-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Qx69lCCFz0J+ZcVi7rUVmbH/Jq8eiZ0CCQrv9LCL2uo2mz3FNMCMnOGXzN2MqsUZ gNpD4hSknbPwkDRtcISOMQ== 0000910643-97-000096.txt : 19970731 0000910643-97-000096.hdr.sgml : 19970731 ACCESSION NUMBER: 0000910643-97-000096 CONFORMED SUBMISSION TYPE: S-11 PUBLIC DOCUMENT COUNT: 38 FILED AS OF DATE: 19970730 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: WELLSFORD REAL PROPERTIES INC CENTRAL INDEX KEY: 0001038222 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 133926898 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-11 SEC ACT: 1933 Act SEC FILE NUMBER: 333-32445 FILM NUMBER: 97648288 BUSINESS ADDRESS: STREET 1: 610 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10020 BUSINESS PHONE: 2123332300 S-11 1 As filed with the Securities and Exchange Commission on July 30, 1997 Registration No. 333-_____ ============================================================================== SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _____________________ FORM S-11 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 _____________________ WELLSFORD REAL PROPERTIES, INC. (Exact Name of Registrant as Specified in its Governing Instruments) 610 Fifth Avenue New York, New York 10020 (212) 333-2300 (Address and Telephone Number of Principal Executive Offices)______________ Edward Lowenthal Wellsford Real Properties, Inc. 610 Fifth Avenue New York, New York 10020 (212) 333-2300 (Name, Address and Telephone Number of Agent for Service) ___________________ Copies to: Robinson Silverman Pearce Aronsohn & Berman LLP 1290 Avenue of the Americas New York, New York 10104 (212) 541-2000 Attention: Alan S. Pearce, Esq. Steven G. Scheinfeld, Esq. ____________________ Approximate date of commencement of the proposed sale to the public: As soon as practicable after the Registration Statement becomes effective. ____________________ If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: /_/ If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering: /_/ If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box: /_/ CALCULATION OF REGISTRATION FEE Proposed Proposed Amount Title of Each Maximum Maximum of Class of Amount Offering Aggregate Regis- Securities being Price Per Offering tration to be Registered Registered Unit (1) Price (1) Fee ============================================================================== Common Stock, $.01 par value per share. . . . 12,242,719 $11.0625 $135,435,079 $41,041 ============================================================================== (1) Estimated solely for purposes of calculating the registration fee. Pursuant to Rule 457(c), the offering price and registration fee are computed on the basis of the average of the high and low prices reported on the American Stock Exchange as of July 25, 1997. The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. WELLSFORD REAL PROPERTIES, INC. Cross Reference Sheet Showing Location in Prospectus of Information Required by Items in Form S-11 Form S-11 Item No. and Heading Location or Caption in Prospectus ------------------------------ --------------------------------- 1. Forepart of the Registration Statement and Outside Front Cover Page of Prospectus Outside Front Cover Page 2. Inside Front and Outside Back Cover Pages of Prospectus Inside Front Cover Page; Outside Back Cover Page; Available Information 3. Summary Information, Risk Factors and Ratio of Earnings to Fixed Charges Outside Front Cover Page; Prospectus Summary; Risk Factors; The Company 4. Determination of Offering Price Outside Front Cover Page; Underwriting 5. Dilution Not Applicable 6. Selling Security Holders Not Applicable 7. Plan of Distribution Outside Front Cover Page; Underwriting 8. Use of Proceeds Use of Proceeds 9. Selected Financial Data Selected Unaudited Combined Financial Data 10. Management's Discussion and Analysis of Financial Condition and Results of Operations Management's Discussion and Analysis of Financial Conditions and Analysis of Operations 11. General Information as to Registrant The Company; Management 12. Policy With Respect to Certain Activities The Company; Policies with Respect to Certain Activities 13. Investment Policies of Registrant The Company; Policies with Respect to Certain Activities 14. Description of Real Estate Business and Properties 15. Operating Data Business and Properties 16. Tax Treatment of Registrant and its Security Holders Certain United States Federal Income Tax Considerations 17. Market Price of and Dividends on the Registrant's Common Equity and Related Stockholder Matters Dividend Policy; Price Range of Common Stock and Dividend History; Description of Capital Stock; Shares Available for Future Sale 18. Description of Registrant's Securities Description of Capital Stock; Certain Provisions of Maryland Law and of the Company's Charter and Bylaws 19. Legal Proceedings Business and Properties -- Legal Proceedings 20. Security Ownership of Certain Beneficial Owners and Management Principal Stockholders 21. Directors and Executive Officers Management 22. Executive Compensation Management -- Executive Compensation 23. Certain Relationships and Related Transactions Certain Transactions 24. Selection, Management and Custody of Registrant's Investments Risk Factors; The Company; Management; Principal Stockholders 25. Policies With Respect to Certain Transactions Certain Transactions 26. Limitations of Liability Certain Provisions of Maryland Law and of the Company's Charter and Bylaws -- Limitation of Liability and Indemnification 27. Financial Statements and Information Prospectus Summary; Summary Unaudited Combined Financial Data; Financial Statements 28. Interests of Named Experts and Counsel Experts; Legal Matters 29. Disclosure of Commission Position on Indemnification for Securities Act Liabilities Certain Provisions of Maryland Law and of the Company's Charter and Bylaws -- Limitation of Liability and Indemnification Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any State in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such State. SUBJECT TO COMPLETION PRELIMINARY PROSPECTUS DATED JULY 30, 1997 PROSPECTUS 12,242,719 Shares WELLSFORD REAL PROPERTIES, INC. Common Stock Wellsford Real Properties, Inc. (the "Company") was organized to create and realize value by identifying and making opportunistic real estate investments through the direct acquisition, rehabilitation, development, financing and management of real properties and/or participation in these activities through the purchase of debt instruments or equity interests of entities engaged in such real estate businesses. Management is concentrating its efforts on defining and building focused operating businesses with recurring sources of income. The Company intends to maximize shareholder value over time through growth in cash flow and net asset value per share. All of the 12,242,719 shares (the "Shares") of Common Stock, $.01 par value per share (the "Common Stock"), of the Company offered hereby are being sold for the account of the Company's shareholders who acquired the Shares from the Company in private placements, and for their beneficiaries, pledgees, transferees, successors-in-interest and assignees (collectively, the "Selling Shareholders"). See "Selling Shareholders." The Company will not receive any of the proceeds from the sale of the Shares. The Shares are listed on the American Stock Exchange (the "ASE") under the symbol "WRP." On July 29, 1997, the last reported sale price of the Company's Common Stock on the ASE was $11.50 per share. Any sale by a Selling Shareholder will be made through customary brokerage channels or private sales and may be made on the ASE, in the over- the-counter market or otherwise at prices to be determined at the time of such sales. See "Plan of Distribution." No underwriter is being used in connection with the registration of the Shares and, accordingly, the Shares are being offered without any underwriting discounts. Normal brokerage commissions, discounts and fees are payable by the Selling Shareholders. See "Risk Factors" beginning on page 11 for certain factors relevant to an investment in the Common Stock, including: ------------------- o Competition in identifying and making investments and attracting tenants. o The inability of the Company to obtain significant amounts of capital. o Risks of excessive costs and delays associated with the acquisition, development, construction and renovation of properties. o Vacancies at existing properties. o Lack of limitation on the amount of debt that may be incurred and risks of highly leveraged investments. o Risks associated with debt instruments held by the Company, including possible payment defaults and reductions in the value of collateral. o Risks associated with investments in junior secured obligations and commercial mortgage-backed securities. o Illiquidity of the Company's real estate investments. o The Company is a recently-formed entity with little prior operating history. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION") OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ------------------- The date of this Prospectus is __________ __, 1997 TABLE OF CONTENTS PROSPECTUS SUMMARY. . . . . . . . . . . . . . . . . . . . . . . . . . . . .-1- The Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-1- Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-3- Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-4- Business Strategy. . . . . . . . . . . . . . . . . . . . . . . . . . .-5- Initial Investments. . . . . . . . . . . . . . . . . . . . . . . . . .-6- Initial Capital and Financing. . . . . . . . . . . . . . . . . . . . .-7- Dividends to Holders of Common Stock . . . . . . . . . . . . . . . . .-7- WELLSFORD REAL PROPERTIES, INC. (PREDECESSOR) SUMMARY UNAUDITED COMBINED FINANCIAL DATA . . . . . . . . . . . . . . . . .-8- RISK FACTORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -11- General Risks. . . . . . . . . . . . . . . . . . . . . . . . . . . . -11- Difficulty of Locating Suitable Investments; Competition; Capital Requirements. . . . . . . . . . . . . . . . . . . . . . . . . . . -11- Risks of Acquisition, Development, Construction and Renovation Activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . -11- Risks of Vacancies at Existing Properties; Dependence on Rental Income from Real Property . . . . . . . . . . . . . . . . . . . . -12- Operating Risks. . . . . . . . . . . . . . . . . . . . . . . . . . . -13- Adverse Consequences of Debt Financing . . . . . . . . . . . . . . . -13- Risks of Investments in Debt Instruments . . . . . . . . . . . . . . -14- Risks of Investments in Mortgage and Other Loans . . . . . . . . . . -14- Lack of Control and Other Risks of Equity Investments in and with Third Parties . . . . . . . . . . . . . . . . . . . . . . . . . . -15- Risk of Loss on Investments in Commercial Mortgage-Backed Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . -15- Nature of Investments Made by the Company May Involve High Risk; Illiquidity of Real Estate Investments . . . . . . . . . . . . . . . -16- Limitations on Remedies. . . . . . . . . . . . . . . . . . . . . . . -16- Third-Party Bankruptcy Risks . . . . . . . . . . . . . . . . . . . . -16- Recently Formed Entity . . . . . . . . . . . . . . . . . . . . . . . -16- Risk of Registration Under Investment Company Act. . . . . . . . . . -16- Risks of Uninsured Loss. . . . . . . . . . . . . . . . . . . . . . . -17- Potential Environmental Liability Related to the Properties. . . . . -17- Dependence on Key Personnel. . . . . . . . . . . . . . . . . . . . . -18- Changes in Policies Without Shareholder Approval . . . . . . . . . . -18- Absence of Public Market; Risk of Changes in Stock Price . . . . . . -18- Costs of Compliance with the Americans with Disabilities Act and Similar Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . -18- Noncompliance with Other Laws. . . . . . . . . . . . . . . . . . . . -19- Effect on Common Stock Price of Shares Available for Future Sale . . -19- Hedging Policies/Risks . . . . . . . . . . . . . . . . . . . . . . . -19- Anti-Takeover Effect Resulting From a Staggered Board, Ability of the Company to Issue Preferred Stock and Certain Provisions of Maryland Law. . . . . . . . . . . . . . . . . . . . . . . . . . . -19- THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -20- General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -20- Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -21- Business Strategy. . . . . . . . . . . . . . . . . . . . . . . . . . -23- USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -24- SELLING SHAREHOLDERS. . . . . . . . . . . . . . . . . . . . . . . . . . . -24- DIVIDEND POLICY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -26- PRICE RANGE OF COMMON STOCK AND DIVIDEND HISTORY. . . . . . . . . . . . . -26- CAPITALIZATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -27- WELLSFORD REAL PROPERTIES, INC. (PREDECESSOR) SELECTED UNAUDITED COMBINED FINANCIAL DATA. . . . . . . . . . . . . . . . -28- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND ANALYSIS OF OPERATIONS. . . . . . . . . . . . . . -30- Results of Operations. . . . . . . . . . . . . . . . . . . . . . . . -30- Liquidity and Capital Resources. . . . . . . . . . . . . . . . . . . -30- BUSINESS AND PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . . -30- Wellsford Commercial Properties. . . . . . . . . . . . . . . . . . . -30- Cyanamid Office