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Agreement Regarding Palomino Park
between
ERP OPERATING LIMITED PARTNERSHIP
and
WELLSFORD REAL PROPERTIES, INC.
Dated as of May 30, 1997
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AGREEMENT REGARDING PALOMINO PARK
THIS AGREEMENT REGARDING PALOMINO PARK (this "Agreement") is made and
entered into as of May 30, 1997 by and between ERP OPERATING LIMITED
PARTNERSHIP, an Illinois limited partnership ("ERP Operating Partnership"),
and WELLSFORD REAL PROPERTIES, a Maryland corporation ("Newco").
A. Newco has been formed as a wholly-owned subsidiary of Wellsford
Residential Property Trust, a Maryland real estate investment trust
("Wellsford Parent"), pursuant to the Contribution Agreement ("Contribution
Agreement") referred to in that certain Agreement and Plan of Merger dated as
of January 16, 1997 (the "Merger Agreement") by and between Equity Residential
Properties Trust, a Maryland real estate investment trust that is the general
partner of ERP Operating Partnership ("EQR") and Wellsford Parent. Pursuant
to the Merger Agreement, Wellsford Parent has contributed to Newco, among
other things, one hundred percent (100%) of the issued and outstanding Class A
Common Stock (the "Class A Stock") of Wellsford Park Highlands Corp., a
Colorado corporation ("WPHC"). Wellsford Parent retained one hundred percent
(100%) of the issued and outstanding Class B Common Stock of WPHC (the "Class
B Stock"). Following the merger of Wellsford Parent and EQR in accordance
with the Merger Agreement, the Class B Stock continued to be held by the
Surviving Trust (as defined in the Merger Agreement). Pursuant to that
certain Contribution Agreement dated as of May 30, 1997 by and between the
Surviving Trust and ERP Operating Partnership, the Surviving Trust has
contributed the Class B Stock to ERP Operating Partnership.
B. Reference is hereby made to a certain Second Amended and Restated
Vacant Land Purchase and Sale Agreement (the "Original Land Contract"), made
and entered into as of March 23, 1995 by and between Mission Viejo Company, a
California corporation ("Mission"), and The Xxxx Company, a Colorado
corporation ("Xxxx Company"), relative to the purchase and sale of certain
property (the "Overall Property") containing approximately 181.803 acres
located in Xxxxxxx County, Colorado and legally described as Xxxx 0, 0, 0, 0
xxx 0, Xxxxxxxxx Xxxxx Filing 126-X. Xxxx Company assigned its rights with
respect to the Original Land Contract to WPHC pursuant to a certain Assignment
and Assumption-Purchase Agreement dated as of May 2, 1995, by and between Xxxx
Company and WPHC. The Original Land Contract has been amended pursuant to a
certain First Amendment to Second Amended and Restated Vacant Land Purchase
and Sale Agreement, made and entered into as of May 1, 1996, by and between
Mission and WPHC. The Original Land Contract, as so amended, is referred to
herein as the "Land Contract."
C. It is presently contemplated that the Overall Property will be
developed in five phases (each, a "Phase") together as an integrated project
(the "Project") consisting of a 1,880-unit gated apartment community
constructed around a centrally located 30-acre park (the "Park"), roads and a
centrally located clubhouse, swimming pool and health club (the "Recreation
Center"). The anticipated number of apartment units in each Phase is as
follows: Phase I - 456 units; Phase II - 304 units; Phase III - 316 units;
Phase IV - 452 units; and Phase V - 352 units.
D. Park at Highlands LLC, a Colorado limited liability company ("Park at
Highlands"), has been formed and continues as a limited liability company
under the laws of the State of Colorado pursuant to a certain Operating
Agreement of Park at Highlands LLC dated as of April 27, 1995 by and between
WPHC and Xx Xxxx, an individual ("Xx Xxxx"), as amended by First Amendment to
Operating Agreement of Park at Highlands LLC dated as of December 29, 1995 by
and between WPHC and Xx Xxxx (collectively, the "Park at Highlands Operating
Agreement").
E. Pursuant to a certain Assignment and Assumption Agreement-Phase I dated
as of May 2, 1995, by and between WPHC and Park at Highlands, WPHC assigned to
Park at Highlands, and Park at Highlands assumed, all of WPHC's rights to
acquire certain land known as Xxx 0 ("Xxx 0"), Xxxxxxxxx Xxxxx Filing 126-A.
Park at Highlands subsequently acquired Lot 1 and Park at Highlands is
constructing on a portion of Xxx 0, xxxxx xx Xxx 0X, Xxxxxxxxx Xxxx Filing Xx.
000-X, Xxxxx Xxxxxxxxx ("Xxx 0X"), a certain multi-family rental apartment
complex, consisting of approximately 456 apartment units with related
facilities ("Phase I") (also known as Blue Ridge).
F. After acquiring Lot 1 from Mission, Park at Highlands transferred
certain property known as Xxx 0X, Xxxxxxxxx Xxxxx Filing No. 126-A, First
Amendment ("Lot 1B") to WPHC. WPHC has constructed the Recreation Center on
Lot 1B. In addition, Park at Highlands transferred to Palomino Park Public
Improvements Corporation, a Colorado nonprofit corporation ("PPPIC"), legal
title to certain property known as Tracts A and B, Highlands Ranch Filing No.
126-A, First Amendment, on which land PPPIC has developed or is expected to
develop the Park, roads and certain infrastructure improvements.
G. Park at Highlands and WPHC have entered into a certain Rec Center Use
Agreement dated as of December 29, 1995, as amended, relating to the
development, operation and use of the Recreation Center constructed or to be
constructed by WPHC on Lot 1B.
H. Red Canyon at Palomino Park LLC, a Colorado limited liability company
("Red Canyon"), has been formed and continues as a limited liability company
under the laws of the State of Colorado pursuant to a certain Operating
Agreement of Red Canyon at Palomino Park LLC, dated as of April 17, 1996 by
and between WPHC and Xx Xxxx, as amended on May 19, 1997 (the "Red Canyon
Operating Agreement"). The Red Canyon Operating Agreement and the Park at
Highlands Operating Agreement are sometimes referred to herein collectively as
the "Operating Agreements."
I. Pursuant to a certain Assignment and Assumption Agreement-Parcel 2,
made and entered into as of May 1, 1996, by and between WPHC and Red Canyon,
WPHC assigned to Red Canyon and Red Canyon assumed, all of WPHC's rights to
acquire certain land known as Xxx 0X, Xxxxxxxxx Ranch Filing Xx. 000-X,
Xxxxxxx Xxxxxx, Xxxxxxxx ("Xxx 0X"). Red Canyon subsequently acquired Lot 2A
and Red Canyon anticipates constructing on Lot 2A a certain multi-family
rental apartment complex, consisting of approximately 304 apartment units with
related facilities ("Phase II").
J. Red Canyon and WPHC have entered into a certain Rec Center Use
Agreement dated as of May 2, 1996, relating to the development, operation and
use of the Recreation Center constructed or to be constructed by WPHC on Xxx
0X.
X. Xx Xxx 0, 0000, XXXX acquired certain land known as Xxx 0X, Xxxxxxxxx
Ranch Filing Xx. 000-X, Xxxxxxx Xxxxxx, Xxxxxxxx ("Xxx 0X"). WPHC anticipates
constructing on Lot 3A a certain multi-family rental apartment complex,
consisting of approximately 316 apartment units with related facilities
("Phase III").
L. The portions of the Overall Property other than Xxxx 0X, 0X, 0X, xxx 0X
xxx Xxxxxx X and B are sometimes referred to herein collectively as the
"Remaining Overall Property".
X. Xxxxxxxx Park Public Improvements Corporation, a Colorado nonprofit
corporation ("PPPIC"), has issued $14,755,000 in bonds to finance the
construction of the roads and the Park and, in connection therewith, has been
empowered to impose certain revenue assessment liens against the Phases owned
by WPHC or a permitted assignee of WPHC to finance the payments due under the
bonds.
N. ERP Operating Partnership and Newco are entering into this Agreement
pursuant to the Merger Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements contained herein, the
parties hereto hereby agree as follows:
ARTICLE 1
COVENANTS RELATING TO WPHC
ERP Operating Partnership and Newco, as the legal and beneficial owners of
all of the issued and outstanding capital stock of WPHC, agree to, and Newco
agrees to cause WPHC to (i) enter into a Shareholders' Agreement, which shall
be prepared by counsel to ERP Operating Partnership and shall be in form and
substance satisfactory to ERP Operating Partnership in the exercise of ERP
Operating Partnership's commercially reasonable judgment, which agreement
shall incorporate the following terms, and (ii) amend the Articles of
Incorporation of WPHC, to the extent permitted by Colorado law, which
amendment shall be prepared by counsel to ERP Operating Partnership and shall
be in form and substance satisfactory to Newco and ERP Operating Partnership
in the exercise of ERP Operating Partnership's commercially reasonable
judgment, which amendment shall incorporate the following terms:
1.1 ERP Operating Partnership shall have no obligation to contribute funds
or capital to WPHC, Red Canyon, Park at Highlands or any future Palomino Park
LLC (as hereinafter defined in Section 1.13) by virtue of its ownership of the
Class B Stock. Nothing in the preceding sentence or elsewhere in this
Agreement shall vitiate the obligation of ERP Operating Partnership to make
any payments to third parties pursuant to agreements entered into by ERP
Operating Partnership with respect to Phase I, Phase II and any Future
Palomino Park Phases including, without limitation, the Tri-Party Agreement
and the Credit Enhancement Agreement.
