CONTRIBUTION AND DISTRIBUTION AGREEMENT
CONTRIBUTION AND DISTRIBUTION AGREEMENT, dated as of May 30, 1997, by and
between WELLSFORD RESIDENTIAL PROPERTY TRUST, a Maryland real estate
investment trust ("Wellsford Parent"), and WELLSFORD REAL PROPERTIES, INC., a
Maryland corporation ("Newco").
RECITALS:
WHEREAS, Wellsford Parent and Equity Residential Properties Trust, a
Maryland real estate investment trust ("EQR"), have entered into an Agreement
and Plan of Merger dated as of January 16, 1997 (the "Merger Agreement"),
providing for the merger of EQR with Wellsford Parent (the "Merger"), with
Wellsford Parent continuing as the surviving entity of the Merger, upon the
terms and subject to the conditions set forth in the Merger Agreement;
WHEREAS, the Board of Trustees of Wellsford Parent has determined that
Wellsford Parent can maximize the value of certain of its assets by not
conveying them in the Merger, and EQR has indicated that it has no interest in
acquiring such assets;
WHEREAS, the Board of Trustees of Wellsford Parent has deemed it
appropriate and advisable, in order to enhance value for the shareholders of
Wellsford Parent, prior to the Merger and as contemplated by the Merger
Agreement, to (i) contribute to Newco certain of the assets and liabilities of
Wellsford Parent and (ii) distribute, immediately prior to the Merger, as a
taxable distribution to the holders of Common Shares of Beneficial Interest,
$.01 par value of Wellsford Parent (the "Wellsford Parent Common Shares"), all
of the outstanding shares of common stock, $.01 par value, of Newco owned by
Wellsford Parent (the "Newco Common Stock");
WHEREAS, following such contribution and distribution, EQR shall acquire
the remaining businesses, operations, assets and liabilities of Wellsford
Parent and its remaining direct and indirect subsidiaries pursuant to the
Merger; and
WHEREAS, Wellsford Parent and Newco have determined that it is necessary
and desirable to set forth the transactions required to effect such
contribution and distribution and to set forth other agreements that will
govern certain other matters following such distribution.
NOW, THEREFORE, in consideration of the mutual agreements, provisions and
covenants contained in this Agreement, the parties hereby agree as follows:
ARTICLE 1
DEFINITIONS
As used in this Agreement, the following terms have the following
meanings (such meanings to be equally applicable to both the singular and
plural forms of the terms defined):
"Action" means any action, suit, arbitration, inquiry, proceeding or
investigation by or before any court, any governmental or other regulatory or
administrative agency or commission or any arbitration tribunal.
"Affiliate" means, when used with respect to a specified person, another
person that, directly or indirectly, controls, is controlled by, or is under
common control with, the person specified.
"Agent" means the distribution agent to be appointed by Wellsford Parent
to distribute to the Holders the shares of Newco Common Stock pursuant to the
Distribution.
"Assumed Liabilities" has the meaning set forth in Section 2.2.
"Code" means the Internal Revenue Code of 1986, as amended, and the
Treasury Regulations promulgated thereunder, including any successor
legislation.
"Commission" means the Securities and Exchange Commission.
"Confidential Information" has the meaning set forth in Section 4.3.
"Contributed Asset" and "Contributed Assets" have the meaning set forth
in Section 2.1.
"Contribution" has the meaning set forth in Section 2.4.
"Credit Enhancement Agreement" means the Credit Enhancement Agreement of
even date herewith between ERP Operating Partnership and Newco.
"Distribution" means the distribution prior to the effective time of the
Merger by Wellsford Parent to the Holders of all the outstanding shares of
Newco Common Stock owned by Wellsford Parent on the Distribution Date on the
basis of 0.25 of a share of Newco Common Stock for each outstanding Wellsford
Parent Common Share.
"Distribution Date" means the date determined pursuant to Section 3.1 on
which the Distribution will be effected.
"Distribution Record Date" means the close of business on the date to be
determined by the Board of Trustees of Wellsford Parent as the record date for
determining the shareholders of Wellsford Parent entitled to receive Newco
Common Stock in the Distribution, which will be the date on which the Merger
is effected.
"Effective Time" means the time on the Distribution Date when Wellsford
Parent delivers to the Agent instructions directing the Agent to effect the
Distribution.
"ERP Operating Partnership" means ERP Operating Limited Partnership, an
Illinois limited partnership, of which EQR is the general partner.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Governmental Authority" means any government or any agency, bureau,
board, commission, court, department, official, political subdivision,
tribunal or other instrumentality of any government, whether federal, state or
local, domestic or foreign.
"Holder" means a holder of record of Wellsford Parent Common Shares on
the Distribution Record Date.
"Indemnifying Party" has the meaning set forth in Section 5.3.
"Indemnitee" has the meaning set forth in Section 5.3.
"Indemnitee Notice" has the meaning set forth in Section 5.4.
"Intellectual Property Rights" has the meaning set forth in Section 2.1.
"IRS" means the Internal Revenue Service.
"Liabilities" means any and all debts, liabilities and obligations,
absolute or contingent, matured or unmatured, liquidated or unliquidated,
accrued or unaccrued, known or unknown, whenever arising, including, without
limitation, Taxes and those debts, liabilities and obligations arising under
any law, rule, regulation, Action, threatened Action, order or consent decree
of any court, any governmental or other regulatory or administrative agency or
commission or any award of any arbitration tribunal, and those arising under
any contract, commitment or undertaking.
