WINTHROP OPTION AGREEMENT
This Winthrop Option Agreement (the "Agreement") is entered into as of
the 17th day of February, 1998 (the "Effective Date"), by and between Insignia
Financial Group, Inc., a Delaware corporation ("Insignia"), and Insignia
Properties, L.P., a Delaware limited partnership ("IPLP").
W I T N E S S E T H:
WHEREAS, on October 27, 1997, Insignia and IPT I LLC entered into a
Subscription and Purchase Agreement (the "Winthrop Agreement") with Winthrop
Financial Associates, A Limited Partnership ("WFA"), First Winthrop Corporation
("FWC") and certain of their affiliates (the "Other Sellers") pursuant to
which, among other things:
(i) on such date, IPT I LLC acquired an associate general partner
interest in WFA, which interest gives IPT I LLC the right to
control and direct all aspects of the property management, asset
management and administrative affairs of the six real estate
limited partnerships controlled by WFA listed on Schedule A
hereto (the "WFA Partnerships");
(ii) on such date, Insignia acquired all of the issued and
outstanding shares of Class B Common Stock ("Class B Shares") of
FWC (which until such time was a wholly-owned subsidiary of
WFA), as a result of which Insignia has the right, pursuant to
the Certificate of Incorporation and Bylaws of FWC, as amended
(collectively, the "FWC Charter Documents"), to appoint each of
the two Class B directors of FWC, which directors in turn
effectively have the right to control and direct all aspects of
the property management, asset management and administrative
affairs of the seven real estate limited partnerships controlled
by FWC listed on Schedule B hereto (the "FWC Partnerships,"
and together with the WFA Partnerships, the "Winthrop
Partnerships");
(iii) on such date, Insignia acquired units of limited partner
interest in four of the Winthrop Partnerships, as more
particularly identified on Schedule C hereto as Category 1 Units
(the "Category 1 Units");
(iv) on January 20, 1997, Insignia acquired units of limited partner
interest in six of the Winthrop Partnerships, as more
particularly identified on Schedule C hereto as Category 2 Units
(the "Category 2 Units");
(v) subject to satisfaction of certain conditions, Insignia has the
right and obligation to acquire units of limited partner
interest in two of the Winthrop Partnerships, as more
particularly identified on Schedule C hereto as Category 3 Units
(the "Category 3 Units") on April 30, 1998; and
(vi) subject to satisfaction of certain conditions and receipt of
certain HUD approvals, Insignia has the right and obligation to
acquire units of limited partner interest in one
of the Winthrop Partnerships, as more particularly identified on
Schedule C hereto as Category 4 Units (the "Category 4 Units,"
and together with the Category 1 Units, Category 2 Units and
Category 3 Units, the "Winthrop Units") as soon as practicable
after receipt of such approvals and satisfaction of such
conditions;
WHEREAS, Insignia and WFA are parties to that certain Stockholders'
Agreement dated as of October 27, 1997 (the "FWC Stockholders' Agreement")
relating to FWC and the Class B Shares, pursuant to which Insignia has certain
put rights with respect to the Class B Shares and the Winthrop Units;
WHEREAS, on October 28, 1997, IPT I LLC caused WFA to enter into
Subcontract, Assignment and Assumption Agreements with IFGP Corporation, which
is a wholly-owned subsidiary of Insignia ("IFGP"), with respect to five of the
six WFA Partnerships, pursuant to which IFGP agreed to provide certain asset
management, investor services and/or partnership management services to such
WFA Partnerships on behalf of WFA and WFA assigned to IFGP its rights to
receive certain fees in respect of such services, and Insignia caused FWC to
enter into Subcontract, Assignment and Assumption Agreements with IFGP with
respect to five of the seven FWC Partnerships, pursuant to which IFGP agreed to
provide certain asset management, investor services and/or partnership
management services to such FWC Partnerships on behalf of FWC and FWC assigned
to IFGP its rights to receive certain fees in respect of such services, in each
case as summarized on Schedule D hereto and more particularly described in such
Subcontract, Assignment and Assumption Agreements (collectively, the "Winthrop
Fees," and together with the Winthrop Units, the "Winthrop Interests");
WHEREAS, Insignia Residential Group, L.P., which is a wholly-owned
subsidiary of Insignia ("IRG"), and Castleton Associates Partnership are
parties to that certain Property Management Agreement dated October 27, 1997
(the "Castleton Management Agreement") relating to that certain real property
described on Exhibit A thereto ("Lake Castleton Apartments");
WHEREAS, pursuant to Article VIII of the Castleton Management
Agreement, IRG has certain rights of first offer with respect to the Lake
Castleton Apartments property, as more particularly described in the Castleton
Management Agreement, which rights are expressly assignable to any of IRG's
"current or future affiliates";
WHEREAS, Insignia and WFA are parties to that certain side letter
dated October 27, 1997 (the "Castleton Side Letter"), pursuant to which WFA has
agreed to pay to Insignia the sum of $2,250,000 in the event that the Lake
Castleton Apartments property is directly or indirectly sold prior to October
27, 2009 (including any sale to Insignia or any of its affiliates); and
WHEREAS, Insignia desires to grant to IPLP, and IPLP desires to
accept, an option to purchase all, but not less than all, of the Winthrop
Interests, on the terms and subject to the conditions set forth below;
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained herein, and other good and valuable
consideration, the receipt and
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sufficiency of which are acknowledged, the parties hereto, each intending to be
legally bound, hereby agree as follows:
1. GRANT OF OPTION; EXPIRATION DATE; PURCHASE PRICE.
1.1 Upon the terms and subject to the conditions set forth herein,
Insignia hereby grants to IPLP an irrevocable option (the "Option") to purchase
all, but not less than all, of the Winthrop Interests.
1.2 The Option shall expire at 5:00 p.m., New York time, on December
31, 1998 (the "Expiration Date").
1.3. Subject to the provisions of Section 3.1, the purchase price (the
"Purchase Price") for the Winthrop Interests to be paid by IPLP to Insignia
upon exercise by IPLP of the Option shall be an amount equal to the sum of:
(A) $28,196,540 (which represents the purchase price paid by
Insignia for the Category 1 Units), plus interest on such
amount from October 27, 1997 through and including the day
immediately preceding the Closing Date (as hereinafter
defined) at the Category 1 Rate (as hereinafter defined),
calculated in simple terms based on the number of days
elapsed and assuming a 365 day year; plus
(B) $6,161,351 (which represents the purchase price paid by
Insignia for the Category 2 Units), plus interest on such
amount from January 20, 1998 through and including the day
immediately preceding the Closing Date at the Category 2
Rate (as hereinafter defined), calculated in simple terms
based on the number of days elapsed and assuming a 365 day
year; plus
(C) $4,570,599 (which represents the purchase price to be paid
by Insignia for the Category 3 Units), plus interest on
such amount from April 30, 1998 (or such later date as
Insignia actually pays for the Category 3 Units) through
and including the day immediately preceding the Closing
Date at the Category 3 Rate (as hereinafter defined),
calculated in simple terms based on the number of days
elapsed and assuming a 365 day year; plus
(D) $1,150,000 (which represents the purchase price to be paid
by Insignia for the Category 4 Units), plus interest on
such amount from the date on which Insignia actually pays
for the Category 4 Units through and including the day
immediately preceding the Closing Date at the Category 4
Rate (as hereinafter defined), calculated in simple terms
based on the number of days elapsed and assuming a 365 day
year; plus
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(E) $5,957,808 (which represents the portion of the purchase
price paid by Insignia allocable to the Winthrop Fees);
plus
(F) $154,730 (which represents that portion of the costs and
expenses incurred by Insignia and its affiliates in
performing due diligence on the real estate assets owned by
the applicable limited partnerships, and all other ratable
transaction costs and expenses, including legal fees and
expenses, incurred by Insignia in connection with the
Winthrop Agreement, in each case attributable to the
acquisition of the Winthrop Interests), plus interest on
such amount from October 27, 1997 through and including the
day immediately preceding the Closing Date at the Category
1 Rate, calculated in simple terms based on the number of
days elapsed and assuming a 365 day year; plus ----
(G) an amount equal to the product of (x) $871,716 multiplied
by (y) a fraction, the numerator of which is the number of
days that elapse from and including October 27, 1997
through and including the day immediately preceding the
Closing Date and the denominator of which is 1,095 (which
represents a ratable portion of the syndication, agency and
other fees under the Insignia Credit Agreement (as
hereinafter defined) attributable to funds borrowed by
Insignia to acquire the Winthrop Interests); minus
(H) the aggregate amount of distributions paid by the Winthrop
Partnerships in respect of the Winthrop Units between
October 27, 1997 and the Closing Date.