Portfolio. . . . . . . . . . . . . . . . . . . . . . -31- Greenbrook Corporate Center. . . . . . . . . . . . . . . . . . . . . -32- Chatham, New Jersey. . . . . . . . . . . . . . . . . . . . . . . . . -33- Wellsford High Yield Investment Portfolio. . . . . . . . . . . . . . -34- 277 Park Loan. . . . . . . . . . . . . . . . . . . . . . . . . . . . -34- Sonterra Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . -34- Wellsford Property Development . . . . . . . . . . . . . . . . . . . -35- Palomino Park. . . . . . . . . . . . . . . . . . . . . . . . . . . . -35- Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . -37- INITIAL CAPITAL AND FINANCING . . . . . . . . . . . . . . . . . . . . . . -37- Line of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . -38- POLICIES WITH RESPECT TO CERTAIN ACTIVITIES . . . . . . . . . . . . . . . -38- Investment Policies. . . . . . . . . . . . . . . . . . . . . . . . . -38- Financing Policies . . . . . . . . . . . . . . . . . . . . . . . . . -39- Policies with Respect to Other Activities. . . . . . . . . . . . . . -39- MANAGEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -40- Directors and Executive Officers . . . . . . . . . . . . . . . . . . -40- Key Employee . . . . . . . . . . . . . . . . . . . . . . . . . . . . -42- Compensation of Directors. . . . . . . . . . . . . . . . . . . . . . -42- Board Committees . . . . . . . . . . . . . . . . . . . . . . . . . . -42- Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . -43- Employment Agreements. . . . . . . . . . . . . . . . . . . . . . . . -43- 1997 Management Incentive Plan . . . . . . . . . . . . . . . . . . . -44- Rollover Stock Option Plan . . . . . . . . . . . . . . . . . . . . . -45- Compensation Committee Interlocks and Insider Participation. . . . . -45- PRINCIPAL STOCKHOLDERS. . . . . . . . . . . . . . . . . . . . . . . . . . -45- CERTAIN TRANSACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . -47- CERTAIN AGREEMENTS BETWEEN THE COMPANY AND ERP OPERATING PARTNERSHIP. . . -47- Common Stock and Preferred Stock Purchase Agreement. . . . . . . . . -48- Registration Rights Agreement. . . . . . . . . . . . . . . . . . . . -50- Agreement Regarding Palomino Park. . . . . . . . . . . . . . . . . . -51- Credit Enhancement Agreement . . . . . . . . . . . . . . . . . . . . -53- DESCRIPTION OF CAPITAL STOCK. . . . . . . . . . . . . . . . . . . . . . . -54- General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -54- Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . -54- Classification or Reclassification of Common Stock or Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -55- Power to Issue Additional Shares of Common Stock and Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -55- Class A Common Stock . . . . . . . . . . . . . . . . . . . . . . . . -56- Series A 8% Convertible Redeemable Preferred Stock . . . . . . . . . -56- CERTAIN PROVISIONS OF MARYLAND LAW AND OF THE COMPANY'S CHARTER AND BYLAWS. . . . . . . . . . . . . . . . . . . . . -61- Classification of the Board of Directors . . . . . . . . . . . . . . -61- Removal of Directors . . . . . . . . . . . . . . . . . . . . . . . . -61- Business Combinations. . . . . . . . . . . . . . . . . . . . . . . . -61- Amendment to the Charter and Bylaws. . . . . . . . . . . . . . . . . -62- Merger, Consolidation, Sale of Assets. . . . . . . . . . . . . . . . -62- Dissolution of the Company . . . . . . . . . . . . . . . . . . . . . -62- Advance Notice of Director Nominations and New Business. . . . . . . -62- Meetings of Shareholders . . . . . . . . . . . . . . . . . . . . . . -62- Limitation of Liability and Indemnification. . . . . . . . . . . . . -63- SHARES AVAILABLE FOR FUTURE SALE. . . . . . . . . . . . . . . . . . . . . -64- CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS . . . . . . . . . -65- PLAN OF DISTRIBUTION. . . . . . . . . . . . . . . . . . . . . . . . . . . -68- CERTAIN ERISA CONSIDERATIONS. . . . . . . . . . . . . . . . . . . . . . . -68- LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -70- EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -70- ADDITIONAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . -70- INDEX TO FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . .F-1 REPORT OF INDEPENDENT AUDITORS. . . . . . . . . . . . . . . . . . . . . . .F-2 WELLSFORD REAL PROPERTIES, INC. (PREDECESSOR) COMBINED BALANCE SHEETS . . . . . . . . . . . . . . . . . . . . . . . . . .F-3 WELLSFORD REAL PROPERTIES, INC. (PREDECESSOR) COMBINED STATEMENTS OF INCOME AND EQUITY. . . . . . . . . . . . . . . . . .F-4 WELLSFORD REAL PROPERTIES, INC. (PREDECESSOR) COMBINED STATEMENTS OF CASH FLOWS . . . . . . . . . . . . . . . . . . . . .F-5 WELLSFORD REAL PROPERTIES, INC. (PREDECESSOR) NOTES TO COMBINED FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . .F-6 WELLSFORD REAL PROPERTIES, INC. (PREDECESSOR) PRO FORMA COMBINED INCOME STATEMENT . . . . . . . . . . . . . . . . . . . F-11 WELLSFORD REAL PROPERTIES, INC. (PREDECESSOR) PRO FORMA COMBINED BALANCE SHEET. . . . . . . . . . . . . . . . . . . . . F-14 SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS Certain statements in the Prospectus Summary and under the captions "Risk Factors," "Business and Properties" and elsewhere in this Prospectus constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company or industry results to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, the following, which are discussed in greater detail under "Risk Factors" herein: general economic and business conditions, which will, among other things, affect demand for commercial and residential properties, availability and credit worthiness of prospective tenants, lease rents and the availability of financing; difficulty of locating suitable investments; competition; risks of real estate acquisition, development, construction and renovation; vacancies at existing commercial properties; dependence on rental income from real property; adverse consequences of debt financing; risks of investments in debt instruments, including possible payment defaults and reductions in the value of collateral; illiquidity of real estate investments; lack of prior operating history; and other changes and factors referenced in this Prospectus. PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements included elsewhere in this Prospectus. The Company began operations in January 1997 as a subsidiary of Wellsford Residential Property Trust ("Wellsford Residential"), a Maryland real estate investment trust. The Company began to operate independently following consummation of a series of transactions, including the contribution (the "Contribution") by Wellsford Residential of certain of its assets to the Company, the distribution (the "Distribution") to the holders of common shares of beneficial interest of Wellsford Residential of all of the shares of Common Stock of the Company owned by Wellsford Residential, and the subsequent merger (the "Merger") of Equity Residential Properties Trust ("EQR"), a Maryland real estate investment trust, into Wellsford Residential. As used in this Prospectus, except where the context requires otherwise, "Company" means Wellsford Real Properties, Inc., a Maryland corporation, and its subsidiaries, and "ERP Operating Partnership" means ERP Operating Limited Partnership, an Illinois limited partnership of which EQR is the general partner and through which EQR conducts substantially all of its operations relating to EQR's properties, and its subsidiaries. The Company The Company was organized to create and realize value by identifying and making opportunistic real estate investments through the direct acquisition, rehabilitation, development, financing and management of real properties and/or participation in these activities through the purchase of debt instruments or equity interests of entities engaged in such real estate businesses. Management is concentrating its efforts on defining and building focused operating businesses with recurring sources of income. The Company intends to maximize shareholder value over time through growth in cash flow and net asset value per share. The Company believes that while liquidity has returned to many real estate markets and that the supply and demand of many real estate asset classes are in relative equilibrium, there are specific opportunities which are expected to continue to exist because of market inefficiencies and impediments to investment, such as transactional complexity, time-consuming regulatory approvals, the prospect of no or limited immediate cash flow and a lack of available property information and market information analysis. In this regard, the Company is initially focusing its investments on three distinct aspects of the real estate business which management believes currently offer such opportunities. They are (i) acquiring underperforming office and other commercial properties below replacement cost, renovating and/or repositioning them, and owning, operating and/or reselling such properties, (ii) investing in real estate-related debt instruments with the potential for high-yields or returns more characteristic of equity ownership and (iii) engaging in selective property development when justified by expected returns. As opportunities emerge, the Company may in the future expand its real estate-related businesses and activities. The Company currently does not intend to qualify as a real estate investment trust ("REIT") under the Internal Revenue Code of 1986, as amended (the "Code"). Consequently, the Company has the flexibility to respond quickly to opportunities without the structural limitations inherent in REITs and to operate, when deemed advantageous by management, on a more highly leveraged basis than most REITs. By not qualifying as a REIT under the Code (which would require the Company to distribute each year at least 95% of its net taxable income, excluding capital gains), the Company has the ability and currently intends to retain for reinvestment its cash flow generated from operations and to sell properties without the substantial income tax penalties which may be imposed on REITs in such transactions. In addition, the Company differs from opportunity funds that are typically structured as private partnerships. In that regard, the business of the Company is conducted without the payment of acquisition, disposition or advisory fees to general partners which should result in additional cash flow being available for reinvestment as well as mitigate the potential for conflicts of interest. In addition, unlike investors in opportunity funds, the Company's shareholders are expected to have enhanced liquidity through their ability to sell or margin their stock. The Company also hopes to attract a broader range of investors because there will be no stipulated investment minimum. However, unlike REITs and opportunity funds, the Company is subject to corporate level taxation. The Company's management includes the co-founders of Wellsford Residential, Jeffrey H. Lynford, Chairman, and Edward Lowenthal, President and Chief Executive Officer, supported by a management team experienced in real estate acquisitions, development, asset management and finance. The Company believes that the over 50 years of combined experience of management in real estate, capital markets and public company operations, their knowledge, credibility and business relationships, and their demonstrated track record of recognizing and profiting from emerging real estate trends should help the Company accomplish its business objectives. From the completion by Wellsford Residential of the initial public offering of its common shares of beneficial interest in November 1992 (the "Wellsford Residential IPO") until consummation of the Merger in May 1997, Messrs. Lynford and Lowenthal, through Wellsford Residential, acquired 69 multifamily properties containing 16,332 units. From calendar year 1992 through calendar year 1996, the revenues of Wellsford Residential and its predecessors increased from $26.5 million to $131.8 million, representing a compounded annual growth rate of approximately 49%, and earnings before interest, depreciation and amortization ("EBITDA") of Wellsford Residential and its predecessors increased from $13.8 million to $72.8 million, representing a compounded annual growth rate of approximately 52%. In analyzing potential investments and market trends and inefficiencies, management has reviewed, and will continue to review, current economic and market information. To date, the management of the Company has implemented its business strategy by identifying, negotiating and consummating the following initial investments: (i) six office buildings, five of which are vacant, located in Northern New Jersey containing an aggregate of approximately 940,400 gross square feet and acquired below replacement cost for an aggregate of approximately $47.6 million, or approximately $50 per gross square foot of building area, with respect to which the Company currently expects to spend an aggregate of approximately $15.8 million in renovation and repositioning costs; (ii) a $25 million subordinated secured mezzanine loan with respect to a class A office building located at 277 Park Avenue, New York City, (iii) a $17.8 million mortgage on, and option to purchase, a 344-unit class A residential apartment complex in Tucson, Arizona and (iv) an approximate 80% interest in Phases I, II and III of, and in options to acquire (at fixed prices) and develop Phases IV and V of, a 1,880-unit