"Losses" and "Loss" mean any and all losses, charges, Liabilities,
claims, damages, penalties and costs or expenses (including, without
limitation, reasonable attorney's fees and any and all expenses whatsoever
reasonably incurred in investigating, preparing or defending against any
Actions or threatened Actions).
"Merger" has the meaning set forth in the recitals.
"Newco Common Stock" has the meaning set forth in the recitals.
"Newco Indemnitees" has the meaning set forth in Section 5.1.
"Newco Liabilities" means, collectively, (i) all the Liabilities of Newco
under this Agreement, (ii) all the Liabilities arising out of or in connection
with or otherwise relating to (A) the Assumed Liabilities, (B) the Liabilities
of Newco and the Newco Subsidiaries, whether incurred before or after the
Effective Time, and (C) the assets and conduct of the business of Newco and
the Newco Subsidiaries, whether incurred before or after the Effective Time,
but shall exclude the liabilities and benefits of Wellsford Parent under the
Tri-Party Agreement.
"Newco Subsidiaries" mean all Subsidiaries of Newco after giving effect
to the transactions contemplated hereby.
"Note" means the Promissory Note dated June 28, 1996 by Specified
Properties VIII, L.P., a Texas limited partnership.
"Palomino Agreement" means the Agreement regarding Palomino Park of even
date herewith between Newco and ERP Operating Partnership.
"Palomino Bonds" mean the Assessment Lien Revenue Bonds, Series 1995,
issued by PPPIC in the original aggregate principal amount of $14,755,000,
pursuant to a Trust Indenture dated as of December 1, 1995.
"Palomino Park" means the Overall Property, as defined in the Palomino
Agreement.
"PPPIC" means Palomino Park Public Improvement Corporation, a Colorado
nonprofit corporation.
"Registration Statement" means the registration statement on Form 10 (or
other applicable form) filed with the Commission by Newco pursuant to the
requirements of Section 12 of the Exchange Act, and the rules and regulations
thereunder, in order to register the Newco Common Stock under Section 12(b) of
the Exchange Act.
"Representatives" has the meaning set forth in Section 4.3.
"Retained Subsidiaries" means all Subsidiaries of Wellsford Parent other
than the Newco Subsidiaries.
"S-4" means the registration statement on Form S-4 filed with the
Commission relating to shares issued in connection with the Merger.
"Securities Act" means the Securities Act of 1933, as amended.
"Sonterra Documents" has the meaning set forth in Section 2.1.
"Subsidiary" means any entity at least 51% of the total outstanding
voting interests of which are owned, directly or indirectly, by another
entity.
"Taxes" means all taxes, charges and fees imposed by the United States or
any state, county, local or foreign government or subdivision or agency
thereof.
"Third-Party Claim" has the meaning set forth in Section 5.4.
"Transaction Costs Agreement" means the Transaction and Termination Costs
Agreement of even date herewith among Wellsford Parent, EQR and Newco.
"Transition Period" means the period from the Effective Time until three
months following the Effective Time.
"Tri-Party Agreement" means, collectively, the Tri-Party Agreements
executed by Wellsford Parent in favor of NationsBank, N.A., as lender under
the construction loan financing for Phase I and Phase II of Palomino Park.
"Wellsford Parent Common Shares" has the meaning set forth in the
recitals.
"Wellsford Parent Indemnitees" has the meaning set forth in Section 5.2.
"Wellsford Parent Liabilities" means, collectively, (i) all the
Liabilities of Wellsford Parent under this Agreement, (ii) all the Liabilities
of Wellsford Parent and the Retained Subsidiaries (other than the Newco
Liabilities), whether arising before or after the Effective Time, and
(iii) the liabilities and benefits of Wellsford Parent under the Tri-Party
Agreement.
"WPHC" means Wellsford Park Highlands Corp., a Colorado corporation.
References to a "Schedule" are, unless otherwise specified, to one of the
Schedules attached to this Agreement, and references to a "Section" are,
unless otherwise specified, to one of the Sections of this Agreement.