1.2 With respect to each Phase, to the extent that said amount is required
to be contributed by WPHC to Park at Highlands or Red Canyon, Newco shall be
required to contribute to the capital of WPHC (each such contribution being
referred to herein as a "Phase Contribution") an amount not to exceed the
amount (the "Phase Contribution Limit") budgeted to be contributed by WPHC to
the Palomino Park LLC developing such Phase in accordance with the terms of
the Operating Agreement for such Palomino Park LLC, pursuant to the budget in
effect for such Phase as of (a) the date hereof (in the case of Park at
Highlands), or (b) the date of the Merger Agreement (in the case of Red
Canyon); said budget of Red Canyon shall be subject to ERP Operating
Partnership's review and approval prior to the applicable dates set forth in
the preceding clause (b) of this Section 1.2 Under no circumstances shall
Newco be entitled to receive additional shares of the capital stock of WPHC
solely by virtue of its contribution of the relevant Phase Contribution to the
respective Phase of the Project.
1.3 WPHC shall not issue any additional capital stock except pursuant to
the anti-dilution provisions of Section 1.4 hereof. WPHC shall not issue any
additional capital stock for the purpose of raising the funds for any Phase
Contribution required to be made by Newco pursuant to Section 1.2 hereof.
1.4 (a) Subject to subparagraph (b) following, in the event any additional
shares of stock of WPHC are to be issued by WPHC, ERP Operating Partnership,
if a shareholder at the time of such issuance, shall have the right to
purchase a sufficient number of newly issued shares of stock of WPHC at the
then-established purchase price and terms to enable it to retain its then-
current percentage of ownership interest in WPHC.
(b) Notwithstanding the preceding subparagraph (a), ERP Operating
Partnership shall not have the preemptive right described above in connection
with the issuance by WPHC of additional shares of WPHC stock to a party other
than Newco or an Affiliate (as hereinafter defined) of Newco. The right of
WPHC to raise capital through the sale of additional WPHC stock to non-
Affiliates of Newco shall in no way detract from or otherwise affect Newco's
obligations under Section 1.2 to contribute capital to WPHC up to the Phase
Contribution Limit.
1.5 If ERP Operating Partnership or Newco (the "Selling Shareholder") shall
receive an offer from a bona fide prospective purchaser (the "Offer") to
purchase all (but not less than all, with respect to ERP Operating
Partnership) or any part or all (with respect to Newco) of its shares of the
capital stock of WPHC and the Selling Shareholder desires to sell such shares
in accordance with such Offer, the Selling Shareholder shall first offer in
writing (a "Notice of Proposed Sale") to sell such shares owned by it to the
other party (the "Non-Selling Shareholder"). Any such sale to the Non-Selling
Shareholder shall be on the same terms and conditions as the Offer, which
terms and conditions shall be specified in the Notice of Proposed Sale;
provided, however, that any Notice of Proposed Sale to ERP Operating
Partnership relating to an offer by Newco to sell its shares of Class A Stock
shall include a provision obligating Newco to first convert such Class A Stock
to Class B Stock if deemed necessary by ERP Operating Partnership. If the
Non-Selling Shareholder has not provided the Selling Shareholder with written
notice of its intention to purchase all of such shares in accordance with the
terms of the Notice of Proposed Sale within thirty (30) days of the Non-
Selling Shareholder's receipt of the Notice of Proposed Sale, then, subject to
Sections 1.5 and 1.6 hereof, the Selling Shareholder shall have the right to
sell its shares to such bona fide prospective purchaser in accordance with the
terms of the Offer; provided, however, that in connection with any such sale
by ERP Operating Partnership of its Class B Stock, WPHC shall agree to convert
such Class B Stock into Class A Stock if deemed necessary by ERP Operating
Partnership. If the Selling Shareholder fails to consummate such sale within
one hundred fifty (150) days following the Non-Selling Shareholder's rejection
of the offer in the Notice of Proposed Sale, then the Selling Shareholder's
shares shall again be subject to all the restrictions of this section.
Notwithstanding the foregoing, Newco shall not have the right to sell or
transfer all or any of its shares of capital stock of WPHC during the period
of time (the "Lock-Up Period") in which ERP Operating Partnership shall retain
any actual or contingent liability under any or all of the Tri-Party
Agreements described in Section 3.1 hereof. At no time shall ERP Operating
Partnership have the right to sell less than all of its shares of the capital
stock of WPHC, except with respect to a Tag Along Transaction under
Section 1.6. Notwithstanding anything herein to the contrary, the right of
first offer to be granted to ERP Operating Partnership shall not apply to a
written offer from a bona fide purchaser that is not an Affiliate of Newco to
purchase all of the shares of capital stock of WPHC owned by Newco and all of
the capital stock of WPHC owned by ERP Operating Partnership if Newco shall
validly exercise its Drag Along Rights in connection therewith, in accordance
with Section 1.7 hereof.
1.6 If (after the expiration of the Lock-Up Period) Newco shall desire to
sell or transfer to a bona fide prospective purchaser any part or all of its
shares of the capital stock of WPHC and provides ERP Operating Partnership
with a right of first refusal in accordance with Section 1.5 hereof which ERP
Operating Partnership rejects in accordance therewith, then Newco shall
provide ERP Operating Partnership with written notice of the pending sale (a
"Tag Along Notice"). ERP Operating Partnership may elect to participate in
such transaction (a "Tag Along Transaction") as an additional selling or
transferring party by delivering a written notice thereof (a "Tag Along
Election Notice") to Newco within thirty (30) days after delivery of such Tag
Along Notice. A Tag Along Election Notice shall specify the number of shares
which ERP Operating Partnership wishes to sell or transfer in such
transaction, which number shall be less than or equal to (i) the aggregate
number of shares of the capital stock of WPHC which Newco proposed to sell or
transfer in such transaction (i.e., all of Newco's shares of the capital stock
of WPHC), multiplied by (ii) a fraction, the numerator of which is the number
of shares of WPHC capital stock owned by ERP Operating Partnership, and the
denominator of which is the aggregate number of shares of the capital stock of
WPHC owned by ERP Operating Partnership and Newco. If ERP Operating
Partnership shall elect to sell or transfer shares in such transaction, the
aggregate number of shares of the capital stock of Newco to be sold or
transferred by Newco shall be reduced, so that the aggregate number of shares
of the capital stock of WPHC to be sold or transferred to such third party by
ERP Operating Partnership and Newco shall remain equal to the aggregate number
of shares of the capital stock of WPHC which Newco originally proposed to sell
or transfer in such transaction. Except as specifically provided below,
participation by ERP Operating Partnership in the offering of shares pursuant
to this Section 1.6 shall be at a price per share equal to the price being
offered to Newco and on terms identical to those terms being offered to Newco.
In the event that neither ERP Operating Partnership nor Newco has exercised
its put/call rights under Section 1.8 hereof on or before the closing of any
Tag Along Transaction, then fifty percent (50%) of the shares of WPHC stock to
be sold by ERP Operating Partnership in connection with the Tag Along
Transaction shall be deemed to be Put/Call Stock (the "P/C Tag Along Stock").
The per share purchase price for such P/C Tag Along Stock shall be equal to
the greater of (a) the Put Price (as hereinafter defined) which would be
applicable as of the date of the closing of the Tag Along Transaction divided
by the total number of shares of Put/Call Stock as of such date, or (b) the
per share purchase price being offered to Newco for the sale of its WPHC
shares in connection with the Tag Along Transaction. The aggregate purchase
price for all P/C Tag Along Stock sold in connection with a Tag Along
Transaction is hereinafter referred to as the "P/C Tag Along Price." The per
share purchase price for all shares sold by ERP Operating Partnership pursuant
to this Section 1.6 other than the P/C Tag Along Stock shall be equal to the
per share purchase price being offered to Newco for its WPHC shares. Newco
shall not sell or transfer all or any portion of its shares of the capital
stock of WPHC other than in accordance with Sections 1.5 and 1.6 hereof.
