payment or to
forego any interest or other sum payable hereunder, the amount of which payment
or foregone interest or other sum is calculated by reference to the gross amount
of any sum receivable or deemed received by the Bank from the Account Parties
hereunder, then, and in each such case, the Account Parties will, within fifteen
(15) days of demand made by the Bank at any time and from time to time and as
often as the occasion therefor may arise, pay to the Bank such additional
amounts as the Bank shall determine in good faith to be sufficient to compensate
the Bank or the Agent for such additional cost, reduction, payment or foregone
interest or other sum. The Bank, in determining such amounts, may use any
reasonable averaging and attribution methods, generally applied by the Bank.
SECTION 2.7 ISSUANCE FEE. In consideration of the delivery of the Letter of
Credit, the Account Parties hereby agree to pay to the Bank a non-refundable
letter of credit issuance fee in the amount of $157,737.00.
SECTION 2.8 LETTER OF CREDIT FACING FEE. The Account Parties agree to pay
to the Bank a nonrefundable letter of credit facing fee, payable without any
requirement of notice or demand by the Bank, for the period from and including
the Closing Date until the Expiration Date in an amount equal to 0.90 % per
annum of the Stated Amount (without regard to reductions of the Stated Amount
subject to reinstatement, it being understood that reductions effected by
submission of a Certificate in the form of Exhibit "D" attached to the Letter of
Credit are not subject to reinstatement). Such fee shall be calculated on the
basis of a 360-day year for the actual number of days belonging to the
Calculation Period (as defined below) and shall be payable quarterly in advance,
in immediately available funds, on the Closing Date and January 1, April 1, July
1 and October 1, of each year (each a "Payment Date"). As used herein, the term
"Calculation Period" shall mean, in respect of each Payment Date (the
"applicable Payment Date"), the period commencing on such applicable Payment
Date and ending on the next Payment Date (or in the case of the applicable
Payment Date immediately prior to the Expiration Date, the Expiration Date).
SECTION 2.9 CAPITAL ADEQUACY. If after the date hereof the Bank determines
that (a) the adoption of or change in any law, rule, regulation or guideline
regarding capital requirements of general application for banks or bank holding
companies or any change in the interpretation or application thereof by any
governmental authority charged with the administration thereof, or (b)
compliance by the Bank or its parent bank holding company with any future
guideline, request or directive of any such entity regarding capital adequacy or
any amendment or change in interpretation of any existing guideline, request or
directive (whether or not having the force of law), has the effect of reducing
the return on the Bank's or such holding
<PAGE>
company's capital as a consequence of the Banking Arrangements hereunder to a
level below that which the Bank or holding company could have achieved but for
such adoption, change or compliance (taking into consideration the Bank's or
such holding company's then existing policies with respect to capital adequacy
and assuming the full utilization of such entity's capital) by any amount deemed
by the Bank to be material, then the Bank may notify the Account Parties
thereof. The Account Parties agree to pay to the Bank the amount of such
reduction in the return on capital as and when such reduction is determined,
upon presentation by the Bank of a statement of the amount setting for the
Bank's calculation thereof. In determining such amount, the Bank may use any
reasonable averaging and attribution methods, generally applied by the Bank.
SECTION 2.10 METHOD OF PAYMENT. All payments by Account Parties to the Bank
hereunder or under any of the Related Documents shall be fully earned when due
and nonrefundable when paid and made in lawful currency of the United States and
in immediately available funds. Amounts payable to the Bank hereunder shall be
transferred to the Bank's account at Commerzbank AG, New York Branch, New York,
NY, ABA # 026 008 044, Account No. 150/1019272/06 Reference: Palomino Park
Public Improvements Corp. (or to such other account of the Bank as the Bank may
specify by written notice to Account Parties) not later than 2:00 p.m. New York,
New York time, on the date payment is due. Any payment received by the Bank
after 2:00 p.m., New York, New York time, shall be deemed to have been received
by the Bank on the next Business Day. If any payment hereunder is due on a day
that is not a Business Day, then such payment shall be due on the immediately
succeeding Business Day.
SECTION 2.11 MAINTENANCE OF ACCOUNTS. The Bank shall maintain in accordance
with its usual practice an account or accounts evidencing the indebtedness of
Account Parties and the amounts payable and paid from time to time hereunder. In
any legal action or proceeding in respect of this Reimbursement Agreement, the
entries made in such account or accounts shall be presumptive evidence of the
existence and amounts of the obligations of Account Parties therein recorded.
The failure to record any such amount shall not, however, limit or otherwise
affect the obligations of Account Parties hereunder to repay all amounts owed
hereunder, together with all interest accrued thereon as provided in this
Article 2.
SECTION 2.12 CURE. Account Parties agree to pay to the Bank on demand any
amounts advanced by or on behalf of the Bank to the extent required to cure any
default, event of default or event of nonperformance under this Reimbursement
Agreement or any Related Document. The Bank shall give Account Parties
reasonably prompt notice of any such advances. The Bank shall have the right,
but not the obligation, to cure any such default, event of default or event of
nonperformance.
SECTION 2.13 WITHHOLDING. All payments of principal, interest and any other
sums due hereunder shall be made in the amounts required hereunder without any
reduction or setoff, notwithstanding the assertion of any right of recoupment or
setoff or of any counterclaim by Account Parties, and without any withholding on
account of taxes, levies, duties or any other deduction whatsoever. If Account
Parties are required by law to withhold or deduct any sum from payments required
under this Reimbursement Agreement, Account Parties shall, to the
<PAGE>
extent permitted by applicable law, increase the amount paid by them to the Bank
so that, after all withholdings and deductions, the amount received by the Bank
shall equal the amount the Bank would have received without any such withholding
or deduction.
SECTION 2.14 REDUCTION AND REINSTATEMENT OF THE LETTER OF CREDIT. The
Stated Amount shall be reduced and reinstated as specified in the Letter of
Credit.
ARTICLE 3
CONDITIONS PRECEDENT
As a condition precedent to the issuance of the Letter of Credit, the Bank
shall have received the following items on or before the Closing Date, each in
form and substance satisfactory to the Bank and its counsel:
SECTION 3.1 ACCOUNT PARTIES' RESOLUTIONS; BYLAWS; OFFICER'S CERTIFICATES.
Copies of resolutions of the Board of Directors of WRP and the Bond Issuer
approving this Reimbursement Agreement, the other Related Documents to which WRP
or the Bond Issuer (as applicable) is a party, the form and content of the
Letter of Credit and the other matters contemplated hereby and copies of all
other documents evidencing any other necessary organizational action and copies
of WRP's Bylaws and the Bond Issuer's Bylaws, all certified by the Secretary of
WRP and the Secretary of the Bond Issuer, as applicable (which certificate shall
state that such resolutions and Bylaws are true, complete and in full force and
effect on the Closing Date).
SECTION 3.2 GUARANTOR'S RESOLUTIONS; OFFICER'S CERTIFICATES. Copies of the
resolutions of the general partner of the Guarantor approving the Guaranty, and
copies of all other documents evidencing any other necessary organization action
and copies of Guarantor's general partner's Bylaws and the Partnership
Agreement, all certified by the Secretary of the general partner of the
Guarantor (which certificate shall state that such resolutions and Bylaws are
true, complete and in full force and effect on the Closing Date). Signature and
incumbency certificates of the officers executing the Guaranty.
SECTION 3.3 ACCOUNT PARTIES' ORGANIZATIONAL DOCUMENTS. Copies certified as
of recent date by the appropriate officer of each State in which WRP and the
Bond Issuer each are organized or authorized to do business and by a duly
authorized officer of WRP or the Bond Issuer (as applicable) to be true and
complete, of the articles of incorporation of WRP and the Articles of
Incorporation of the Bond Issuer, as applicable or its qualifications to do
business, as applicable, as in effect on such date of certification.
SECTION 3.4 GUARANTOR'S ORGANIZATIONAL DOCUMENTS. Copies certified as of
recent date by the appropriate officer of each State in which the Guarantor is
organized or authorized to do business and by a duly authorized officer of the
Guarantor to be true and complete, of the partnership agreement, or its
qualification to do business, as applicable as in effect on such date of
certification.
<PAGE>
SECTION 3.5 REGULATORY APPROVALS. [Reserved]
SECTION 3.6 OFFICER'S CERTIFICATES. Certificates from the Secretaries of
WRP and the Bond Issuer, respectively, certifying the names and true signatures
of the officers of WRP and the Bond Issuer, respectively, authorized to sign
this Reimbursement Agreement and/or the Related Documents to which WRP and/or
the Bond Issuer is a party.
SECTION 3.7 OPINIONS OF COUNSEL. Opinions, in form and substance acceptable
to the Bank and upon which the Bank may rely, of (i) Brownstein Hyatt & Farber,
P.C., Colorado counsel to the Bond Issuer, (ii) Ballard Spahr Andrews &
Ingersoll, LLP, Maryland counsel to WRP, (iii) Piper Marbury Rudnick & Wolfe,
counsel to the Guarantor, (iv) White & Case LLP, New York counsel to the Bank
and (v) German in-house counsel to the Bank.
SECTION 3.8 RELATED DOCUMENTS. An executed copy of each of the Promissory
Notes, the Pledge Agreement and the Deed of Trust Amendment.
SECTION 3.9 ISSUANCE FEE. The Bank shall have received the letter of credit
issuance fee stated in Section 2.7.
SECTION 3.10 COMPLIANCE CERTIFICATE. A Compliance Certificate in the form
of Exhibit D hereto dated as of the Closing Date demonstrating compliance with
each of the covenants calculated therein as of the most recent fiscal quarter
end of WRP shall have been delivered to the Bank.
SECTION 3.11 RATING. Ratings letter from Moody's which confirms that the
Bonds have received long-term and short-term ratings at least equal to the
long-term and short-term ratings of the Bank.
SECTION 3.12 ACCOUNT PARTIES CERTIFICATE(S). Certificates signed by duly
authorized officers of WRP and the Bond Issuer, respectively, dated the Closing
Date, stating that: (a) the representations and warranties of WRP and/or the
Bond Issuer, respectively, contained in Article 4 and in the Related Documents
are correct on and as of the Closing Date as though made on and as of such date;
(b) WRP and/or the Bond Issuer, respectively, are in compliance with all of the
covenants set forth in Articles 5 and 6; (c) no petition by or against WRP
and/or the Bond Issuer has at any time been filed under the United States
Bankruptcy Code or under any similar act; (d) no Event of Default or Default has
occurred and is continuing, or would result from the issuance of the Letter of
Credit and execution, delivery or performance of this Reimbursement Agreement or
the Related Documents; and (e) such other matters as the Bank or its counsel may
request.
SECTION 3.13 [RESERVED]
SECTION 3.14 PAYMENT OF FEES AND EXPENSES. Payment of all amounts
(including attorney's fees and expenses) payable at the Closing Date pursuant to
Section 2.6.
<PAGE>
SECTION 3.15 FINANCIAL STATEMENTS. The most recent annual audited financial
statements of WRP and the unaudited financial statements as of the Balance Sheet
Date of WRP and Highlands. The most recent unaudited financial statements of the
Bond Issuer. All of such statements shall be accompanied with a certificate from
an officer of WRP, Highlands or the Bond Issuer, as applicable, stating that no
material adverse change in the consolidated assets, liabilities, operations or
financial condition of WRP, Highlands, or the Bond Issuer, as applicable, has
occurred since the date of the most recent financial statements.
SECTION 3.16 PALOMINO ENTITIES CERTIFICATE(S). Certificates signed by duly
authorized officers of Highlands, dated the Closing Date, stating that: (a) no
petition by or against any of the Palomino Entities has at any time been filed
under the United States Bankruptcy Code or under any similar act; (b) no event
of default nor any occurrence, circumstance or event or any combination thereof
which with the lapse of time and/or giving of notice would constitute an event
of default under any of the Related Documents to which any of the Palomino
Entities is a party has occurred and is continuing, or would result from the
execution, delivery or performance of any of the Related Documents; (c) the
representations and warranties of Palomino Entities contained in the Assessment
Agreement are correct on and as of the Closing Date; and (d) such other matters
as the Bank or its counsel may request.
SECTION 3.17 REMARKETING AGENT CERTIFICATE. A certificate from the
Remarketing Agent in form and substance satisfactory to the Bank and its
counsel.
SECTION 3.18 BOND TRUSTEE CERTIFICATE. A certificate of the Bond Trustee in
form and substance satisfactory to the Bank and its counsel.
SECTION 3.19 OTHER DOCUMENTS. Such other documents, instruments, approvals
and, if requested by the Bank, certified duplicates of executed copies thereof,
and opinions as the Bank may reasonably request.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
Account Parties represent and warrant to the Bank as follows:
SECTION 4.1 CORPORATE AUTHORITY, ETC.
(1) INCORPORATION; GOOD STANDING. WRP: (i) is a Maryland corporation duly
organized, incorporated, validly existing and in good standing under the laws of
Maryland, (ii) has all requisite power to own its property, to conduct its
business as now conducted and as presently contemplated and to enter into and
satisfy its obligations under this Reimbursement Agreement and the other Related
Documents to which it is a party, and (iii) is in good standing as a foreign
entity and is duly authorized to do business in Denver, Colorado and in each
other jurisdiction where failure to be so qualified in such other jurisdiction
could have a materially adverse effect on the business, assets or financial
condition of WRP.
<PAGE>
(2) AUTHORIZATION. The execution, delivery and performance of this
Reimbursement Agreement and the Related Documents and the transactions
contemplated hereby and thereby (a) are within the authority of WRP and the Bond
Issuer, respectively, (b) have been duly authorized by all necessary proceedings
on the part of WRP and the Bond Issuer, respectively, (c) 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 WRP, the Bond Issuer or any of the Palomino
Entities is subject or any judgment, order, writ, injunction, license or permit
applicable to WRP, the Bond Issuer or any of the Palomino Entities or any of
their respective properties, (d) 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 charter documents, partnership agreement, declaration
of trust or other charter documents or bylaws of, or any agreement or other
instrument binding upon, WRP, the Bond Issuer or any of the Palomino Entities,
or any of their respective properties, and (e) 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 WRP, the Bond Issuer or any of the Palomino
Entities or any of their respective properties other than the liens for the
benefit of the holders of the Bonds created by the Bond Indenture and the lien
of the Assessment and Lien.
(3) ENFORCEABILITY. The execution and delivery of this Reimbursement
Agreement and the Related Documents to which each of them are parties are valid
and legally binding obligations of WRP and the Bond Issuer, enforceable against
each of them in accordance with the respective terms and provisions hereof and
thereof, except as enforceability is limited by bankruptcy, insolvency,
reorganization, moratorium or other laws relating to or affecting generally the
enforcement of creditors' rights and except to the extent that availability of
the remedy of specific performance or injunctive relief is subject to the
discretion of the court before which any proceeding therefor may be brought.
SECTION 4.2 GOVERNMENTAL APPROVALS. The execution, delivery and performance
by WRP and the Bond Issuer of this Reimbursement Agreement and the execution,
delivery and performance by WRP and the Bond Issuer of the Related Documents to
which each of them are parties and the transactions contemplated hereby and
thereby do not require the approval or consent of, or filing with, any
governmental agency or authority other than those already obtained.
SECTION 4.3 TITLE TO PROPERTIES; LEASES. Except as indicated on Schedule A
hereto, the Bond Issuer, and the Palomino Entities own all of the assets
reflected in their respective consolidated balance sheets as at the Balance
Sheet Date or acquired since that date (except property and assets sold or
otherwise disposed of in the ordinary course of business since that date),
subject to no rights of others, including any mortgages, leases (except standard
residential apartment leases for a duration of less than 18 months) conditional
sales agreements, title retention agreements, liens or other encumbrances except
Permitted Liens. Each of the Palomino Entities holds fee title to all of the
property securing payment of the assessments to be paid to pay debt service on
the Bonds, subject to no rights of others, including any mortgages, leases
(except standard residential apartment leases for a duration of less than 18
months), conditional sales agreements, title retention agreements, liens or
other encumbrances except
<PAGE>
Permitted Liens described in Sections 6.4. Without limiting the foregoing, each
of the Palomino Entities has good and marketable fee simple title to, or a valid
and subsisting leasehold interest in, all real property reasonably necessary for
the operation of their respective businesses, free from all liens or
encumbrances of any nature whatsoever, except for Permitted Liens. Each of WRP
or its Subsidiaries, and Highlands or its Subsidiaries, as the case may be, is
the insured under owner's policies of title insurance covering all real property
owned by it, in each case in an amount not less than the purchase price for such
real property.
SECTION 4.4 FINANCIAL STATEMENTS. WRP and Highlands have furnished to the
Bank: income statements and balance sheets of WRP as of the Balance Sheet Date
satisfactory in form and substance to the Bank. Such balance sheet and
statements of income and stockholder's equity and all other financial statements
delivered to the Bank by WRP and all other financial statements delivered to the
Bank by WRP have been prepared in accordance with generally accepted accounting
principles, are complete, true and correct and fairly present the financial
condition of WRP and its Subsidiaries and Highlands and its Subsidiaries,
respectively, as of such dates and the results of the operation of each of them.
There are no liabilities, contingent or otherwise, of WRP or Highlands or any of
their respective Subsidiaries involving material amounts not disclosed in said
financial statements and the related notes thereto, or financial statements and
the related notes thereto delivered to the Bank in accordance with Section 5.4
hereof.