ARTICLE 2
CONTRIBUTION OF PROPERTIES
AND ASSETS TO NEWCO
2.1 Contribution. Subject to the terms and conditions of this
Agreement, immediately prior to the Distribution Date, Wellsford Parent shall,
without any representations or warranties, express or implied, assign,
transfer, convey and deliver to Newco all of Wellsford Parent's right, title
and interest in and to the following properties and assets (each a
"Contributed Asset", and collectively, the "Contributed Assets"):
(a) all agreements and other documents in connection with a 344-unit
apartment project located in Tucson, Arizona, and commonly known as Sonterra
at Xxxxxxxx Centre, including, without limitation, those agreements and
documents (the "Sonterra Documents") which are listed on Schedule 2.1(a)
attached hereto;
(b) any and all funds (other than payments of principal and interest
under the Note received prior to the Distribution Date), held by Wellsford
Parent or its designees under the Sonterra Documents, including, without
limitation, any and all tax deposits held pursuant to the Deed of Trust;
(c) eighty (80) shares of Class A Common Stock of WPHC, constituting 80%
of the outstanding shares of WPHC and 100% of the outstanding voting shares of
WPHC;
(d) cash in the amount (determined pursuant to Section 1.10 of the
Merger Agreement (the "Contribution Funds")) of $12,965,995;
(e) the split dollar life insurance agreements listed on Schedule 2.1(e)
hereto;
(f) the Xxxxxxx Xxxxx Non-Qualified Deferred Compensation Plan Trust
Agreement, dated June 20, 1994, by and between Wellsford Parent and Xxxxxxx
Xxxxx Trust Company;
(g) the Xxxxxxx Xxxxx Non-Qualified Deferred Compensation Plan Revocable
Trust Agreement dated May 28, 1997 by and between Wellsford Parent and Xxxxxxx
Xxxxx Trust Company;
(h) the Xxxxxxx Xxxxx Special Non-Qualified Deferred Compensation Plan
adopted by Wellsford Parent;
(i) any rights of Wellsford Parent under the Operating Agreement of Park
at Highlands LLC dated as of April 27, 1995, as amended, and the Operating
Agreement of Red Canyon at Palomino Park LLC, as amended;
(j) any rights of Wellsford Parent under the Reimbursement Agreement
dated December 1, 1995 between PPPIC and Wellsford Parent;
(k) Wellsford Bond Pledge and Security Agreement, dated December 1,
1995, among PPPIC, Wellsford Parent and United States Trust Company of New
York (the "Bond Trustee");
(l) the Palomino Park Promissory Note dated December 20, 1995 from PPPIC
to Wellsford Parent, delivered pursuant to the Reimbursement Agreement
described in clause (i) of this definition;
(m) the opinion of Xxxxxxx Xxxxx Xxxxxxx & Xxxxxxxxx dated December 20,
1995, addressed, inter alia, to Wellsford Parent, with respect to the Bonds;
(n) any other agreements between PPPIC and Wellsford Parent, and any
other agreements of third parties which run to the benefit of Wellsford Parent
with respect to the Palomino Bonds;
(o) the Letter of Credit Reimbursement Agreement dated December 1, 1995
among PPPIC, Wellsford Parent and Dresdner Bank AG, New York Branch;
(p) any agreements executed by Dresdner Bank AG, New York Branch in
favor of Wellsford Parent;
(q) any rights of Wellsford Parent under the Bond Pledge and Security
Agreement dated December 1, 1995 among PPPIC, Wellsford Parent, Dresdner Bank
AG, New York Branch and the Bond Trustee;
(r) any other rights or interest of Wellsford Parent and any of the
Retained Subsidiaries in any of the documents and agreements regarding
Palomino Park (other than the rights of ERP Operating Partnership under the
Credit Enhancement Agreement and the Palomino Agreement);
(s) furniture, fixtures, equipment and personalty located in the office
premises demised pursuant to the Headquarter Lease; and
(t) the name "Wellsford", the ticker symbol "WRP", and the plate used in
connection with the engraving and printing of the Wellsford Parent share
certificates (the "Intellectual Property Rights").
Such contribution shall be effected in such a manner so that Wellsford
Parent and the Retained Subsidiaries have no continuing obligation with
respect to the Contributed Assets after the Effective Time, except as
otherwise provided in the Credit Enhancement Agreement and the Palomino
Agreement.
2.2 Assumption.
(a) Subject to the terms and conditions of this Agreement,
simultaneously with the contribution contemplated by Section 2.1, Newco shall
assume and undertake to pay and discharge the following (the "Assumed
Liabilities"):
(i) All Liabilities of Wellsford Parent with respect to the
Contributed Assets, including, without limitation, all liabilities and
obligations of Wellsford Parent under each of the agreements giving rise
to any of the Contributed Assets;
(ii) the obligations arising under the option certificates listed on
Schedule 2.2(a) attached hereto (the "Option Agreements"), which will be
satisfied by (A) issuing Newco Common Stock pursuant to the Amended Newco
Options (defined below) and (B) amending the Option Agreements, as
described in Schedule 2.2(a) (as amended, the "Amended Newco Options");
(iii) the obligation to pay Xxxxxxx Xxxxxxx a consulting fee of
$500,000, payable $250,000 in cash and $250,000 by the issuance of Newco
Common Stock; and
(iv) the Promissory Note dated December 20, 1995 issued by Wellsford
Parent in favor of Dresdner Bank AG;
(v) the Indemnification Agreement dated November 12, 1996 given by
Wellsford Parent and WPHC to Xxxxxx X. XxxXxxxxx; and
(vi) any other obligation of Wellsford Parent and the Retained
Subsidiaries under any other agreement relating to the Sonterra
Documents, the Palomino Bonds, PPPIC or Palomino Park, except the
obligations of ERP Operating Partnership under the Credit Enhancement
Agreement and the Palomino Agreement.
(b) Notwithstanding anything contained in Section 2.2(a), Wellsford
Parent hereby retains, and Newco does not assume and will have no liability
with respect to, Wellsford Parent Liabilities, except as otherwise provided in
the Transaction Costs Agreement.
2.3 Agreements and Documents to be Delivered in Connection with
Contribution. Wellsford Parent and Newco shall execute and deliver, or cause
to be executed and delivered, all agreements, documents and instruments
necessary or appropriate to effect the contribution contemplated by Section
2.1 and the assumption contemplated by Section 2.2, including, without
limitation, those agreements, documents and instruments described in this
Section 2.3:
(a) Wellsford Parent and Newco shall execute and deliver, or cause to be
executed and delivered, an Assignment and Assumption Agreement for the
Contributed Assets and the Assumed Liabilities.