1.7 If, after the expiration of the Lock-Up Period, Newco shall receive a
written offer from a bona fide purchaser that is not an Affiliate of Newco to
purchase all of the shares of capital stock of WPHC owned by Newco and all of
the capital stock of WPHC owned by ERP Operating Partnership, then Newco shall
promptly give ERP Operating Partnership written notice thereof. If Newco
elects, ERP Operating Partnership agrees to sell or transfer all of the shares
of WPHC stock owned by ERP Operating Partnership in accordance with the terms
of such written offer, provided that, except as specifically provided below,
the sale of shares by ERP Operating Partnership pursuant to this Section 1.7
shall be on terms identical to those being offered to Newco (a "Drag Along
Right"). To the extent that the shares of WPHC stock owned by ERP Operating
Partnership and sold pursuant to this Section 1.7 include the shares of
Put/Call Stock, the aggregate purchase price for the Put/Call Stock being sold
pursuant to this Section 1.7 shall be the applicable Call Price (as
hereinafter defined) which would be applicable as of the date of the closing
of such Drag Along Transaction. The per share purchase price for all shares,
other than Put/Call Shares, of WPHC stock sold by ERP Operating Partnership as
part of a Drag Along Transaction shall be equal to the per share purchase
price offered to Newco.
1.8 Subject to Section 1.8(iv) hereof, fifty percent (50%) of the Class B
Stock owned by ERP Operating Partnership as of the date hereof (the "Put/Call
Stock") shall be subject to the following:
(i) At any time from and after the fifth (5th) anniversary of the date
hereof, ERP Operating Partnership shall have the right to "put" all (but not
less than all) of the Put/Call Stock to Newco for a sales price (the "Put
Price") equal to $1,900,000 less the amount of any "Sales or Refinancing
Proceeds" (as such term is defined in the applicable Operating Agreements)
received by ERP Operating Partnership (by reason of WPHC's interests in the
Palomino Park LLCs) to the extent allocable to the Put/Call Stock. The Put
Price shall not be subject to dilution based upon any underlying dilution in
the Put/Call Stock;
(ii) At any time from and after the date hereof, Newco shall have the
right to "call" all (but not less than all) of the Put/Call Stock. If Newco
calls the Put/Call Stock prior to the fifth (5th) anniversary of the date
hereof, then the purchase price (the "Call Price") shall be an amount equal
to $1,900,000 less the amount of any Sales or Refinancing Proceeds received
by ERP Operating Partnership to the extent allocable to the Put/Call Stock.
If Newco calls the Put/Call Stock on or after the fifth (5th) anniversary of
the date hereof, then the Call Price shall be an amount equal to $1,900,000
(in 2002 Equivalent Dollars, as such term is hereinafter defined) less the
amount of any Sales or Refinancing Proceeds received by ERP Operating
Partnership with respect to ERP Operating Partnership's interest in the
Palomino Park LLCs which is allocable to the Put/Call Stock. The Call Price
shall not be subject to dilution based upon any underlying dilution in the
Put/Call Stock.
(iii) The mechanics of the exercise of the put/call shall be
substantially as follows:
(a) At any time after the fifth (5th) anniversary of the date
hereof, provided that Newco shall not have previously furnished the
Call Notice (as hereinafter defined), ERP Operating Partnership shall
have the right to furnish a notice (a "Put Notice") to Newco informing
Newco that ERP Operating Partnership has elected to sell all (but not
less than all) of the Put/Call Stock to Newco for a price equal to the
Put Price, plus or minus the adjustments set forth below;
(b) At any time from and after the date hereof, provided that ERP
Operating Partnership shall not have previously furnished the Put
Notice, Newco shall have the right to furnish a notice (the "Call
Notice") to ERP Operating Partnership informing ERP Operating
Partnership that Newco has elected to purchase all (but not less than
all) of the Put/Call Stock for a price equal to the applicable Call
Price, plus or minus the adjustments set forth below;
(c) The closing of the transactions described in clause (a) or
clause (b) above, as the case may be, shall occur on a date (the
"Option Closing Date") and at a place and time mutually agreed to by
ERP Operating Partnership and Newco, which date shall be not more than
thirty (30) days after the furnishing of the Put Notice or the Call
Notice, as the case may be. The transaction shall be closed in the
following manner:
(1) ERP Operating Partnership shall deliver to Newco an
Assignment of Stock pursuant to which ERP Operating Partnership
shall assign the Put/Call Stock to Newco without recourse,
representation or warranty, other than representations relating to
authorization, execution and delivery of the instrument of
assignment and a representation that ERP Operating Partnership has
not created or suffered the creation of any liens, claims or
encumbrances on or prior assignments of the Put/Call Stock;
(2) The purchase price shall be increased by an amount equal
to the Put/Call Stock's ratable share of any undistributed cash
held by WPHC and/or the Palomino Park LLCs after the establishment
of a reasonable reserves for operating expenses and reasonably
projected capital replacements, subject to the provisions of
Section 10.1 of the Operating Agreements for the Park at Highlands
and Red Canyon and any comparable provision of the Operating
Agreement for future Palomino Park LLCs;
(3) Newco shall pay the applicable purchase price (i.e., the
Put Price or the Call Price, as the case may be) in cash in full
to ERP Operating Partnership at closing, subject to the
adjustments described in subsection (2) above.
(d) Notwithstanding anything to the contrary contained in this Section
1.8, in the event that ERP Operating Partnership and Newco have entered into
a Tag Along Transaction prior to either party's election to exercise its put
or call rights under this Section 1.8, then (a) the number of shares of
Put/Call Stock thereafter subject to the put/call shall be reduced by the
number of shares of P/C Tag Along Stock sold in connection with such Tag
Along Transaction and (b) the applicable Put Price or Call Price thereafter
payable pursuant to this Section 1.8 shall be reduced by the amount of the
P/C Tag Along Price received by ERP Operating Partnership in connection with
such Tag Along Transaction.
(e) Notwithstanding anything to the contrary contained in this Section
1.8, at such time, if any, as ERP Operating Partnership shall have received
an aggregate of $1,900,000 (if said threshold amount has not been received
by the fifth anniversary of the date hereof, then the balance remaining of
said threshold amount shall thereafter be expressed in terms of 2002
Equivalent Dollars) in Sales or Refinancing Proceeds to the extent allocable
to the Put/Call Stock, Newco shall have the right to acquire all (but not
less than all) of the Put/Call Stock for a purchase price equal to One
Dollar ($1.00).
(f) As employed herein, the term "2002 Equivalent Dollars" means the
equivalent purchasing power at any time of the value of One Dollar ($1.00)
as of the date hereof. The 2002 Equivalent Dollars of any amount shall be
determined by multiplying said amount by one (1) plus a fraction, the
numerator of which is the difference between (x) the Consumer Price Index
(as hereinafter defined) for the calendar month last published prior to the
date of such determination and (y) the Consumer Price Index for the calendar
month last published as of the fifth (5th) anniversary of the date of this
Agreement and the denominator of which is the Consumer Price Index for the
calendar month last published as of the fifth (5th) anniversary of the date
of this Agreement. As used herein, the term "Consumer Price Index" shall
mean the Consumer Price Index for Urban Wage Earners and Clerical Workers,
US Cities Average, all Items (Base Year 1982-1984=100) for the applicable
month published by the Bureau of Labor Statistics of the United States
Department of Labor or similar index agreed to by the parties if such index
is changed or is no longer available.
1.9 To the extent that WPHC receives any distributions of any nature from
any of the Palomino Park LLCs, WPHC shall promptly pass such distributions
through to the shareholders of WPHC in the form of dividends. WPHC shall
cause the Palomino Park LLCs to promptly distribute to WPHC all cash received
by said entity, after paying current expenses and establishing reasonable
reserves for operating expenses and reasonably projected capital replacements,
subject to the provisions of Section 10.1 of the Operating Agreements for the
Park at Highlands and Red Canyon and any comparable provision of the Operating
Agreement for future Palomino Park LLCs.
1.10 WPHC shall not authorize or effect any stock split or reverse stock
split which would have the effect of diluting or otherwise eliminating ERP
Operating Partnership's then-current ownership interest in WPHC.
1.11 Neither WPHC nor any of the Palomino Park LLCs shall engage in any
business other than that associated with the real estate development,
management, operation, leasing, financing, refinancing and disposition of the
Overall Property and the Project.
1.12 Neither WPHC nor any Subsidiary of WPHC shall engage any Affiliate of
WPHC or any Subsidiary of WPHC to provide any goods or perform any services on
other than an arm's-length basis or otherwise reasonably competitive basis.
