EXHIBIT 10.17
CONTRIBUTION AND DISTRIBUTION AGREEMENT
CONTRIBUTION AND DISTRIBUTION AGREEMENT, dated as of _____________,
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 one 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,
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board, commission, court, department, official, political subdivision,
tribunal or other instrumentality of any government, whether federal, state
or local, domestic or foreign.
"Headquarter Lease" has the meaning set forth in Section 2.1.
"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.
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"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) to be 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 to be 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 the Tri-Party Agreement executed by
Wellsford Parent in favor of NationsBank, N.A., as lender under the
construction loan financing for Phase I 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
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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 $_______________;
(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 Special Non-Qualified Deferred Compensation
Plan adopted by Wellsford Parent;
(h) 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;
(i) any rights of Wellsford Parent under the Reimbursement Agreement
dated December 1, 1995 between PPPIC and Wellsford Parent;
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(j) the Palomino Park Promissory Note dated December 20, 1993 from
PPPIC to Xxxxx, delivered pursuant to the Reimbursement Agreement described
in clause (i) of this definition;
(k) the opinion of Xxxxxxx Xxxxx Xxxxxxx & Ingersoll dated
December 20, 1995, addressed, inter alia, to Xxxxx, with respect to the
Bonds;
(l) 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;
(m) the Letter of Credit Reimbursement Agreement dated December 1,
1995 among PPPIC, Wellsford Parent and Dresdner Bank AG, New York Branch;
(n) any agreements executed by Dresdner Bank AG, New York Branch in
favor of Wellsford Parent;
(o) any rights of Wellsford Parent under the Bond Pledge and Security
Agreement dated December 1, 1995 among PPPIC, Wellsford Parent and Dresdner
Bank AG, New York Branch;
(p) 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);
(q) the lease described on Schedule 2.1(h) hereto (the "Headquarter
Lease") [sublease of the premises subject to the Headquarter Lease] [to be
revised pursuant to Section 5.23 of the Merger Agreement];
(r) furniture, fixtures, equipment and personalty located in the
office premises demised pursuant to the Headquarter Lease; and
(s) 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
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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:
(i) Assignment of the Note without recourse;
(ii) Assignment of Deed of Trust (as defined on Schedule 2.1(a)
hereto), in form suitable for recording;
(iii) Assignment of Loan Agreement (as defined on Schedule
2.1(a) hereto);
(iv) Assignment of Assignment of Leases and Rents (as defined on
Schedule 2.1(a) hereto), in form suitable for recording;
(v) Assignment of Security Agreement (as defined on Schedule
2.1(a) hereto), in form suitable for recording;
(vi) Memorandum of Assignment of Option Agreement (as defined on
Schedule 2.1(a) hereto), in form suitable for recording;
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(vii) UCC-3 Assignments, in form suitable for filing or
recording, as the case may be;
(viii) Assignment of Lender's Title Policy;
(ix) Omnibus Assignment of Mortgage Documents relating to the
Sonterra Documents not otherwise covered by the documents listed in
this Section 2.3(b);
(x) Assignment of Seller's Waiver (as defined in Schedule 2.1(a)
hereto);
(xi) 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.
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
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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
one Newco Common Stock for each Wellsford Parent Common Share held by such
Holder.
3.3 Unclaimed Stock. Any 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, 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.
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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
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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
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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
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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
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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
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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
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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:_________________________________
Name:
Title:
WELLSFORD REAL PROPERTIES, INC.
By:_________________________________
Name:
Title:
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SCHEDULE 2.1(a)
SONTERRA AGREEMENTS
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").
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16. Owner's Title Policy No. 512169 issued by Chicago Title Insurance
Company, dated September 20, 1996.
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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.
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SCHEDULE 2.1(h)
HEADQUARTER LEASE
Lease between Rockefeller Center Properties and Wellsford Residential
Property Trust, dated June 29, 1994.
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SCHEDULE 2.2(a)
OPTION AGREEMENTS
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