(b) Wellsford Parent shall execute and deliver or cause to be executed
and delivered the following documents:
RDO Assignment of Note and Security Agreements, including an
assignment of (a) the Note without recourse, (b) the Deed of Trust (as
defined on Schedule 2.1(a) hereto), (c) the Loan Agreement (as defined on
Schedule 2.1(a) hereto), (d) the Assignment of Leases and Rents (as
defined on Schedule 2.1(a) hereto), (e) the Security Agreement (as
defined on Schedule 2.1(a) hereto), and (f) those certain financing
statements perfecting Wellsford Parent's security interests granted by
the Deed of Trust and the Security Agreement (collectively, the
"Security Documents");
(ii) Assignment of Deed of Trust and Security Documents, in form
suitable for recording;
(iii) Assignment of Option Agreement (as defined on Schedule
2.1(a) hereto), in form suitable for recording;
(iv) UCC-2 Assignments, in form suitable for filing or recording, as
the case may be;
(v) Omnibus Assignment of Mortgage Documents relating to the
Sonterra Documents not otherwise covered by the documents listed in this
Section 2.3(b);
(vi) Assignment of Seller's Waiver (as defined in Schedule 2.1(a)
hereto);
(vii) Certificate(s) representing eighty (80) shares of Class A
Common Stock of WPHC, with valid stock powers attached; and
(xii) Xxxx of Sale granting to Newco all right, title and
interest of Wellsford Parent to the Intellectual Property Rights.
2.4 Contributions Not Effected Prior to the Distribution; Transfer
Deemed Effective as of the Distribution Date. To the extent that any
assignment, transfer, conveyance or delivery (each, a "Contribution") of any
Contributed Asset contemplated by this Article II shall not have been
consummated on or prior to the Distribution Date, the parties shall cooperate
to effect such Contribution as promptly following the Distribution Date as
shall be practicable. Nothing herein shall be deemed to require the
Contribution of any Contributed Assets which by their terms or operation of
law cannot be assigned, transferred, conveyed or delivered; provided, however,
that Wellsford Parent and Newco shall use their reasonable best efforts to
seek to obtain any necessary consents or approvals for the Contribution of all
Contributed Asset contemplated to be contributed pursuant to this Article II.
In the event that any Contribution of a Contributed Asset has not been
consummated, from and after the Distribution Date Wellsford Parent shall hold
such Contributed Asset in trust for the use and benefit of Newco, and shall
take such other action as may be reasonably requested by Newco in order to
place Newco, insofar as is reasonably possible, in the same position as would
have existed had such Contributed Asset been contributed as contemplated by
this Article II. As and when any such Contributed Asset is able to be
assigned, transferred, conveyed or delivered, as the case may be, such
Contribution shall be effected forthwith. The parties agree that, as of the
Distribution Date, Newco shall be deemed to have acquired complete and sole
beneficial ownership over all of the Contributed Assets, together with all
rights, powers and privileges incident thereto and all duties, obligations and
responsibilities incident thereto including, without limitation, to the
Assumed Liabilities.
2.5 In contemplation of the Contribution and Distribution, Wellsford
Parent and Newco have entered into a Sublease whereby Wellsford Parent has
subleased to Newco the premises covered by the Lease between Rockefeller
Center Properties ("Prime Landlord") and Wellsford Parent, dated June 29,
1994. Newco has agreed to indemnify Wellsford Parent against certain claims
of the Prime Landlord pursuant to an Indemnity Agreement executed and
delivered by Newco.
ARTICLE 3
DISTRIBUTION AND RELATED TRANSACTIONS
3.1 Actions Prior to Distribution.
(a) The Board of Trustees of Wellsford Parent (or a duly authorized
committee thereof) shall, in its discretion, establish the Distribution Record
Date and the Distribution Date and any procedures necessary or appropriate in
connection with the Distribution, but in no event shall the Distribution occur
prior to such time as the conditions set forth in this Agreement have been
satisfied or waived. Such action shall not create any obligation on the part
of Wellsford Parent to effect the Distribution or in any way limit Wellsford
Parent's power of termination set forth in Section 6.1 of this Agreement.
(b) Wellsford Parent and Newco shall prepare and mail, prior to the
Distribution Date, to the holders of Wellsford Parent Common Shares, such
information concerning Newco, its business, operations and management, the
Distribution and such other matters as Wellsford Parent shall reasonably
determine to be necessary and as may be required by law. Wellsford Parent and
Newco will prepare, and Newco will, to the extent required under applicable
law, file with the Commission any such documentation which Wellsford Parent
determines are necessary or desirable to effectuate the Distribution, and
Wellsford Parent and Newco shall each use its reasonable best efforts to
obtain all necessary approvals from the Commission with respect thereto as
soon as practicable.
(c) Wellsford Parent and Newco shall take all such action as may be
necessary or appropriate under the securities or blue sky laws of the United
States (and any comparable laws under any foreign jurisdiction) in connection
with the Distribution.
(d) Wellsford Parent and Newco shall take all reasonable steps necessary
and appropriate to cause the conditions set forth in Section 6.1 to be
satisfied and to effect the Distribution on the Distribution Date.
(e) Newco shall prepare and file, and shall use its reasonable best
efforts to have approved on or prior to the Distribution Date, an application
for the listing of the Newco Common Stock to be distributed in the
Distribution on the New York Stock Exchange, the American Stock Exchange or
NASDAQ National Market System, subject to official notice of issuance.
3.2 Distribution. On or prior to the Distribution Date, subject to the
conditions and rights of termination set forth in this Agreement, Wellsford
Parent shall (i) deliver to the Agent for the benefit of the Holders a single
stock certificate representing all the Newco Common Stock owned by Wellsford
Parent, endorsed by Wellsford Parent in blank, and (ii) deliver to the Agent
written instructions to distribute on the Distribution Date to each Holder or
designated transferee or transferees of such Holder 0.25 of a share of Newco
Common Stock for each Wellsford Parent Common Share held by such Holder (and,
if applicable, cash in lieu of fractional shares).