SECTION 4.5 NO MATERIAL CHANGES. Since the Balance Sheet Date, there has
occurred no materially adverse change in the financial condition or business of
WRP and its Subsidiaries taken as a whole, the Bond Issuer and its Subsidiaries
taken as a whole, or Highlands and its Subsidiaries taken as a whole from that
shown on or reflected in the consolidated balance sheet of each of them as of
the Balance Sheet Date, or their respective consolidated statement of income or
cash flows for the fiscal year then ended, other than changes in the ordinary
course of business that have not had any materially adverse effect either
individually or in the aggregate on the business or financial condition of WRP,
the Bond Issuer or the Palomino Entities.
SECTION 4.6 FRANCHISES, PATENTS, COPYRIGHTS, ETC. WRP and its Subsidiaries,
the Bond Issuer and its Subsidiaries and Highlands and its Subsidiaries,
respectively, each possess all franchises, patents, copyrights, trademarks,
trade names, servicemarks, licenses and permits, and rights in respect of the
foregoing, adequate for the conduct of their business substantially as now
conducted without known conflict with any rights of others. Each of the Palomino
Entities possessess all franchises, patents, copyrights, trade names,
servicemarks, licenses and permits, and rights in respect of the foregoing,
including without limitation land use approvals, adequate for the construction
and completion of Phase I of the Development.
SECTION 4.7 LITIGATION. Except as stated on Schedule B there are no
actions, suits, proceedings or investigations of any kind pending or threatened
against WRP or any of its Subsidiaries, the Bond Issuer or any of its
Subsidiaries or Highlands or any of its Subsidiaries before any court, tribunal
or administrative agency or board that, if adversely determined, might, either
in any case or in the aggregate, materially adversely affect the properties,
assets, financial
<PAGE>
condition or business of such Person or materially impair the right of such
Person to carry on business substantially as now conducted by it, or result in
any liability not adequately covered by insurance, or for which adequate
reserves are not maintained on the balance sheet of such Person, or which
question the validity of this Reimbursement Agreement or any of the Related
Documents, any action taken or to be taken pursuant hereto or thereto or any
lien or security interest created or intended to be created pursuant hereto or
thereto, or which will adversely affect the ability of WRP, the Bond Issuer
and/or the Palomino Entities to pay and perform their respective obligations in
the manner contemplated by this Reimbursement Agreement and the Related
Documents.
SECTION 4.8 NO MATERIALLY ADVERSE CONTRACTS, ETC. None of WRP, the Bond
Issuer, Highlands or any of their respective Subsidiaries is subject to any
charter, corporate or other legal restriction, or any judgment, decree, order,
rule or regulation that has or is expected in the future to have a materially
adverse effect on the business, assets or financial condition of such Person.
None of WRP, the Bond Issuer, Highlands or any of their respective Subsidiaries
is a party to any contract or agreement that has or is expected, in the judgment
of the officers of such Person, to have any materially adverse effect on the
business of any of them.
SECTION 4.9 COMPLIANCE WITH OTHER INSTRUMENTS, LAWS, ETC. None of WRP, the
Bond Issuer, Highlands or any of their respective Subsidiaries is in violation
of any provision of its charter or other organizational documents, by-laws, or
any agreement or instrument to which it may be subject or by which it or any of
its properties may be bound or any decree, order, judgment, statute, license,
rule or regulation, in any of the foregoing cases in a manner that could result
in the imposition of substantial penalties or materially and adversely affect
the financial condition, properties or business of such Person.
SECTION 4.10 TAX STATUS. WRP, the Bond Issuer, Highlands and each of their
respective Subsidiaries (a) has made or filed all federal and state income and
all other material tax returns, reports and declarations required by any
jurisdiction to which it is subject, (b) has paid all taxes and other
governmental assessments and charges shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and by appropriate proceedings, and (c) has set aside on its books provisions
reasonably adequate for the payment of all taxes for periods subsequent to the
periods to which such returns, reports or declarations apply. There are no
unpaid taxes in any material amount claimed to be due by the taxing authority of
any jurisdiction, and the officers of WRP, the Bond Issuer and Palomino Entities
know of no basis for any such claim.
SECTION 4.11 NO EVENT OF DEFAULT. No Default or Event of Default has
occurred and is continuing.
SECTION 4.12 HOLDING COMPANY AND INVESTMENT COMPANY ACTS, ETC. None of WRP,
the Bond Issuer, Highlands or any of their respective Subsidiaries is a "holding
company," or a "subsidiary company" of a "holding company," or an "affiliate" of
a "holding company," as such terms are defined in the Public Utility Holding
Company Act of 1935; nor is it an "investment company," or an "affiliated
company" or a "principal underwriter" of an
<PAGE>
"investment company," as such terms are defined in the Investment Company Act of
1940. None of WRP, the Bond Issuer, Highlands or any of their respective
Subsidiaries is subject to regulation under the Federal Power Act, the
Interstate Commerce Act or to its knowledge any federal or state statute or
regulation which regulates the issuance of securities and/or debt of companies
limiting its ability to incur indebtedness for money borrowed, except federal
and state securities laws.
SECTION 4.13 ABSENCE OF UCC FINANCING STATEMENTS, ETC. Except with respect
to Permitted Liens, there is no financing statement, security agreement, chattel
mortgage, real estate mortgage or other document filed or recorded with any
filing records, registry, or other public office, that purports to cover, affect
or give notice of any present or possible future lien on, or security interest
or security title in, any property of the Palomino Entities, or the Bond Issuer,
or any of its Subsidiaries.
SECTION 4.14 NONCONTRAVENTION. The execution and delivery, or assumption,
as the case may be, by WRP and the Bond Issuer of this Reimbursement Agreement
and the Related Documents to which each of them is a party, and the performance
of their respective obligations hereunder and thereunder, will not violate any
existing law or regulation or result in a breach of any of the terms of, or
constitute a default under, any indenture, mortgage, deed of trust, lease or
other agreement or instrument to which any of them is a party or by which any of
them or any of their respective property is bound or their respective articles
of incorporation, limited liability agreements or declarations of trust (as
applicable), bylaws or any of the rules or regulations applicable to either of
them or to their respective property or decree or order of any court or other
governmental body.
SECTION 4.15 CERTAIN TRANSACTIONS. [Reserved]
SECTION 4.16 EMPLOYEE BENEFIT PLANS. WRP, the Bond Issuer, Highlands and
each ERISA Affiliate of each of them have fulfilled their obligations under the
minimum funding standards of ERISA and the Code with respect to each Employee
Benefit Plan, Multi-employer Plan or Guaranteed Pension Plan (referred to each
individually as a "PLAN" and collectively as "PLANS") and is in compliance in
all material respects with the presently applicable provisions of ERISA and the
Code with respect to each Plan. None of WRP, the Bond Issuer, Highlands or any
ERISA Affiliate of either of them has (a) sought a waiver of the minimum funding
standard under Section 412 of the Code in respect of any Plan, (b) failed to
make any contribution or payment to any Plan, or made any amendment to any Plan,
which has resulted or could result in the imposition of a Lien or the posting of
a bond or other security under ERISA or the Code, or (c) incurred any liability
under Title IV of ERISA other than a liability to the PBGC for premiums under
Section 4007 of ERISA. Except as disclosed in WRP's, the Bond Issuer's or
Highlands' respective financial statements, none of WRP, the Bond Issuer,
Highlands or any of their respective Subsidiaries maintains or has maintained
any Plan. None of WRP, the Bond Issuer, Highlands or any of their respective
Subsidiaries has received any notice or has any knowledge to the effect that it
is not in full compliance with any of the requirements of such Plan(s). No fact
or circumstance which may have a material adverse effect on the Plan's tax
<PAGE>
qualified status exists in connection with any Plan. None of WRP, the Bond
Issuer, Highlands or any of their respective Subsidiaries has any accumulated
funding deficiency under any Plan.
SECTION 4.17 REGULATIONS U AND X. No portion of any Drawing, Liquidity
Drawing Amount or LC Loan under this Reimbursement Agreement or the Letter of
Credit is to be used for the purpose of purchasing or carrying any "margin
security" or "margin stock" as such terms are used in Regulations U and X of the
Board of Governors of the Federal Reserve System, 12 C.F.R. Parts 221 and 224.
SECTION 4.18 ENVIRONMENTAL COMPLIANCE. Account Parties have conducted or
caused to be conducted Phase I environmental site assessments with respect to
the past usage and condition of the Real Estate (including Phase I of the
Development) and the Development and, in each case, the operations conducted
thereon, and are familiar with the present condition and usage of the Real
Estate (including Phase I of the Development) and the Development and the
operations conducted thereon and, based upon such reports and knowledge, makes
the following representations and warranties:
(1) To the best of Account Parties' knowledge, none of WRP, the Bond
Issuer, Highlands and their respective Subsidiaries or any operator of the
Real Estate (including Phase I of the Development) or the Development, or
any operations thereon is in violation, or alleged violation, of any
judgment, decree, order, law, license, rule or regulation pertaining to
environmental matters, including without limitation, those arising under
the Resource Conservation and Recovery Act ("RCRA"), the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 as amended
("CERCLA"), the Superfund Amendments and Reauthorization Act of 1986
("SARA"), the Federal Clean Water Act, the Federal Clean Air Act, the Toxic
Substances Control Act, or any state or local statute, regulation,
ordinance, order or decree relating to the environment (hereinafter
"Environmental Laws"), which violation involves the Real Estate (including
Phase I of the Development) or the Development and would have a material
adverse effect on the environment or the business, assets or financial
condition of WRP, the Bond Issuer or any of the Palomino Entities or the
development of Phase I of the Development or the Development as a whole.
(2) None of WRP, the Bond Issuer, Highlands or their respective
Subsidiaries has received notice from any third party including, without
limitation, any federal, state or local governmental authority, (a) that it
has been identified by the United States Environmental Protection Agency
("EPA") as a potentially responsible party under CERCLA with respect to a
site listed on the National Priorities List, 40 C.F.R. Part 300 Appendix B
(1986); (b) that any hazardous waste, as defined by 42 U.S.C. Section
9601(5), any hazardous substances as defined by 42 U.S.C. Section 9601(14),
any pollutant or contaminant as defined by 42 U.S.C. Section 9601(33) or
any toxic substances, oil or hazardous materials or other chemicals or
substances regulated by any Environmental Laws ("Hazardous Substances")
which it has generated, transported or disposed of have been found at any
site at which a federal, state or local agency or other third party has
conducted or has ordered that any such Person conduct a remedial
<PAGE>
investigation, removal or other response action pursuant to any
Environmental Law; or (c) that it is or shall be a named party to any
claim, action, cause of action, complaint, or legal or administrative
proceeding (in each case, contingent or otherwise) arising out of any third
party's incurrence of costs, expenses, losses or damages of any kind
whatsoever in connection with the release of Hazardous Substances.
(3) To the best of Account Parties' knowledge, except as set forth in
Schedule C or, in the case of Real Estate (including any portion of the
Development other than Phase I of the Development) acquired after the date
hereof, except as may be disclosed in writing to the Bank upon the
acquisition of the same: (i) no portion of the Real Estate or the
Development has been used for the handling, processing, storage or disposal
of Hazardous Substances except in accordance with applicable Environmental
Laws, and no underground tank or other underground storage receptacle for
Hazardous Substances is located on any portion of the Real Estate or the
Development; (ii) in the course of any activities conducted by WRP, the
Bond Issuer, Highlands and their respective Subsidiaries, the District or
the operators of any properties of any of them, no Hazardous Substances
have been generated or are being used on the Real Estate or the Development
except in the ordinary course of business and in accordance with applicable
Environmental Laws; (iii) there has been no past or present releasing,
spilling, leaking, pumping, pouring, emitting, emptying, discharging,
injecting, escaping, disposing or dumping (a "Release") or threatened
Release of Hazardous Substances on, upon, into or from the Real Estate or
the Development, or, to the best of Account Parties' knowledge, on, upon,
into or from the other properties of WRP, the Bond Issuer, Highlands or
their respective Subsidiaries, which Release would have a material adverse
effect on the value of any of the Real Estate, Phase I of the Development,
the Development as a whole or adjacent properties of either of them or the
environment; (iv) to the best of Account Parties' knowledge, there have
been no Releases on, upon, from or into any real property in the vicinity
of any of the Real Estate, Phase I of the Development or the Development as
a whole which, through soil or groundwater contamination, may have come to
be located on, and which would have a material adverse effect on the value
of, the Real Estate, Phase I of the Development or the Development as a
whole; and (v) any Hazardous Substances that have been generated on any of
the Real Estate, Phase I of the Development or the Development as a whole
have been transported off-site only by carriers having an identification
number issued by the EPA or approved by a state or local environmental
regulatory authority having jurisdiction regarding the transportation of
such substance and, to the best knowledge of Account Parties without
independent investigation, treated or disposed of only by treatment or
disposal facilities maintaining valid permits as required under all
applicable Environmental Laws, which transporters and facilities have been
and are, to the best of Account Parties' knowledge without independent
investigation, operating in compliance with such permits and applicable
Environmental Laws.
(4) None of WRP, the Bond Issuer, Highlands and their respective
Subsidiaries, any Real Estate, Phase I of the Development or any other
portion of the Development is subject to any applicable Environmental Law
requiring the performance
<PAGE>
of Hazardous Substances site assessments, or the removal or remediation of
Hazardous Substances, or the giving of notice to any governmental agency or
the recording or delivery to other Persons of an environmental disclosure
document or statement by virtue of the transactions set forth herein and
contemplated hereby, or as a condition to the effectiveness of any other
transactions contemplated hereby.
SECTION 4.19 SUBSIDIARIES. Schedule D sets forth all of the Subsidiaries of
the Bond Issuer and Highlands, respectively. The form and jurisdiction of
organization of each of such Subsidiaries, and WRP's, the Bond Issuer's and
Highlands' ownership interest therein, is set forth in said Schedule D.
SECTION 4.20 RELATED DOCUMENTS. All of the representations and warranties
of WRP, the Bond Issuer and Highlands made in this Reimbursement Agreement and
the Related Documents or any document or instrument delivered to the Bank
pursuant to or in connection with any of such Related Documents are true and
correct in all material respects, and none of WRP, the Bond Issuer or Highlands
has failed to disclose such information as is necessary to make such
representations and warranties not misleading.
SECTION 4.21 PROPERTY. All of WRP's, the Bond Issuer's Highlands' and their
respective Subsidiaries' properties (including without limitation Phase I of the
Development) are in good repair and condition, subject to ordinary wear and
tear, other than with respect to deferred maintenance existing as of the date of
acquisition of such property as permitted in this Section 4.21. Without limiting
the foregoing, WRP has completed an appropriate investigation of the physical
condition of each such property as of the later of the date of WRP's or such
other Person's purchase thereof or the date upon which such property was last
security for Indebtedness of WRP or such Person, including without limitation an
analysis of the structural condition and existence of any material deferred
maintenance, and such property is in good condition, order and repair, and any
material deferred maintenance existing as of the date of acquisition of such
property has been corrected or satisfactory remediation actions are being taken.
WRP further has completed an appropriate investigation of the environmental
condition of each such property as of the later of the date of WRP's or such
other Person's purchase thereof or the date upon which such property was last
security for Indebtedness of WRP or such Person, including preparation of a
"Phase I" report and, if appropriate, a "Phase II" report, in each case prepared
by a recognized environmental engineer in accordance with customary standards
which discloses that such property is not in violation of the representations
and covenants set forth in this Reimbursement Agreement, unless satisfactory
remediation actions are being taken. There are no unpaid or outstanding real
estate or other taxes or assessments on or against any property of WRP, the Bond
Issuer, Highlands or any of their respective Subsidiaries (including without
limitation Phase I of the Development) which are payable by WRP, the Bond
Issuer, Highlands or their respective Subsidiaries (except only real estate or
other taxes or assessments, that are not yet due and payable). There are no
pending eminent domain proceedings against the Development or any property of
WRP, the Bond Issuer, Highlands or their respective Subsidiaries or any part
thereof, and, to the knowledge of Account Parties, no such proceedings are
presently threatened or contemplated by any taking authority which may
individually or in the aggregate have any materially adverse effect on the
business or financial condition of WRP,
<PAGE>
the Bond Issuer or Highlands. None of the Development, Phase I of the
Development or any other property of WRP, the Bond Issuer, Highlands or their
respective Subsidiaries is now damaged or injured as a result of any fire,
explosion, accident, flood or other casualty in any manner which individually or
in the aggregate would have any materially adverse effect on the business or
financial condition of WRP, the Bond Issuer or Highlands.
SECTION 4.22 BROKERS. None of WRP, the Bond Issuer, Highlands or any of
their respective Subsidiaries has engaged or otherwise dealt with any broker,
finder or similar entity in connection with this Reimbursement Agreement, the
Letter of Credit contemplated hereunder, or any Related Document.
SECTION 4.23 OTHER DEBT. None of WRP, the Bond Issuer, Highlands and their
respective Subsidiaries is in default in the payment of any Indebtedness or
under any agreement, mortgage, deed of trust, security agreement, financing
agreement, indenture or lease to which any of them is a party except with
respect to the violation of financial covenants under the existing finance
facility between Wellsford Finance, Inc. and Fleet National Bank, under which no
amounts are owed by Wellsford Finance, Inc. Neither WRP, the Bond Issuer nor any
of the Palomino Entities is a party to or bound by any agreement, instrument or
indenture that may require the subordination in right or time of payment of any
of the obligations of any of them under this Reimbursement Agreement or any of
the Related Documents to which they are a party to any other indebtedness or
obligation of WRP, the Bond Issuer or the Palomino Entities.
SECTION 4.24 SOLVENCY. As of the Closing Date and after giving effect to
the transactions contemplated by this Reimbursement Agreement and the Related
Documents, none of WRP, the Bond Issuer or any of the Palomino Entities is
insolvent on a balance sheet basis such that the sum of such Person's
liabilities exceeds the sum of such Person's assets. Each of WRP, the Bond
Issuer, and each of the Palomino Entities is able to pay its debts as they
become due, and has sufficient capital to carry on its business.