1.13 All portions of the Remaining Overall Property that are acquired or
owned by WPHC or by any Subsidiary, shall be acquired or owned by WPHC or
Colorado limited liability companies formed and continued pursuant to
Operating Agreements in substantially the form of the Red Canyon Operating
Agreement (Park at Highlands, Red Canyon and any such entity that is so formed
in the future being referred to herein as a "Palomino Park LLC"). WPHC shall
not assign WPHC's rights to acquire all or any portion of the Remaining
Overall Property to any party that is not a Subsidiary of WPHC, without first
(i) affording ERP Operating Partnership a right of first offer with respect to
the sale or assignment of said rights, in accordance with procedures
substantially similar in nature to the procedures set forth in Section 2.3(a)
hereof and (ii) causing the acquiring party to subject the property in
question to all assessment liens arising from or in connection with the
Assessment Lien Revenue Bonds, Series 1995, issued by PPPIC in the aggregate
principal amount of $14,755,000.
1.14 Newco and WPHC shall take all actions necessary to ensure that each of
the Palomino Park LLC's will be classified for federal tax purposes as a
partnership and not as an association taxable as corporation.
1.15 WPHC may transfer, convey or assign, directly or indirectly, any of
WPHC's legal or beneficial ownership interest in Red Canyon or Park at
Highlands, provided that (i) such transfer, conveyance, or assignment is not
to an Affiliate of WPHC or Newco and (ii) WPHC at all times retains at least a
twenty-one percent (21%) ownership interest in the entity in question. There
are no restrictions on the transfer, conveyance or assignment of any of WPHC's
legal or beneficial ownership interest in the Recreation Center or any future
Palomino Park Phases, provided that such transfer, conveyance or assignment is
not to an Affiliate of WPHC or Newco.
ARTICLE 2
RIGHTS OF FIRST/LAST OFFER
2.1 Concurrently herewith, WPHC shall enter into an agreement with ERP
Operating Partnership, in which Newco shall join for the purpose of
guarantying WPHC's obligations, pursuant to which WPHC shall agree that:
(i) with the exception of the possible conversion of one or more of
Phase I and Phase II for condominium purposes (the term "condominium" shall
include townhome conversion) and the retail sale of condominium units by
WPHC or the applicable Palomino Park LLC, (A) WPHC shall not transfer,
convey or assign, directly or indirectly, any legal or beneficial ownership
interest in Phase I or Phase II and (B) WPHC shall cause each of Park at
Highlands and Red Canyon not to transfer, convey or assign, directly or
indirectly, any legal or beneficial ownership interest in either of such
Phases, until after such time (as to each such Phase) as the documents
described in clause (ii) below shall have been entered into; and
(ii) within six (6) months following the substantial completion of each
of Phase I and Phase II, respectively, WPHC shall cause Park at Highlands
and Red Canyon, as the case may be, to enter into the following documents
with ERP Operating Partnership and to record memoranda thereof against title
to the applicable portion of the Overall Property owned by said entity:
A. A Right of First/Last Offer Agreement, by and between ERP
Operating Partnership and Park at Highlands with respect to Phase I;
and
B. A Right of First/Last Offer Agreement, by and between ERP
Operating Partnership and Red Canyon with respect to Phase II.
2.2 Each of the documents described in Section 2.1 hereinabove shall be
prepared by counsel to ERP Operating Partnership and shall be in form and
substance satisfactory to ERP Operating Partnership in ERP Operating
Partnership's commercially reasonable judgment, and shall incorporate
substantially the terms set forth in subsections (a), (b), (c) and (d) of this
Section 2.2. For the purposes of this Section 2.2, the owner of the subject
portion of the Overall Property (i.e., Park at Highlands with respect to
Lot 1A and Red Canyon with respect to Lot 2A are referred to herein as the
"Owner," and the property owned by said Owner is referred to hereinbelow as
the "Subject Property" it being understood and agreed that the Subject
Property shall not consist of any property not owned directly or indirectly by
WPHC and shall not include any property other than portions or all of the
Overall Property and shall not be part of a transaction or series of
transactions involving any property other than the foregoing:
(a) Owner shall have the right to sell (or enter into an option or other
agreement for sale of) the Subject Property solely in accordance with the
terms set forth below in this Section 2.3. If Owner desires to sell or grant
an option to sell the Subject Property or any portion thereof or to cause the
Subject Property or any portion thereof to be marketed for sale, or to enter
into any contract, agreement or other arrangement for the future sale thereof,
Owner shall first furnish a written notice (a "Marketing Election Notice")
accompanied by a reasonably detailed term sheet (the "Term Sheet") identifying
all of the material economic terms of the proposed transaction. Regardless of
whether the transaction is structured as a purchase and sale agreement or an
option, the closing of the sale pursuant thereto shall be scheduled to occur
no later than nine (9) months after the date of the Marketing Election Notice.
ERP Operating Partnership shall have a period of thirty (30) days from the
date on which the Marketing Election Notice is furnished (the "Marketing
Election Response Period") in which to furnish a written notice (a "Marketing
Election Response Notice") to Owner, advising Owner of ERP Operating
Partnership's election to either:
(i) Consent to Owner's entering into the proposed transaction with a
third party upon economic terms not more favorable to the purchaser or
optionee than the terms set forth in the Term Sheet; or
(ii) Elect to enter into the proposed transaction as purchaser or
optionee, in accordance with the business and economic terms set forth in
the Term Sheet, subject to the negotiation of mutually agreeable
documentation (as provided in subsection (b) below) within a period of
thirty (30) days.
(b) If ERP Operating Partnership shall have made the election described in
clause (ii) of Section 2.3(a) above (an "Affirmative Election"), Owner shall
furnish ERP Operating Partnership with a draft of the proposed agreement
governing the proposed transaction (together with the principal ancillary
documents) within ten (10) days following the date on which the Affirmative
Election was furnished to Owner. If for any reason whatsoever Owner and ERP
Operating Partnership do not enter into a binding written contract governing
the transaction on or before the thirtieth (30th) day following the furnishing
of the Affirmative Election, then subsection (e) hereof shall apply.
(c) Owner and ERP Operating Partnership agree that each shall act in good
faith and shall be reasonable and cooperate with the other including, without
limitation, executing any documents that may reasonably be required in order
to consummate the transactions contemplated by the provisions set forth in
this Section 2.3.
(d) If, within the Marketing Election Response Period, ERP Operating
Partnership shall not have made the Affirmative Election, Owner shall have the
right to effectuate a sale or option of the Subject Property to a third party
purchaser that is not an Affiliate of Owner if such sale is made within a
period (the "Marketing Period") of nine (9) months following the expiration of
the Marketing Election Response Period, pursuant to business and economic
terms that are not more favorable to the purchaser or optionee than as set
forth in the Term Sheet.
(e) If ERP Operating Partnership made the Affirmative Election but a
binding written contract or option was not entered into during the period
contemplated in clause (ii) of subsection (a) above, then Owner shall have the
right to consummate the transaction in question during the Marketing Period,
provided that if during the Marketing Period, a bona fide offer is received
from a party that is not an Affiliate of Owner for the purchase of the Subject
Property upon economic terms that are more favorable to the purchaser or
optionee than as set forth on the Term Sheet, or if a bona fide offer is
received from a party that is not an Affiliate of Owner to purchase the
Subject Property pursuant to the terms of a proposed purchase and sale or
option documentation (the "Proposed Agreement") which imposes materially fewer
non-economic burdens or confers materially greater non-economic benefits upon
the purchaser or optionee than the final drafts (the "Final Drafts") of the
documentation submitted to ERP Operating Partnership by Owner pursuant to
subsection (b) above, then in either case, if Owner desires to accept such an
offer, Owner shall communicate said offer to ERP Operating Partnership and ERP
Operating Partnership shall have a period of ten (10) business days following
ERP Operating Partnership's receipt of such notice from the Owner to notify
Owner as to whether ERP Operating Partnership desires to purchase the Subject
Property on the same terms. If ERP Operating Partnership elects to purchase
the Subject Property on the same terms, the closing shall take place at a date
mutually agreed upon by ERP Operating Partnership and Owner, no later than the
later of (x) the scheduled closing date under the Proposed Agreement and (y)
sixty (60) days after ERP Operating Partnership's election to accept such
offer, the only variations in the Proposed Agreement being de minimis changes
made to reflect, for example, the date of said closing and the name of the
purchaser or optionee. The closing of said purchase will occur in accordance
with the terms of the offer and the modifications proposed by said non-
Affiliated party with respect to the Form Agreement.
(f) If Owner is authorized to proceed with the sale or option transaction
pursuant to this Section 2.3, then, at the closing of said transaction, ERP
Operating Partnership shall execute and deliver an instrument, in recordable
form, extinguishing all of ERP Operating Partnership's rights of first offer,
rights of first refusal and rights with respect to Subject Property,
sufficient to enable the purchaser's or optionee's title insurer to omit same
as an exception to this coverage.
(g) Owner shall deliver to ERP Operating Partnership a copy of all Proposed
Agreements prior to the execution and delivery thereof. Any such Proposed
Agreement shall be marked so as to identify all variations from the Final
Drafts. If required, the terms of such Proposed Agreements shall be held in
confidence by ERP Operating Partnership.