3.3 Fractional Shares.
(a) No Fractional Shares. Notwithstanding anything herein to the
contrary, no certificate or scrip evidencing a fractional share of Newco
Common Stock shall be issued in connection with the Distribution, and any such
fractional share interests to which a Holder would otherwise be entitled will
not entitle such Holder to vote or to any rights of a stockholder of Newco.
In lieu of any such fractional shares, each Holder who, but for the provisions
of this Section 3.3(a), would be entitled to receive a fractional share
interest of Newco Common Stock pursuant to the Distribution shall be paid
cash, without any interest thereon, as hereinafter provided. Wellsford Parent
shall instruct the Agent to determine the number of whole shares and
fractional shares of Newco Common Stock allocable to each Holder, to aggregate
all such fractional shares into whole shares, to sell the whole shares
obtained thereby in the open market at the then prevailing prices on behalf of
Holders who otherwise would be entitled to receive fractional share interests
and to distribute to each such Holder his, her or its ratable share of the
total proceeds of such sale, after making appropriate deductions of the amount
required to be withheld for federal income tax purposes and after deducting
any applicable transfer taxes. All brokers' fees and commissions incurred in
connection with such sales shall be paid by Newco.
(b) Unclaimed Stock or Cash. Any Newco Common Stock or cash in lieu of
fractional shares and dividends or distributions with respect to Newco Common
Stock that remain unclaimed by any Holder 180 days after the Distribution Date
shall be returned to Wellsford Parent, and any such Holder shall look only to
Wellsford Parent for the Newco Common Stock, cash, if any, in lieu of
fractional share interests and any such dividends or distributions to which
they are entitled, subject in each case to applicable escheat or other
abandoned property laws.
3.4 No Representations or Warranties. Each of the parties hereto
understands and agrees that no party hereto is, in this Agreement or in any
other agreement or document contemplated by this Agreement or otherwise,
making any representation or warranty whatsoever, including, without
limitation, as to title, value or legal sufficiency.
ARTICLE 4
COVENANTS
4.1 Undertaking by Wellsford Parent. Wellsford Parent hereby undertakes
to change its name from "Wellsford Residential Property Trust" to a new name
bearing no resemblance to its present name, immediately upon consummation of
the Merger. Promptly, and in any event prior to the completion of the
Transition Period, Wellsford Parent shall remove all references to the name
"Wellsford" from the names of the Retained Subsidiaries and all of its
stationery.
4.2 Corporate Records. Wellsford Parent shall use its best efforts to
arrange, as soon as practicable following the Distribution Date, for the
transportation and delivery to Newco of all original agreements, documents,
books, records and files relating to or affecting Newco, the Contributed
Assets or the Assumed Liabilities, to the extent such items are not already in
the possession of Newco, provided that Wellsford Parent may retain any tax
returns, reports, forms or work papers, and Newco will be provided with copies
of such returns, reports, forms or work papers.
4.3 Confidentiality. Each of Wellsford Parent and Newco shall hold, and
shall cause its respective trustees, directors, officers, Affiliates,
employees, agents, accountants, consultants and advisors (collectively,
"Representatives") to hold, in strict confidence all information concerning
the other relating to the Contributed Assets and the Assumed Liabilities in
its possession (except to the extent that such information has been (a) in the
public domain through no fault of such party or any of its Representatives,
including information contained in the Registration Statement and the S-4 and
other statements and reports filed with the Commission, or (b) later lawfully
acquired from other sources by such party) to the extent such information (i)
relates to the period up to the Effective Time, (ii) relates to this Agreement
or (iii) is obtained from the other party pursuant to this Agreement
("Confidential Information"). Each party shall not release or disclose, or
permit to be released or disclosed by any of its Representatives or otherwise,
any Confidential Information to any other person, except its auditors,
attorneys, financial advisors, bankers and other consultants and advisors who
need to know such information, unless compelled to disclose by judicial or
administrative process or, as advised by its counsel, by other requirements of
law. In the event that either party or its Representatives (a "Disclosing
Party") is compelled to release or disclose, or permit to be released or
disclosed, any Confidential Information as provided in the immediately
preceding sentence, such Disclosing Party shall (i) immediately notify the
other party (the "Providing Party") of the existence, terms and circumstances
surrounding such a requirement, (ii) consult with the Providing Party on the
advisability of taking legally available steps to resist or narrow such
requirement and (iii) if disclosure of such information is nevertheless
required, furnish only that portion of the Confidential Information which, in
the opinion of such Disclosing Party's counsel, such Disclosing Party is
legally compelled to disclose and to cooperate with any action by the
Providing Party to obtain an appropriate protective order or other reliable
assurance that confidential treatment will be accorded the Confidential
Information (it being agreed that the Providing Party shall reimburse the
Disclosing Party for all reasonable out-of-pocket expenses incurred by the
Disclosing Party in connection with such cooperation).
4.4 Further Assurances. Each of the parties hereto shall use their
reasonable best efforts, prior to, on and after the Distribution Date, to take
or cause to be taken, all actions, and to do, or cause to be done, all things,
necessary, proper or desirable under applicable laws and regulations to carry
out the purposes of this Agreement and to vest Newco with full title to all
Contributed Assets. Without limiting the foregoing, Wellsford Parent and
Newco shall use their best efforts to obtain all consents and approvals, to
enter into all amendatory agreements and to make all filings and applications
and take all other actions which may be required for the consummation of the
transactions contemplated by this Agreement, including, without limitation,
all applicable regulatory filings.