class A multifamily development in a suburb of Denver, Colorado. See "Business and Properties". Upon consummation of the Merger, ERP Operating Partnership acquired shares of the Company's Class A Common Stock, $.01 par value per share ("Class A Common"), at a price per share equal to $10.30 (the book value per share of the Common Stock on the date of the Merger), for an aggregate purchase price of $3.5 million. On June 2, 1997, the Company sold 12,000,000 shares of Common Stock in a private placement (the "Private Placement") primarily to institutional investors at a price per share equal to $10.30 (the book value per share of Common Stock on the date of closing of the Private Placement), for an aggregate purchase price of $123.6 million. As of July 1, 1997, an aggregate of approximately $74.4 million of the proceeds from the sale of the shares of Class A Common and from the Private Placement had been applied by the Company to, among other things, repay loans, the proceeds of which were used by the Company to acquire its five commercial properties and to make an investment of $20 million in the subordinated secured mezzanine loan described above, and approximately $52.7 million was available to the Company. In addition, the Company has available various other sources of capital, financing and credit support, including (i) the commitment of ERP Operating Partnership to acquire at the Company's option up to $25 million of the Company's Series A 8% Convertible Redeemable Preferred Stock, $.01 par value per share (liquidation preference of $25.00 per share) ("Series A Preferred"), each share of which is convertible into Common Stock at a price of $11.124 (representing a premium of 8% in excess of the book value per share of the Common Stock on the date of the Merger) (the "ERP Preferred Commitment") and (ii) a two-year $50 million line of credit (extendible for one year) from BankBoston, N.A. (formerly known as The First National Bank of Boston) ("BankBoston") and Morgan Guaranty Trust Company of New York ("Morgan Guaranty") (the "Line of Credit") which initially bears interest at an annual rate equal to LIBOR plus 175 basis points. The ERP Preferred Commitment is pledged as security for the Line of Credit. See "Initial Capital and Financing" and "Description of Capital Stock - Series A 8% Convertible Redeemable Preferred Stock". Risk Factors Prospective investors should consider the matters discussed under "Risk Factors" on page 11 of this Prospectus prior to any investment in the Company. Some of the significant considerations include: o Competition in identifying and making investments and attracting tenants. o The inability of the Company to obtain significant amounts of capital. o Risks of excessive costs and delays associated with the acquisition, development, construction and renovation of properties. o Vacancies at existing properties. o Lack of limitation on the amount of debt that may be incurred and risks of highly leveraged investments. o Risks associated with debt instruments held by the Company, including the possibility that borrowers may not be able to make payments when due, that the value of collateral may be less than amounts owed and that interest rates charged may be less than the Company's cost of funds. o Risks associated with investments in mortgage loans and junior secured obligations, including lack of control over the collateral and any foreclosure procedures. o Lack of control and risks associated with equity investments in and with third parties. o Risks associated with investments in commercial mortgage-backed securities, resulting, in part, from the fact that the process of rating and servicing such securities is difficult and existing credit support is inadequate. o Illiquidity of the Company's real estate investments. o The Company is a recently-formed entity with little prior operating history. o Risk that the Company may have to register as an "investment company" under the Investment Company Act of 1940, as amended. o Risks of uninsured loss at the Company's properties. o Potential liability for unknown or future environmental liabilities. o The Company is dependent primarily upon the efforts of its Chairman of the Board and President and Chief Executive Officer. o The ability of the Company's Board of Directors to amend or revise the Company's investment and other policies without a vote of shareholders. o The potential antitakeover effect of certain provisions of the Company's Articles of Amendment and Restatement (the "Charter") and Maryland law. Management The management of the Company is led by members of the former senior management of Wellsford Residential, including, as noted above, Messrs. Lynford and Lowenthal. During the 11 years ending on the date of the Distribution, Messrs. Lynford and Lowenthal, together with other members of their team, succeeded in accomplishing the following: o Researched and identified multifamily properties in the Southwestern United States as an opportunity for above-market returns with modest risk. o Identified, evaluated and negotiated the acquisition of over 21,000 high-quality multifamily units in eight states. Wellsford Residential owned 72 multifamily properties containing 19,004 units at the time of the Merger. From calendar year 1992 through calendar year 1996, the revenues of Wellsford Residential and its predecessors increased from $26.5 million to $131.8 million, representing a compounded annual growth rate of approximately 49%, and EBITDA increased from $13.8 million to $72.8 million, representing a compounded annual growth rate of approximately 52%. o Completed a $100 million initial public offering of Wellsford Residential, which was the first publicly-traded REIT dedicated exclusively to the ownership of multifamily properties. o Raised approximately $585 million in eight subsequent offerings of Wellsford Residential's common shares, convertible preferred shares, perpetual preferred shares and senior unsecured debt. o Obtained an investment grade rating for Wellsford Residential's senior unsecured debt and subsequently obtained a rating increase to BBB by Standard & Poor's Rating Services, Inc. ("S&P") and Duff & Phelps, Inc. ("Duff & Phelps"). o Obtained a $150 million unsecured line of credit for Wellsford Residential from a consortium of domestic and foreign banks. o Consummated one of the first public REIT mergers when Wellsford Residential acquired Holly Residential Properties, Inc. o Created an internal property management operation for Wellsford Residential, which directly managed 84% of its properties. o Consummated the Merger with EQR in a transaction that valued Wellsford Residential at approximately $1 billion. Further, investors who bought their common shares of beneficial interest of Wellsford Residential ("Wellsford Common") at the initial public offering in November, 1992, would have received an average annual return of approximately 23.8% on their initial investment, based upon the closing market price of a share of Wellsford Common on the New York Stock Exchange on May 30, 1997 (the date of the Merger) and assuming all distributions received on such shares of Wellsford Common were immediately reinvested in Wellsford Common. Business Strategy In furtherance of its business strategy, the Company is initially focusing its efforts in three distinct areas of the real estate business. As opportunities emerge, the Company may in the future expand or modify its real estate-related businesses and activities. Commercial Properties. The Company will seek to acquire office and other commercial properties below replacement cost and operate and/or resell the properties after renovation, redevelopment and/or repositioning. The Company believes that appropriate well-located commercial properties which are currently underperforming can be acquired on advantageous terms and repositioned with the expectation of achieving enhanced returns which are greater than returns which could be achieved by acquiring a stabilized property. The Company also believes that these types of properties are not attractive acquisition candidates for REITs because the properties have no or limited cash flow as a result of required rehabilitation or their not being substantially leased. High Yield Debt Investments. The Company will make loans that constitute, or will invest in real estate-related senior, junior or otherwise subordinated debt instruments, which may be unsecured or secured by liens on real estate, interests therein or the economic benefits thereof, and which have the potential for high yields or returns more characteristic of equity ownership. These investments may include debt that is acquired at a discount, mezzanine financing, commercial mortgage-backed securities ("CMBS"), secured and unsecured lines of credit, distressed loans, and loans previously made by foreign and other financial institutions. The Company believes that there are opportunities to acquire real estate debt securitized by the use of CMBS, especially in the low or below investment grade tranches, at significant returns as a result of inefficiencies in pricing, while utilizing management's real estate expertise to analyze the underlying properties and thereby effectively minimizing risk. Property Development. The Company will engage in selective development activities as opportunities arise and when justified by expected returns. The Company believes that by pursuing selective development activities it can achieve returns which are greater than returns which could be achieved by acquiring stabilized properties. Certain development activities may be conducted in joint ventures with local developers who may bear the substantial portion of the economic risks associated with the construction, development and initial rent-up of properties. As part of its strategy, the Company may seek to obtain bond financing from local governmental authorities which generally bear interest at rates substantially below rates available from conventional financing. The Company may in the future make equity investments in entities owned and/or operated by unaffiliated parties and which engage in real estate- related businesses and activities or businesses that service the real estate industry. Some of the entities in which the Company may invest may be start- up companies or companies in need of additional capital. The Company may also manage and lease properties owned by it or in which it has an equity or debt investment. Initial Investments In furtherance of its business strategy, the Company has identified, negotiated and consummated the acquisition of the following investments: o Five properties consisting of six office buildings located in Northern New Jersey, all of which are vacant except for Greenbrook Corporate Center, which was approximately 88.6% occupied at July 1, 1997. The Company currently intends to invest an aggregate of approximately $15.8 million to renovate and reposition such properties. As of July 1, 1997, the Company had incurred approximately $3.3 million of expenses. The Company also has the right under existing local law to develop an additional 1.1 million square feet of commercial space at these properties. The buildings are described as follows: Planned Improve- Purchase ments Purchase Price/ /Planned Price Location Gross Purchase Improve- & Planned Property in Area Price Per ments Impr. Per Name New Jersey (Sq. Ft.) Sq. Ft.(1) Per Sq. Ft. Sq. Ft.(1) - ------------ ---------- ------- ---------- ----------- --------- Point View Wayne 560,000 $15.8 mil- $10.1 mil- $46.3 Corporate lion/$28 lion/$28 Park (two buildings)(2) Greenbrook Fairfield 190,000 23.7 mil- 0.5 mil- 127.4 Corp. Ctr. lion/125 lion/3 1700 Valley Wayne 70,600 1.0 mil- 0.2 mil- 17 Road(2) lion/14 lion/3 Chatham Chatham 65,000 5.1 mil- 3.1 mil- 126.2 Building(3) lion/78 lion/48 1800 Valley Wayne 54,800 2.0 mil- 1.9 mil- 71.2 Road(2) lion/36 lion/35 ------- -------- -------- ----- Total/Weighted average 940,000 $47.6 mil- $14.8 mil- $67.4 lion/$50.6 lion/$17 ======= ========== ========== ====== __________________ (1) Assumes no allocation of purchase price for undeveloped land. (2) Point View Corporate Park, 1700 Valley Road and 1800 Valley Road were recently assessed for real estate tax purposes at approximately $61.0 million in the aggregate by the local governmental authority. (3) Approximately 22,000 square feet in the Chatham Building has been leased to a new tenant for 10 years at an initial gross rent of $26.00 per net rentable square foot, which increases to approximately $28.00 per net rentable square foot starting in the sixth year. o $25 million of an $80 million subordinated secured mezzanine loan with respect to the approximately 1.74 million square foot, 52-story class A office building located in mid-town Manhattan at 277 Park Avenue, New York City (the "277 Park Loan"). The 277 Park Loan is payable in full in May, 2007 and bears interest payable monthly at the rate of approximately 12% per annum. o A $17.8 million mortgage loan on (the "Sonterra Loan"), and option (the "Sonterra Option") to purchase for approximately $20.5 million through December, 1997 and for $21 million during 1998, a 344-unit, newly constructed class A residential apartment project located in Tucson, Arizona known as "Sonterra at Williams Centre." The Sonterra Loan was originated in July 1996, and is payable in full on July 1, 1999 and bears interest at the rate of 9% percent per annum. o An approximate 80% interest in