(h) Nothing herein shall prohibit Owner from mortgaging the Subject
Property as security for a loan made at arm's length to said Owner by a lender
that is not an Affiliate of Owner, even though said financing may confer upon
the lender a right to share in the cash flow or appreciation in the Subject
Property, provided however that said lender is not granted an option to
purchase the Subject Property, in connection with said loan.
(i) The rights conferred upon ERP Operating Partnership under this
Article 2 are subject and subordinate to any and all rights and interests
which may now or at any time hereafter be granted in the Subject Property
including, without limitation, the several assessment liens imposed in
connection with the PPPIC bonds, easements, rights of way, restrictions,
encumbrances, and mortgages (complying with subsection (h) above) and options
and contracts (if Owner shall have complied with the provisions of this
Article). ERP Operating Partnership shall execute any instrument reasonably
required by Owner or the holder of such interest or appropriate title insurer
to evidence such subordination.
(j) Time shall be deemed of the essence with respect to all of the time
periods with which ERP Operating Partnership is obligated to comply under this
Article.
(k) Owner reserves the right to withdraw from the market an offer at any
time for any or no reason. Owner may restart ERP Operating Partnership's
rights under this Article at any time by submitting the terms of any revised
offer to ERP Operating Partnership, whereupon the process shall repeat itself
ab initio.
ARTICLE W
TRI-PARTY AGREEMENTS AND STANDBY AGREEMENTS
3.1 (a) Reference is hereby made to a certain Tri-Party Agreement dated
December 29, 1995 (the "Phase I Tri-Party Agreement"), by and among
Nationsbank of Texas, N.A. ("Nationsbank"), Park at Highlands, WPHC, Wellsford
Parent, Xx Xxxx and Xxxx Company. Newco acknowledges that, pursuant to the
Merger Agreement, the Surviving Trust has succeeded to Wellsford Parent's
rights, interests and obligations under the Tri-Party Agreement, and that the
Surviving Trust has caused said rights, interests and obligations to be
assigned to (and assumed by) ERP Operating Partnership. Newco, however,
covenants and agrees as follows with respect to the Phase I Tri-Party
Agreement:
(i) Provided that ERP Operating Partnership makes the Loan Payoff
payment therein required, Newco shall cause WPHC to assign to ERP Operating
Partnership (or, if not assignable, to enforce for the benefit of ERP
Operating Partnership) all certifications that are required by the terms of
the Phase I Tri-Party Agreement, to be certified to WPHC;
(ii) Newco shall cause WPHC not to exercise, waive or modify any
rights, or grant any approvals, under the Tri-Party Agreement without ERP
Operating Partnership's prior written consent, which shall not be
unreasonably withheld or delayed;
(iii) The "Final Project Budget" (as such term is referred to in
the Phase I Tri-Party Agreement) shall not be increased without ERP
Operating Partnership's prior written consent. The parties acknowledge that
the Final Project Budget under the Phase I Tri-Party Agreement constitutes a
limit on ERP Operating Partnership's financial obligations under the
Tri-Party Agreement and, in order to avoid any confusion with the
development budgets adopted by the Palomino Park LLC's, the term Final
Project Budget will not be employed hereinafter in this Agreement and the
term "Tri-Party Agreement Ceiling" will be employed in this Agreement in
lieu thereof.
(b) With respect to Phase II, ERP Operating Partnership understands that
(i) Red Canyon and/or WPHC are currently negotiating the terms of the proposed
construction loan (the "Phase II Loan"), and the related loan documentation
(the "Phase II Loan Documentation"), with Nationsbank or other prospective
lenders, and (ii) the plans and specifications for Phase II (the "Phase II
Plans") have not yet been finalized, and (iii) the exhibits to the operating
agreement for Red Canyon have not yet been finalized. Newco acknowledges that
ERP Operating Partnership shall have only the following rights of review and
approval in connection therewith:
(i) ERP Operating Partnership acknowledges having reviewed and
approved certain non-dimension elevations and floor plans for Phase II
(collectively, the "Preliminary Plans"), copies of which are attached hereto
as Schedule I. Newco shall cause WPHC to furnish the final proposed plans
and specifications to ERP Operating Partnership for ERP Operating
Partnership's review and approval, which shall not be withheld or delayed if
said plans and specifications constitute a logical progression from, and are
not inconsistent with, the Preliminary Plans;
(ii) ERP Operating Partnership has reviewed and approved a preliminary
total budget of $30,000,000 for Phase II, with an anticipated construction
loan in the face principal amount of $29,300,000 (collectively, the
"Preliminary Budget"). Newco shall cause WPHC to furnish to ERP Operating
Partnership the final proposed budget (the loan budget and the total budget)
for Phase II for ERP Operating Partnership's review and approval, which
shall not be withheld or delayed if the total budget for Phase II (including
land, valued at cost, and all other items) (the "Total Phase II Budget") is
not greater than $33,000,000 and ERP Operating Partnership does not have a
commercially reasonable basis to doubt the accuracy of the budget; and
(iii) The exhibits to the Operating Agreements shall be subject to
ERP Operating Partnership's review and approval not to be unreasonably
withheld.
ERP Operating Partnership further understands that Newco is attempting to
structure the Phase II Loan Documentation so that the forms of the documents
themselves will be essentially identical to the "Loan Documents" (as such term
is defined in the Tri-Party Agreement) for Phase I and such that the overall
structure of the Phase II Loan shall be not less favorable to Red Canyon and
WPHC than were the Loan Documents for Phase I as they related to Park at
Highlands and WPHC. In particular, ERP Operating Partnership understands that
Newco will request that ERP Operating Partnership enter into a Tri-Party
Agreement for Phase II (the "Phase II Tri-Party Agreement") that is structured
in the same manner as the Tri-Party Agreement for Phase I. ERP Operating
Partnership hereby agrees to do so, provided that (i) the Tri-Party Agreement
Ceiling (determined at the time the Phase II Tri-Party Agreement is entered
into and not subject to subsequent increase without ERP Operating
Partnership's prior written consent) applicable to the Phase II Tri-Party
Agreement shall be less than or equal to $29,300,000, adjusted downward on a
dollar for dollar basis to the extent that the Total Phase II Budget is less
than $30,000,000, and adjusted upward on a dollar for dollar basis to the
extent that the Total Phase II Budget is greater than $30,000,000 but less
than or equal to $31,500,000; (ii) the maturity date under the Phase II Loan
is no later than the third anniversary of the date hereof; (iii) ERP Operating
Partnership shall have no obligations to the lender with respect to the
Phase II Loan, other than as set forth in the Phase II Tri-Party Agreement;
and (iv) the form of the Phase II Tri-Party Agreement shall have been modified
from the form of the Phase I Tri-Party Agreement so as to be consistent with
clauses (i) through (iii) of Section 3.1(a) hereof and provided further that
ERP Operating Partnership shall not be required to make any representations or
warranties regarding Phase II. In no event shall the Tri-Party Agreement
Ceiling for the Phase II Tri-Party Agreement be greater than $30,800,000.
3.2 (a) Concurrently herewith, WPHC shall enter into a Standby Purchase
and Sale Agreement with ERP Operating Partnership (the "Standby Agreement")
pursuant to which WPHC shall agree to cause the applicable Palomino Park LLC
to grant ERP Operating Partnership an option to purchase only Phase I or Phase
II, as the case may be, upon and subject to the satisfaction of the conditions
set forth herein.
(b) ERP Operating Partnership shall have the right to exercise its option
to purchase Phase I from and after the date, if any, on which ERP Operating
Partnership shall make the "Loan Payoff" (as such term is employed in Section
1 of the Phase I Tri-Party Agreement) pursuant to Section 1 of the Phase I
Tri-Party Agreement. Said option must be exercised, if at all, within thirty
(30) days following the making of said Loan Payoff and ERP Operating
Partnership shall not have the right to exercise said option unless ERP
Operating Partnership has made the Loan Payoff.
(c) ERP Operating Partnership shall have the right to exercise its option
to purchase Phase II from and after the date, if any, on which ERP Operating
Partnership shall make the "Loan Payoff" (as such term shall be employed in
Section 1 of the Phase II Tri-Party Agreement) pursuant to Section 1 of the
Phase II Tri-Party Agreement. Said option must be exercised, if at all,
within thirty (30) days following the making of said Loan Payoff and ERP
Operating Partnership shall not have the right to exercise said option unless
ERP Operating Partnership has made the Loan Payoff.
(d) The Purchase Price for Phase I, pursuant to the Standby Agreement shall
be One Hundred Dollars ($100); the Purchase Price for Phase II, pursuant to
the Standby Agreement, shall be One Hundred Dollars ($100).