As used herein, "Category 1 Rate" means the average rate of interest
(expressed on an annual basis) in effect during the period commencing on
October 27, 1997 and ending on the date immediately preceding the Closing Date
under that certain Amended and Restated Credit Agreement dated as of March 19,
1997 by and among Insignia, First Union National Bank of South Carolina, Xxxxxx
Commercial Paper, Inc. and the Lenders referred to therein (the "Insignia
Credit Agreement"); "Category 2 Rate" means the average rate of interest
(expressed on an annual basis) in effect during the period commencing on
January 20, 1998 and ending on the date immediately preceding the Closing Date
under the Insignia Credit Agreement; "Category 3 Rate" means the average rate
of interest (expressed on an annual basis) in effect during the period
commencing on April 30, 1998 (or such later date as Insignia actually pays for
the Category 3 Units) and ending on the date immediately preceding the Closing
Date under the Insignia Credit Agreement; and "Category 4 Rate" means the
average rate of interest (expressed on an annual basis) in effect during the
period commencing on the date on which Insignia actually pays for the Category
4 Units and ending on the date immediately preceding the Closing Date under the
Insignia Credit Agreement.
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2. EXERCISE OF OPTION; CLOSING.
2.1 The Option may be exercised by IPLP by delivering a written notice
of exercise (a "Notice of Exercise") to Insignia at any time prior to 5:00
p.m., New York time, on the Expiration Date.
2.2 The closing (the "Closing") of the transfers of the Winthrop
Interests and the payment of the Purchase Price therefor, and of all other
transactions contemplated hereby, shall occur on a business day to be specified
in the Notice of Exercise which is not sooner than 10 days after the date the
Notice of Exercise is delivered (the "Closing Date"). At the Closing, IPLP
shall pay (or cause to be paid) the Purchase Price to Insignia in immediately
available funds, and Insignia shall execute and deliver to IPLP (or its
designee) (i) instruments of assignment transferring the Winthrop Units from
Insignia to IPLP (or its designee) in form and substance satisfactory to IPLP
and (ii) such other documents and instruments as are necessary to effect the
other transactions and agreements contemplated in Section 3 of this Agreement.
In addition, Insignia will cause IFGP to enter into Subcontract, Assignment and
Assumption Agreements with IPLP, pursuant to which IPLP shall agree to perform
on behalf of IFGP the services to which the Winthrop Fees relate and IFGP shall
assign to IPLP all of IFGP's rights to receive the Winthrop Fees.
3. OTHER AGREEMENTS.
3.1 If IPLP exercises the Option and the Closing Date occurs before
Insignia has purchased all of the Category 3 Units and/or Category 4 Units,
then (i) the Purchase Price shall be deemed automatically reduced by the amount
thereof attributable to such unpurchased Winthrop Units and (ii) at the Closing
Insignia and IPLP shall execute and deliver an instrument pursuant to which
Insignia agrees to act as attorney-in-fact for IPLP in connection with the
purchase(s) of such unpurchased Winthrop Units pursuant to and in accordance
with the Winthrop Agreement, and IPLP agrees to indemnify and reimburse
Insignia for all of its costs and expenses in connection with such purchase(s).
3.2 At the Closing, Insignia shall cause IRG to execute and deliver
such documents as are necessary for IRG to effectively assign all of its rights
under Article VIII of the Castleton Management Agreement to IPLP (or IPLP's
designee). In the event that IPLP or any of its affiliates acquires the Lake
Castleton Apartments property pursuant to such rights, Insignia shall, at its
election, either (i) assign to IPLP all of Insignia's rights under the
Castleton Side Letter at the time of such acquisition or (ii) promptly exercise
its rights under the Castleton Side Letter and in turn pay over to IPLP the
$2,250,000 due thereunder.
3.3 At or promptly after the Closing, Insignia and Insignia Properties
Trust, of which IPLP is the operating partnership ("IPT"), shall amend and
restate the existing Operating Agreement of IPT I LLC (of which Insignia and
IPT are the sole members, with Insignia having a 90.1% interest and IPT having
a 9.9% interest) dated October 21, 1997 to provide that IPT shall be the sole
"managing member" of IPT I LLC, with the sole authority to manage the business
and affairs of IPT I LLC.