SECTION 4.25 COMPLETE AND CORRECT INFORMATION. All information, reports and
other papers and data with respect to WRP, the Bond Issuer, Highlands and their
respective Subsidiaries furnished to the Bank were, at the time the same were so
furnished, complete and correct in all material respects, to the extent
necessary to give the Bank a true and accurate knowledge of the subject matter.
No fact is known to WRP, the Bond Issuer or any of the Palomino Entities which
adversely affects or in the future may (so far as it can foresee) adversely
affect its business, assets or liabilities, financial condition, results of
operations, or its business prospects or the development of Phase I of the
Development or any other portion of the Development which has not been set forth
in the financial statements referred to in Section 4.4 above or in such
information, reports, papers and data or otherwise disclosed in writing to the
Bank. No document furnished or statement made by WRP, the Bond Issuer or any of
the Palomino Entities in connection with the negotiation, preparation or
execution of this Reimbursement Agreement, or any other Related Document
contains any untrue statement of a fact material to its credit worthiness or
omits to state a material fact necessary in order to make the statements
contained therein not misleading.
<PAGE>
SECTION 4.26 PUBLIC IMPROVEMENTS LIENS. There are no liens or encumbrances
of any kind on the Public Improvements or Phase I of the Development other than
Permitted Liens (as defined here and in the Bond Indenture).
SECTION 4.27 PLEDGE OF PLEDGED BONDS. The security interests granted to the
Bank pursuant to the Pledge Agreement (a) constitute a perfected security
interest in the collateral pledged pursuant to the Pledge Agreement (the
"Collateral") under the Uniform Commercial Code and (b) are, and with respect to
any subsequently acquired property, will be, superior and prior to the rights of
all third Persons now existing or hereafter arising whether by way of mortgage,
lien, security interests, encumbrances, assignments or otherwise. All such
actions as is necessary has been taken to establish and perfect the Bank's
rights in and to the Collateral.
SECTION 4.28 SECURITY FOR PLEDGED BONDS. The Bond Indenture creates, for
the benefit and security of the Bonds, the legally valid and binding Lien on and
pledge of the Revenues and the funds ("FUNDS") in which they are from time to
time on deposit which the Bond Indenture purports to create. There are no Liens
on the Revenues or the Funds other than the Lien created by the Bond Indenture.
No filing, registering, recording or publication of the Bond Indenture or any
other document or instrument is required to establish the pledge under the Bond
Indenture or to perfect, protect or maintain the Lien created thereby on the
Revenues and the Funds.
ARTICLE 5
AFFIRMATIVE COVENANTS
Account Parties covenant and agree that, so long as the Expiration Date has
not occurred or any amount is due or owning to the Bank under this Reimbursement
Agreement or any Related Document, each of them will comply with each of the
covenants contained in this Article 5, unless the Bank shall otherwise consent
in writing:
SECTION 5.1 COMPLIANCE WITH BOND INDENTURE AND RELATED DOCUMENTS. WRP, the
Bond Issuer and the Palomino Entities shall comply with each of the covenants of
each of them set forth in the Bond Indenture and all Related Documents.
SECTION 5.2 MAINTENANCE OF OFFICE. WRP will maintain its chief executive
office at 535 Madison Avenue, New York, New York 10022, and the Bond Issuer will
maintain its chief executive office at 1623 Blake Street, #270, Denver, Colorado
80202, or, in each case, at such other place in the United States of America as
WRP or the Bond Issuer shall designate upon prior written notice to the Bank,
where notices, presentations and demands to or upon each of them in respect of
this Reimbursement Agreement and the Related Documents to which they are parties
may be given or made.
SECTION 5.3 RECORDS AND ACCOUNTS. WRP and Bond Issuer will (a) keep, and
cause each of their respective Subsidiaries (including but not limited to
Highlands) to keep, true
<PAGE>
and accurate records and books of account in which full, true and correct
entries will be made of all dealings or transactions of or in relation to the
business and affairs of such Person in accordance with generally accepted
accounting principles and (b) maintain adequate accounts and reserves for all
taxes (including income taxes), depreciation and amortization of its properties
and the properties of their respective Subsidiaries, contingencies and other
reserves.
SECTION 5.4 FINANCIAL STATEMENTS, CERTIFICATES AND INFORMATION. WRP and the
Bond Issuer will each deliver to the Bank:
(a) as soon as practicable, but in any event not later
than 90 days after the end of their respective fiscal years, the
audited consolidated balance sheet of each of them and their respective
Subsidiaries (including but not limited to Highlands) at the end of
such year, and the related audited consolidated statements of income,
changes in shareholder's equity and cash flows for such year, each
setting forth in comparative form the figures for the previous fiscal
year and all such statements to be in reasonable detail, prepared in
accordance with generally accepted accounting principles, and
accompanied by an auditor's report prepared without qualification by
Ernst & Young LLP or by another "Big Five" accounting firm, the Form
10-K filed with the SEC for WRP (unless the SEC has approved an
extension, in which event WRP will deliver to the Bank a copy of the
Form 10-K simultaneously with delivery to the SEC), and any other
information the Bank may need to complete a financial analysis of WRP,
the Bond Issuer and the Palomino Entities;
(b) as soon as practicable, but in any event not later than 60
days after the end of each of the first three fiscal quarters of each
of WRP and the Bond Issuer, copies of the unaudited consolidated
balance sheet of WRP and the Bond Issuer, respectively, and their
respective Subsidiaries (including but not limited to Highlands) as at
the end of such quarter, and the related unaudited consolidated
statements of income, changes in shareholder's equity and cash flows
for the portion of such Account Party's fiscal year then elapsed, all
in reasonable detail and prepared in accordance with generally
accepted accounting principles (which may be provided by inclusion in
the Form 10-Q of WRP for such period provided pursuant to subsection
(c) below), together with a certification by the principal financial
or principal accounting officer of WRP and the Bond Issuer,
respectively, that the information contained in such financial
statements fairly presents the financial position of WRP and the Bond
Issuer, respectively, and their respective Subsidiaries on the date
thereof (subject to year-end adjustments);
(c) as soon as practicable, but in any event not later than 60
days after the end of the first three fiscal quarters of WRP in each
year, copies of Form 10-Q filed with the SEC for WRP (unless the SEC
has approved an extension in which event WRP will deliver such copies
of the Form 10-Q to the Bank simultaneously with delivery to the SEC);
(d) simultaneously with the delivery of the financial statements
referred to in Sections 5.4(a) and 5.4(b) above, and within thirty
(30) days of the filing by WRP of a Form 8-K with the SEC or the
filing with the SEC of any other document amending any
<PAGE>
other filing previously made by WRP a statement (a "Compliance
Certificate") certified by the principal financial officer or
principal accounting officer of WRP in the form of Exhibit D hereto
setting forth in reasonable detail computations evidencing compliance
with the covenants contained in Section 6, and (if applicable)
reconciliations to reflect changes in generally accepted accounting
principles since the Balance Sheet Date;
(e) concurrently with the delivery of the financial statements
described in subsections (b) and (c) above, a certificate signed by
the president or chief financial officer or principal accounting
officer of WRP and the Bond Issuer (as applicable) to the effect that,
having read this Reimbursement Agreement, and based upon an
examination which they deem sufficient to enable them to make an
informed statement, there does not exist any Default or Event of
Default, or if such Default or Event of Default has occurred,
specifying the facts, nature and status with respect thereto; and any
remedial steps taken or proposed to correct each such default;
(f) contemporaneously with the filing or mailing thereof, copies
of all material of a financial nature filed with the SEC or sent to
the stockholders of WRP;
(g) simultaneously within the delivery of the financial statement
referred to in subsection (a) above, a statement (i) listing the Real
Estate owned by Highlands and the Bond Issuer and their respective
Subsidiaries (or in which any such Person owns an interest) and
stating the location thereof, the date acquired and the acquisition
cost, (ii) listing the Indebtedness of Highlands and the Bond Issuer
and their respective Subsidiaries (excluding Indebtedness of the type
described in Sections 6.3(a)-6.3(e)), which statement shall include,
without limitation, a statement of the original principal amount of
such Indebtedness and the current amount outstanding, the holder
thereof, the maturity date and any extension options, the interest
rate, the collateral provided for such Indebtedness and whether such
Indebtedness is recourse or non-recourse, and (iii) listing the
properties of Highlands and the Bond Issuer and their respective
Subsidiaries which are under "development" (as used in Section 6.13)
and providing a brief summary of the status of such development; and
(h) from time to time such other financial data and information
in the possession of WRP, the Bond Issuer or the Palomino Entities
(including without limitation auditors' management letters, property
inspection and environmental reports and information as to zoning and
other legal and regulatory changes affecting WRP, the Bond Issuer, the
Palomino Entities, the Public Improvements, Phase I of the Development
or the Development) as the Bank may reasonably request.
SECTION 5.5 NOTICES.
(1) DEFAULTS. Account Parties will promptly notify the Bank in writing of
the occurrence of any Default or Event of Default. If any Person shall give any
notice or take any other action in respect of a claimed default (whether or not
constituting an Event of Default) under this Reimbursement Agreement, any other
Related Document or under any note, evidence
<PAGE>
of indebtedness, indenture or other obligation to which or with respect to which
WRP, the Bond Issuer or any of their respective Subsidiaries (including but not
limited to Highlands) is a party or obligor, whether as principal or surety, and
such default would permit the holder of such note or obligation or other
evidence of indebtedness to accelerate the maturity thereof, which acceleration
would have a material adverse effect on WRP, the Bond Issuer or any of the
Palomino Entities, or the existence of which claimed default might become an
Event of Default under Sections 7.1(g) and 7.1(h), Account Parties shall
forthwith give written notice thereof to the Bank, describing the notice or
action and the nature of the claimed default.
(2) ENVIRONMENTAL EVENTS. Account Parties will promptly give notice to the
Bank (i) upon WRP, Highlands or the Bond Issuer obtaining knowledge of any
potential or known Release, or threat of Release, of any Hazardous Substances at
or from any portion of Phase I of the Development or any other portion of the
Development or any Real Estate of WRP, the Bond Issuer or their respective
Subsidiaries (with respect to the Real Estate of Subsidiaries of WRP other than
Palomino Entities, only those which have the potential to materially affect the
assets, liabilities, financial conditions or operations of WRP); (ii) of any
violation of any Environmental Law that WRP, the Bond Issuer or any of their
respective Subsidiaries reports in writing or is reportable by such Person in
writing (or for which any written report supplemental to any oral report is
made) to any federal, state or local environmental agency; and (iii) upon
becoming aware thereof, of any inquiry, proceeding, investigation, or other
action, including a notice from any agency of potential environmental liability,
of any federal, state or local environmental agency or board, that in either
case involves any portion of Phase I of the Development or any other portion of
the Development or Real Estate of WRP, the Bond Issuer or their respective
Subsidiaries (including without limitation Highlands) or has the potential to
materially affect the assets, liabilities, financial conditions or operations of
WRP, the Bond Issuer or their respective Subsidiaries (including without
limitation Highlands).
(3) NOTICE OF LITIGATION AND JUDGMENTS. Account Parties will give notice to
the Bank in writing within 15 days of becoming aware of any litigation or
proceedings threatened in writing or any pending litigation and proceedings
affecting Phase I of the Development, the balance of the Development or the
Public Improvements, WRP, Highlands or any of its Subsidiaries, or the Bond
Issuer or any of its Subsidiaries or to which WRP, Highlands or any of its
Subsidiaries, or the Bond Issuer or any of its Subsidiaries is or is to become a
party involving an uninsured claim against any such Person that could reasonably
be expected to have a materially adverse effect on WRP, any of the Palomino
Entities, the Bond Issuer, or Highland or any of its Subsidiaries, and stating
the nature and status of such litigation or proceedings. Account Parties will
give notice to the Bank, in writing, in form and detail satisfactory to the Bank
within ten days of any judgment not covered by insurance, whether final or
otherwise, against the Bond Issuer, its Subsidiaries or any of the Palomino
Entities in an amount in excess of $250,000, or against WRP in an amount in
excess of $1,000,000.
(4) [Reserved]
(5) LOCATION, NAME AND BUSINESS. Account Parties shall promptly provide the
Bank with Notice of (a) any change of the location of their respective Executive
Offices or
<PAGE>
the Executive Office of the Palomino Entities, (b) any change in their
respective names or the name of any of the Palomino Entities or any intention of
either of them or any of the Palomino Entities to alter the nature of its
business.
(6) PALOMINO INDEBTEDNESS. Account Parties will promptly give notice to the
Bank of the incurrence of any Indebtedness, secured in whole or in part by any
real property securing any portion of the assessments to be paid under the
Assessment Agreement, including a description of such Indebtedness and the terms
and provisions thereof.
SECTION 5.6 EXISTENCE; MAINTENANCE OF PROPERTIES.
(1) WRP will do or cause to be done all things necessary to preserve and
keep in full force and effect its existence as a Maryland corporation and
Highlands' existence as a Colorado corporation. The Bond Issuer will do or cause
to be done all things necessary to preserve and keep in full force and effect
its existence as a Colorado nonprofit corporation. WRP and the Bond Issuer will
cause each of their respective Subsidiaries to do or cause to be done all things
necessary to preserve and keep in full force and effect its legal existence. WRP
and the Bond Issuer will do or cause to be done all things necessary to preserve
and keep in full force all of its rights and franchises and those of its
Subsidiaries. WRP and the Bond Issuer will, and will cause each of their
respective Subsidiaries to, continue to engage primarily in the businesses now
conducted by it and in related businesses.
(2) Account Parties (i) will cause all of their properties and those of
their respective Subsidiaries (including but not limited to Highlands) used or
useful in the conduct of its business or the business of such Subsidiaries to be
maintained and kept in good condition, repair and working order (ordinary wear
and tear excepted) and supplied with all necessary equipment, and (ii) will
cause to be made all necessary repairs, renewals, replacements, betterment and
improvements thereof in all cases in which the failure so to do would have a
material adverse effect on the condition of its properties or on the financial
condition, assets or operations of WRP and its Subsidiaries (taken as a whole),
or the Bond Issuer and its Subsidiaries, respectively.
SECTION 5.7 INSURANCE. WRP and the Bond Issuer will, at their expense,
procure and maintain or cause to be procured and maintained insurance covering
them, their respective Subsidiaries and their respective properties in such
amounts and against such risks and casualties as are customary for properties of
similar character and location, due regard being given to the type of
improvements thereon, their construction, location, use and occupancy.
SECTION 5.8 TAXES. WRP, the Bond Issuer and each Subsidiary of each of them
will duly pay and discharge, or cause to be paid and discharged, before the same
shall become overdue, all taxes, assessments and other governmental charges
imposed upon it and upon Phase I of the Development or other Real Estate, sales
and activities, or any part thereof, or upon the income or profits therefrom, as
well as all claims for labor, materials, or supplies that if unpaid might by law
become a lien or charge upon any of their respective property; provided that any
such tax, assessment, charge, levy or claim need not be paid if the validity or
amount thereof
<PAGE>
shall currently be contested in good faith by appropriate proceedings and if
WRP, the Bond Issuer or such Subsidiary shall have set aside on its books
adequate reserves with respect thereto; and provided, further, that forthwith
upon the commencement of proceedings to foreclose any lien that may have
attached as security therefor, WRP, the Bond Issuer and each of their respective
Subsidiaries either (i) will provide a bond issued by a surety reasonably
acceptable to the Bank and sufficient to stay all such proceedings or (ii) if no
such bond is provided, will pay each such tax, assessment, charge, levy or
claim.
SECTION 5.9 INSPECTION OF PROPERTIES AND BOOKS. WRP and the Bond Issuer
shall, and shall cause any of the Palomino Entities to, permit the Bank, or any
representative designated by the Bank, at Account Parties' expense, to visit and
inspect the Public Improvements, Phase I of the Development, the balance of the
Development or any of the other properties of the Bond Issuer or any of the
Palomino Entities, to examine the books of account of each of them and their
Subsidiaries (and to make copies thereof and extracts therefrom) and to discuss
the affairs, finances and accounts of each of them and their Subsidiaries with,
and to be advised as to the same by, its officers, all at such reasonable times
and intervals as the Bank may reasonably request. The Bank shall use good faith
efforts to coordinate such visits and inspections so as to minimize the
interference with and disruption to WRP's, the Bond Issuer's and/or Highland's
normal business operations.
SECTION 5.10 COMPLIANCE WITH LAWS, CONTRACTS, LICENSES, AND PERMITS. WRP
and the Bond Issuer will each comply with, and will cause each of its
Subsidiaries to comply in all respects with (i) all applicable laws and
regulations now or hereafter in effect wherever its business is conducted,
including all Environmental Laws, (ii) the provisions of its corporate charter,
partnership agreement or declaration of trust, as the case may be, and other
charter documents and bylaws, (iii) all agreements and instruments to which it
is a party or by which it or any of its properties may be bound, (iv) all
applicable decrees, orders, and judgments, and (v) all licenses and permits
required by applicable laws and regulations for the conduct of its business or
the ownership, use or operation of its properties, failure to comply with which
could have a material adverse effect on WRP, Bond Issuer or their respective
Subsidiaries. If at any time before the Expiration Date has occurred or any
amount is due or owing to the Bank under this Reimbursement Agreement or any
Related Document, any authorization, consent, approval, permit or license from
any officer, agency or instrumentality of any government shall become necessary
or required in order that any Account Party may fulfill any of its obligations
hereunder, any Account Party will immediately take or cause to be taken all
steps necessary to obtain such authorization, consent, approval, permit or
license and furnish the Bank with evidence thereof.