Phases I, II and III of, and in options to acquire and develop Phases IV and V of, a 1,880-unit class A multifamily development known as "Palomino Park," located on 182 acres, of which 65 acres have been developed, in a suburb of Denver, Colorado. Palomino Park is being constructed around a centrally located 24-acre park and has a 29,000-square-foot recreation center. Phase I, which is to consist of 456 units, is approximately 83% completed, approximately 64% leased and is expected to be completed in late 1997. Construction on Phase II, which is to consist of 304 units, is expected to be completed in late 1998 or early 1999. As of March 31, 1997, an aggregate of approximately $23.9 million had been invested in Palomino Park, exclusive of amounts advanced under the existing construction loans for Phases I and II. ERP Operating Partnership has an approximate 20% interest in Palomino Park. Initial Capital and Financing Upon consummation of the Merger, ERP Operating Partnership acquired shares of the Company's Class A Common at a price per share equal to $10.30 (the book value per share of the Common Stock on the date of the Merger) and for an aggregate purchase price of $3.5 million. On June 2, 1997, the Company sold 12,000,000 shares of Common Stock in the Private Placement primarily to institutional investors at a price per share equal to $10.30 (the book value per share of Common Stock on the date of closing of the Private Placement) for an aggregate purchase price of $123.6 million. As of July 1, 1997, an aggregate of approximately $74.4 million of the proceeds from the sale of the shares of Class A Common and from the Private Placement had been applied by the Company to, among other things, repay loans, the proceeds of which were used by the Company to acquire its five commercial properties and to make an investment of $20 million in the 277 Park Loan, and approximately $52.7 million was available to the Company. In addition, the Company has available the following other sources of capital, financing and credit support: o $25 million pursuant to the ERP Preferred Commitment to acquire up to 1,000,000 shares of Series A Preferred at the request of the Company and subject to certain limited conditions. Each share of Series A Preferred is convertible into Common Stock at a price of $11.124 (representing a premium of 8% in excess of the book value per share of the Common Stock on the date of the Merger). The ERP Preferred Commitment is pledged as security for the Line of Credit. o $50 million under a two-year line of credit obtained from BankBoston and Morgan Guaranty. The Line of Credit initially bears interest at an annual rate equal to LIBOR plus 175 basis points and is extendible for an additional one-year period. o Approximately $81.1 million in construction financing and credit enhancement with respect to Palomino Park. See "Initial Capital and Financing," "Description of Capital Stock" and "Certain Agreements Between the Company and ERP Operating Partnership." Dividends to Holders of Common Stock The Company does not currently contemplate paying dividends on the Common Stock. Earnings from the Company's investments are currently expected to be reinvested by the Company in future acquisitions and investments. The Board of Directors of the Company may determine in its discretion to pay dividends on the Common Stock in the future, and any such determination will be dependent upon the Company's results of operations, financial condition, contractual restrictions and other factors deemed relevant at that time by the Company's Board of Directors. WELLSFORD REAL PROPERTIES, INC. (PREDECESSOR) SUMMARY UNAUDITED COMBINED FINANCIAL DATA The following tables set forth the summary unaudited pro forma combined financial data for the Company (Predecessor) as a combined entity, giving effect to the Merger, Contribution, Distribution and Private Placement as if they had occurred on the dates indicated herein, after giving effect to the pro forma adjustments described in the notes to the unaudited pro forma combined financial statements included elsewhere in this Prospectus. The summary unaudited pro forma combined operating data are presented as if the Merger, Contribution, Distribution and Private Placement had been consummated on January 1, 1997. In addition to the Merger, Contribution, Distribution and Private Placement, the pro forma combined operating data gives effect to the origination of the 277 Park Loan and the purchase of five commercial office properties, all of which occurred between January 1, 1997 and June 30, 1997, as if they had occurred on January 1, 1997. The summary unaudited pro forma combined balance sheet data are presented as if the Merger, Contribution, Distribution, Private Placement, sale of the Class A Common to ERP Operating Partnership (the "Class A Sale") and Line of Credit had been consummated on March 31, 1997. In addition to the Merger, Contribution, Distribution, Private Placement, Class A Sale and Line of Credit, the pro forma combined balance sheet data gives effect to certain material events set forth in the previous paragraph which occurred between April 1, 1997 and June 30, 1997 as if they had occurred on March 31, 1997, and as if Phase I of Palomino Park had been acquired on March 31, 1997. See the notes to the unaudited Pro Forma Combined Balance Sheet at March 31, 1997 included elsewhere in this Prospectus. In the opinion of management, all adjustments necessary to reflect the effects of the Merger, Contribution, Distribution and Private Placement have been made. The summary unaudited pro forma combined financial data should be read in conjunction with, and is qualified in its entirety by, the historical combined financial statements and notes thereto of the Company included in this Prospectus. The summary unaudited pro forma combined operating and balance sheet data are presented for comparative purposes only and are not necessarily indicative of what the actual combined results of the Company would have been for the period and as of the date presented, nor does such data purport to represent the results of future periods, particularly because four of the five commercial office properties were vacant on March 31, 1997. Wellsford Real Properties, Inc. (Predecessor) Summary Unaudited Combined Financial Data Pro Forma Historical Three Months Three Months Historical Ended Ended Year Ended March 31, March 31, December 31, 1997 1997 1996 ---- ---- ---- (Unaudited) (Unaudited) (In thousands except per share data) OPERATING DATA: Revenues: Rental income $ 762 Other income 40 Interest income 1,135 $ 401 $ 757 ------------------------------------------- 1,937 401 757 ------------------------------------------- Expenses: Property operating and maintenance 211 Real estate taxes 107 General and administrative 438 Depreciation 128 Property management 34 ------------------------------------------- 918 0 0 ------------------------------------------- Income before income taxes 1,019 401 757 Provision for income taxes 416 ------------------------------------------- Net income $ 603 $ 401 $ 757 =========================================== Net income per common share $0.04 Weighted average common shares outstanding 16,888 Pro Forma Historical Historical Historical March 31, March 31, December 31, December 31, 1997 1997 1996 1995 ---- ---- ---- ---- (Unaudited) (Unaudited) (In thousands) BALANCE SHEET DATA: Real estate (prior to depreciation) $ 129,889 $ 47,806 $ 21,306 $ 7,955 Mortgage notes and interest receivable $ 42,934 $ 17,934 $ 17,934 $ 0 Cash and cash equivalents $ 21,180 $ 0 $ 0 $ 0 Restricted cash $ 3,198 $ 3,198 $ 5,520 $ 10,414 Total assets $ 199,805 $ 68,938 $ 44,760 $ 18,369 Total debt $ 14,755 $ 36,366 $ 14,755 $ 14,755 Total equity $ 173,933 $ 32,572 $ 30,005 $ 3,614 Period from Pro Forma Historical Historical Historical March 22 to March 31, March 31, March 31, December 31, December 31, 1997 1997 1996 1996 1995 (Unaudited) (Unaudited) (Unaudited) (In thousands) OTHER DATA: Funds from operations $ 731 $ 401 $ 0 $ 757 $ 0 EBITDA $ 1,147 $ 401 $ 0 $ 757 $ 0 Cash flows from operating activities $ 2,925 $ 2,723 $ 1,082 $ 5,517 $ 4,341 Cash flows from investing activities $ (133,583) $ (26,500) $ (231) $ (31,151) $ (7,955) Cash flows from financing activities $ 152,040 $ 23,777 $ (851) $ 25,634 $ 3,614 RISK FACTORS Ownership of the Common Stock involves the following material risks: General Risks If the properties of the Company, the properties of those entities in which it invests or the properties of those entities to which it will lend (collectively, the "Properties") do not generate revenue sufficient to meet operating expenses, including debt service and capital expenditures, the financial condition and results of operations of the Company may be adversely affected. The Company's financial condition and results of operations may also be adversely affected by a number of other factors, including international and domestic general economic climate and local real estate conditions (such as oversupply of or reduced demand for space and changes in market rental rates); the perceptions of prospective tenants of the safety, convenience and attractiveness of the Properties; the ability of the owner to provide adequate management, maintenance and insurance; energy and supply shortages; the ability to collect on a timely basis all rent from tenants and interest from borrowers; the expense of periodically renovating, repairing and reletting spaces; and increasing operating costs (including real estate taxes and utilities) which may not be passed through to tenants. Certain significant expenditures associated with investments in real estate (such as mortgage payments, real estate taxes, insurance and maintenance costs) are generally not reduced when circumstances cause a reduction in rental revenues from the investment. If a Property is mortgaged to secure the payment of indebtedness and if the Company or the entity in which the Company invests or to which it lends is unable to meet its mortgage payments, a loss could be sustained as a result of foreclosure on the property or the exercise of other remedies by the mortgagee. In addition, real estate values and income from properties are also affected by such factors as compliance with laws, including tax laws, interest rate levels and the availability of financing. Difficulty of Locating Suitable Investments; Competition; Capital Requirements Identifying, completing and realizing on real estate investments has from time to time been highly competitive, and involves a high degree of uncertainty. The Company will be competing for investments with many public and private real estate investment vehicles, including financial institutions (such as mortgage banks, pension funds and real estate investment trusts) and other institutional investors, as well as individuals. There can be no assurance that the Company will be able to locate and complete investments which satisfy the Company's rate of return objective or realize upon their value or that it will be able to fully invest its available capital. Many of those with whom the Company will compete for investments and its services are far larger than the Company, may have greater financial resources than the Company and may have management personnel with more experience than the officers of the Company. The success of the Company's business strategy is dependent upon being able to obtain significant amounts of equity capital and proceeds from borrowings on terms financially advantageous to the Company. The inability of the Company to obtain such equity capital and debt proceeds on such terms may have a material adverse effect on the Company. Risks of Acquisition, Development, Construction and Renovation Activities Acquisition. The Company intends to acquire existing properties to the extent that they can be acquired on advantageous terms and meet the Company's investment criteria. Acquisitions of properties entail general investment risks associated with any real estate investment, including the risk that investments will fail to perform as expected, that estimates of the cost of improvements to bring an acquired property up to standards established for the intended market position may prove inaccurate and the occupancy rates and rents achieved may be less than anticipated. Development, Construction and Renovation. The Company also intends to pursue the selective development, construction and renovation of commercial and residential properties for its own account or the account of, or through, entities in which it owns an equity interest as opportunities arise. Risks associated with the Company's development, construction and renovation activities include the risks that: the Company may abandon development opportunities after expending resources to determine feasibility; construction and renovation costs of a project may exceed original estimates; occupancy rates and rents at a newly completed property may not be sufficient to make the property profitable; and development, construction, renovation and lease- up may not be completed on schedule (including risks beyond the control of the Company, such as weather or labor conditions or material shortages) resulting in increased debt service expense and construction costs. Development, construction and renovation activities are also subject to risks relating to the inability to obtain, or delays in obtaining, all necessary zoning, land- use, building, occupancy