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3.4 From and after the Closing, Insignia, in its capacity as the
holder of all of the issued and outstanding Class B Shares of FWC, shall
appoint the two individuals designated by IPLP from time to time in its sole
discretion as the Class B directors of FWC pursuant to Insignia's rights under
the FWC Charter Documents.
3.5 Insignia agrees that if an "Insignia Trigger Event" (as defined in
the FWC Stockholders' Agreement) occurs subsequent to the Closing, Insignia
will consult and cooperate with IPLP in good faith in determining whether to
elect to exercise its "put" rights under the FWC Stockholders' Agreement as a
result of such Insignia Trigger Event, and shall pay over to IPLP any funds
received by Insignia attributable to the Winthrop Interests upon exercise of
such remedy.
3.6 Insignia and IPLP agree that they will be responsible for
indemnification obligations of Insignia and IPT I LLC, as the case may be,
under the Winthrop Agreement and the FWC Stockholders' Agreement based on their
respective authority with respect to the various Winthrop entities involved in,
and their respective fault with respect to, the matters giving rise to such
indemnification obligations, and will be the beneficiaries of the
indemnification obligations of WFA, FWC and the Other Sellers, as the case may
be, under the Winthrop Agreement and the FWC Stockholders' Agreement based on
their respective ownership of assets and revenue streams acquired under or in
connection with the Winthrop Agreement affected by the matters giving rise to
such indemnification obligations.
4. MISCELLANEOUS.
4.1 Expenses. Each of the parties hereto shall bear and pay all costs
and expenses incurred by it or on its behalf in connection with the
transactions contemplated hereunder, including fees and expenses of its own
financial consultants, investment bankers, accountants and counsel.
4.2 Waiver and Amendment. Any provision of this Agreement may be
waived, but only in writing, at any time by the party that is entitled to the
benefits of such provision. This Agreement may not be modified, amended,
altered or supplemented except upon the execution and delivery of a written
agreement executed by the parties hereto.
4.3 Entire Agreement; No Third-Party Beneficiary; Severability. This
Agreement (a) constitutes the entire agreement among the parties hereto
concerning the subject matter hereof and supersedes all prior agreements and
understandings, both written and oral, and (b) is not intended, and shall not
be construed, to confer upon any person other than the parties hereto any
rights or remedies hereunder. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction or a federal or
state regulatory agency to be invalid, void or unenforceable, the remainder of
the terms, provisions, covenants and restrictions of this Agreement shall
remain in full force and effect and shall in no way be affected, impaired or
invalidated.
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4.4 Governing Law. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of Delaware, without regard
to any otherwise applicable conflicts of law rules.
4.5 Descriptive Headings. The descriptive headings contained herein
are for convenience of reference only and shall not affect in any way the
meaning or interpretation of this Agreement.
4.6 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally, telecopied (with
confirmation) or mailed by registered or certified mail (return receipt
requested) to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice):
If to Insignia: Insignia Financial Group, Inc.
One Insignia Financial Xxxxx
X.X. Xxx 0000
Xxxxxxxxxx, XX 00000
Telecopy Number: (000) 000-0000
Attention: Xxxxxx Xxxxxx
If to IPLP: Insignia Properties, L.P.
c/o Insignia Properties Trust
One Insignia Financial Plaza
P.O. Box 19059
Xxxxxxxxxx, XX 00000
Telecopy Number: (000) 000-0000
Attention: Xxxxx X. Aston and
Xxxxxxx X. Xxxxxx
In each case with Insignia Financial Group, Inc.
a copy (which shall One Insignia Financial Plaza
not constitute P.O. Box 1089
notice) to: Xxxxxxxxxx, XX 00000
Telecopy Number: (000) 000-0000
Attention: General Counsel and
Secretary
4.7 Counterparts. This Agreement and any amendments hereto may be
executed in counterparts, each of which shall be considered one and the same
agreement and shall become effective when both counterparts have been signed,
it being understood that both parties need not sign the same counterpart.
4.8 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder or under the Option shall be assigned or
delegated by any party hereto (whether by operation of law or otherwise)
without the prior written consent of the other party, which consent shall not
be unreasonably withheld, conditioned or delayed.
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4.9 Further Assurances. Upon the exercise of the Option by IPLP, the
parties shall execute and deliver, or cause to be executed and delivered, all
other documents and instruments and take all other action that may be
reasonably necessary in order to consummate the transactions provided for by
such exercise.