ARTICLE 5
INDEMNIFICATION
5.1 Indemnification by Wellsford Parent. Except as otherwise set forth
herein, Wellsford Parent, for itself and its Affiliates, and their respective
successors and assigns, shall indemnify, defend and hold harmless Newco, each
of its directors, officers, employees and agents, and each Affiliate of Newco,
and each of the heirs, executors, successors and assigns of any of the
foregoing (the "Newco Indemnitees") from and against any and all Losses of the
Newco Indemnitees arising out of, by reason of or otherwise in connection with
the Wellsford Parent Liabilities, except as otherwise provided in the
Transaction Costs Agreement.
5.2 Indemnification by Newco. Except as otherwise set forth herein,
Newco, for itself and its Affiliates and their respective successors and
assigns, shall indemnify, defend and hold harmless Wellsford Parent, each of
its trustees, officers, employees and agents, and each Affiliate of Wellsford
Parent, and each of the heirs, executors, successors and assigns of any of the
foregoing (the "Wellsford Parent Indemnitees") from and against any and all
Losses of the Wellsford Parent Indemnitees arising out of, by reason of or
otherwise in connection with the Newco Liabilities, except as otherwise
provided in the Credit Enhancement Agreement and the Palomino Agreement.
5.3 Limitations on Indemnification Obligations. The amount which any
party (an "Indemnifying Party") is or may be required to pay to any other
party (an "Indemnitee") pursuant to Section 5.1 or Section 5.2 shall be
reduced (retroactively or prospectively) by any insurance proceeds or other
amounts actually recovered by or on behalf of such Indemnitee, in reduction of
the related Loss. If an Indemnitee shall have received the payment required
by this Agreement from an Indemnifying Party in respect of a Loss and shall
subsequently actually receive insurance proceeds or other amounts in respect
of such Loss, then such Indemnitee shall pay to such Indemnifying Party a sum
equal to the amount of such insurance proceeds or other amounts actually
received, up to the aggregate amount of any payments received from such
Indemnifying Party pursuant to this Agreement in respect of such Loss.
5.4 Procedure for Indemnification.
(a) If an Indemnitee shall receive notice or otherwise learn of the
assertion by a person (including, without limitation, any Governmental
Authority) who is not a party to this Agreement or the Merger Agreement of any
claim or of the commencement by any such person of any Action (a "Third-Party
Claim") with respect to which an Indemnifying Party may be obligated to
provide indemnification pursuant to this Agreement, such Indemnitee shall give
such Indemnifying Party written notice (the "Indemnitee Notice") thereof
promptly after becoming aware of such Third-Party Claim; provided, however,
that the failure of any Indemnitee to give notice as provided in this Section
5.4 shall not relieve the applicable Indemnifying Party of its obligations
under this Article V, except to the extent that such Indemnifying Party is
prejudiced by such failure to give notice. Such Indemnitee Notice shall
describe the Third-Party Claim in reasonable detail and shall indicate the
amount (estimated if necessary) of the Loss that has been or may be sustained
by such Indemnitee.
(b) The Indemnitee shall provide to the Indemnifying Party on request
all information and documentation reasonably necessary to support and verify
any Losses which the Indemnitee believes give rise to a claim for
indemnification hereunder and shall give the Indemnifying Party reasonable
access to all books, records and personnel in the possession or under the
control of the Indemnitee which would have bearing on such claim.
(c) Upon receipt of the Indemnitee Notice required by Section 5.4(a),
the Indemnifying Party shall be entitled, if it so elects, to take control of
the defense and investigation with respect to such claim and to employ and
engage attorneys of its own choice to handle and defend the same, at the
Indemnifying Party's cost, risk and expense, upon written notice to the
Indemnitee of such election within 30 days of receipt of Indemnitee's notice.
The Indemnifying Party shall not settle any third-party claim that is the
subject of indemnification without the written consent of the Indemnitee,
which consent shall not be unreasonably withheld; provided, however, that the
Indemnifying Party may settle a claim without the Indemnitee's consent if such
settlement (i) includes a complete release of the Indemnitee and (ii) does not
require the Indemnitee to make any payment or take any action or otherwise
materially adversely affect the Indemnitee. After notice from an Indemnifying
Party to an Indemnitee of its election to assume the defense of a Third-Party
Claim, such Indemnifying Party will not be liable to such Indemnitee under
this Article V for any legal or other expenses subsequently incurred by such
Indemnitee in connection with the defense thereof; provided, that, if the
defendants in any such claim include both the Indemnifying Party and one or
more Indemnitees and a conflict of interest between such Indemnitees and such
Indemnifying Party exists in respect of such claim, such Indemnitees will have
the right to employ separate counsel reasonably satisfactory to the
Indemnifying Party to represent such Indemnitees, and in that event the
reasonable fees and expenses of such separate counsel (but not more than one
separate counsel) will be paid by such Indemnifying Party.
(d) If an Indemnifying Party elects to defend or to seek to compromise
any Third-Party Claim, the appropriate Indemnitee shall (x) cooperate in all
reasonable respects with the Indemnifying Party in connection with such
defense and (y) not admit any liability with respect to, or settle, compromise
or discharge, such Third-Party Claim without the Indemnifying Party's prior
written consent.
(e) If the Indemnifying Party shall decline to assume the defense of any
such Third-Party Claim, or shall fail to notify the Indemnitee that it will
defend such claim within 30 days after receipt of the Indemnitee Notice, the
Indemnitee shall defend against such claim (provided that the Indemnitee shall
not settle such claim without the consent of the Indemnifying Party). The
expenses of all proceedings, contests or lawsuits in respect of such claims
shall be borne by the Indemnifying Party but only if the Indemnifying Party is
responsible pursuant to this Article V to indemnify the Indemnitee in respect
of the Third-Party Claim.