SECTION 5.11 FURTHER ASSURANCES. Each Account Party shall, and WRP shall
cause any of the Palomino Entities to, upon the request of the Bank, from time
to time, execute and deliver and, if necessary, file, register and record such
further financing statements, amendments, confirmation statements and other
documents and instruments and take such further action as may be reasonably
necessary to effectuate the provisions of this Reimbursement Agreement and the
Related Documents. The Bank shall be entitled to receive, when it deems
necessary, such information which shall include without limitation, all
financial or other information regarding the Subsidiaries of WRP as the Bank may
determine in its sole discretion
<PAGE>
to be related to the maintenance of the Letter of Credit. Except to the extent
it is exempt therefrom, Account Parties will pay or cause to be paid all filing,
registration and recording fees incident to such filing, registration and
recording, and all expenses incident to the preparation, execution and
acknowledgment of such instruments or further assurance, and all federal or
state fees and other similar fees, duties, imposts, assessments and charges
arising out of or in connection with, the execution and delivery of this
Reimbursement Agreement, the Related Documents and such instruments of further
assurance.
SECTION 5.12 SILVER MESA REDEMPTION. WRP intends to cause Silver Mesa at
Palomino Park LLC to repay its Indebtedness specified in Section 6.3(i), by
refinancing such loan with new Indebtedness in an amount not to exceed
$32,000,000. Upon such refinancing taking effect, if the Account Parties wish to
extinguish and remove the Assessment and Lien secured by the property owned by
Silver Mesa at Palomino Park, or if otherwise required pursuant to Section
6.10(4), the Account Party hereby undertakes to cause the redemption of the
Bonds in the amount of $2,070,000, and the Bank shall consent to such
redemption.
SECTION 5.13 MORE RESTRICTIVE AGREEMENTS. Without limiting the terms of
Section 6.3, should WRP enter into or modify any agreements or documents
pertaining to any existing or future Indebtedness, debt offering or equity
offering which agreements or documents includes covenants (whether affirmative
or negative), warranties, representations, defaults or events of default (or any
provision which may have the same practical effect as any of the foregoing)
which are individually or in the aggregate more restrictive against WRP, than
those set forth herein, WRP shall promptly notify the Bank, and if the Bank so
requests, WRP shall agree to amend this Reimbursement Agreement to include some
or all of such more restrictive provisions as determined by the Bank in its sole
discretion.
ARTICLE 6
NEGATIVE COVENANTS
Account Parties covenant and agree that, so long as the Expiration Date has
not occurred or any amount is due or owing to the Bank under this Reimbursement
Agreement or any Related Document, each of them shall comply with each of the
negative covenants contained in this Article 6 unless the Bank shall have given
its prior written consent:
SECTION 6.1 AMENDMENTS. Each Account Party shall not, and WRP shall not
permit any Subsidiary of WRP to amend, modify or supplement, or agree to any
amendment or modification of, or supplement to, any of the Related Documents or
the WRP Reimbursement Agreement to which it is a party. Each Account Party shall
not, and WRP shall not permit any Subsidiary of WRP to amend, modify or
supplement, or agree to any amendment or modification of, or supplement to, that
certain Operating Agreement of Red Canyon, dated as of April 17, 1996, that
certain Operating Agreement of Highlands, dated as of April 27, 1995 (as amended
by that First Amendment to Operating Agreement of Highlands, dated December 29,
1995) and that certain Deposit and Contract Administration Agreement, made as of
May 2, 1995, by
<PAGE>
and between the Feld Company and Highlands, if such amendment, modification or
supplement would have an adverse effect on the Bank or any Account Party's
ability to satisfy its obligations under this Reimbursement Agreement or any
Related Document or on Guarantor's ability to satisfy its obligations under the
Guaranty.
SECTION 6.2 OPTIONAL REDEMPTION. Except as provided in Section 5.12, the
Account Parties shall not cause or permit an optional redemption of the Bonds
pursuant to the Bond Indenture unless such optional redemption (a) will be
funded without a drawing on the Letter of Credit or (b) the Bank has consented
thereto in writing (which consent may be granted or withheld by the Bank in its
sole discretion).
SECTION 6.3 RESTRICTIONS ON INDEBTEDNESS. Bond Issuer and Highlands will
not, and will not permit any of their respective Subsidiaries to, create, incur,
assume, guarantee or be or remain liable, contingently or otherwise, with
respect to any Indebtedness other than:
(a) Indebtedness to the Bank and the holders of the Bonds arising
under any of the Reimbursement Agreement and the Related Documents, and the
documents related thereto, Indebtedness of Red Canyon in a principal amount
not to exceed $29,500,000, on terms similar to those applicable to the
construction financing for Phase I of the Development provided by
Nationsbank, the proceeds of which will be used to construct Phase II of
the Development;
(b) current liabilities of Account Parties or their respective
Subsidiaries incurred in the ordinary course of business but not incurred
through (i) the borrowing of money, or (ii) the obtaining of credit except
for credit on an open account basis customarily extended and in fact
extended in connection with normal purchases of goods and services;
(c) Indebtedness in respect of taxes, assessments, governmental
charges or levies and claims for labor, materials and supplies to the
extent that payment therefor shall not at the time be required to be made
in accordance with the provisions of Section 5.8;
(d) Indebtedness in respect of judgments or awards that have been in
force for less than the applicable period for taking an appeal so long as
execution is not levied thereunder or in respect of which the affected
Account Parties shall at the time in good faith be prosecuting an appeal or
proceedings for review and in respect of which a stay of execution shall
have been obtained pending such appeal or review;
(e) endorsements for collection, deposit or negotiation and warranties
of products or services, in each case incurred in the ordinary course of
business;
(f) Indebtedness of the Bond Issuer to WRP under the WRP Reimbursement
Agreement;
<PAGE>
(g) the mortgage loan to Park at Highlands LLC by Federal Home Loan
Mortgage Corporation in an amount not to exceed $34,500,000 pursuant to a
Mortgage Loan Agreement dated December 24, 1997;
(h) the mortgage loan to Red Canyon by Federal Home Loan Mortgage
Corporation in an amount not to exceed $27,000,000 pursuant to a Mortgage
Loan Agreement dated November 20, 1998;
(i) the loan to Silver Mesa at Palomino Park LLC by Bank of America,
National Association in an amount not to exceed $27,733,391 pursuant to a
Construction Loan Agreement dated December 18, 1998;
(j) the loan to Green River at Palomino Park LLC by Bank of America,
National Association in an amount not exceeding US$39,400,000 pursuant to a
Construction Loan Agreement dated February 8, 2000; and
(k) Indebtedness to refinance the loan specified in (i) above.
SECTION 6.4 RESTRICTIONS ON LIENS ETC. Bond Issuer and Highlands will not,
and will not permit any of their respective Subsidiaries to, (i) create or incur
or suffer to be created or incurred or to exist any lien, encumbrance, mortgage,
pledge, charge, restriction or other security interest of any kind upon any of
its property or assets of any character whether now owned or hereafter acquired,
or upon the income or profits therefrom; (ii) transfer any of its property or
assets or the income or profits therefrom for the purpose of subjecting the same
to the payment of Indebtedness or performance of any other obligation in
priority to payment of its general creditors; (iii) acquire, or agree or have an
option to acquire, any property or assets upon conditional sale or other title
retention or purchase money security agreement, device or arrangement; (iv)
suffer to exist for a period of more than 30 days after the same shall have been
incurred any Indebtedness or claim or demand against it that if unpaid might by
law or upon bankruptcy or insolvency, or otherwise, be given any priority
whatsoever over its general creditors; (v) sell, assign, pledge or otherwise
transfer any accounts, contract rights, general intangibles, chattel paper or
instruments, with or without recourse; or (vi) incur or maintain any obligation
to any holder of Indebtedness of any Account Party or such Subsidiary which
prohibits the creation or maintenance of any lien securing the obligations
thereof (collectively "Liens"); provided that, the Account Parties and any
Subsidiary thereof may create or incur or suffer to be created or incurred or to
exist:
(a) liens in favor of WRP or its Subsidiaries on all or part of the
assets of Subsidiaries securing Indebtedness owing by such Subsidiaries to
their parent;
(b) liens on properties to secure taxes, assessments and other
governmental charges or claims for labor, material or supplies in respect
of obligations not overdue;
(c) liens on properties in respect of judgments, awards or
indebtedness, the Indebtedness with respect to which is permitted by
Section 6.3(d), Section 6.3(f) or Section 4.5;
<PAGE>
(d) encumbrances on properties consisting of easements, rights of way,
zoning restrictions, restrictions on the use of real property and defects
and irregularities in the title thereto, landlord's or lessor's liens under
leases to which any Account Party or a Subsidiary thereof is a party, and
other minor liens or encumbrances none of which interferes materially with
the use of the property affected in the ordinary conduct of the business of
the Account Parties and their Subsidiaries, which defects do not
individually or in the aggregate have a materially adverse effect on the
business of any Account Party individually or of each Account Party and its
Subsidiaries on a consolidated basis;
(e) liens on Real Estate and Short-term Investments securing
Indebtedness permitted by Section 6.3;
(f) liens in favor of the Bank and liens in favor of the lender to the
Palomino Entities securing Indebtedness of the Palomino Entities permitted
under Section;
(g) liens arising under the Assessment and Lien; and
(h) "Right of First Offer" made to Equity Residential Property Trust
with respect to apartment villages owned by Park at Highlands LLC and Red
Canyon.
SECTION 6.5 RESTRICTIONS ON INVESTMENTS. Neither the Bond Issuer or
Highlands will not, and will not permit any of their respective Subsidiaries to,
make or permit to exist or to remain outstanding any Investment except
Investments in:
(a) marketable direct or guaranteed obligations of the United States
of America that mature within one (1) year from the date of purchase by
such Account Party or such Subsidiaries;
(b) marketable direct obligations of any of the following: Federal
Home Loan Mortgage Corporation, Student Loan Marketing Association, Federal
Home Loan Banks, Federal National Mortgage Association, Government National
Mortgage Association, Bank for Cooperatives, Federal Intermediate Credit
Banks, Federal Financing Banks, Export-Import Bank of the United States,
Federal Land Banks, or any other agency or instrumentality of the United
States of America;
(c) demand deposits, certificates of deposit, bankers acceptances and
time deposits of United States banks having total assets in excess of
$100,000,000; provided, however, that the aggregate amount at any time so
invested with any single bank having total assets of less than
$1,000,000,000 will not exceed $200,000;
(d) securities commonly known as "commercial paper" issued by a
corporation organized and existing under the laws of the United States of
America or any State which at the time of purchase are rated by Moody's or
by Standard & Poor's at not less than "P 1" if then rated by Moody's, and
not less than "A 1", if then rated by Standard & Poor's;
<PAGE>
(e) mortgage-backed securities guaranteed by the Government National
Mortgage Association, the Federal National Mortgage Association or the
Federal Home Loan Mortgage Corporation and other mortgage-backed bonds
which at the time of purchase are rated by Moody's or by Standard & Poor's
at not less than "Aa" if then rated by Moody's and not less than "AA" if
then rated by Standard & Poor's;
(f) repurchase agreements having a term not greater than 90 days and
fully secured by securities described in the foregoing Sections 6.5.(a),
6.5(b) or 6.5(e) with banks described in the foregoing Section 6.5(c) or
with financial institutions or other corporations having total assets in
excess of $500,000,000;
(g) shares of so-called "money market funds" registered with the SEC
under the Investment Company Act of 1940 which maintain a level per-share
value, invest principally in investments described in the foregoing
Sections 6.5(a) through 6.5(f) and have total assets in excess of
$50,000,000; and
(h) Investments in WRP, Bond Issuer or the Palomino Entities.
SECTION 6.6 MERGER, CONSOLIDATION. Neither Bond Issuer nor Highlands will,
or will permit any of their respective Subsidiaries to, become a party to any
merger or consolidation without the prior written consent of the Bank. WRP will
not, and will not permit any of its respective Subsidiaries to, become a party
to any merger or consolidation except (i) the merger or consolidation of one or
more Subsidiaries of WRP with and into WRP, with WRP being the surviving entity,
and (ii) the merger or consolidation of two or more Subsidiaries of WRP;
provided however, that any such merger or consolidation shall not adversely
affect the effectiveness of the Guaranty.
SECTION 6.7 SALE AND LEASEBACK. Neither Bond Issuer nor Highlands will, or
will permit any of their respective Subsidiaries to, enter into any arrangement,
directly or indirectly, whereby Bond Issuer and Highlands or any Subsidiary
thereof shall sell or transfer any Real Estate owned by it in order that then or
thereafter Bond Issuer and Highlands or any Subsidiary of either of them shall
lease back such Real Estate.
SECTION 6.8 COMPLIANCE WITH ENVIRONMENTAL LAWS.
(1) Account Parties will not, and will not permit any of their Subsidiaries
(including without limitation Highlands) to, do any of the following: (a) use
any portion of Phase I of the Development or any of the Real Estate or any
portion thereof as a facility for the handling, processing, storage or disposal
of Hazardous Substances, except for small quantities of Hazardous Substances
used in the ordinary course of business and in compliance with all applicable
Environmental Laws, (b) cause or permit to be located on any portion of Phase I
of the Development or any of the Real Estate any underground tank or other
underground storage receptacle for Hazardous Substances except in full
compliance with Environmental Laws, (c) generate any Hazardous Substances on any
portion of Phase I of the
<PAGE>
Development or any of the Real Estate except in full compliance with
Environmental Laws, (d) conduct any activity at any portion of Phase I of the
Development or any Real Estate or use any portion of Phase I of the Development
or any Real Estate in any manner so as to cause a Release of Hazardous
Substances on, upon or into Phase I of the Development or the Real Estate or any
surrounding properties or any threatened Release of Hazardous Substances which
might give rise to liability under CERCLA or any other Environmental Law, or (e)
directly or indirectly transport or arrange for the transport of any Hazardous
Substances (except in compliance with all Environmental Laws).
(2) Account Parties shall:
(a) in the event of any change in Environmental Laws governing the
assessment, release or removal of Hazardous Substances, which change would
lead a prudent lender to require additional testing to avail itself of any
statutory insurance or limited liability, take all action (including,
without limitation, the conducting of engineering tests at the sole expense
of Account Parties) to confirm that no Hazardous Substances are or ever
were Released or disposed of on Phase I of the Development or the Real
Estate; and
(b) if any Release or disposal of Hazardous Substances shall occur or
shall have occurred on Phase I of the Development or the Real Estate
(including without limitation any such Release or disposal occurring prior
to the acquisition of such Development or Real Estate by any Account
Party), cause the prompt containment and removal of such Hazardous
Substances and remediation of Phase I of the Development or the Real Estate
in full compliance with all applicable laws and regulations and to the
satisfaction of the Bank; provided, that Account Parties shall be deemed to
be in compliance with Environmental Laws for the purpose of this subsection
(b) so long as it or a responsible third party with sufficient financial
resources is taking reasonable action to remediate or manage any event of
noncompliance to the satisfaction of the Bank and no action shall have been
commenced by any enforcement agency. The Bank may engage its own
Environmental Engineer to review the environmental assessments and Account
Parties' compliance with the covenants contained herein.
At any time after an Event of Default shall have occurred hereunder, or, whether
or not an Event of Default shall have occurred, at any time that the Bank shall
have reasonable grounds to believe that a Release or threatened Release of
Hazardous Substances may have occurred, relating to Phase I of the Development
or any Real Estate, or that any of Phase I of the Development or the Real Estate
is not in compliance with the Environmental Laws, the Bank may at its election
(and will at the request of the Bank) obtain such environmental assessments of
Phase I of the Development or such Real Estate prepared by an Environmental
Engineer as may be necessary or advisable for the purpose of evaluating or
confirming (i) whether any Hazardous Substances are present in the soil or water
at or adjacent to Phase I of the Development or such Real Estate and (ii)
whether the use and operation of Phase I of the Development or such Real Estate
comply with all Environmental Laws. Environmental assessments may include
detailed visual inspections of Phase I of the Development or such Real Estate
including, without limitation, any and all storage areas, storage tanks, drains,
dry wells and leaching areas, and the taking of soil samples, as well as such
other investigations or analyses as are necessary or appropriate for a complete
determination of the compliance of such Real Estate and the use and operation
thereof
<PAGE>
with all applicable Environmental Laws. All such environmental assessments shall
be at the sole cost and expense of Account Parties.
SECTION 6.9 DISTRIBUTIONS. WRP will not make any Distributions which would
cause it to violate the provisions of Section 6.17.
SECTION 6.10 ASSET SALES.
(1) WRP shall not sell, transfer, or otherwise dispose of any interest in
Highlands unless after giving effect to such disposition, WRP shall hold at
least fifty-one percent (51%) of the Voting Interests of Highlands, and
Highlands shall not sell, transfer, or otherwise dispose of any interest in any
of the Palomino Entities or any other limited liability company formed to
develop any phase of the Development that is or will be subject to the
Assessment and Lien, unless, after giving effect to such disposition, Highlands
shall hold at least fifty-one percent (51%) of the Voting Interests of the
Palomino Entities or such other limited liability companies (as applicable), in
any case, unless consented to in writing by the Bank.
(2) WRP shall not sell, transfer or otherwise dispose of any of its
interest whether direct or indirect in Highlands, WPHC and/or Red Canyon or any
of its interest in any portion of the Development without the Bank's prior
written consent.
(3) Highlands shall not sell, transfer or otherwise dispose of Phase I of
the Development or any portion thereof or any of its interest in any other
portion of the Development without the Bank's prior written consent.