4.10 Specific Performance. The parties hereto agree that this
Agreement may be enforced through specific performance, injunctive relief and
other equitable relief. The parties further agree to waive any requirement for
the securing or posting of any bond in connection with seeking or obtaining any
such equitable relief and that this provision is without prejudice to any other
rights that the parties hereto may have for any failure to perform this
Agreement.
IN WITNESS WHEREOF, the parties have duly executed and delivered this
Agreement as of the date first above written.
INSIGNIA FINANCIAL GROUP, INC.
By: _____________________________
Xxxxxxx X. Xxxxx
Senior Vice President
INSIGNIA PROPERTIES, L.P.
By: Insignia Properties Trust,
its General Partner
By: _____________________________
Xxxxxxx X. Xxxxx
Senior Vice President
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SCHEDULE A
TO
WINTHROP OPTION AGREEMENT
(WFA Partnerships)
DFW Apartment Investors Limited Partnership
DFW Residential Investors Limited Partnership
Olde Mill Investors Limited Partnership
Riverside Park Associates Limited Partnership
Westbury Investors Limited Partnership
Winrock-Houston Limited Partnership
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SCHEDULE B
TO
WINTHROP OPTION AGREEMENT
(FWC Partnerships)
Springhill Lake Investors Limited Partnership
Winthrop Texas Investors Limited Partnership
Chestnut Hill Associates Limited Partnership
Real Estate Venture Fund III Limited Partnership
Texas Residential Investors Limited Partnership
Winthrop Apartment Investors Limited Partnership
Winthrop Growth Investors 1 Limited Partnership
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SCHEDULE C
TO
WINTHROP OPTION AGREEMENT
(Winthrop Units)
Category 1 Units
-- 200.58 Units of Limited Partner Interest in Riverside Park Associates
Limited Partnership
-- 241.15 Units of Limited Partner Interest in Springhill Lake Investors
Limited Partnership
-- 88.5 Units of Limited Partner Interest in Winrock-Houston Limited
Partnership
-- 25.25 Units of Limited Partner Interest in Winthrop Texas Investors
Limited Partnership
Category 2 Units
-- 55.625 Units of Limited Partner Interest in Chestnut Hill Associates
Limited Partnership
-- 27.5 Units of Limited Partner Interest in DFW Apartment Investors Limited
Partnership
-- 15.5 Units of Limited Partner Interest in DFW Residential Investors
Limited Partnership
-- 38.75 Units of Limited Partner Interest on Olde Mill Investors Limited
Partnership
-- 1.5 Units of Limited Partner Interest in Real Estate Venture Fund III
Limited Partnership
-- 11 Units of Limited Partner Interest in Texas Residential Investors
Limited Partnership
Category 3 Units
-- 43.5 Units of Limited Partner Interest in Winthrop Apartment Investors
Limited Partnership
-- 4,872.34 Units of Limited Partner Interest in Winthrop Growth Investors 1
Limited Partnership
Category 4 Units
-- 18 Units of Limited Partner Interest in Westbury Investors Limited
Partnership
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SCHEDULE D
TO
WINTHROP OPTION AGREEMENT
(Winthrop Fees)
1996 AMOUNT OF
--------------------------------------------------------------------------------------
PARTNERSHIP NAME ASSET INVESTOR PARTNERSHIP
MANAGEMENT FEE SERVICES FEE MANAGEMENT FEE
--------------------------------------- -------------------------- ------------------------- -------------------------
Chestnut Hill Associates Limited $119,543
Partnership
DFW Apartment Investors Limited $ 54,114
Partnership
DFW Residential Investors Limited $ 30,712
Partnership
Olde Mill Investors Limited $ 50,000
Partnership
Real Estate Venture Fund III Limited $212,686
Partnership
Riverside Park Associates Limited $175,705
Partnership
Springhill Lake Investors Limited $100,000 $ 10,000
Partnership
Texas Residential Investors Limited $ 48,177
Partnership
Winrock-Houston Limited Partnership $ 75,412 $ 79,693
Winthrop Texas Investors Limited $ 31,560
Partnership
-------------------------- ------------------------- -------------------------
SUBTOTALS $175,412 $539,504 $272,686
-------------------------- ------------------------- -------------------------
-------------------------
GRAND TOTAL $987,602
-------------------------
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