(f) In the event of payment by an Indemnifying Party to any Indemnitee
in connection with any Third-Party Claim, such Indemnifying Party shall be
subrogated to and shall stand in the place of such Indemnitee as to any events
or circumstances with respect to which such Indemnitee may have any right or
claim relating to such Third-Party Claim against any claimant or plaintiff
asserting such Third-Party Claim. Such Indemnitee shall cooperate with such
Indemnifying Party in a reasonable manner, and at the cost and expense of such
Indemnifying Party, in prosecuting any subrogated right or claim.
(g) With respect to any Third-Party Claim for which the Indemnifying
Party assumes responsibility for defense, the Indemnifying Party shall inform
the Indemnitee, upon the reasonable written request of the Indemnitee, of the
status of efforts to resolve such Third-Party Claim. With respect to any
Third-Party Claim for which the Indemnifying Party does not assume such
responsibility, the Indemnitee shall inform the Indemnifying Party, upon the
reasonable written request of the Indemnifying Party, of the status of efforts
to resolve such Third-Party Claim.
5.5 Survival of Indemnities. The obligations of Wellsford Parent and
Newco under this Article V shall survive the sale or other transfer by it of
any assets or businesses or the assignment by it of any Liabilities, with
respect to any Loss of the other related to such assets, businesses or
Liabilities.
ARTICLE 6
CONDITIONS TO THE CONTRIBUTION AND THE DISTRIBUTIONS
6.1 Conditions Precedent to the Distributions. The obligation of
Wellsford Parent to cause the Contribution of the Contributed Assets pursuant
to Article II and to cause the consummation of the Distributions pursuant to
Article III shall be subject, at the option of Wellsford Parent, to the
fulfillment or waiver, of each of the following conditions:
(a) Effective Date of Registration Statement. Each of the Registration
Statement and the S-4 shall have been declared effective by order of the
Commission and shall not be the subject of any stop order or proceeding by the
Commission seeking a stop order.
(b) No Prohibitions. Consummation of the transactions contemplated
hereby shall not be prohibited by applicable law and no Governmental Authority
of competent jurisdiction shall have enacted, issued, promulgated, enforced or
entered any statute, rule, regulation, executive order, decree, injunction or
other order (whether temporary, preliminary or permanent) which is in effect
and which materially restricts, prevents or prohibits consummation of the
Distribution, the Merger or any transaction contemplated by this Agreement or
the Merger Agreement, it being understood that the parties hereto hereby agree
to use their reasonable best efforts to cause any such decree, judgment,
injunction or other order to be vacated or lifted as promptly as possible.
(c) Conditions Precedent to Merger Satisfied. Each condition to the
closing of the Merger set forth in Sections 6.1 and 6.3 of the Merger
Agreement shall have been satisfied or waived.
ARTICLE 7
MISCELLANEOUS
7.1 Termination. This Agreement may be terminated and the Distribution
abandoned for any or no reason at any time prior to the Distribution by and in
the sole discretion of the Board of Trustees of Wellsford Parent without the
approval of Newco or the shareholders of Wellsford Parent. In the event of
such termination, no party will have any liability of any kind to any other
party.
7.2 Complete Agreement; Construction. This Agreement, including the
Schedules, constitutes the entire agreement between the parties with respect
to the subject matter hereof, and supersedes all previous negotiations,
commitments and writings with respect to such subject matter.
7.3 Survival of Agreements. Except as otherwise contemplated by this
Agreement, all covenants and agreements of the parties contained in this
Agreement will survive the Distribution Date.
7.4 Governing Law. This Agreement will be governed by and construed in
accordance with the laws of the State of Maryland, without regard to the
principles of conflicts of laws thereof.
7.5 Notices. All notices and other communications hereunder must be in
writing and must be delivered by hand, mailed by registered or certified mail
(return receipt requested) or sent by facsimile transmission to the parties at
the following addresses (or at such other addresses for a party as may be
specified by like notice) and will be deemed given on the date on which such
notice is received:
To Wellsford Parent:
Before the Distribution Date, to:
Wellsford Residential Property Trust
000 Xxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, XX 00000
Attn: President
Fax: (000) 000-0000
After the Distribution Date, to:
Equity Residential Properties Trust
Xxx Xxxxx Xxxxxxxxx Xxxxx
Xxxxx 000
Xxxxxxx, XX 00000
Attn: President
Fax: (000) 000-0000
To Newco:
Wellsford Real Properties, Inc.
000 Xxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, XX 00000
Attn: President
Fax: (000) 000-0000
7.6 Amendments. This Agreement may not be modified or amended except by
an agreement in writing signed by the parties.
7.7 Successors and Assigns. Except in connection with the Merger, this
Agreement shall not be assignable, in whole or in part, directly or
indirectly, by either party hereto without the prior written consent of the
other, and any attempt to assign any rights or obligations arising under this
Agreement without such consent shall be void; provided, however, that the
provisions of this Agreement shall be binding upon, inure to the benefit of
and be enforceable by the parties and their respective successors and
permitted assigns; provided, further, that the rights and obligations of
Wellsford Parent under this Agreement may be assigned after the Merger to ERP
Operating Partnership.