(4) Notwithstanding the foregoing, the Bank agrees that it will not
unreasonably withhold its consent to the sale of one or more phases of the
Development as condominiums, subject to an allocable redemption of the Bonds
prior to conversion, and a corresponding reduction of the stated amount of the
letter of credit issued by the Bank; provided, however, that the amount of such
redemption shall be authorized by the Bank in advance of such sale.
SECTION 6.11 [RESERVED].
SECTION 6.12 [RESERVED] .
SECTION 6.13 RESTRICTION ON PREPAYMENT OF INDEBTEDNESS. Bond Issuer shall
not prepay the principal amount, in whole or in part, of any Indebtedness other
than the obligations to the Bank under the Reimbursement Agreement and the
Related Documents; provided, however, that after the occurrence of an Event of
Default, Bond Issuer may prepay the Indebtedness described in Section 6.3(b) in
the ordinary course of business.
SECTION 6.14 [RESERVED].
SECTION 6.15 RESTRICTIONS UPON MODES AND INTEREST PERIODS FOR BONDS. Each
Account Party covenants that, until after the Expiration Date: (a) the Account
Parties will not
<PAGE>
permit any Rate Period to be in effect which has a duration of longer than two
hundred and ten (210) days or which ends after the Expiration Date; (b) the
Account Parties will not permit a particular Rate Period to be in effect with
respect to a particular Rate Mode if the initial principal amount of the Bonds
covered by such Rate Period and Rate Mode is less than $3,000,000; and (c) the
Account Parties will not permit the Bonds to bear interest at a rate other than
the Weekly Rate (as defined in the Bond Indenture) without the prior written
consent of the Bank.
SECTION 6.16 ACCOUNTING METHODS AND FISCAL YEAR. Account Parties will not
and will not permit any of their Subsidiaries to adopt, permit or consent to any
change in accounting practices other than as required by generally accepted
accounting principles.
SECTION 6.17 FINANCIAL COVENANTS OF WRP.
(1) MINIMUM SHAREHOLDER'S EQUITY. WRP will not, at the end of any fiscal
quarter, permit its Shareholder's Equity to be less than $200,000,000 (the
"Shareholders' Equity Threshold"); provided, however, the Shareholders' Equity
Threshold shall be reduced by the aggregate cost of the shares of common stock
of WRP repurchased by WRP after the date hereof, provided that in no event shall
the Shareholders' Equity Threshold be reduced to less than $180,000,000.
(2) CONSOLIDATED EBITDA . WRP will not, at the end of any fiscal quarter,
permit WRP's Consolidated EBITDA for the Test Period minus the Capital
Improvement Reserve for the Test Period to be less than 1.35 times the WRP
Consolidated Debt Service for the Test Period.
(3) ASSETS TO LIABILITIES RATIO. WRP, at the end of any fiscal quarter will
not permit the ratio of its Consolidated Total Liabilities to its Consolidated
Total Assets to exceed 0.55 to 1.
SECTION 6.18 OFFICIAL STATEMENT AND OTHER DOCUMENTS. Other than the
sections of the Official Statement entitled "THE LETTER OF CREDIT" and "THE
REIMBURSEMENT AGREEMENT" and the references to and summaries of such Sections
throughout the Official Statement, Account Parties shall not include or permit
to be included, any material or reference relating to the Bank or the Letter of
Credit in any offering circular or any other document or any tombstone, unless
such material or reference is approved in writing by the Bank prior to its
inclusion therein; provided, that Account Parties may disclose the existence of
the Letter of Credit to the extent required in connection with their reporting
or disclosure requirements; or distribute, or permit to be distributed or used,
any offering circular unless a copy of such offering circular has been furnished
to the Bank.
SECTION 6.19 REMARKETING. Account Parties shall not permit the Remarketing
Agent for the Bonds to remarket any Bonds, (i) if an Event of Default shall have
occurred and be continuing and the Bank shall have instructed Account Parties
not to permit the remarketing of such Bonds, or (ii) at a price less than the
principal amount thereof plus accrued interest, if any, thereon to the
respective dates of remarketing.
<PAGE>
SECTION 6.20 SUBSTITUTE CREDIT FACILITY. Account Parties shall not
authorize, permit or consent to any substitution of another credit or liquidity
facility for the Letter of Credit unless (a) there shall be paid to the Bank,
prior to or simultaneously with such substitution, any and all amounts due and
owing and to become due and owing to the Bank (including without limitation all
unpaid Drawings, Liquidity Drawing Amounts, LC Loans and the pro rata portion of
all accrued and unpaid fees) under this Reimbursement Agreement and the other
Related Documents, and (ii) a substitution occurs for the Letter of Credit.
SECTION 6.21 REMARKETING AGENT AND BOND TRUSTEE. Account Parties shall not
appoint or permit or suffer to be appointed any successor Remarketing Agent or
successor Bond Trustee without the prior written approval of the Bank (which
approval shall not be unreasonably withheld); or enter into any successor
Remarketing Agreement without the prior written approval of the Bank (which
approval shall not be withheld if and so long as such successor Remarketing
Agreement contains provisions that are substantially the same as those contained
in, and affords protection to the rights and interests of the Bank that is
substantially the same as that afforded by, the predecessor Remarketing
Agreement, as the case may be). Any approvals required from the Bank hereunder
shall be given or denied within 10 days of the request therefor, accompanied, in
the case of a successor Remarketing Agreement, by a draft of such proposed
Remarketing Agreement in final form, and the failure of the Bank to respond to
such request by the close of business on the tenth day shall be deemed, on the
eleventh day, to constitute consent by the Bank hereunder. Prior to its
appointment, any substitute Bond Trustee must sign an agreement assuming the
obligations of its predecessor under the Pledge Agreement.
ARTICLE 7
EVENTS OF DEFAULT
SECTION 7.1 EVENTS OF DEFAULT. The occurrence of any of the following
events (including the expiration of any specified time) shall constitute an
"EVENT OF DEFAULT," unless waived by the Bank in writing:
(a) failure of any Account Party to pay when due any amount due under
this Reimbursement Agreement or under any of the Related Documents other
than amounts drawn under the Letter of Credit pursuant to a Liquidity
Drawing or an LC Loan;
(b) failure of the Account Parties to pay when due and payable,
whether at the stated date of maturity or any accelerated date of maturity
or at any other date fixed for payment, any amount drawn under the Letter
of Credit pursuant to a Liquidity Drawing or an LC Loan, except as
permitted by Section 2.2;
(c) failure of any Account Party to observe or perform its respective
obligations under the covenants, conditions or provisions set forth in
Sections 5.4, 6.1, 6.2, 6.10(2), 6.10(3), 6.15, or 6.19 of this
Reimbursement Agreement; or failure of WRP to observe or perform any of the
covenants set forth in Section 6.17 and to remedy such failure within 15
Business Days of such failure;
<PAGE>
(d) failure of any Account Party to observe or perform any of the
covenants, conditions or provisions of this Reimbursement Agreement (other
than as specified in Sections 7.1(a), (b) and (c), above), and to remedy
such failure within 15 Business Days of such failure;
(e) any representation or warranty made by any Account Party or its
Subsidiaries (including without limitation Highlands) herein or in any
Related Documents, certificate, financial or other statement furnished
pursuant to this Reimbursement Agreement or other Related Documents shall
prove to have been untrue or incomplete in any material respect when made;
(f) the occurrence and continuation of a default or an event of
default under the Bond Indenture or any of the other Related Documents;
(g) (i) default by any Account Party in the payment of the principal
of or interest on any obligation or Indebtedness owed to the Bank; (ii) the
default by the Bond Issuer in the payment of the principal of or interest
on any other obligation for borrowed money, credit received or other
Indebtedness, as and when the same shall become due, or failure to observe
or perform any material term, covenant or agreement contained in any
agreement by which it is bound, evidencing or securing any such borrowed
money or credit received or other Indebtedness for such period of time as
would permit (assuming the giving of appropriate notice is requested) the
holder or holders thereof or of any obligations issued thereunder to
accelerate the maturity thereof, or (iii) the default by WRP with respect
to any Indebtedness with an aggregate outstanding principal amount greater
than $10,000,000, in the payment of the principal of or interest on any
other obligation for borrowed money, credit received or other Indebtedness,
as and when the same shall become due, or failure to observe or perform any
material term, covenant or agreement contained in any agreement by which it
is bound, evidencing or securing any such borrowed money or credit received
or other Indebtedness for such period of time as would permit (assuming the
giving of appropriate notice is requested) the holder or holders thereof or
of any obligations issued thereunder to accelerate the maturity thereof;
(h) entry or filing of any judgment, writ or warrant of attachment or
of any similar process against any Account Party or any of their respective
Subsidiaries or against any property of any Account Party or any such
Subsidiary, in an amount in excess of (i) the sum of $250,000 with respect
to Bond Issuer or its Subsidiaries, or (ii) $1,000,000 with respect to WRP
or any of its Subsidiaries, or any judgment creditor shall levy upon assets
or properties of either Account Party or any of their respective
Subsidiaries;
(i) filing of a petition or application for the appointment of a
trustee or other custodian, liquidator or receiver in bankruptcy, custodian
or receiver for any Account Party or any of their respective Subsidiaries
(limited to Highlands and its Subsidiaries with respect to WRP) or all or
part of their respective assets and property or any thereof or a case or
other proceeding shall be commenced against any Account Party or any of
<PAGE>
their respective Subsidiaries (limited to Highlands and its Subsidiaries
with respect to WRP) under any bankruptcy, reorganization, arrangement,
insolvency, readjustment of debt, dissolution of liquidation or similar law
of any jurisdiction, now or hereafter in effect, and any Account Party or
any of their respective Subsidiaries (limited to Highland and its
Subsidiaries with respect to WRP) shall indicate its approval thereof,
consent thereto or acquiescence therein or such petition, application, case
or proceeding shall not have been dismissed within 60 days following the
filing or commencement thereof;
(j) institution of bankruptcy, reorganization, arrangement, insolvency
or liquidation proceedings, or other proceedings for relief under any
bankruptcy law or similar law for the relief of debtors, by or against any
Account Party or any of their respective Subsidiaries (limited to Highlands
and its Subsidiaries with respect to WRP) (other than bankruptcy
proceedings instituted by any Account Party against third parties), and, if
instituted against any Account Party or any of their respective
Subsidiaries (limited to Highlands and its Subsidiaries with respect to
WRP), allowance or consent by such Person to such proceedings or failure to
obtain dismissal, stay or other nullification within thirty (30) days after
such institution;
(k) entrance of a decree or order appointing any such trustee,
custodian, liquidator or receiver or adjudicating any Account Party or any
of their respective Subsidiaries (limited to Highland and its Subsidiaries
with respect to WRP) bankrupt or insolvent, or approving a petition in any
such case or other proceeding, or a decree or order for relief is entered
in respect of any Account Party or any of their respective Subsidiaries
(limited to Highlands and its Subsidiaries with respect to WRP), in each
case of the foregoing in an involuntary case under federal bankruptcy laws
as now or hereafter constituted;
(l) (A) remaining in force, undischarged, unsatisfied and unstated,
for more than 30 days, whether or not consecutive, any uninsured final
judgment against the Bond Issuer, Highlands or any of their respective
Subsidiaries that, with other outstanding uninsured final judgments,
undischarged, against the Bond Issuer, Highlands and their Subsidiaries
exceeds in the aggregate $250,000; or (B) remaining in force, undischarged,
unsatisfied and unstayed, for more than 60 days, whether or not
consecutive, any uninsured final judgment against WRP or any Material
Subsidiary of WRP that, with other outstanding uninsured final judgments,
undischarged, against WRP and its Material Subsidiaries exceeds, in the
aggregate, $1,000,000.
(m) cancellation, termination, revocation or rescission of this
Reimbursement Agreement or of the Related Documents otherwise than in
accordance with the terms thereof or with the express prior written
agreement, consent or approval of the Bank, or any action at law, suit in
equity or other legal proceeding to cancel, revoke or rescind any of this
Reimbursement Agreement or the Related Documents shall be commenced by or
on behalf of any Account Party or any of its holders of Voting Interests,
any of the Palomino Entities, the Bond Trustee or the Remarketing Agent or
any Bond holder or any court or any other governmental or regulatory
authority or agency of competent
<PAGE>
jurisdiction shall make a determination that, or issue a judgment, order,
decree or ruling to the effect that, any one or more of this Reimbursement
Agreement or any of the Related Documents is illegal, invalid or
unenforceable in accordance with the terms thereof in any material respect
as determined by the Bank;
(n) any dissolution, termination, partial or complete liquidation,
merger or consolidation of any Account Party or any of the Palomino
Entities or any sale, transfer or other disposition of the assets of any
Bond Issuer or Highlands or any of their respective Subsidiaries or any
sale, transfer, or other disposition of a substantial portion of the assets
of WRP, other than as permitted under the terms of this Reimbursement
Agreement or the Related Documents;
(o) any suit or proceeding shall be filed against any Account Party or
any of its Subsidiaries or any of their respective assets which in the good
faith business judgment of the Bank after giving consideration to the
likelihood of success of such suit or proceeding and the availability of
insurance to cover any judgment with respect thereto and based on the
information available to them, if adversely determined, would have a
materially adverse affect on the ability of such Account Party or any of
the Palomino Entities to perform each and every one of its obligations
under and by virtue of this Reimbursement Agreement and the Related
Documents;
(p) Any Account Party shall be indicted for a federal crime, a
punishment for which could include the forfeiture of any assets of any of
them;
(q) Jeffrey H. Lynford shall cease to be the Chairman of the Board of,
and Edward Lowenthal shall cease to be the President of, WRP, and a
competent and experienced successor for each such Person shall not be
approved by the Bank within six (6) months of such event;
(r) this Reimbursement Agreement or any of the Related Documents
ceases to be valid and binding on any Account Party or any of the Palomino
Entities (as applicable); or this Reimbursement Agreement or any of the
Related Documents is declared null and void, or the validity or
enforceability thereof is contested by any Account Party or any of the
Palomino Entities (as applicable); or any Account Party or any of the
Palomino Entities (as applicable); denies it has any or further liability
under this Reimbursement Agreement or any of the Related Documents;
(s) the substitution or replacement of the Letter of Credit with an
Alternate Letter of Credit (as defined in the Bond Indenture) while any
amounts are owed to the Bank hereunder or under the Letter of Credit;
(t) default under the Guaranty by the Guarantor; and
(u) default by the Guarantor in the payment of the principal of or
interest on any obligations or Indebtedness under the Revolving Credit
Agreement (as defined in the Guaranty); or the occurrence and continuation
of a default under, or the failure to observe
<PAGE>
or perform any material term, covenant or agreement contained in the
Revolving Credit Agreement;
then, and in any such event, the Bank may, by notice in writing to the Account
Parties, declare all amounts owing with respect to this Reimbursement Agreement
and the Related Documents to be, and they shall thereupon forthwith become,
immediately due and payable without presentment, demand, protest or other notice
of any kind, all of which are hereby expressly waived by each Account Party;
provided that in the event of any Event of Default specified in Section 7.1(j),
or 7.1(k) or 7.1(l), all such amounts shall become immediately due and payable
automatically and without any requirement of notice from the Bank.
SECTION 7.2 RIGHTS AND REMEDIES. Upon the occurrence and continuation of an
Event of Default, the Bank, in its sole discretion, (a) may by notice to the
Account Parties and the Bond Trustee, declare the obligations of the Account
Parties hereunder and under the Promissory Notes to be immediately due and
payable, and the same shall thereupon become immediately due and payable
(provided that, the obligations of the Account Parties hereunder shall be and
become automatically and immediately due and payable without such notice upon
the occurrence of an Event of Default described in Section 7.1(j), 7.1(k) or
7.1(l) above), without demand, presentment, protest or further notice of any
kind, all of which are hereby expressly waived by each Account Party, (b) may
deliver to the Bond Trustee written notice that an Event of Default has been
declared under this Reimbursement Agreement and that the Letter of Credit will
terminate ten (10) days after receipt of such notice together with a written
request that the Bonds be accelerated, (c) may cure any default, event of
default or event of nonperformance under this Reimbursement Agreement or under
any of the Related Documents (in which event the Account Parties shall reimburse
the Bank therefor pursuant to Section 2.12 hereof), (d) may direct the Bond
Trustee to cause a mandatory tender of the Bonds pursuant to Section 4.02(c) of
the Bond Indenture, (e) may direct the Account Parties not to permit or the
Remarketing Agent to cease remarketing the Bonds, or (f) may exercise any other
rights or remedies available under this Reimbursement Agreement, any Related
Document, any other agreement or at law or in equity. The rights and remedies of
the Bank specified herein are for the sole and exclusive benefit, use and
protection of the Bank, and the Bank is entitled, but shall have no duty or
obligation to any Account Party, the Bond Trustee, the Bondholders or otherwise,
(i) to exercise or to refrain from exercising any right or remedy reserved to
the Bank hereunder, or (ii) to cause the Bond Trustee or any other party to
exercise or to refrain from exercising any right or remedy available to it under
any of the Related Documents.