and other required governmental permits and authorizations. These risks could result in substantial unanticipated delays or expenses and, under certain circumstances, could prevent completion of development, construction and renovation activities once undertaken, any of which could adversely affect the financial condition and results of operations of the Company. Properties under development or acquired for development may generate little or no cash flow from the date of acquisition through the date of completion of development and may experience operating deficits after the date of completion. In addition, new development and renovation activities, regardless of whether or not they are ultimately successful, typically require a substantial portion of management's time and attention. The Company may elect not to exercise its option to purchase the land underlying Phases IV and/or V of Palomino Park, perhaps after having expended money and time to determine the feasibility of developing such Phase. In addition, the Company may elect, after having acquired the land underlying one or more of the Phases and paid the purchase price therefor, not to commence construction, or to delay construction, because of local occupancy rates or rents, excessive construction or renovation costs, lack of satisfactory financing or for any other reason. Any properties developed and renovated by the Company will be subject to the risks associated with the ownership and operation of real estate described elsewhere in this section entitled "Risk Factors." Risks of Vacancies at Existing Properties; Dependence on Rental Income from Real Property The Company currently owns five office properties consisting of six buildings, five of which buildings are vacant. The sixth office building is currently approximately 88.6% leased. The Company expects to incur significant costs, including those relating to leasing commissions and tenant improvements, in connection with the leasing of these properties and may be required to offer tenant concessions, including free rental periods. The failure of the Company to lease these properties in a timely manner and on economically favorable terms may have a material adverse effect on the Company. The Company's cash flow, results of operations and value of its assets would be adversely affected if a significant number of tenants of the Properties failed to meet their lease obligations or if the Company or the owner of a Property were unable to lease a significant amount of space on economically favorable terms. In the event of a default by a lessee, the owner may experience delays in enforcing its rights as lessor and may incur substantial costs in protecting its investment. The bankruptcy or insolvency of a major tenant may have an adverse effect on a property. At any time, a tenant may also seek protection under the bankruptcy laws, which could result in rejection and termination of such tenant's lease and thereby cause a reduction in the cash flow of the property. If a tenant rejects its lease, the owner's claim for breach of the lease would (absent collateral securing the claim) be treated as a general unsecured claim. Generally, the amount of the claim would be capped at the amount owed for unpaid pre-petition lease payments unrelated to the rejection, plus the greater of one year's lease payments or 15% of the remaining lease payments payable under the lease (but not to exceed the amount of three years' lease payments). No assurance can be given that the Properties will not experience significant tenant defaults in the future. Operating Risks The Properties are subject to operating risks common to the particular property type, any and all of which may adversely affect occupancy or rental rates. Such properties are subject to increases in operating expenses such as cleaning; electricity; heating, ventilation and air-conditioning; elevator repair and maintenance; insurance and administrative costs; and other general costs associated with security, landscaping, repairs and maintenance. While commercial tenants are often obligated to pay a portion of these escalating costs, there can be no assurance that they will agree to pay such costs or that the portion that they agree to pay will fully cover such costs. If operating expenses increase, the local rental market may limit the extent to which rents may be increased to meet increased expenses without decreasing occupancy rates. To the extent rents cannot be increased or costs controlled, the cash flow of the Company and its financial condition may be adversely affected. Adverse Consequences of Debt Financing Leverage. Some of the Company's real estate equity investments may utilize a leveraged capital structure, in which case a third party lender would be entitled to cash flow generated by such investments prior to the Company receiving a return. As a result of such leverage, the Company would be subject to the risks normally associated with debt financing, including the risk that cash flow from operations and investments will be insufficient to meet required payments of principal and interest, the risk that existing debt (which in most cases will not have been fully amortized at maturity) will not be able to be refinanced or that the terms of such refinancings will not be as favorable to the Company and the risk that necessary capital expenditures for such purposes as renovations and other improvements will not be able to be financed on favorable terms or at all. While such leverage may increase returns or the funds available for investment by the Company, it also will increase the risk of loss on a leveraged investment. If the Company defaults on secured indebtedness, the lender may foreclose and the Company could lose its entire investment in the security for such loan. Because the Company may engage in portfolio financings where several investments are cross- collateralized, multiple investments may be subject to the risk of loss. As a result, the Company could lose its interests in performing investments in the event such investments are cross-collateralized with poorly performing or nonperforming investments. In addition, recourse debt, which the Company reserves the right to obtain, may subject other assets of the Company to risk of loss. Existing Debt Maturities; Foreclosures. The Company anticipates that only a portion of the principal of the Company's indebtedness outstanding from time to time will be repaid prior to maturity. However, the Company may not have sufficient funds to repay such indebtedness at maturity; it may therefore be necessary for the Company to refinance debt through additional debt financing or equity offerings. If the Company is unable to refinance this indebtedness on acceptable terms, the Company may be forced to dispose of properties or other assets upon disadvantageous terms, which could result in losses to the Company and adversely affect the amount of cash available for further investment. Risk of Rising Interest Rates. The Company may incur indebtedness in the future that also bears interest at a variable rate or may be required to refinance its debt at higher rates. Outstanding advances under the Company's Line of Credit bear interest at a variable rate. Accordingly, increases in interest rates could increase the Company's interest expense and adversely effect the financial condition and results of operations of the Company. Covenants. Various credit facilities or other debt obligations may require the Company to comply with a number of financial and other covenants on an ongoing basis. Failure to comply with such covenants may limit the Company's ability to borrow funds or may cause a default under its then- existing indebtedness. No Limitation on Debt. The organizational documents of the Company do not contain any limitation on the amount of indebtedness the Company may incur. The Company also has the ability to use a more highly leveraged business strategy than typically used by REITs. Accordingly, the Company could become highly leveraged, resulting in an increase in debt service that could increase the risk of default on the Company's indebtedness. Risks of Investments in Debt Instruments The Company intends to originate and participate in debt investments and may acquire performing or nonperforming debt investments. In general, debt instruments carry the risk that borrowers may not be able to make debt service payments or to pay principal when due, the risk that the value of any collateral may be less than the amounts owed, the risk that interest rates payable on the debt instruments may be lower than the Company's cost of funds, and the risk that the collateral may be mismanaged or otherwise decline in value during periods in which the Company is seeking to obtain control of the underlying real estate. The Company is also dependent on the ability of the borrowers to operate successfully their properties. Such borrowers and their properties will be subject to the other risks affecting the ownership and operation of real estate set forth in this section entitled "Risk Factors." Some of the loans may be structured so that all or a substantial portion of the principal will not be paid until maturity, which increases the risk of default at that time. It is anticipated that a substantial portion of the debt in which the Company invests will not be rated by any nationally-recognized rating agency. Generally, the value of unrated classes is subject to more fluctuation due to economic conditions than rated classes. The Company's acquisition of credit supported classes of securitizations (which generally are expected to be first loss classes) which are unrated at the time of acquisition and which have lower ratings may increase the risk of nonpayment or of a significant delay in payments on these classes. Should rated assets be downgraded, it may adversely affect their value and may adversely affect the financial condition and results of operations of the Company. Risks of Investments in Mortgage and Other Loans To the extent the Company invests in mortgage and other loans, such loans may or may not be recourse obligations of the borrower and generally will not be insured or guaranteed by governmental agencies or otherwise. In the event of a default under such obligations, the Company may have to foreclose on its mortgage or other collateral or protect its investment by acquiring title to the collateral and, in the case of mortgage loans, thereafter making substantial improvements or repairs in order to maximize the collateral's investment potential. Borrowers may contest enforcement of foreclosure or other remedies, seek bankruptcy protection against such enforcement and/or bring claims for lender liability in response to actions to enforce mortgage and other obligations. Relatively high "loan-to-value" ratios and declines in the value of the collateral may prevent the Company from realizing an amount equal to its loan upon foreclosure. The Company may participate in loans originated by other financing institutions. As a participant, the Company may not have the sole authority to declare a default under the loan or to control the collateral or any foreclosure. Any investments in junior secured obligations which are subordinate to liens of senior secured obligations would involve additional risks, including the lack of control over the collateral and any related foreclosure proceeding. In the event of a default on a senior secured obligation, the Company may make payments to prevent foreclosure on the lien of the senior lender without necessarily improving the Company's position with respect to the subject collateral. In such event, the Company would be entitled to share in the proceeds only after satisfaction of the amounts due to the holder of the senior secured obligation. Lack of Control and Other Risks of Equity Investments in and with Third Parties The Company may invest in shares of "REITs" or other entities that invest in real estate assets, including debt instruments and equity interests. In such cases, the Company will be relying on the assets, investments and management of the REIT or other entity in which it is investing. Such entities and their properties will be subject to the other risks affecting the ownership and operation of real estate and investment in debt set forth in this section entitled "Risk Factors." The Company may also co-invest with third parties through partnerships, joint ventures or other entities, acquiring non-controlling interests in or sharing responsibility for managing the affairs of a property, partnership, joint venture or other entity and, therefore, will not be in a position to exercise sole decision-making authority regarding the property, partnership, joint venture or other entity. Investments in partnerships, joint ventures, or other entities may, under certain circumstances, involve risks not present were a third party not involved, including the possibility that the Company's partners or co- venturers might become bankrupt or otherwise fail to fund their share of required capital contributions, that such partners or co-venturers might at any time have economic or other business interests or goals which are inconsistent with the business interests or goals of the Company, and that such partners or co-venturers may be in a position to take action contrary to the instructions or the requests of the Company and contrary to the Company's policies or objectives. Such investments