7.8 No Third-Party Beneficiaries. Except for the provisions of Article
V relating to Indemnitees and as otherwise expressly provided herein, the
provisions of this Agreement are solely for the benefit of the parties hereto
and their respective successors and permitted assigns and should not be deemed
to confer upon third parties any remedy, claim, liability, reimbursement,
claim of action or other right in excess of those existing without reference
to this Agreement.
7.9 Title and Headings. Titles and headings to sections herein are
inserted for the convenience of reference only and are not intended to be a
part of or to affect the meaning or interpretation of this Agreement.
7.10 Legal Enforceability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof. Any
such prohibition or unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provision in any other jurisdiction. Without
prejudice to any rights or remedies otherwise available to any party hereto,
each party hereto acknowledges that damages would be an inadequate remedy for
any breach of the provisions of this Agreement and agrees that the obligations
of the parties hereunder are specifically enforceable.
7.11 Counterparts. This Agreement may be executed in one or more
counterparts, each of which when executed shall be deemed an original, but all
of which together shall constitute one and the same instrument.
7.12 Non-Recourse. This Agreement and all documents, agreements,
understandings and arrangements relating hereto have been entered into or
executed on behalf of Wellsford Parent by the undersigned in his capacity as a
trustee or officer of Wellsford Parent, which has been formed as a Maryland
real estate investment trust pursuant to an Amended and Restated Declaration
of Trust of Wellsford Parent dated as of November 2, 1992, as amended and
restated, and not individually, and neither the trustees, officers or
shareholders of Wellsford Parent shall be personally bound or have any
personal liability hereunder. Newco shall look solely to the assets of
Wellsford Parent for satisfaction of any liability of Wellsford Parent with
respect of this Agreement and all documents, agreements, understandings and
arrangements relating to this Agreement and will not seek recourse or commence
any action against any of the trustees or officers of Wellsford Parent or any
of their personal assets for the performance or payment of any obligation of
Wellsford Parent hereunder or thereunder.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed as of the day and year first above written.
WELLSFORD RESIDENTIAL PROPERTY TRUST
By: /s/ Xxxxxxx Xxxxxxx
-------------------------------------
Name: Xxxxxxx Xxxxxxx
Title: Chairman
WELLSFORD REAL PROPERTIES, INC.
By: /s/ Xxxxxx Xxxxxxxxx
------------------------------------
Name: Xxxxxx Xxxxxxxxx
Title: President
SCHEDULE 2.1(a)
SONTERRA DOCUMENTS
1. Loan Agreement ("Loan Agreement"), dated as of June 28, 1996, by and
between Wellsford Residential Property Trust and Specified Properties VIII,
L.P., a Texas Limited Partnership ("Specified").
2. Waiver of Borrower's Condition, dated as of July 11, 1996, by
Specified.
3. Promissory Note, dated June 28, 1996, by Specified in favor of
Wellsford Residential Property Trust in the amount of $17,800,000.00 (the
"Note").
4. Deed of Trust, Security Agreement and Fixture Filing, made as of
June 28, 1996, by Specified, as Trustor, Chicago Title Insurance Company, as
Trustee, and Wellsford Residential Property Trust, as Beneficiary ("Deed of
Trust").
5. Guaranty Agreement, dated as of June 28, 1996, by Xxxx X. Xxxxxxxxxx
in favor of Wellsford Residential Property Trust.
6. Assignment of Leases and Rents, dated as of June 28, 1996, by and
from Specified to and for the benefit of Wellsford Residential Property Trust
("Assignment of Leases and Rents").
7. Assignment of Agreements, made as of June 28, 1996, by Specified to
Wellsford Residential Property Trust.
8. Consent and Agreement of Manager, by Lexford Properties, Inc., dated
as of July 15, 1996.
9. Hazardous Substances Remediation and Indemnification Agreement,
dated as of June 28, 1996, by Specified, Westwood Residential No. 9 Limited
Partnership, a Texas limited partnership, and Westwood Residential General
Partner No. 9, Inc., a Texas corporation, in favor of Wellsford Residential
Property Trust.
10. Security Agreement, dated as of June 28, 1996, between Specified and
Wellsford Residential Property Trust ("Security Agreement").
11. Letter Agreement, dated July 9, 1996, between Specified, Wellsford
Residential Property Trust and Chicago Title Insurance Company.
12. Lender's Title Policy No. 512169 issued by Chicago Title Insurance
Company, dated July 12, 1996 ("Lender's Title Policy").
13. Option Agreement, made as of June 28, 1996, by and between Specified
and Wellsford Residential Property Trust ("Option Agreement").
14. Memorandum of Option to Purchase, made as of June 28, 1996, by
Specified and Wellsford Residential Property Trust.
15. Waiver of Seller's Condition, dated as of July 11, 1996, by
Specified ("Seller's Waiver").
16. Owner's Title Policy No. 512169 issued by Chicago Title Insurance
Company, dated September 20, 1996.
SCHEDULE 2.1(e)
SPLIT DOLLAR LIFE INSURANCE
1. Modification Agreement, dated as of December 11, 1995, by and
between Wellsford Residential Property Trust and Xxxxxx Xxxxxxxxx.
2. Modification Agreement, dated as of December 11, 1995, by and
between Wellsford Residential Property Trust and Xxxxxxx X. Xxxxxxx.
3. Modification Assignment, dated as of December 11, 1995, by and
between Wellsford Residential Property Trust and Xxxxxx Xxxxxxxxx.
4. Modification Assignment, dated as of December 11, 1995, by and
between Wellsford Residential Property Trust and Xxxxxxx X. Xxxxxxx.
SCHEDULE 2.2(a)
OPTION AGREEMENTS