ARTICLE 8
NATURE OF OBLIGATIONS; INDEMNIFICATION
SECTION 8.1 OBLIGATIONS ABSOLUTE. The obligations of each Account Party
under this Reimbursement Agreement shall be absolute, unconditional and
irrevocable, and shall not be subject to any right of setoff or counterclaim
against the Bank or any Participant, and shall be paid or performed strictly in
accordance with the terms of this Reimbursement Agreement and
<PAGE>
the other Related Documents under all circumstances whatsoever, including
without limitation the following circumstances: (a) any lack of validity or
enforceability of this Reimbursement Agreement or any Related Document; (b) any
amendment or waiver of, or any consent to departure from, all or any of the
Related Documents, other than, with respect to any particular obligation, the
specific waiver by the Bank of such particular obligation under such Related
Document; (c) the existence of any claim, set-off, defense or other right which
any Account Party may have at any time against the Bond Trustee, any beneficiary
or any transferee of the Letter of Credit (or any Persons for whom the Bond
Trustee, any such beneficiary or any such transferee may be acting), the Bank or
any other Person, whether in connection with this Reimbursement Agreement, any
Related Document, the transactions contemplated herein or therein or any
unrelated transaction; (d) any breach of contract or dispute among or between
any Account Party, the Palomino Entities, the Bond Trustee, the Remarketing
Agent, the Guarantor, the Bank or any other Person; (e) any certificate,
statement or any other document presented under the Letter of Credit proving to
be forged, fraudulent, invalid or insufficient in any respect or any statement
therein being untrue or inaccurate in any respect (unless the Account Parties
prove that any Bank action taken in reliance on such certificate, statement or
other document constituted gross negligence or willful misconduct); (f) any
non-application or misapplication by the Bond Trustee of the proceeds of any
Drawing under the Letter of Credit or any other act or omission of the Bond
Trustee, the Remarketing Agent or any other Person in connection with the Letter
of Credit; (g) payment by the Bank under the Letter of Credit against
presentation of a certificate which does not comply with the terms of the Letter
of Credit; provided that such payment by the Bank shall not have constituted
gross negligence or willful misconduct of the Bank; (h) any extension of time
for or delay, renewal or compromise of or other indulgence or modification
granted or agreed to by the Bank with or without notice to or approval by the
Account Parties with respect to the Banking Arrangements other than, with
respect to any particular obligation or cost, the specific modification to the
Account Parties by the Bank of such particular obligation or cost; or (i) any
other circumstance or happening whatsoever, whether or not similar to any of the
foregoing, provided that such circumstance or happening shall not have
constituted gross negligence or willful misconduct of the Bank.
SECTION 8.2 CONTINUING OBLIGATION. This Reimbursement Agreement is a
continuing obligation, shall survive the expiration of the Letter of Credit and
shall (a) be binding upon the Bank, the Account Parties and their respective
successors and assigns, and (b) inure to the benefit of and be enforceable by
the Bank and its successors, transferees and assigns; provided that neither WRP
nor the Bond Issuer may assign all or any part of this Reimbursement Agreement
without the prior written consent of the Bank.
SECTION 8.3 LIABILITY OF THE BANK. Account Parties assume all risks of the
acts or omissions of the Bond Trustee and any transferee of the Letter of Credit
with respect to its use of the Letter of Credit. Neither the Bank nor any of its
officers or directors shall be liable or responsible for: (a) the use which may
be made of the Letter of Credit or for any acts or omissions of the Bond Trustee
and any beneficiary or transferee in connection therewith; (b) any reference
which may be made to this Reimbursement Agreement or the Letter of Credit in any
agreements, instruments or other documents; (c) the validity, sufficiency or
genuineness of documents, or of any endorsement(s) thereon, even if such
documents should in fact prove to be
<PAGE>
in any or all respects invalid, insufficient, fraudulent or forged; (d) payment
by the Bank against presentation of documents which do not comply with the terms
of the Letter of Credit, including failure of any documents to bear any
reference or adequate reference to the Letter of Credit; or (e) any other
circumstances whatsoever in making or failing to make payment under the Letter
of Credit. Without limiting the foregoing, the Bank may accept any document that
appears on its face to be in order, without responsibility for further
investigation. The determination of whether a drawing has been made under the
Letter of Credit prior to the Expiration Date or whether a drawing made under
the Letter of Credit is in proper and sufficient form shall be made by the Bank
in its sole discretion, which determination shall be conclusive and binding upon
Account Parties to the extent permitted by law except to the extent Account
Parties proves that such determination constituted gross negligence or willful
misconduct of the Bank. Account Parties hereby waive any right to object to any
payment made under the Letter of Credit with regard to a drawing that is in the
form provided in the Letter of Credit, but which varies with respect to
punctuation, capitalization, spelling or similar matters of form.
Notwithstanding the foregoing, the Bank shall be liable to Account Parties for
acts or events described in subsections (a) through (e) above to the extent, but
only to the extent, of any direct, as opposed to indirect or special or
consequential, damages, suffered by Account Parties which Account Parties proves
were caused by: (i) the gross negligence or willful misconduct of the Bank, in
determining whether a drawing made under the Letter of Credit complies with the
terms and conditions therefor stated in the Letter of Credit, or (ii) the gross
negligence or willful failure of the Bank to pay under the Letter of Credit
after a drawing by the Bond Trustee strictly complying with the terms and
conditions of the Letter of Credit; provided, however, that the maximum amount
of damages recoverable by Account Parties as provided above is expressly limited
to the Stated Amount of the Letter of Credit.
SECTION 8.4 INDEMNIFICATION. In addition to any and all rights of
reimbursement, indemnification, subrogation or any other rights pursuant hereto
or under law or equity, WRP and the Bond Issuer, jointly and severally, hereby
agree to indemnify and hold harmless the Bank and its officers, directors and
agents (each an "INDEMNIFIED PARTY") from and against any and all claims,
damages, losses, liabilities, reasonable costs or expenses whatsoever (including
attorneys' fees) which the Indemnified Party may incur (or which may be claimed
against the Indemnified Party by any person or entity whatsoever) by reason of
or in connection with the execution, delivery and performance of this
Reimbursement Agreement or any of the Related Documents or any other matter
arising therefrom, including, without limitation, any of the following: (a) any
untrue statement or alleged untrue statement of any material fact contained or
incorporated by reference in the Official Statement (other than information
relating to the Bank and provided by the Bank for inclusion therein) or the
omission or alleged omission to state in the Official Statement of a material
fact necessary to make such statements, in the light of the circumstances under
which they are or were made, not misleading; (b) the execution and delivery or
transfer of, or payment or failure to pay under, the Letter of Credit; (c) the
issuance and sale of the Bonds; or (d) the use of the proceeds of the Bonds;
provided that no Account Party shall be required to indemnify the Indemnified
Party for any claims, damages, losses, liabilities, costs or expenses to the
extent, but only to the extent, caused by (A) the willful misconduct of the
Indemnified Party or (B) gross negligence of the Indemnified Party. If any
proceeding shall be brought or threatened against an Indemnified Party by reason
of or in connection with the events
<PAGE>
described above (except as otherwise provided in (A) or (B) above), the
Indemnified Party shall promptly notify the Account Parties in writing and the
Account Parties shall assume the defense thereof, including the employment of
counsel and the payment of all costs of litigation. Notwithstanding the
preceding sentence, the Indemnified Party shall have the right to employ its own
counsel and to determine its own defense of such action in any such case, but
the fees and expenses of such counsel shall be at the expense of the Indemnified
Party unless (i) the employment of such counsel shall have been authorized in
writing by an Account Party or (ii) neither Account Party, after due notice of
the action, shall have employed counsel to have charge of such defense, in
either of which events the reasonable fees and expenses of counsel for the
Indemnified Party shall be borne by the Account Party. The Account Party shall
not be liable for any settlement of any such action effected without its
consent. Nothing under this Section 8.4 is intended to limit payment obligations
of WRP or the Bond Issuer.
SECTION 8.5 TELECOPIED DOCUMENTS. At the request of Account Parties, the
Letter of Credit provides that demands for payment thereunder may be presented
to the Bank by, among other methods, telecopy. The Account Parties acknowledge
and assume all risks relating to the use of such telecopied demands for payment
and agree that their obligations under this Reimbursement Agreement and the
Related Documents shall remain absolute, unconditional and irrevocable as
provided in Section 8.1 above if the Bank honors such telecopied demands for
payment.
ARTICLE 9
ISSUANCE, TRANSFER, REDUCTION
OR EXTENSION OF LETTER OF CREDIT
SECTION 9.1 ISSUANCE. Subject to the terms and conditions of this
Reimbursement Agreement, the Bank agrees to issue the Letter of Credit to the
Bond Trustee in substantially the form of Exhibit A hereto, having a term
beginning on the Closing Date and ending on the Expiration Date and having a
Stated Amount as set forth therein, as such Stated Amount may be reduced and
reinstated in accordance with the terms of the Letter of Credit.
SECTION 9.2 TRANSFER, REDUCTION AND REINSTATEMENT. The Letter of Credit may
be transferred, reduced and reinstated in accordance with the provisions set
forth therein.
ARTICLE 10
MISCELLANEOUS
SECTION 10.1 RIGHT OF SETOFF. Upon the occurrence of an Event of Default,
the Bank may, at any time and from time to time, without notice to any Account
Party or any other person (any such notice being expressly waived), set off and
appropriate and apply, against and on account of, any obligations and
liabilities of any Account Party to the Bank arising under or connected with
this Reimbursement Agreement and the Related Documents, without regard to
<PAGE>
whether or not the Bank shall have made any demand therefor, and although such
obligations and liabilities may be contingent or unmatured, any and all deposits
(general or special, including but not limited to indebtedness evidenced by
certificates of deposit, whether matured or unmatured, but not including trust
accounts) and any other indebtedness at any time held or owing by the Bank to or
for the credit or the account of any Account Party.
SECTION 10.2 AMENDMENTS AND WAIVERS. No amendment or waiver of any
provision of this Reimbursement Agreement nor consent to any departure by any
Account Party from any such provision shall in any event be effective unless the
same shall be in writing and signed by the Bank. Any such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given. In the event any agreement contained in this Reimbursement
Agreement should be breached by any Account Party and thereafter waived by the
Bank, such waiver shall be limited to the particular breach so waived for the
specific period set out in such waiver and such waiver shall not constitute a
waiver of such breach for any other period and shall not waive any other or
similar breach hereunder.
SECTION 10.3 NO WAIVER; REMEDIES. No failure on the part of the Bank to
exercise, and no delay in exercising, any right under this Reimbursement
Agreement shall operate as a waiver of such right; nor shall any single or
partial exercise of any right under this Reimbursement Agreement preclude any
other further exercise of such right or the exercise of any other right. The
remedies herein provided are cumulative and not exclusive of any remedies
provided by law.
SECTION 10.4 NOTICES. Unless specifically indicated otherwise herein, all
notices and other communications provided for hereunder shall be in writing and,
if to any Account Party, addressed to it at:
Wellsford Real Properties, Inc.
535 Madison Avenue
New York, New York 10020
Attention: James J. Burns
Telephone No.: (212) 383-3400
Telecopy No.: (212) 421-7244
Palomino Park Public Improvements Corporation
1623 Blake Street, #270
Denver, Colorado 80202
Attention: David M. Strong
Telephone No.: (303) 534-4396
Telecopy No.: (303) 534-4398
<PAGE>
With a copy to:
Brownstein Hyatt & Farber, P.C.
410 17th Street, 22nd Floor
Denver, Colorado 80202-4437
Attention: Thomas J. Mancuso, Esq.
Telephone No.: (303) 534-6335
Telecopy No.: (303) 623-1956
and:
Robinson, Silverman, Pearce, Aronsohn & Berman
1290 Avenue of the Americas
New York, New York 10104
Attention: Alan S. Pearce, Esq.
Telephone No.: (212) 541-2000
Telecopy No.: (212) 541-4630
or if to the Bank, addressed to it at:
Commerzbank AG
New York Branch
Two World Trade Center
New York, New York 10281
Attention: Douglas Traynor
Telephone No.: (212) 266-7200
Telecopy No.: (212) 266-7565
or if to the Bond Trustee, addressed to it at:
United States Trust Company of New York
114 West 47th Street, 25th Floor
New York, New York 10036-1532
Attn: Chris Grell
Telephone No.: (212) 852-1034
Telecopy No.: (212) 852-1625
or if to the Remarketing Agent addressed to it at:
Norwest Investment Services
Public Finance Division
608 Second Avenue South
Minneapolis, MN 55479
Attention: Laurie Mount
Telephone No.: (612)667-9435
Telecopy No.: (612)667-9906
<PAGE>
or as to each party at such other address as shall be designated by such party
in a written notice to the other parties.
Any notice or other communication shall be sufficiently given and shall be
deemed given when delivered to the addressee in writing or when given by
telephone immediately confirmed in writing by tested telex, telecopier or other
telecommunication device.
SECTION 10.5 SEVERABILITY. Any provision of this Reimbursement Agreement
which is prohibited, unenforceable or not authorized in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such prohibition,
unenforceability or nonauthorization without invalidating the remaining
provisions hereof or affecting the validity, enforceability or legality of such
provision in any other jurisdiction.
SECTION 10.6 GOVERNING LAW. THIS REIMBURSEMENT AGREEMENT SHALL BE GOVERNED
AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK AND APPLICABLE
FEDERAL LAW WITHOUT REGARD TO CHOICE OF LAW RULES.
SECTION 10.7 CONSENT TO JURISDICTION AND VENUE, ETC. Each of the Bond
Issuer and WRP irrevocably (a) agrees that any suit, action or other legal
proceeding arising out of or relating to this Reimbursement Agreement or any of
the other Related Documents may be brought in a court of record in the State of
New York or in the Courts of the United States located in such state, (b)
consents to the jurisdiction of each such court in any such suit, action or
proceeding and (c) waives any objection which it may have to the laying of venue
of any such suit, action or proceedings in any of such courts and any claim that
any such suit, action or proceeding has been brought in an inconvenient forum.
Each of the Bond Issuer and WRP agrees that a final judgment in any such suit,
action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
All mailings under this Section 10.7 shall be by certified mail, return receipt
requested.
Nothing in this Section 10.7 shall affect the right of the Bank to serve
legal process in any other manner permitted by law or affect the right of the
Bank to bring any suit, action or proceeding either the Bond Issuer or WRP or
their respective property or any property encumbered by the Assignment and Lien
in the courts of any other jurisdiction.
SECTION 10.8 HEADINGS. Section headings in this Reimbursement Agreement are
included herein for convenience of reference only and shall not have any effect
for purposes of interpretation or construction of the terms of this
Reimbursement Agreement.
SECTION 10.9 PARTICIPATION. Each Account Party each acknowledges and agrees
that the Bank may participate portions of its obligations under the Letter of
Credit and the obligations of the Account Parties under the Pledged Bonds, the
Promissory Notes, this Reimbursement Agreement and any other Related Documents
(collectively, the "PARTICIPATED OBLIGATIONS") to other financial institutions.
The Account Parties waive any right to receive notice of such participation. The
Account Parties agree to reasonably cooperate to the extent required by the Bank
in effecting such participation, provided that neither Account Party shall be
<PAGE>
required to incur any additional expense as a consequence of such participation.
Each Account Party further acknowledges and agrees that upon any such
participation the Participants will become owners of a pro rata portion of the
Participated Obligations and each waives any right of setoff it may at any time
have against the Bank or any Participant with regard to the Participated
Obligations.
SECTION 10.10 ISSUING BRANCH OF THE BANK. The Letter of Credit will be
issued on the Closing Date by the New York Branch of the Bank but the Bank may,
at its sole option, transfer such Letter of Credit obligation on its books to
any other United States branch or agency of the Bank authorized to issue such
Letter of Credit. The Bond Trustee shall accept such replacement letter of
credit and return the prior Letter of Credit to the Bank upon receipt by the
Bond Trustee of (a) notice of such replacement, (b) the replacement letter of
credit issued by such other branch or agency of the Bank, which replacement
letter of credit is identical in all material respects to the Letter of Credit
but for any revisions to the addresses to which demand for payment must be
delivered, (c) opinions from counsel to the Bank with respect to such
replacement letter of credit restating and confirming the opinions delivered by
such counsel at the Closing Date and (d) if the Bonds are then rated by a Rating
Agency, evidence that such replacement letter of credit would not, in and of
itself, result in the lowering of the rating on the Bonds by such Rating Agency.
No amendments to this Reimbursement Agreement or any of the Related Documents
shall be required to effect such transfer.
SECTION 10.11 COUNTERPARTS. This Reimbursement Agreement may be signed in
any number of counterpart copies, but all such copies shall constitute one and
the same instrument.
SECTION 10.12 COMPLETE AND CONTROLLING AGREEMENT. This Reimbursement
Agreement and the other Related Documents completely set forth the agreements
between the Bank, and the Account Parties with respect to matters herein and
fully supersede all prior agreements, both written and oral, between the Bank,
and the Account Parties relating to the issuance of the Letter of Credit and all
matters set forth herein and in the Related Documents.
SECTION 10.13 WAIVER OF JURY TRIAL. WRP AND THE BOND ISSUER EACH HEREBY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO TRIAL BY JURY FOR
ANY TRIAL RESULTING EITHER DIRECTLY OR INDIRECTLY OUT OF, UNDER OR IN CONNECTION
WITH THIS REIMBURSEMENT AGREEMENT OR ANY OF THE OTHER RELATED DOCUMENTS. WRP AND
THE BOND ISSUER EACH FURTHER AGREES THAT, IN THE EVENT OF LITIGATION, IT WILL
NOT PERSONALLY OR THROUGH ITS AGENTS OR ATTORNEYS SEEK TO REPUDIATE THE VALIDITY
OF THIS SECTION 10.13, AND IT ACKNOWLEDGES THAT IT FREELY AND VOLUNTARILY
ENTERED INTO THIS AGREEMENT TO WAIVE TRIAL BY JURY IN ORDER TO INDUCE THE BANK
TO ISSUE THE LETTER OF CREDIT.