(e) No fee shall be payable to ERP Operating Partnership in connection with
the Phase I Tri-Party Agreement. In consideration of ERP Operating
Partnership's undertakings pursuant to the Phase II Tri-Party Agreement,
however, Newco shall pay to ERP Operating Partnership a fee (the "Tri-Party
Fee"), with respect to each of the first three (3) "Annual Periods" (as such
term is hereinafter defined) from and after the date hereof, in the respective
amount set forth below with respect to each such Annual Period;
(i) The fee for the first Annual Period shall be an amount equal to
one percent (1%) of the face principal amount of the construction loan for
Phase II;
(ii) The fee for the second Annual Period shall be an amount equal to
one percent (1%) of the face principal amount of the construction loan for
Phase II; and
(iii) The fee for the third Annual Period shall be one and one-half
percent (1 1/2%) of the face principal amount of the construction loan for
Phase II.
As employed herein, the term "Annual Period" shall mean a period commencing
on the date on which ERP Operating Partnership enters into the Phase II
Tri-Party Agreement or on any anniversary of said date and ending on the
immediately preceding day of the same month in the next calendar year. The
Tri-Party Fee for any given Annual Period shall be payable quarterly in
advance (in equal fourths of the Tri-Party Fee for the entire Annual Period in
which said quarter falls) on the first day of each quarter of said Annual
Period, shall be earned in full for said quarter as of the first day of said
quarter and shall not be refundable for any reason whatsoever, including
without limitation the termination of the Phase II Tri-Party Agreement prior
to the expiration of the quarter for which said Standby Fee has been paid.
With respect to each Annual Period, a "quarter" shall be any of the four
periods commencing on the first day of said Annual Period or on the dates that
are three, six or nine months thereafter, respectively, and ending on the day
prior to the commencement of the next quarter.
(f) ERP Operating Partnership shall not be responsible for the payment of
any transfer or transaction taxes, the purchase of documentary stamps or other
transaction costs of any kind whatsoever (other than the payment of ERP
Operating Partnership's own attorneys' fees) in connection with the closing.
All other costs and expenses (including title, escrow and survey costs and the
fees and expenses of any professionals providing inspections or certifications
as provided hereinbelow) shall be borne solely by Park at Highlands or Red
Canyon, as the case may be.
(g) ERP Operating Partnership's obligations under the Phase I Tri-Party
Agreement and the Phase II Tri-Party Agreement shall be unsecured.
3.3 In connection with ERP Operating Partnership's purchase of Phase I or
the Phase II, as the case may be, pursuant to the Standby Agreement, WPHC
shall cause the following conditions to be satisfied at closing:
(a) A title insurance company satisfactory to ERP Operating Partnership in
the exercise of ERP Operating Partnership's commercially reasonable judgment
shall have issued to ERP Operating Partnership an Owner's policy of title
insurance, in the amount of the purchase price, in such form and with such
endorsements as shall be reasonably requested by ERP Operating Partnership,
showing ERP Operating Partnership in title to the subject property subject to
no title exceptions other than matters not materially interfering with the
use, operation and maintenance of the property in question for its intended
purpose as a multifamily development within Highlands Ranch.
The title policy shall contain full extended coverage over mechanic's lien
claims or rights to liens in connection with all work performed before the
date of closing. The title policy shall reflect that all financing and liens
of a definite or ascertainable amount have been released from the subject
property, other than liens for taxes and assessments not yet due and payable,
and all assessment liens including, without limitation, the Indemnification
Assessment Lien and all other liens arising from or in connection with the
Assessment Lien Revenue Bonds, Series 1995, issued by PPPIC in the aggregate
principal amount of $14,755,000. At a minimum, the endorsements to be
contained in said title policy shall include the following;
(i) 103.1 and 103.2 (encroachments);
(ii) 103.7 (property abuts or has insurable access to open and
dedicated street);
(iii) 110.1 (deleting standard exceptions);
(iv) 110.2 (special exceptions) if any new exceptions appear that are
not listed as permitted exceptions identified above;
(v) 115.2 (PUD);
(vi) 116.1 (survey); and
(vii) 123.2 (zoning).
(b) ERP Operating Partnership shall have received reasonably satisfactory
evidence (which may be included in the title policy described in Subsection
(a) above) that all real property taxes and assessments for the Phase that are
due and payable through the date of closing have been timely and fully paid.
(c) If so requested by ERP Operating Partnership, Red Canyon or Park at
Highlands, as the case may be, shall have furnished ERP Operating Partnership
with evidence of the termination of all contracts and service agreements
between said Palomino Park LLC and any Affiliate controlled by WPHC thereof,
and the waiver of any and all claims against ERP Operating Partnership with
respect to said contracts or agreements.
(d) Red Canyon or Park at Highlands, as the case may be, shall represent
and warrant to ERP Operating Partnership that, to their best knowledge, no
hazardous substances or other materials regulated by environmental laws have
been introduced to the Subject Property from and after March 15, 1994 in
excess of amounts permitted by applicable environmental laws, and that, to the
best knowledge of Red Canyon or Park at Highlands, as the case may be, the
Phase has been completed in accordance with all applicable laws, codes and
ordinances.
3.4 WPHC's obligations under the Standby Agreement shall be guaranteed by
Newco. Nothing in this Agreement or in any other instrument, agreement or
document, however characterized, including without limitation the Operating
Agreements for Park at Highlands and Red Canyon (in particular, Section 4.1.2
thereof) shall obligate Newco to pay the construction loan for the Phase, and
ERP Operating Partnership shall have no recourse whatsoever to seek recourse
to any extent against Newco for the payment of any part of said loan,
irrespective of whether ERP Operating Partnership pays any sums under the
Tri-Party Agreement for the Phase. Consistent with the foregoing, ERP
Operating Partnership shall have no right of enforcement, whether by
subrogation or direct action, or otherwise, of the capital contribution
requirements of Newco set forth in the Operating Agreement.
\ED The Standby Agreement (and the guaranty referred to in Section 3.4
hereof) shall be prepared by counsel to ERP Operating Partnership, shall
incorporate the terms set forth above in this Article 3 and shall otherwise be
in form and substance satisfactory to ERP Operating Partnership in ERP
Operating Partnership's commercially reasonable judgment.
3.6 The rights of ERP Operating Partnership under the Standby Agreement are
and shall at all times be subject to any and all liens, restrictions,
covenants and encumbrances, now existing and hereafter arising, affecting the
Subject Property and ERP Operating Partnership shall furnish any instrument
reasonably required by Newco, Park at Highlands, Red Canyon or any title
insurer sufficient to enable the title insurer to omit same as an exception to
title insurance coverage.
ARTICLE 4
CONDITIONS PRECEDENT
4.1 The execution and delivery of all of the documents and instruments
described in Articles 1, 2 and 3 above shall be mutually necessary conditions
precedent. In addition, the satisfaction of the following shall constitute
additional conditions precedent to the consummation of the transactions
contemplated under this Agreement:
(i) the approval of all third parties whose consent or approvals may
be required for the consummation of said transactions;
(ii) an acknowledgment by Nationsbank, WPHC and Park at Highlands that
the Phase I Tri-Party Agreement is in full force and effect and has not been
modified, that no notice of default has been given thereunder by Nationsbank
with respect to Wellsford Parent that has not been cured, and that the
Tri-Party Agreement Ceiling as it relates to Phase I has not been modified,
and Wellsford Parent's obligations under the Phase I Tri-Party Agreement
have been assigned to ERP Operating Partnership by the Surviving Trust and
that said parties will look solely to ERP Operating Partnership for the
performance of said obligations; an acknowledgment by Nationsbank that ERP
Operating Partnership's obligations to Nationsbank with respect to Phase I
are as set forth in the Phase I Tri-Party Agreement;
(iii) a release executed by Xx Xxxx, of any and all obligations of
Wellsford Parent in connection with the Palomino Park LLCs (other than the
Phase I Tri-Party Agreement), including, without limitation, the obligations
to make capital contributions to Park at Highlands and Red Canyon;
(iv) evidence, reasonably satisfactory to ERP Operating Partnership, of
the due and valid authorization, execution and delivery of the documents and
instruments contemplated to be entered into pursuant to this Agreement by
Newco, WPHC, Park at Highlands, Red Canyon, or any Affiliate of any of the
foregoing;
(v) the delivery to ERP Operating Partnership of copies of the
Operating Agreements, as amended pursuant hereto, certified as true, correct
and complete by WPHC;
(vi) the delivery to ERP Operating Partnership of copies of the
corporate organizational documents for WPHC, certified as true, correct and
complete by an officer of WPHC;
(vii) certificates, in form and substance and executed by such
parties as ERP Operating Partnership may reasonably require, evidencing that
all documents and materials submitted to ERP Operating Partnership prior to
the execution and delivery of the Merger Agreement and relating to the
Overall Property, the Project or any portion thereof, shall not have been
materially modified, supplemented or amended without ERP Operating
Partnership's prior written consent and, to the best knowledge of the
undersigned, are free from default;
(viii) the consummation of the transactions contemplated under the
Merger Agreement and the Contribution Agreement.