may also have the potential risk of impasse on decisions, such as a sale, because neither the Company nor the partner or co-venturer would have full control over the partnership or joint venture. Consequently, actions by such partner or co-venturer might result in subjecting properties owned by the partnership or joint venture to additional risk. In addition, the Company may in certain circumstances be liable for the actions of its third-party partners or co-venturers. Risk of Loss on Investments in Commercial Mortgage-Backed Securities As noted above, the Company may seek to invest in real estate-related debt instruments, which may include CMBS. Many of the risks of investing in CMBS reflect the risks of investing directly in the real estate securing the underlying mortgage loans. This may be especially true in the case of commercial mortgage securities secured by, or evidencing an interest in, a single commercial mortgage loan or a relatively small or less diverse pool of commercial mortgage loans. See "-Risks of Investments in Mortgage Loans." The risks of investing in commercial mortgage securities include risks that the existing credit support will prove to be inadequate, either because of unanticipated levels of losses or, if such credit support is provided by a third party, because of difficulties experienced by such provider. Delays or difficulties encountered in servicing commercial mortgage securities may cause greater losses and, therefore, greater resort to credit support than was originally anticipated, and may cause a rating agency to downgrade a security. The Company may acquire subordinated tranches of CMBS issuances. In general, subordinated tranches of CMBS are entitled to receive repayment of principal only after all principal payments have been made on more senior tranches and also have subordinated rights as to receipt of interest distributions. In addition, an active secondary market for such subordinated securities is not as well developed as the market for certain other mortgage- backed securities. Accordingly, such subordinated CMBS may have limited marketability and there can be no assurance that a more efficient secondary market will develop. Nature of Investments Made by the Company May Involve High Risk; Illiquidity of Real Estate Investments The Company may make investments in real estate-related assets and businesses which have experienced severe financial difficulties, which difficulties may never be overcome. Since the Company may only make a limited number of investments and since many of the investments may involve a high degree of risk, poor performance by one of the investments could severely affect the financial condition and results of operations of the Company. Equity and debt investments in real estate may be relatively illiquid. Such illiquidity limits the ability of the Company to modify its portfolio in response to changes in economic or other conditions. Illiquidity may result from the absence of an established market for the investments as well as legal or contractual restrictions on their resale by the Company. Limitations on Remedies Although the Company will have certain contractual remedies upon the default by borrowers under certain debt instruments, such as foreclosing on the underlying real estate or other collateral or collecting rents generated therefrom, certain legal requirements (including the risks of lender liability) may limit the ability of the Company to effectively exercise such remedies. The right of a mortgage lender to convert its loan position into an equity interest may be limited or prevented by certain common law or statutory prohibitions or delayed by legal proceedings. Third-Party Bankruptcy Risks Investments made in assets operating in workout modes or under Chapter 11 of the Bankruptcy Code could be subordinated or disallowed, and the Company could be liable to third parties in such circumstances. Furthermore, distributions made to the Company in respect of such investments could be recovered if any such distribution is found to be a fraudulent conveyance or preferential payment. Bankruptcy laws, including the automatic stay imposed upon the filing of a bankruptcy petition, may delay the ability of the Company to realize on collateral for loan positions held by it or may adversely affect the priority of such loans through doctrines such as equitable subordination or may result in a restructure of the debt through principles such as the "cramdown" provisions of the bankruptcy laws. Recently Formed Entity It should be noted that the Company is a recently formed entity with little prior operating history and that its properties and assets have only been recently acquired. Risk of Registration Under Investment Company Act The Company is currently not registered as an investment company under the Investment Company Act of 1940, as amended (the "Investment Company Act"), since management believes that the Company either is not within the definitions of "investment company" thereunder or, alternatively, is excluded from regulation under the Investment Company Act by one or more exemptions. In the future, the Company will seek to continue to conduct its operations so as to avoid registration under the Investment Company Act. Therefore, the assets that the Company may acquire or sell may be limited by the provisions of the Investment Company Act. If the Company were to become an investment company under the Investment Company Act and if it failed to qualify for an exemption thereunder, it would be unable to conduct its business as presently conducted which could have a material adverse effect on the Company and the market price for the Common Stock. Risks of Uninsured Loss The Company will carry comprehensive liability, fire, extended coverage and rental loss insurance with respect to all of the properties that it owns, with policy specifications, insured limits and deductibles customarily carried for similar properties. There are, however, certain types of losses (such as losses arising from acts of war or relating to pollution) that are not generally insured because they are either uninsurable or not economically insurable. Should an uninsured loss or a loss in excess of insured limits occur, the Company could lose its capital invested in a property, as well as the anticipated future revenue from such property and would continue to be obligated on any mortgage indebtedness or other obligations related to the property. Any such loss would adversely affect the financial condition and results of operations of the Company. With respect to those properties in which the Company holds an interest through a mortgage, as well as those properties owned by entities to whom the Company makes unsecured loans, the borrowers will most likely be obligated to maintain insurance on such properties and to arrange for the Company to be covered as a named insured on such policies. The face amount and scope of such insurance coverage may be less comprehensive than the Company would carry if it held the fee interest in such property. Accordingly in such circumstances, or in the event that the borrowers fail to maintain required coverage, uninsured or underinsured losses may occur, which could have an adverse impact on the Company's cash flow or financial condition. Potential Environmental Liability Related to the Properties Under various Federal, state and local laws, ordinances and regulations, an owner or operator of real estate is liable for the costs of removal or remediation of certain hazardous or toxic substances on or in such property. These laws often impose such liability without regard to whether the owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances. The cost of any required remediation and the owners's liability therefor as to any property is generally not limited under such enactments and could exceed the value of the property and/or the aggregate assets of the owner. The presence of such substances, or the failure to properly remediate such substances, may adversely affect the owner's ability to sell or rent such property or to borrow using such property as collateral. Persons who arrange for the disposal or treatment of hazardous or toxic substances may also be liable for the costs of removal or remediation of such substances at a disposal or treatment facility, whether or not such facility is owned or operated by such person. Certain environmental laws govern the removal, encapsulation or disturbance of asbestos-containing materials ("ACMs") when such materials are in poor condition, or in the event of renovation or demolition. Such laws impose liability for release of ACMs into the air and third parties may seek recovery from owners or operators of real properties for personal injury associated with ACMs. In this regard, it should be noted that the main headquarters building at the Cyanamid Office Portfolio contains ACMs. The Company is currently proceeding with the removal of ACMs in such building. The operation and subsequent removal of certain underground storage tanks are also regulated by federal and state laws. In connection with the ownership (direct or indirect), operation, management and development of real properties, the Company may be considered an owner or operator of such properties or as having arranged for the disposal or treatment of hazardous or toxic substances, and, therefore, potentially liable for removal or remediation costs, as well as certain other related costs, including governmental fines and injuries to persons and property. The properties described in this Prospectus that are owned by the Company have had recent Phase I or similar environmental audits (which involved general inspections without soil sampling, ground water analysis or radon testing, and for the Properties constructed in 1978 or earlier, survey inspections to ascertain the existence of ACMs were conducted) completed by independent environmental consultant companies. These environmental audits have not revealed any environmental liability that would have a material adverse effect on the Company's business. Dependence on Key Personnel The Company is dependent primarily on the efforts of Jeffrey H. Lynford, Chairman of the Board, and Edward Lowenthal, President and Chief Executive Officer, and the loss of either of their services could have an adverse effect on the operations of the Company. Mr. Lynford and Mr. Lowenthal have each entered into employment agreements with the Company having a term ending December 31, 2002. The Company intends to retain the services of individuals with expertise and experience in certain activities to be conducted by the Company, and the loss of the services of any of these individuals could also have an adverse effect on the operations of the Company. Changes in Policies Without Shareholder Approval The investment, financing, borrowing and distribution policies of the Company and its policies with respect to all other activities, growth, debt, capitalization and operations, will be determined by the Company's Board of Directors. Although it has no present intention to do so, the Board of Directors may amend or revise these policies at any time and from time to time at its discretion without a vote of the shareholders of the Company. A change in these policies could adversely affect the Company's financial condition, results of operations and the market price of the Common Stock. See "Policies with Respect to Certain Activities." Absence of Public Market; Risk of Changes in Stock Price As of July 1, 1997, there were 16,572,043 shares of Common Stock issued and outstanding. Although a trading market for the Common Stock exists, there can be no assurance that an active trading market for the Common Stock will be sustained in the future. In the absence of an active public trading market, an investor may be unable to liquidate his investment in the Company. The prices at which the Common stock trades will be determined by the marketplace and may be influenced by many factors, including, among others, the depth and liquidity of the market for the Common Stock, investor perception of the Company and its businesses, the Company's dividend policy, interest rates and general economic and market conditions. Prices at which the Common Stock may trade in the future cannot be predicted. Costs of Compliance with the Americans with Disabilities Act and Similar Laws Under the Americans with Disabilities Act of 1980 (the "ADA"), places of public accommodations and commercial facilities are required to meet certain federal requirements related to access and use by disabled persons. Compliance with ADA requirements could require both structural and non- structural changes to the properties in which the Company invests and noncompliance could result in imposition of fines by the United States government or an award of damages to private litigants. Although management of the Company believes that its properties are substantially in compliance with present requirements of the ADA, the Company may incur additional costs of compliance in the future. A number of additional Federal, state and local laws exist which impose further burdens or restrictions on owners with respect to access by disabled persons and may require modifications to properties in which the Company invests, or restrict certain further renovations thereof, with respect to access by disabled persons. Final regulations under the ADA have not yet been promulgated and the