SECTION 10.14 ASSIGNABILITY TO FEDERAL RESERVE. The Bank may assign and
pledge all or any portion of the obligations owing to it hereunder or under any
of the Related
<PAGE>
Documents to any Federal Reserve Bank or the United States Treasury as
collateral security pursuant to Regulation A of the Board of Governors of the
Federal Reserve System and any Operating Circular issued by such Federal Reserve
Bank, provided that any payment in respect of such assigned obligations made by
any Account Party to the Bank in accordance with the terms of this Reimbursement
Agreement or such Related Documents shall satisfy such Account Party's
obligations hereunder or thereunder in respect of such assigned obligation to
the extent of such payment. No such assignment shall release the Bank from its
obligations hereunder or under any Related Document.
SECTION 10.15 SUBROGATION AND SUBORDINATION. Notwithstanding anything to
the contrary set forth in this Reimbursement Agreement, the Related Documents or
the WRP Reimbursement Agreement:
(1) SUBROGATION. Except as set forth in Subsection 10.15(2) below with
respect to the WRP Reimbursement Agreement, until all obligations to the Bank
under this Reimbursement Agreement and the Related Documents shall have been
paid in full and the Letter of Credit shall have expired or been canceled, each
Account Party shall withhold exercise of (a) any claim, right or remedy, direct
or indirect, that such Account Party now has or may hereafter have against the
other Account Party or any of its assets in connection with this Reimbursement
Agreement or the Related Documents or the performance by any Account Party of
its obligations thereunder, in each case, whether such claim, right or remedy
arises in equity, under contract, by statute, under common law or otherwise and
including without limitation (i) any right of subrogation, reimbursement or
indemnification that any Account Party now has or may hereafter have against the
other Account Party, (ii) any right to enforce, or to participate in, any claim,
right or remedy that the Bank now or may hereafter have against any Account
Party, and (iii) any benefit of, and any right to participate in, any collateral
or security now or hereafter held by the Bond Trustee or the Bank, and (b) any
right of contribution any Account Party may have against any other Person
regarding any of the obligations under this Reimbursement Agreement and the
Related Documents. Each Account Party agrees that, to the extent the agreement
to withhold the exercise of its rights of subrogation, reimbursement,
indemnification and contribution as set forth herein is found by a court of
competent jurisdiction to be void or voidable for any reason, any rights of
contribution such Account Party may have against the other Account Party or any
such other Person shall be junior to and subordinate to any rights the Bank or
the Bond Trustee may have in any such collateral or security, and to any right
the Bank may have against such other Account Party or such other Person. The
Bank may use, sell or dispose of any item of collateral or security as it sees
fit without regard to any subrogation rights any Account Party may have, and
upon any such disposition or sale any rights of subrogation any Account Party
may have shall terminate. If any amounts shall be paid to any Account Party on
account of such subrogation, reimbursement or indemnification rights at any time
when all obligations to the Bank then due and owing under this Reimbursement
Agreement and the Related Documents shall not have been paid in full, such
amount shall be held in trust for the Bank and shall forthwith be paid over to
the Bank to be credited and applied against the obligations to the Bank under
this Reimbursement Agreement and the Related Documents whether matured or
unmatured, in accordance with the terms hereof and thereof.
<PAGE>
(2) SUBORDINATION. Any Indebtedness of an Account Party now or hereafter
held by any other Account Party, including without limitation all obligations
under the WRP Reimbursement Agreement, is hereby subordinated in right of
payment to the prior payment in full of all obligations of such Person to the
Bank now or hereafter existing under this Reimbursement Agreement and the other
Related Documents (all such obligations by any Account Party to the other
Account Party being the "Subordinated Obligations"). Each Account Party agrees
not to ask, demand, sue for, take or receive from the other Account Party,
directly or indirectly, in cash or other property or by set-off or in any other
manner (including without limitation from or by way of collateral), payment of
all or any of the Subordinated Obligations of such other Account Party unless
and until all obligations then due and owing under this Reimbursement Agreement
and the other Related Documents shall have been paid and satisfied in full. Any
payment on any Subordinated Obligation collected or received by any Account
Party after an Event of Default has occurred and is continuing shall be held in
trust for the Bank and shall forthwith be paid over to the Bank to be credited
and applied against the obligations to the Bank under this Reimbursement
Agreement and the Related Documents, but without affecting, impairing or
limiting in any manner the liability of any Account Party under any other
provision of this Reimbursement Agreement and the other Related Documents.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK: SIGNATURE PAGE FOLLOWS]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Letter of Credit
Reimbursement Agreement to be duly executed and delivered by their respective
officers thereunto duly authorized as of the date first above written.
PALOMINO PARK PUBLIC IMPROVEMENTS CORPORATION
By: /s/ David M. Strong
-----------------------
Name: David M. Strong
Title: President
WELLSFORD REAL PROPERTIES, INC., a Maryland corporation
By: /s/ David M. Strong
-----------------------
Name: David M. Strong
Title: Vice President
COMMERZBANK AG, New York Branch
By: /s/ Ralph C. Marra
----------------------
Name: Ralph C. Marra
Title: Vice President
By: David Buettner
------------------
Name: David Buettner
Title: Assistant Treasurer
<PAGE>
Exhibit A
---------
June ___, 2000
Irrevocable Letter of Credit No. [__________________]
United States Trust Company of New York
114 West 47th Street, 15th Floor
New York, New York 10036-1532
Attention: Christopher Grell
Palomino Park Public Improvements Corp.
Assessment Lien Revenue Bonds
Series 1995 -- $14,755,000
Ladies and Gentlemen:
At the request and for the account of Palomino Park Public Improvements
Corporation (the "Bond Issuer") and Wellsford Real Properties, Inc. ("WRP")
(collectively WRP and the Bond Issuer are referred to herein as the "ACCOUNT
PARTIES") pursuant to the Letter of Credit Reimbursement Agreement between us
and the Account Parties dated as of June [_], 2000 (as amended or supplemented
from time to time pursuant to its terms, the "REIMBURSEMENT AGREEMENT"), we
hereby establish this Irrevocable Letter of Credit (the "LETTER OF CREDIT") in
your favor as Bond Trustee under the Trust Indenture between Bond Issuer and
you, as trustee, dated as of September 1, 1995 (as amended or supplemented from
time to time pursuant to its terms, the "BOND INDENTURE"), for the benefit of
the holders of the Bond Issuer's above-referenced series of bonds issued under
the Bond Indenture (the "BONDS") in accordance with the following terms and
conditions.
1. EXPIRATION. This Letter of Credit automatically shall expire at 5:00
p.m., New York time, on the earliest of:
(a) May 30, 2005; provided that, if on or before the then-stated expiration
date of this Letter of Credit, we provide you as Bond Trustee with a written
notice in the form of Exhibit H hereto that this Letter of Credit shall be
extended, then the term of this Letter of Credit shall be extended to the date
provided in such notice (it being understood that we shall have the right in our
sole discretion to determine whether to extend the term of this Letter of
Credit);
<PAGE>
(b) our receipt of your certificate in the form of Exhibits E or F hereto
appropriately completed, together with this Letter of Credit;
(c) 10 days after you have received notice from us stating that an Event of
Default has occurred under the Reimbursement Agreement and requesting the
acceleration of the Bonds;
(d) immediately following our payment of a Drawing in order to pay the
Purchase Prices of Bonds tendered pursuant to clause (b) or (c) of Section 4.02
of the Bond Indenture; and
(e) the date of payment of an Interest Drawing (as defined below) and a
Principal Drawing (as defined below) which when added to all other Interest
Drawings and Principal Drawings honored hereunder and not subject to
reinstatement in the aggregate equals the initial amount of the Stated Amount
(as defined below), as the same previously may have been reduced pursuant to the
Bank's receipt of a certificate in the form of Exhibit D.
In the event such expiration date shall not be a Business Day (as
hereinafter defined), then this Letter of Credit shall expire at the opening of
business on the next succeeding Business Day.
2. STATED AMOUNT. The maximum aggregate amount available under this Letter
of Credit shall be $15,773,702, which amount as from time to time reduced and
reinstated as provided in paragraphs 3 and 4 is hereinafter referred to as the
"STATED AMOUNT." Of the Stated Amount, up to $14,755,000 is available for the
payment of the unpaid principal of, or the portion of the purchase price of
Bonds tendered or deemed tendered for purchase under Section 4.01 or 4.02 of the
Bond Indenture corresponding to principal of, the Bonds (the "PRINCIPAL
PORTION"), and up to $1,018,702 is available for the payment of the unpaid
interest accrued on, or the portion of the purchase price of Bonds tendered for
purchase under said Sections of the Bond Indenture corresponding to interest
accrued on, the Bonds (the "INTEREST PORTION") (which amount represents 210 days
of interest on the Principal Portion at 12% per annum based on a year of 365
days). The amount paid to purchase Bonds tendered for purchase pursuant to the
Bond Indenture is herein referred to as the "PURCHASE PRICE" for such Bonds.
3. REDUCTIONS IN THE STATED AMOUNT. The Stated Amount, the Principal
Portion and the Interest Portion, as applicable, shall be reduced automatically
from time to time as follows:
(a) Upon our honoring of a demand for payment hereunder, the Stated Amount,
the Principal Portion and the Interest Portion, as applicable, shall be reduced
by an amount equal to the amount of such demand for payment. More specifically:
(i) In connection with each Interest Drawing, the Interest Portion
shall be reduced by the amount requested for payment on the submitted
Drawing Certificate;
<PAGE>
(ii) In connection with each Principal Drawing, the Principal Portion
shall be reduced by the amount requested for payment on the submitted
Drawing Certificate;
(iii) In connection with each Purchase Drawing, the Principal Portion
shall be reduced by the amount referenced in paragraph 3(a) of the
submitted Drawing Certificate and the Interest Portion shall be reduced by
the amount referenced in paragraph 3(b) of the submitted Drawing
Certificate.
(b) Upon our receipt of your certificate in the form of Exhibit D hereto
appropriately completed, the Stated Amount, the Principal Portion and the
Interest Portion, as applicable, shall be reduced by an amount equal to the
amount specified in such certificate, provided that no reduction under this
clause (b) shall duplicate any reduction under (a) above. Upon such a reduction,
we may require you to return this Letter of Credit and to accept in substitution
hereof a substitute Letter of Credit for a Stated Amount reflecting such
reduction, but otherwise identical in form and substance to this Letter of
Credit.
4. AUTOMATIC REINSTATEMENT.
(a) Reductions under paragraph 3(a) with respect to any demand for payment
of interest on the Bonds (except for that portion of the Purchase Price
corresponding to unpaid interest, if any, on such Bonds) shall be reinstated
automatically unless you receive notice in writing from us (which may include
delivery by prepaid telecopier, telex, telegram or other telecommunication) on
or before the close of business on the tenth day after such demand for payment
was honored by us stating that an Event of Default under the Reimbursement
Agreement has occurred and requesting the acceleration or mandatory tender of
the Bonds.
(b) Reductions under paragraph 3(a) with respect to any demand for payment
of the Purchase Price of Bonds tendered or deemed to have been tendered pursuant
to Section 4.01 of the Bond Indenture or the occurrence of a Conversion Date and
a mandatory tender under and in accordance with Section 4.02 of the Bond
Indenture shall be reinstated automatically upon the receipt by the Bank of (i)
a certificate from you in the form of Exhibit I attached hereto, (ii) monies in
the amount drawn under such Drawing for the reimbursement to the Bank of such
amounts in accordance with Section 2.4 of the Reimbursement Agreement and (iii)
such additional monies as are required pursuant to Section 2.4 of the
Reimbursement Agreement in order to effect a release from the Bank's security
interest of the Bonds ("PLEDGED BONDS") purchased with said drawing and pledged
to the Bank under that certain Bond Pledge and Security Agreement dated as of
June __, 2000 by and among us, the Account Parties and you, as custodian (the
"PLEDGE AGREEMENT").
(c) Reductions under paragraph 3(b) shall not be subject to reinstatement.
Reductions under paragraph 3(a) with respect to (i) any demand for payment of
the principal of the Bonds or (ii) the Purchase Price of Bonds tendered or
deemed to have been tendered pursuant to any section of the Bond Indenture other
than Section 4.01 of the Bond Indenture or the occurrence of a Conversion Date
and a mandatory tender under and in accordance with Section 4.02 of the Bond
Indenture shall not be subject to reinstatement.
5. DOCUMENTS TO BE PRESENTED. Funds under this Letter of Credit are
available to you, against presentment to us of the following drawings
(collectively, a "DRAWING") in accordance with Section 6 below:
(a) in the case of a demand for payment of the unpaid interest accrued on
the Bonds, a certificate signed by you in the form of Exhibit A hereto
appropriately completed (an "INTEREST DRAWING");
(b) in the case of a demand for payment of the unpaid principal of the
Bonds, a Certificate signed by you in the form of Exhibit B hereto appropriately
completed (a "PRINCIPAL DRAWING"); and
(c) in the case of a demand for payment of the Purchase Price of the Bonds
pursuant to Article IV of the Bond Indenture, a certificate signed by you in the
form of Exhibit C hereto appropriately completed (a "PURCHASE Drawing").
6. METHOD AND NOTICE OF PRESENTMENT.
(a) The certificates referenced in paragraph 5 (a "DEMAND FOR
PAYMENT") may be delivered to us in person or by telecopy. A demand for
payment shall be presented during our business hours on a Business Day
prior to the expiration hereof at our office at Commerzbank AG, New York
Branch, (Telecopy Number: (212) 266-7427) Attn.: Letter of Credit
Department or at such other address or telecopy number as we may notify you
in writing from time to time. As used herein, "BUSINESS DAY" means any day
other than (i) a Saturday or Sunday or (ii) a day on which commercial banks
in Denver, Colorado, New York, New York or the city or cities in which are
located the principal corporate trust offices of the Bond Trustee under the
Bond Indenture and our office at which demands for payment under this
Letter of Credit are required to be made are authorized or required by law
or executive order to close, or (iii) a day on which the New York Stock
Exchange is closed.
(b) Prior to the delivery of any demand for payment, you shall
endeavor in good faith to give us telephonic notice of your intention to
deliver such demand for payment, stating the method of presentment and the
type and amount of such demand for payment; provided, that your failure to
give such telephonic notice will not affect our obligation to honor demands
for payment in strict conformity with the terms hereof. The telephonic
notice required hereunder shall be given to Commerzbank AG, New York
Branch,
<PAGE>
Attention: Letter of Credit Department at (212) 266-7280, or such other
department or persons as we shall notify you in writing from time to time.
Such telephonic notice may be waived at our sole discretion.
7. TIME AND METHOD FOR PAYMENT.
(a) If demand for payment is made on a Business Day in strict
conformity with the terms and conditions hereof, payment shall be made to
you (i) in the case of a Principal Drawing or an Interest Drawing, if a
demand for payment is received by us prior to 2:00 p.m. New York time, not
later than 10:00 a.m. New York time, on the next succeeding Business Day or
such later date as you may specify in such demand for payment; and (ii) in
the case of a Purchase Drawing for, if a demand for payment is received by
us prior to 2:00 p.m. New York time, not later than 10:00 a.m. New York
time, on the next succeeding Business Day or such later date as you may
specify in such demand for payment. If such demand for payment is received
by us after the applicable times, such demand shall be deemed to have been
received on the next Business Day. All times referenced herein are as of
New York, New York time.
(b) Unless otherwise agreed, payment under this Letter of Credit
pursuant to an Interest Drawing, a Principal Drawing or a Purchase Drawing
shall be made by Fedwire in immediately available funds to the account of
the Bond Trustee. For the purposes of determining compliance with the times
for payment specified in (a) above, payment shall be deemed to have been
made by us when we have delivered appropriate wire transfer instructions to
an appropriate Federal Reserve Bank.
(c) All payments made by the Bank under this Letter of Credit shall be
made with the Bank's own funds.
8. TRANSFERABILITY. This Letter of Credit is transferable in its entirety,
but not in part, to any transferee who has succeeded you as Bond Trustee under
the Bond Indenture and may be successively transferred. Transfer of the
available balance under this Letter of Credit to such transferee shall be
effected by the presentation to us of this Letter of Credit accompanied by a
certificate substantially in the form of Exhibit G hereto.
9. GOVERNING LAW AND CUSTOMS. TO THE EXTENT CONSISTENT WITH THE EXPRESS
PROVISIONS HEREOF, THIS LETTER OF CREDIT SHALL BE GOVERNED BY THE UNIFORM
CUSTOMS AND PRACTICE FOR DOCUMENTARY CREDITS (1993 REVISION), INTERNATIONAL
CHAMBER OF COMMERCE PUBLICATION NO. 500 (THE "UCP"), AND, TO THE EXTENT
CONSISTENT WITH THE UCP AND THE EXPRESS PROVISIONS HEREOF, THE LAWS OF THE STATE
OF NEW YORK.
10. IRREVOCABILITY. This Letter of Credit shall be irrevocable.
<PAGE>
11. NO NEGOTIATION. A demand for payment under this Letter of Credit shall
be presented directly to us and shall not be negotiated to or by any third
party.
12. EXCLUDED BONDS. No demand for payment under this Letter of Credit may
be made with respect to any Corporation Bond or any Pledged Bond (as each such
term is defined in the bond Indenture) (each an "EXCLUDED BOND").
13. ADDRESS FOR COMMUNICATIONS. Communications with respect to this Letter
of Credit, other than demands for payment pursuant to paragraph 6, shall be in
writing and shall be addressed to us at Commerzbank AG, New York Branch, Two
World Financial Center, New York, NY 10281, Attn.: Letter of Credit Department
(Telecopy Number (212)266-7427) or such other address or telecopy number as we
may notify you in writing from time to time, specifically referring thereon to
our Irrevocable Letter No. 150SBY00300064.