4.2 It shall be a condition precedent to ERP Operating Partnership's
obligations to enter into the Phase II Tri-Party Agreement that no Event of
Default beyond all applicable cure periods shall have occurred under this
Agreement.
4.3 Newco shall use its best efforts to ensure that all conditions
precedent to ERP Operating Partnership's obligations which are set forth in
clauses (i)-(viii) inclusive of Section 4.1 shall be satisfied as of the date
of the consummation of the transactions contemplated by the Merger Agreement.
In the event that Newco is unable to satisfy any condition precedent set forth
in clauses (i)-(viii) inclusive of Section 4.1 hereof by the date of the
consummation of the transactions contemplated by the Merger Agreement, after
the exercise of its best efforts to satisfy such condition, ERP Operating
Partnership shall have the right, in its sole and absolute discretion, (i) to
satisfy such condition precedent, at its cost and expense, or (ii) to waive
compliance with any such condition precedent.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
5.1 Representations and Warranties of Newco. Newco hereby represents and
warrants to ERP Operating Partnership as follows:
(a) Newco (i) is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its organization,
(ii) has all requisite corporate power and authority to own its property and
assets and to carry on its business as now conducted and as proposed to be
conducted by Newco, (iii) is qualified to do business in every jurisdiction
where such qualification is required, except where the failure so to qualify
would not result in a "Material Adverse Effect on Newco" (as such term is
hereinafter defined), and (iv) has the corporate power and authority to
execute, deliver and perform its obligations under this Agreement. As
employed herein, the term "Material Adverse Effect on Newco" shall mean
(i) a materially adverse effect on the financial condition of Newco, or
(ii) material impairment of the ability of Newco to pay any amount due, or
to perform any other material obligation, under any Letter of Credit
Document or Alternate Reimbursement Document, as those terms are defined in
that certain Credit Enhancement Agreement dated May 30, 1997 by and between
ERP Operating Partnership and Newco (the "Credit Enhancement Agreement").
(b) The execution, delivery and performance by Newco of this Agreement
and the transactions contemplated hereby (i) have been duly authorized by
all requisite corporate and, if required, stockholder action and (ii) will
not (A) violate (x) any provision of law, statute, rule or regulation to
which Newco or any of its "Affiliates" (as such term is defined in
Section 6.2) shall be subject, or of the certificate or articles of
incorporation or other constitutive documents or by-laws of Newco, (y) any
order of any governmental authority or quasi-governmental authority, or
(z) any provision of any indenture or other material agreement or instrument
to which Newco is a party or by which it or any of its property is or may be
bound, (B) be in conflict with, result in a breach of or constitute (alone
or with notice or lapse of time or both) a default under any such indenture,
agreement or other instrument, or (C) result in the creation or imposition
of any lien upon or with respect to any property or assets now owned or
hereafter acquired by Newco, except for the lien, if any, created pursuant
to the terms of this Agreement.
(c) This Agreement has been duly executed and delivered by Newco and
constitutes a legal, valid and binding obligation of Newco enforceable
against Newco in accordance with its terms, except as such enforceability
may be limited by bankruptcy, insolvency or other laws affecting the
enforcement of creditors' rights generally, or by general equity principles,
including but not limited to principles governing the availability of the
remedies of specific performance and injunctive relief.
(d) Each of the Palomino Park LLCs is classified for federal tax
purposes as a partnership and not as an association taxable as a
corporation.
(e) There have been no modifications to the Final Project Budget
attached to the Phase I Tri-Party Agreement, other than change orders funded
by WPHC. The total value of all negative change orders in connection with
Phase I is less than $500,000.
5.2 Representations and Warranties of ERP Operating Partnership. ERP
Operating Partnership hereby represents and warrants to Newco as follows:
(a) ERP Operating Partnership (i) is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of
its organization, (ii) has all requisite corporate power and authority to
own its property and assets and to carry on its business as now conducted
and as proposed to be conducted by ERP Operating Partnership, (iii) is
qualified to do business in every jurisdiction where such qualification is
required, except where the failure so to qualify would not result in a
"Material Adverse Effect on ERP Operating Partnership" (as such term is
hereinafter defined), and (iv) has the corporate power and authority to
execute, deliver and perform its obligations under this Agreement. As
employed herein, the term "Material Adverse Effect on ERP Operating
Partnership" shall mean a materially adverse effect on the financial
condition of ERP Operating Partnership.
(b) The execution, delivery and performance by ERP Operating
Partnership of this Agreement and the transactions contemplated hereby
(i) have been duly authorized by all requisite corporate and, if required,
stockholder action, and (ii) will not (A) violate (x) any provision of law,
statute, rule or regulation to which ERP Operating Partnership or any of its
"Affiliates" (as such term is defined in Section 6.2) shall be subject, or
of the certificate or articles of incorporation or other constitutive
documents or by-laws of ERP Operating Partnership, (y) any order of any
governmental authority or quasi-governmental authority, or (z) any provision
of any indenture or other material agreement or instrument to which ERP
Operating Partnership is a party or by which it or any of its property is or
may be bound, (B) be in conflict with, result in a breach of or constitute
(alone or with notice or lapse of time or both) a default under any such
indenture, agreement or other instrument, or (C) result in the creation or
imposition of any lien upon or with respect to any property or assets now
owned or hereafter acquired by ERP Operating Partnership.
(c) This Agreement has been duly executed and delivered by ERP
Operating Partnership and constitutes a legal, valid and binding obligation
of ERP Operating Partnership enforceable against ERP Operating Partnership
in accordance with its terms, except as such enforceability may be limited
by bankruptcy, insolvency or other laws affecting the enforcement of
creditors' rights generally, or by general equity principles, including but
not limited to principles governing the availability of the remedies of
specific performance and injunctive relief.
ARTICLE 6
EVENTS OF DEFAULT
6.1 Events of Default. The happening of any of the following events shall
be an "Event of Default" hereunder:
(a) any representation or warranty made or deemed made in or in
connection with this Agreement by Newco shall prove to have been false or
misleading in any material respect when so made, deemed made or furnished;
(b) default shall be made in the payment of any amounts due under this
Agreement and such default is not cured within five (5) business days of
written notice from ERP Operating Partnership of such default;
(c) material default shall be made in the due observance or
performance by Newco of any covenant, condition or agreement contained in
(i) this Agreement and any documents or instruments entered into pursuant to
this Agreement, other than a default in the payment of any amount due under
this Agreement, and such material default shall not be cured within fifteen
(15) business days of written notice from ERP Operating Partnership of such
default;
(d) an involuntary proceeding shall be commenced or an involuntary
petition shall be filed in a court of competent jurisdiction seeking
(i) relief in respect of Newco or any Subsidiary (as hereinafter defined),
or of a substantial part of the property or assets of Newco or any
Subsidiary, under Title 11 of the United States Code, as now constituted or
hereafter amended, or any other Federal or state bankruptcy, insolvency,
receivership or similar law, (ii) the appointment of a receiver, trustee,
custodian, sequestrator, conservator or similar official for Newco or any
Subsidiary or for a substantial part of the property or assets of Newco or
any Subsidiary or (iii) the winding-up or liquidation of Newco or any
Subsidiary; and such proceeding or petition shall continue undismissed for
90 days or an order or decree approving or ordering any of the foregoing
shall be entered;
(e) Newco or any Subsidiary shall (i) voluntarily commence any
proceeding or file any petition seeking relief under Title 11 of the United
States Code, as now constituted or hereafter amended, or any other Federal
or state bankruptcy, insolvency, receivership or similar law, (ii) consent
to the institution of, or fail to contest in a timely and appropriate
manner, any proceeding or the filing of any petition described in (h) above,
(iii) apply for or consent to the appointment of a receiver, trustee,
custodian, sequestrator, conservator or similar official for Newco or any
Subsidiary or for a substantial part of the property or assets of Newco or
any Subsidiary, (iv) file an answer admitting the material allegations of a
petition filed against it in any such proceeding, (v) make a general
assignment for the benefit of creditors, (vi) become unable, admit in
writing its inability or fail generally to pay its debts as they become due
or (vii) take any action for the purpose of effecting any of the foregoing;
(f) one or more judgments for the payment of money in an aggregate
amount in excess of $250,000 shall be rendered against Newco, and the same
shall remain undischarged or unbonded for a period of thirty (30)
consecutive days during which execution shall not be effectively stayed, or
any judgment creditor shall levy upon assets or properties of Newco or any
Subsidiary to enforce any such judgment; or
(g) there shall have occurred a Change in Control with respect to
Newco.
6.2 Definitions. As employed herein, the following terms shall have the
following meanings:
"Affiliate" shall mean, when used with respect to a specified Person,
another Person that directly, or indirectly through one or more
intermediaries, Controls or is Controlled by or is under common Control
with the Person specified.