ultimate amount of the cost of compliance with the ADA or other such laws is not currently ascertainable. While such costs are not expected to have a material effect on the Company, they could be substantial. If required changes involve greater expense than the Company currently anticipates, the Company's financial condition and results of operations could be adversely affected. Noncompliance with Other Laws Real estate properties are also subject to various Federal, state and local regulatory requirements, such as state and local fire and life safety requirements. Failure to comply with these requirements could result in the imposition of fines by governmental authorities or awards of damages to private litigants. The Company believes that its properties are currently in material compliance with all such regulatory requirements. However, there can be no assurance that these requirements will not be changed or that new requirements will not be imposed which would require significant unanticipated expenditures by the Company and could have an adverse effect on the Company's results of operations. Effect on Common Stock Price of Shares Available for Future Sale Sales of a substantial number of shares of the Common Stock, or the perception that such sales could occur, could adversely affect prevailing market prices of the Common Stock. In addition, upon registration of the 12,242,719 Shares offered hereby, the Shares may be sold in the public markets from time to time. Also, 3,076,235 shares of Common Stock have been reserved for issuance pursuant to the Company's stock option plans (options to purchase 1,873,610 of such shares have been granted, 1,326,235 of which were granted in replacement for former Wellsford Residential share options), and approximately 5,000,000 shares of Common Stock have been reserved for issuance upon conversion of the Series A Preferred and Class A Common. When issued, these reserved shares and shares subject to options will be available for sale in the public markets from time to time pursuant to exemptions from registration requirements or upon registration. No prediction can be made about the effect that future sales of the Common Stock will have on the market prices of the Common Stock. Hedging Policies/Risks In connection with the financing of certain real estate investments, the Company may employ hedging techniques designed to protect the Company against adverse movements in currency and/or interest rates. While such transactions may reduce certain risks, such transactions themselves may entail certain other risks. Thus, while the Company may benefit from the use of these hedging mechanisms, unanticipated changes in interest rates, securities prices, or currency exchange rates may result in a poorer overall performance for the Company than if it had not entered into such hedging transactions. Anti-Takeover Effect Resulting From a Staggered Board, Ability of the Company to Issue Preferred Stock and Certain Provisions of Maryland Law The Company's Board of Directors is divided into three classes. The initial terms of the first, second and third classes will expire in 1998, 1999 and 2000, respectively. Beginning in 1998, directors for each class will be chosen for a three-year term upon the expiration of their then current term, and each year one class of directors will be elected by the shareholders. The staggered terms for directors may limit the shareholders' ability to change control of the Company even if a change of control were in the interests of shareholders. The Company's Charter authorizes the Board of Directors to establish one or more series of preferred shares and to determine, with respect to any series of preferred shares, the preferences and other terms of such series. Although the Board of Directors has no intention at the present time, it could issue a series of preferred shares that could, depending on the terms of such series, impede or prevent a merger, tender offer or other transaction that some, or a majority, of the Company's shareholders might believe to be in their best interest or in which shareholders might receive a premium for their shares over the then current market price of such shares. Under the Maryland General Corporation Law ("MGCL"), certain "business combinations" (including certain issuances of equity securities) between a Maryland corporation and any person who beneficially owns ten percent or more of the voting power of the corporation's shares (an "Interested Stockholder") or an affiliate thereof are prohibited for five years after the most recent date on which the Interested Stockholder becomes an Interested Stockholder. Thereafter, unless exempted in accordance with the MGCL, any such business combination must be approved by two supermajority stockholder votes. The directors of the Company have exempted from the Maryland statute any business combinations with Jeffrey H. Lynford or Edward Lowenthal or any of their affiliates or any other person acting in concert or as a group with any of such persons and, consequently, the five-year prohibition and the supermajority vote requirements will not apply to business combinations between such persons and the Company. See "Certain Provisions of Maryland Law and of the Company's Charter and Bylaws." The provisions of the MGCL described above and the exemptions granted may discourage a third party from making an acquisition proposal for the Company and may have the effect of delaying, deferring or preventing a transaction with or a change in control of the Company that might involve a premium price for the Common Stock or otherwise be in the best interest of the stockholders. Until May 30, 2007, pursuant to the Common Stock and Preferred Stock Purchase Agreement between ERP Operating Partnership and the Company, the Company has the right to direct the voting of all shares of the Series A Preferred, the Class A Common and the Common Stock owned by ERP Operating Partnership or any of its affiliates, except as to the election of the director to be designated by ERP Operating Partnership or any matter relating to the rights, preferences and privileges of the Series A Preferred or the Class A Common. Such voting right may hinder a change in control. THE COMPANY General The Company was organized to create and realize value by identifying and making opportunistic real estate investments through the direct acquisition, rehabilitation, development, financing and management of real properties and/or participation in these activities through the purchase of debt instruments or equity interests of entities engaged in such real estate businesses. Management is concentrating its efforts on defining and building focused operating businesses with recurring sources of income. The Company intends to maximize shareholder value over time through growth in cash flow and net asset value per share. The Company believes that while liquidity has returned to many real estate markets and that the supply and demand of many real estate asset classes are in relative equilibrium, there are specific opportunities which are expected to continue to exist because of market inefficiencies and impediments to investment, such as transactional complexity, time-consuming regulatory approvals, the prospect of no or limited immediate cash flow and a lack of available property information and market information analysis. In this regard, the Company is initially focusing its investments on three distinct aspects of the real estate business which management believes currently offer such opportunities. They are (i) acquiring underperforming office and other commercial properties below replacement cost, renovating and/or repositioning them, and owning, operating and/or reselling such properties, (ii) investing in real estate-related debt instruments with the potential for high-yields or returns more characteristic of equity ownership and (iii) engaging in selective property development when justified by expected returns. As opportunities emerge, the Company may in the future expand its real estate-related businesses and activities. The Company currently does not intend to qualify as a REIT under the Code. Consequently, the Company has the flexibility to respond quickly to opportunities without the structural limitations inherent in REITs and to operate, when deemed advantageous by management, on a more highly leveraged basis than most REITs. By not qualifying as a REIT under the Code (which would require the Company to distribute each year at least 95% of its net taxable income, excluding capital gains), the Company has the ability and currently intends to retain for reinvestment its cash flow generated from operations and to sell properties without the substantial income tax penalties which may be imposed on REITs in such transactions. In addition, the Company differs from opportunity funds that are typically structured as private partnerships. In that regard, the business of the Company is conducted without the payment of acquisition, disposition or advisory fees to general partners which should result in additional cash flow being available for reinvestment as well as mitigate the potential for conflicts of interest. In addition, unlike investors in opportunity funds, the Company's shareholders are expected to have enhanced liquidity through their ability to sell or margin their stock. The Company also hopes to attract a broader range of investors because there will be no stipulated investment minimum. However, unlike REITs and opportunity funds, the Company is subject to corporate level taxation. The Company's management includes the co-founders of Wellsford Residential, Jeffrey H. Lynford, Chairman, and Edward Lowenthal, President and Chief Executive Officer, supported by a management team experienced in real estate acquisitions, development, asset management and finance. The Company believes that the over 50 years of combined experience of management in real estate, capital markets and public company operations, their knowledge, credibility, and business relationships, and their demonstrated track record of recognizing and profiting from emerging real estate trends should help the Company accomplish its business objectives. From the Wellsford Residential IPO in November 1992 until consummation of the Merger in May 1997, Messrs. Lynford and Lowenthal, through Wellsford Residential, acquired 69 multifamily properties containing 16,332 units. From calendar year 1992 through calendar year 1996, the revenues of Wellsford Residential and its predecessors increased from $26.5 million to $131.8 million, representing a compounded annual growth rate of approximately 49%, and EBITDA of Wellsford Residential and its predecessors increased from $13.8 million to $72.8 million, representing a compounded annual growth rate of approximately 52%. In analyzing potential investments and market trends and inefficiencies, management has reviewed, and will continue to review, current economic and market information. The Company is a Maryland corporation which was incorporated in January 1997. The Company's executive offices are located at 610 Fifth Avenue, New York, New York 10020 and its telephone number is (212) 333-2300. Management The management of the Company is led by members of the former senior management of Wellsford Residential, including Jeffrey H. Lynford, Chairman, and Edward Lowenthal, President and Chief Executive Officer, of the Company, who held the same offices at Wellsford Residential. Joining them are Gregory F. Hughes and David M. Strong, who were Chief Financial Officer and Vice President, respectively, of Wellsford Residential, and Richard R. Previdi, who was previously a managing director of Emmes & Company, a real estate investment company and a managing director of Trammell Crow N.E., Inc. and Chief Executive Officer of that company's Northern Virginia Commercial Division. Wellsford Residential Acquisitions Messrs. Lynford and Lowenthal formed Wellsford Group, Inc. ("WGI") with an initial capitalization of $1 million provided primarily by William E. Simon, Raymond Chambers and Frank Walsh, former principals of Wesray, a private leveraged buy-out firm, and by principals of Eastdil Realty, Inc., a private real estate investment banking firm. During the period from 1986 through November 1992, WGI and its affiliates acquired 19 multifamily properties consisting of 5,255 units. After WGI and its affiliates transferred their properties to Wellsford Residential in 1992, Wellsford Residential commenced an aggressive acquisition strategy by purchasing 69 properties containing 16,332 multifamily units which increased the historical cost of its total assets from $147 million at the time of the Wellsford Residential IPO, to $756 million at December 31, 1996. These acquisitions included 14 properties containing 5,100 units in Oklahoma purchased for $133 million in May 1994, and the $250 million acquisition by merger in December 1994 of Holly Residential Properties, Inc., a real estate investment trust publicly traded on the New York Stock Exchange which developed, owned and operated 34 properties containing over 5,000 multifamily units in the Seattle/Tacoma area. In May 1997, Wellsford Residential consummated the Merger with EQR in a transaction that valued Wellsford Residential at approximately $1 billion. Wellsford Residential Management and Development of Properties During 1995 and 1996 Wellsford Residential focused its efforts on its core portfolio