14. COMPLETE AGREEMENT. This Letter of Credit, including Exhibits A through
I hereto, sets forth in full the terms of our undertaking. Reference in this
Letter of Credit to other documents or instruments is for identification
purposes only and such reference shall not modify or affect the terms hereof or
cause such documents or instruments to be deemed incorporated herein.
We hereby agree with you to honor your demand for payment presented in
strict compliance with the terms and conditions of this Letter of Credit.
Very truly yours,
COMMERZBANK AG,
New York Branch
By:
------------------------------------------
Name:
-----------------------------------
Title:
---------------------------------------
By:
------------------------------------------
Name:
-----------------------------------
Title:
---------------------------------------
<PAGE>
EXHIBIT A
CERTIFICATE FOR INTEREST DRAWING
Palomino Park Public Improvements Corp.
Assessment Lien Revenue Bonds
Series 1995
Irrevocable Letter of Credit No. _______________
The undersigned, a duly authorized officer of [_______________] (the "BOND
TRUSTEE"), hereby certifies to Commerzbank AG, New York Branch (the "BANK"),
with reference to Irrevocable Letter of Credit No. _____________ (the "LETTER OF
CREDIT"; any capitalized term used herein and not defined shall have its
respective meaning as set forth in the Letter of Credit) issued by the Bank in
favor of the Bond Trustee, that:
(1) The Bond Trustee is the Bond Trustee under the Bond Indenture and is
making this demand for payment of interest accrued through _________________
(the "PAYMENT DATE") on the Bonds in accordance with the Bond Indenture. Said
interest consists of $____________ of interest accrued on Bonds bearing interest
at a [Weekly Rate/Term Rate] (as such terms are defined in the Bond Indenture),
which amount of interest is payable on such Bonds on the Payment Date.
(2) Demand is hereby made under the Letter of Credit for $__________, which
amount does not exceed (i) the amount in paragraph (1) or (ii) the Interest
Portion of the Stated Amount.
(3) The amount demanded hereunder does not include any amount payable with
respect to any Excluded Bond.
(4) The proceeds of this demand for payment equal to the amount set forth
in paragraph (1) of this Certificate shall be deposited in the Letter of Credit
Debt Service Account (as defined in the Bond Indenture) and shall be applied
solely to the payment of unpaid interest on Bonds bearing interest at a [Weekly
Rate/Term Rate] (as such terms are defined in the Bond Indenture) in accordance
with the Bond Indenture.
(5) (a) Payment of this demand for payment is requested on or before
10:00 a.m. New York time, on the later of (i) the Payment Date (or if the
Payment Date is not a Business Day, the next succeeding Business Day) and
(ii) the Business Day next succeeding the Business Day on which this
Certificate is received or deemed to have been received by the Bank in
accordance with paragraph 7(a) of the Letter of Credit.
(b) Payment of this demand for payment shall be made in accordance
with the payment instructions provided in paragraph 7(b) of the Letter of
Credit.
<PAGE>
IN WITNESS WHEREOF, the Bond Trustee has executed and delivered this
Certificate as of the _____ day of _______________, ________.
[____________, _____], as Bond Trustee
By:
------------------------------------------
Name:
-----------------------------------
Title:
---------------------------------------
<PAGE>
EXHIBIT B
CERTIFICATE FOR PRINCIPAL DRAWING
Palomino Park Public Improvements Corp.
Assessment Lien Revenue Bonds
Series 1995
Irrevocable Letter of Credit No. __________________
The undersigned, a duly authorized officer of [_______________] (the "BOND
TRUSTEE"), hereby certifies to Commerzbank AG, New York Branch (the "BANK"),
with reference to Irrevocable Letter of Credit No. _________________ (the
"LETTER OF CREDIT"; any capitalized term used herein and not defined shall have
its respective meaning as set forth in the Letter of Credit) issued by the Bank
in favor of the Bond Trustee, that:
(1) The Bond Trustee is the Bond Trustee under the Bond Indenture and is
making this demand for payment of principal of the Bonds in accordance with the
Bond Indenture, which principal is payable on ___________ (the "PAYMENT DATE"),
by reason of*:
[GRAPHIC OMITTED]1 (a) scheduled maturity;
[GRAPHIC OMITTED]2 (b) redemption in whole or in part; or
[GRAPHIC OMITTED]3 (c) the occurrence of an Event of Default under the
Reimbursement Agreement and the declaration of acceleration thereunder.
(2) The amount of principal of the Bonds that is payable on the Payment
Date equals $_________.
(3) Demand is hereby made under the Letter of Credit for $____________,
which amount does not exceed (i) the amount in paragraph (2) or (ii) the
Principal Portion of the Stated Amount.
(4) The amount demanded hereunder does not include any amount payable with
respect to an Excluded Bond.
(5) The proceeds hereof shall be deposited in the Letter of Credit Debt
Service Account (as defined in the Bond Indenture) and shall be applied solely
to the payment of the principal of Bonds in accordance with the Bond Indenture.
* Check (a), (b) or (c) as applicable.
<PAGE>
(6) (a) Payment of this demand for payment is requested on or before 10:00
a.m. New York time, on the later of (i) the Payment Date (or if the Payment Date
is not a Business Day, the next succeeding Business Day) and (ii) the Business
Day next succeeding the Business Day on which this Certificate is received or
deemed to have been received by the Bank in accordance with paragraph 7(a) of
the Letter of Credit.
(b) Payment of this demand for payment shall be made in accordance with the
payment instructions provided in paragraph 7(b) of the Letter of Credit.
IN WITNESS WHEREOF, the Bond Trustee has executed and delivered this
Certificate as of the _____ day of _______________, ________.
[____________, _____], as Bond Trustee
By:
------------------------------------------
Name:
-----------------------------------
Title:
---------------------------------------
<PAGE>
EXHIBIT C
CERTIFICATE FOR PURCHASE DRAWING
Palomino Park Public Improvements Corp.
Assessment Lien Revenue Bonds
Series 1995
Irrevocable Letter of Credit No. _________________
The undersigned, a duly authorized officer of [_______________] (the "BOND
TRUSTEE"), hereby certifies to Commerzbank AG, New York Branch (the "BANK"),
with reference to Irrevocable Letter of Credit No. _________________ (the
"LETTER OF CREDIT"; any capitalized term used herein and not defined shall have
its respective meaning as set forth in the Letter of Credit) issued by the Bank
in favor of the Bond Trustee, that:
(1) The Bond Trustee is the Bond Trustee under the Bond Indenture and is
making this demand for payment in connection with the tender (or deemed tender)
of Bonds pursuant to Article IV of the Bond Indenture for purchase on
______________________ (the "PURCHASE DATE"). The Bonds to be purchased consist
of $___________ principal amount of Bonds bearing interest at a [Weekly
Rate/Term Rate] (as such terms are defined in the Bond Indenture).
(2) The sum of the Purchase Prices for the Bonds referenced in paragraph
(1) of this Certificate equals $________.
(3) Demand is hereby made under the Letter of Credit for $_________, which
amount represents:
(a) $___________ attributable to the Principal Portion of the Purchase
Prices to be paid on the Bonds referenced in paragraph (1) of this Certificate.
Said amount does not exceed, and shall be applied to reduce, the Principal
Portion of the Stated Amount; and
(b) $___________ attributable to the Interest Portion of the Purchase
Prices to be paid on the Bonds referenced in paragraph (1) of this Certificate.
Said amount does not exceed, and shall be applied to reduce, the Interest
Portion of the Stated Amount.
(4) The amount demanded hereunder does not include any amount payable with
respect to an Excluded Bond.
(5) The proceeds hereof shall be deposited in the Letter of Credit Purchase
Account (as defined in the Bond Indenture) and held in trust for the sole
benefit of the Bank until such proceeds are (a) used to purchase Bonds at the
Purchase Price against delivery of such Bonds or Bonds issued in lieu thereof to
the Bank or its designated agent or (b) returned to the Bank.
(6) (a) Payment of this demand for payment is requested on or before 10:00
a.m. New York time on the later of (i) the Purchase Date (or if the Purchase
Date is not a Business Day, the next succeeding Business Day) and (ii) the
Business Day on which this Certificate is received or deemed to have been
received by the Bank in accordance with paragraph 7(a) of the Letter of Credit.
(b) Payment of this demand for payment shall be made in accordance with the
payment instructions provided in paragraph 7(b) of the Letter of Credit.
IN WITNESS WHEREOF, the Bond Trustee has executed and delivered this
Certificate as of the _____ day of ________, ________.
[____________, _____], as Bond Trustee
By:
------------------------------------------
Name:
-----------------------------------
Title:
---------------------------------------
<PAGE>
EXHIBIT D
CERTIFICATE REGARDING REDUCTION OF STATED AMOUNT
Palomino Park Public Improvements Corp.
Assessment Lien Revenue Bonds
Series 1995
Irrevocable Letter of Credit No. _________________
The undersigned, a duly authorized officer of [_______________] (the "BOND
TRUSTEE"), hereby certifies to Commerzbank AG, New York Branch (the "BANK"),
with reference to Irrevocable Letter of Credit No. _________________ (the
"LETTER OF CREDIT"; any capitalized term used herein and not defined shall have
its respective meaning as set forth in the Letter of Credit) issued by the Bank
in favor of the Bond Trustee, that:
(1) Bonds in the aggregate principal amount of $________ were paid or
deemed to have been paid on _________.
(2) 210 days' interest at 12% per annum (based on a year of 365 days
consisting of twelve 30-day months) on the principal amount of the Bonds
referenced in paragraph (1) of this Certificate is $_________.
(3) Pursuant to paragraph 3(b) of the Letter of Credit, upon receipt by the
Bank of this Certificate the Stated Amount shall be reduced by $________, such
reduction to be allocated so that the Principal Portion of the Stated Amount
shall be reduced by the amount stated in paragraph (1) of this Certificate and
the Interest Portion shall be reduced by the amount stated in paragraph (2) of
this Certificate.
IN WITNESS WHEREOF, the Bond Trustee has executed and delivered this
Certificate as of the ____ day of _____________, _________.
[____________, _____], as Bond Trustee
By:
------------------------------------------
Name:
-----------------------------------
Title:
---------------------------------------
<PAGE>
EXHIBIT E
TERMINATION CERTIFICATE--DEFEASANCE
Palomino Park Public Improvements Corp.
Assessment Lien Revenue Bonds
Series 1995
Irrevocable Letter of Credit No. _________________
The undersigned, a duly authorized officer of [_______________] (the "BOND
TRUSTEE"), hereby certifies to Commerzbank AG, New York Branch (the "BANK"),
with reference to Irrevocable Letter of Credit No. _________________ (the
"LETTER OF CREDIT"; any capitalized term used herein and not defined shall have
its respective meaning as set forth in the Letter of Credit) issued by the Bank
in favor of the Bond Trustee, that all outstanding Bonds have been paid or
deemed to have been paid in full in accordance with Article X of the Bond
Indenture.
The Letter of Credit is attached hereto and being surrendered to you
herewith.
IN WITNESS WHEREOF, the Bond Trustee has executed and delivered this
Certificate as of the ____ day of ________________, ________.
[____________, _____], as Bond Trustee
By:
------------------------------------------
Name:
-----------------------------------
Title:
---------------------------------------
<PAGE>
EXHIBIT F
TERMINATION CERTIFICATE--SUBSTITUTE LETTER OF CREDIT
Palomino Park Public Improvements Corp.
Assessment Lien Revenue Bonds
Series 1995
Irrevocable Letter of Credit No. _________________
The undersigned, a duly authorized officer of [_______________] (the "BOND
TRUSTEE"), hereby certifies to Commerzbank AG, New York Branch (the "BANK"),
with reference to Irrevocable Letter of Credit No. _________________ (the
"LETTER OF CREDIT"; any capitalized term used herein and not defined shall have
its respective meaning as set forth in the Letter of Credit) issued by the Bank
in favor of the Bond Trustee, that the conditions precedent to the acceptance of
an alternate letter of credit under Section 5.15 of the Bond Indenture have been
satisfied.
The Letter of Credit is attached hereto and being surrendered to you
herewith.
IN WITNESS WHEREOF, the Bond Trustee has executed and delivered this
Certificate as of the ____ day of _____________,________.
[____________, _____], as Bond Trustee
By:
------------------------------------------
Name:
-----------------------------------
Title:
---------------------------------------
<PAGE>
EXHIBIT G
NOTICE OF TRANSFER
Commerzbank AG
New York Branch
Two World Financial Center
New York, NY 10281
Attention: Letter of Credit Department
Palomino Park Public Improvements Corp.
Assessment Lien Revenue Bonds
Series 1995
Letter of Credit No. _________________
Ladies and Gentlemen:
For value received, the undersigned beneficiary hereby irrevocably
transfers to:
(Name of Transferee)
(Address)
all rights of the undersigned beneficiary to draw under the above Letter of
Credit in its entirety. Any capitalized term used herein and not defined shall
have its respective meaning as set forth in the above-referenced Letter of
Credit issued by you in connection with the above-referenced Bonds.
By this transfer, all rights of the undersigned beneficiary in such Letter
of Credit are transferred to the transferee and the transferee shall have the
sole rights as beneficiary thereof, including sole rights relating to any
amendments, whether increases or extensions or other amendments and whether now
existing or hereafter made. All amendments are to be advised directly to the
transferee without necessity of any consent of or notice to the undersigned
beneficiary.
By its signature below the undersigned transferee acknowledges that it has
duly succeeded as Bond Trustee under the Bond Indenture.
The Letter of Credit is returned herewith and we ask you to notify the
transferee in such form as you deem advisable of this transfer and of the terms
and conditions of the Letter of Credit.
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Notice of Transfer as
of ___________________, ______.
SIGNATURE AUTHENTICATED:
(Bank)
(Authorized Signature)
Date: _______________, ______
Yours very truly,
(Bond Trustee)
By:
------------------------------------------
Name:
-----------------------------------
Title:
---------------------------------------
ACKNOWLEDGED:
(Transferee)
By:
------------------------------------------
Name:
-----------------------------------
Title:
---------------------------------------
<PAGE>
EXHIBIT H
NOTICE OF RENEWAL
[---------------]
[---------------]
[---------------]
Attention: [______________]
Palomino Park Public Improvements Corp.
Assessment Lien Revenue Bonds
Series 1995
Letter of Credit No. _________________
Ladies and Gentlemen:
The undersigned, a duly authorized officer of Commerzbank AG, New York
Branch (the "BANK"), hereby advises you, with reference to Irrevocable Letter of
Credit No. _________________ (the "LETTER OF CREDIT"; any capitalized term used
herein and not defined shall have its respective meaning as set forth in the
Letter of Credit) issued by the Bank in your favor, that:
(1) At the request and for the account of the Bond Issuer and WRP, we
hereby extend the date referenced in paragraph 1(a) of the Letter of Credit (as
such date may have been extended previously from time to time) to ________.
(2) Except as specifically provided in paragraph (1) above, all of the
terms and conditions of the Letter of Credit remain unchanged and in full force
and effect.
(3) This Notice of Renewal is an integral part of the Letter of Credit.
IN WITNESS WHEREOF, the undersigned, on behalf of the Bank, has executed
and delivered this Notice of Renewal as of the ____ day of ____________, _____.
COMMERZBANK AG, New York Branch
By:
------------------------------------------
Name:
-----------------------------------
Title:
---------------------------------------
By:
------------------------------------------
Name:
-----------------------------------
Title:
---------------------------------------
<PAGE>
EXHIBIT I
BOND TRUSTEE'S CERTIFICATE TO EFFECT RELEASE OF PLEDGED BONDS
Palomino Park Public Improvements Corp.
Assessment Lien Revenue Bonds
Series 1995
Irrevocable Letter of Credit No. _________________
The undersigned, as duly authorized officer of [_______________] (the "BOND
TRUSTEE"), hereby certifies to Commerzbank AG, New York Branch (the "BANK"),
with reference to Irrevocable Letter of Credit No. _________________ (the
"LETTER OF CREDIT"; any capitalized term used herein and not defined shall have
its respective meaning as set forth in the Letter of Credit) issued by the Bank
in favor of the Bond Trustee, that:
(1) The Bond Issuer has instructed the Bond Trustee to deliver this
Certificate to the Bank in order to inform the Bank that on ______________ (the
"PAYMENT DATE"), the Bond Issuer shall pay or shall cause to be paid such
amounts as are required pursuant to Section 2.4 of the Reimbursement Agreement
in order to effect a release of $___________ in Principal Amount of Pledged
Bonds. The Pledged __________ Bonds _________ to _________ be _________ released
_________ are __________ described _________ as _________ follows:
(2) The amount to be paid to the Bank on said date shall equal $_________,
consisting of the following:
(a) Payment of previously unpaid Liquidity Drawing Amounts [if Liquidity
Drawing _____ $___________ Amounts drawn on multiple Drawing Dates are to be
paid, specify the separate amount for each such Drawing Date];
(b) Payment of accrued interest in accordance with the Reimbursement
Agreement $___________ on the amount referenced in clause (a) above, to the
extent not previously paid;
(c) Payment of the principal portion of previously unpaid LC Loans;
$___________
(d) Payment of accrued interest on amount referenced in clause (c) above,
to the $___________ extent not previously paid; and
(e) Payment of any other sums due and payable pursuant to Article 2 of the
_____ $___________ Reimbursement Agreement in connection with the release of
Pledged Bonds hereby requested.
<PAGE>
IN WITNESS WHEREOF, the Bond Trustee has executed and delivered this
Certificate as of the _______ day of __________________, _____.
[____________, _____], as Bond Trustee
By:
------------------------------------------
Name:
-----------------------------------
Title:
---------------------------------------
<PAGE>