A "Change in Control" shall be deemed to have occurred with respect
to Newco or PPPIC, as the case may be, if (a) any Person or group (within
the meaning of Rule 13d-5 of the Securities and Exchange Commission as in
effect on the date hereof) shall own, directly or indirectly, beneficially
or of record, shares representing more than 50% of the aggregate ordinary
voting power represented by the issued and outstanding capital stock of
Newco; or (b) a change shall occur during any period in the Board of
Directors of Newco in which the individuals who constituted the Board of
Directors of Newco at the beginning of such period (together with any
other director whose election by the Board of Directors of Newco or whose
nomination for election by the stockholders of Newco was approved by a
vote of at least two-thirds of the directors then in office who either
were directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason
to constitute a majority of the directors of Newco then in office.
"Control", when used with respect to any specified Person, means the
power to direct the management and policies of such Person, whether
through the ownership of voting securities, by contract or otherwise. The
term "controlled" has a meaning correlative to the foregoing.
"Person" shall mean any natural person, corporation, business trust,
joint venture, association, company, partnership or government, or any
agency or political subdivision thereof.
"Subsidiary" of Newco shall mean WPHC, Park at Highlands or Red Canyon.
6.3 Remedies.
(a) Upon the occurrence of an Event of Default described in
Section 6.1 hereof, ERP Operating Partnership shall have any and all
remedies available to it at law, in equity or pursuant to statute. Nothing
in this section shall entitle ERP Operating Partnership to disaffirm to any
extent and in any manner its obligations under the Phase I Tri-Party
Agreement or (if ERP Operating Partnership has previously executed and
delivered the Phase II Tri-Party Agreement) the Phase II Tri-Party
Agreement; provided, however, that ERP Operating Partnership shall have no
obligation to enter into the Phase II Tri-Party Agreement if an Event of
Default shall have occurred.
(b) Upon the failure of ERP Operating Partnership to perform any of
its obligations under this Agreement, Newco shall have any and all remedies
available to it at law, in equity or pursuant to statute.
ARTICLE 7
RELEASE OF ERP OPERATING PARTNERSHIP
Notwithstanding anything to the contrary contained in this Agreement, Newco
shall not cause or permit to occur any transactions or series of transactions
as a result of which Newco will cease to own a controlling interest in WPHC or
WPHC will cease to own a controlling interest in the Palomino Park LLCs
without first causing ERP Operating Partnership to be fully released from the
Credit Enhancement Agreement of even date herewith between ERP Operating
Partnership and Newco (the "Credit Enhancement Agreement"), the "Initial ERP
Operating Partnership Guaranty" (as such term is defined in the Credit
Enhancement Agreement) and any "Alternate ERP Operating Partnership
Guaranties" (as such term is defined in the Credit Enhancement Agreement).
ARTICLE 8
TAX SHARING AGREEMENT
Concurrently herewith, the parties hereto shall enter into a Tax Sharing
Agreement in the form attached hereto as Exhibit A.
ARTICLE 9
MISCELLANEOUS
9.1 Notices. Notices and other communications provided for herein shall be
in writing and shall be delivered by hand or overnight courier service, mailed
or sent by telecopy, as follows:
(a) if to Newco: Wellsford Real Properties, Inc.
000 Xxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx Xxxxxxxxx
Telecopy No.: (000) 000-0000
with a copy to: Xxxxxxxx Xxxxxxxxx Xxxxxx Xxxxxxxx &
Xxxxxx LLP
1290 Avenue of the Americas
Xxx Xxxx, Xxx Xxxx 00000-0000
Attn: Xxxx X. Xxxxxx, Esq.
Telecopy No.: (000) 000-0000
(b) if to the ERP Operating
Partnership: ERP Operating Partnership
c/o Equity Residential Properties Trust
Xxx Xxxxx Xxxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxx 00000
Attn: President
Telecopy No.: (000) 000-0000
with a copy to: Equity Residential Properties Trust
Xxx Xxxxx Xxxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxx X. Xxxxxx, Esq.
Telecopy No.: (000) 000-0000
and: Xxxxxxx & Xxxxx
000 X. XxXxxxx Xx., Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxx X. Xxxxxxxx, Esq.
Telecopy No.: (000) 000-0000
9.2 Survival of Agreement. All covenants, agreements, representations and
warranties made by Newco herein and in the certificates or other instruments
prepared or delivered in connection with or pursuant to this Agreement shall
be considered to have been relied upon by ERP Operating Partnership and shall
survive the date of this Agreement, regardless of any investigation made by
ERP Operating Partnership or on its behalf, and shall continue in full force
and effect so long as ERP Operating Partnership retains any obligations or
liability under this Agreement, or any document or instrument entered into
pursuant hereto.
9.3 Binding Effect. This Agreement shall become effective when it shall
have been executed by Newco and ERP Operating Partnership, and thereafter
shall be binding upon and inure to the benefit of Newco, ERP Operating
Partnership and their respective successors and assigns, except that Newco
shall not have the right to assign its rights hereunder or any interest herein
without the prior consent of ERP Operating Partnership.
9.4 Applicable Law. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH
AND GOVERNED BY THE LAWS OF THE STATE OF ILLINOIS.
9.5 Waivers; Amendment.
(a) No failure or delay of Newco or ERP Operating Partnership in
exercising any power or right hereunder shall operate as a waiver thereof,
nor shall any single or partial exercise of any such right or power, or any
abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of each party hereunder are
cumulative and are not exclusive of any rights or remedies which they would
otherwise have. No waiver of any provision of this Agreement or consent to
any departure by either party therefrom shall in any event be effective
unless the same shall be permitted by paragraph (b) below, and then such
waiver or consent shall be effective only in the specific instance and for
the purpose for which given. No notice or demand on the other party in any
case shall entitle the other party to any other or further notice or demand
in similar or other circumstances.
(b) Neither this Agreement nor any provision hereof may be waived,
amended or modified except pursuant to an agreement or agreements in writing
entered into by Newco and ERP Operating Partnership.
9.6 Entire Agreement. This Agreement, including any exhibits and schedules
hereto, constitutes the entire contract between the parties relative to the
subject matter hereof. Any previous agreement among the parties with respect
to the subject matter hereof is superseded by this Agreement. Nothing in this
Agreement, expressed or implied, is intended to confer upon any party other
than the parties hereto and thereto any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
9.7 Waiver of Jury Trial. Each party hereto hereby waives, to the fullest
extent permitted by applicable law, any right it may have to a trial by jury
in respect of any litigation directly or indirectly arising out of, under or
in connection with this Agreement.
9.8 Severability. In the event any one or more of the provisions contained
in this Agreement should be held invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein and therein shall not in any way be affected or impaired
thereby. The parties shall endeavor in good-faith negotiations to replace the
invalid, illegal or unenforceable provisions with valid provisions the
economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.
9.9 Headings. Article and Section headings used herein are for convenience
of reference only, are not part of this Agreement and are not to affect the
construction of, or to be taken into consideration in interpreting, this
Agreement.
9.10 Jurisdiction; Consent to Service of Process.
(a) NEWCO HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF
AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF ANY ILLINOIS STATE
COURT OR FEDERAL COURT OF THE UNITED STATES OF AMERICA SITTING IN THE CITY
OF CHICAGO OR THE CITY OF NEW YORK, AND ANY APPELLATE COURT THEREFROM, IN
ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR
FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES
HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN
RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH
ILLINOIS OR NEW YORK STATE COURT OR, TO THE EXTENT PERMITTED BY LAW, IN SUCH
FEDERAL COURT. EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN
ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN
OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED
BY LAW. NOTHING IN THIS AGREEMENT SHALL AFFECT ANY RIGHT THAT ANY PARTY MAY
OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT
IN THE COURTS OF ANY JURISDICTION.
(b) NEWCO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE
FULLEST EXTENT IT MAY LEGALLY AND EFFECTIVELY DO SO, ANY OBJECTION WHICH IT
MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT IN ANY ILLINOIS OR
NEW YORK STATE OR FEDERAL COURT. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, THE DEFENSE OF
AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY
SUCH COURT.
IN WITNESS WHEREOF, ERP Operating Partnership and Newco have caused this
Agreement to be signed by their respective officers hereunto duly authorized
all as of the date first written above.
ERP OPERATING LIMITED PARTNERSHIP
By: EQUITY RESIDENTIAL PROPERTIES TRUST,
its general partner
By:/s/ Xxxxx X. Xxxxxx
-----------------------------
Name: Xxxxx X. Xxxxxx
Title: Executive Vice President
and General Counsel
WELLSFORD REAL PROPERTIES, INC.
By:/s/ Xxxxxx Xxxxxxxxx
---------------------------------
Name: Xxxxxx Xxxxxxxxx
Title: President
EXHIBIT A
FORM OF TAX SHARING AGREEMENT
SCHEDULE I
PRELIMINARY PLANS