and the development of new properties. Property management, which had previously been contracted to third parties, was substantially internalized. Immediately prior to the consummation of the Merger, Wellsford Residential provided direct management for 84% of its properties. In addition, Wellsford Residential developed three new properties consisting of 548 multifamily units during this period, helping to reduce the average age of its portfolio. Wellsford Residential also commenced development of Palomino Park, a 182-acre master planned class A multifamily residential community in Highlands Ranch, a suburb of Denver, Colorado. See "Business and Properties- Wellsford Property Development-Palomino Park." Wellsford Residential Equity and Debt Financings Wellsford Residential funded its acquisition and development activities with various sources of capital including public and private debt and equity. In November 1992, Wellsford Residential raised $100 million in the Wellsford Residential IPO. Wellsford Residential was one of the first REITs to obtain a corporate credit rating, when it received an implied senior rating of BBB - from S&P and Duff & Phelps in September 1993. This rating facilitated the issuance by Wellsford Residential in November 1993 of $100 million of convertible preferred shares. In January 1995 Wellsford Residential became one of the first REITs to access the unsecured debt markets with a $100 million issuance. In August 1995 Wellsford Residential's senior credit rating was upgraded to BBB by S&P and Duff & Phelps, which helped facilitate the issuance of $125 million of unsecured notes and $57.5 million of perpetual preferred shares. Wellsford Residential's commitment to a conservative corporate capital structure, including a 35% debt to total market capitalization ratio, resulted in the investment grade rating and a gradual reduction of its costs of capital, as reflected by the borrowing costs on its line of credit. At the time of the Wellsford Residential IPO, Wellsford Residential's line of credit was secured and bore an annual interest rate of LIBOR plus 3.75%. Subsequently, Wellsford Residential's line of credit in the amount of $150 million became unsecured with an annual interest rate of LIBOR plus 1.50%. In November 1996, Wellsford Residential issued 3-year medium term notes at an annual interest rate of LIBOR plus .32%. Wellsford Residential Return to Shareholders As a result of the above accomplishments, Wellsford Residential was able to raise its dividend 15% during the period from the Wellsford Residential IPO until the consummation of the Merger. Investors who bought their shares of Wellsford Common in the Wellsford Residential IPO would have received an average annual return of approximately 23.8% on their initial investment, based upon the closing market price of a share of Wellsford Common on the New York Stock Exchange on May 30, 1997 (the date of the Merger), and assuming all distributions received on such shares of Wellsford Common were immediately reinvested in Wellsford Common. There can be no assurance that the Company's future performance or average rate of return achieved by its investors will be similar to Wellsford Residential's past accomplishments or the average rate of return achieved by its shareholders. The Company's business strategy differs substantially from that of Wellsford Residential's, which operated as a REIT and invested primarily in multifamily properties. Business Strategy In furtherance of its business strategy, the Company is initially focusing its efforts in three distinct areas of the real estate business. As opportunities emerge and in response to changes in market, real estate and general economic conditions, the Company may in the future retract from, discontinue or expand its real estate related business and activities. Commercial Properties. The Company will seek to acquire office and other commercial properties below replacement cost and operate and/or resell such properties after renovation, redevelopment and/or repositioning. The Company believes that appropriate well-located commercial properties which are currently underperforming can be acquired on advantageous terms and repositioned with the expectation of achieving enhanced returns which are greater than returns which could be achieved by acquiring a stabilized property. The Company also believes that these types of properties are not attractive acquisition candidates for REITs because the properties have no or limited cash flow as a result of required rehabilitation or their not being substantially leased. The Company's acquisitions to date demonstrate that the Company is able to take advantage of existing opportunities in this area. The Company has hired Richard R. Previdi, a former partner at Trammell Crow Co. with significant leasing and redevelopment experience in major metropolitan areas from Washington, D.C. to New York, to seek out such opportunities. Initially, the Company will seek to apply its business strategy to suburban office properties. In this regard, the Company has acquired five suburban office properties, containing six buildings, all of which are located in Northern New Jersey. As opportunities arise, the Company may seek to acquire other types of commercial properties, including industrial properties. See "Business and Properties." High Yield Debt Investments. The Company will make loans that constitute, or will invest in real estate-related senior, junior or otherwise subordinated debt instruments, which may be unsecured or secured by liens on real estate or the economic benefits thereof. The Company will focus on investments of this type which have the potential for high yields or returns more characteristic of equity ownership. These investments may contain options to acquire, or be convertible into the right to acquire, all or a portion of the underlying real estate, or contain the right to participate in the cash flow and economic return which may be derived from the real estate. These investments may include debt that is acquired at a discount, mezzanine financing, commercial mortgage-backed securities, secured and unsecured lines of credit, distressed loans, and loans previously made by foreign and other financial institutions. In some cases the Company may only acquire a participating interest in the debt instrument. The Company believes that there are opportunities to acquire real estate debt, especially in the low or below investment grade tranches, at significant returns as a result of inefficiencies in pricing, while utilizing management's real estate expertise to analyze the underlying properties and thereby effectively minimizing risk. The Company will initially focus on opportunities arising in the following areas, among others. First, where traditional CMBS buyers cannot or will not invest, such as the purchase of subordinated real estate debt secured not by a mortgage but by other indicia of ownership of an asset. Second, where the Company believes that the market has mispriced an outstanding tranche of debt because of insufficient asset specific information. The Company's investments in the Sonterra Loan and the 277 Park Loan demonstrate its ability to take advantage of opportunities in this area. See "Business and Properties." Property Development. The Company will engage in selective development activities as opportunities arise and when justified by expected returns. The Company believes that by pursuing selective development activities it can achieve returns which are greater than returns which could be achieved by acquiring stabilized properties. In this regard, the Company will continue the development of Palomino Park, its five-phase residential community begun by Wellsford Residential, taking advantage of the fixed-price purchase options for the land underlying such residential community obtained by Wellsford Residential two years ago. This development may be retained for investment and operated by the Company, sold, or converted to condominium ownership. The Company may also acquire land for speculation, future development or subdivision. Certain development activities may be conducted in joint ventures with local developers who may bear the substantial portion of the economic risks associated with the construction, development and initial rent- up of properties. As part of its strategy, the Company may seek to obtain bond financing from local governmental authorities which generally bear interest at rates substantially below rates available from conventional financing. See "Business and Properties." The Company may in the future make equity investments in entities owned by third parties and which engage in real estate-related businesses and activities or businesses that service the real estate industry. Some of the entities in which the Company may invest may be start-up companies or companies in need of additional capital. The Company may also in the future invest in retail, residential, hotel and other types of properties and may also manage and lease properties owned by it or in which it has an equity or debt investment. In analyzing potential investments and market trends and inefficiencies, management has reviewed, and will continue to review, current economic and market information. Much of this information has been, and will continue to be, provided by REIS Reports, Inc., a nationally recognized real estate market database firm. USE OF PROCEEDS The Shares offered hereby are being registered for the account of Selling Shareholders and, accordingly, the Company will not receive any of the proceeds from the sale of the Shares by the Selling Shareholders. SELLING SHAREHOLDERS The following table sets forth certain information regarding the beneficial ownership of Shares by the Selling Shareholders as of July 1, 1997, and the number of Shares being offered by this Prospectus. Each Selling Shareholder will receive all of the net proceeds from the sale of its respective Shares offered hereby. Number Number of Shares of Shares Beneficially Being Owned Registered ------------ ------------ Longleaf Partners Realty Fund 3,398,000 3,398,000 Mutual Qualified Fund 2,427,184 2,427,184 Yale University 964,932 964,932 BancBoston Investments Inc. 811,000 811,000 SVP-RPC Joint Venture 811,000 811,000 Morgan Stanley Institutional Fund U.S. Real Estate Portfolio 654,898 654,898 Van Kampen American Capital LIT Real Estate Portfolio 447,242 447,242 MS SICAV Real Estate 314,115 314,115 Wellsford Commercial Properties, LLC(1) 218,447 218,447 Morgan Stanley Real Estate Special Situations Fund II, LP 210,146 210,146 Van Kampen American Capital Real Estate Securities Fund 199,020 199,020 MOAB Investments, L.P. 173,600 173,600 Morgan Stanley Real Estate Special Situations Fund I, LP 157,609 157,609 Stichting Pensioenfonds ABP 156,032 156,032 Gary C. Comer 151,300 151,300 Stichting Bedrijfspensioenfonds voor 104,023 104,023 J. Roderick MacArthur Foundation 97,000 97,000 Intermatic, Inc. Pension Trust 97,000 97,000 The Eugenia II Investment Holdings LTD. - REIT 63,630 63,630 Jesselson Foundation 60,000 60,000 Comer Foundation 48,500 48,500 Morgan Stanley Real Estate Special Situations Inc. 48,334 48,334 Morgan Stanley U.S. Real Estate Portfolio 45,351 45,351 Lloyd G. Schermer as Trustee of the Lloyd G. Schermer Declaration of Trust Dated 11/17/89 38,800 38,800 Trust F/B/O A. Daniel Jesselson U/W Ludwig Jesselson 37,000 37,000 Alice Albright Arlen, Trustee U/T/D 7/2/63 F/B/O Alice Albright Arlen 29,100 29,100 R.H. Newman Trustee or Successor Trustee under the R.H. Newman Living Trust U/A/D 4/18/89 29,100 29,100 William M. Cockrum, Trustee of the William M. Cockrum Trust dated 8/1/79(2) 24,272 24,272 Susan Burkhardt Living Trust Dated 8/18/69 19,400 19,400 Carol B. Cohen Trustee DTD 10/12/78 19,400 19,400 Earl E. Segerdahl 19,400 19,400 MRMB Charitable Remainder Trust II U/T/D 8/8/95 19,400 19,400 Alice Albright Arlen 19,400 19,400 Octagon Capital Association 19,400 19,400 David B. Heller P/T Rollover IRA 19,400 19,400 James Amend 19,400 19,400 Betty A. Schermer as Trustee of the Betty A. Schermer Declaration of Trust Dated 11/17/89 19,400 19,400 Principal Asset Allocation Fund - Real Estate Account 15,777 15,777 Bergman Charitable Trust/Betsy Lynn Rosenfield 14,500 14,500 Bergman Charitable Trust/Robert Bergman 14,500 14,500 Richard C. Anderson 14,500 14,500 Bergman Charitable Trust/Carol Cohen 14,500 14,500 NTBG Gov Sec Endow I 14,500 14,500 Steven J. Stogel 12,000 12,000 Universal Funds - Real Estate Portfolio 11,007 11,007 Lloyd Schermer, IRA 9,700 9,700 Stephen C. Neal 9,700 9,700 Alicia M. Hoge Trust, D/T/D 12/30/83 9,700 9,700 NTBG Gov Sec Endow II 9,700 9,700 The R.H.N. Corporation 9,700 9,700 NTBG Gov Sec Endow III GVSEC 5-10 Yr. 9,700 9,700 Barbara S. Bluhm 9,700 9,700 Douglas E. Cohen 9,700 9,700 Tanya Wexler Trust #18 9,700 9,700 The Kampong Fund 9,700 9,700 Joseph P. Weil 9,700 9,700 William C. Mitchell, IRA 9,700 9,700 J. Wexler Revocable Trust F/B/O Susan Wexler 9,700 9,700 Scott D. Cohen 9,700 9,700 Carl C. Lang and Gail R. Lang 4,400 4,400 Total 12,242,719 12,242,719 ========== ========== (1) See "Certain Transactions" as to the ownership interests of Jeffrey H. Lynford, Edward Lowenthal and the wife of Mark Germain in Wellsford Commercial Properties, LLC. (2) Mr. Cockrum was an advisor to Wellsford Residential and is an advisor to the Company. DIVIDEND POLICY The Company does not currently contemplate paying dividends on the Common Stock. Earnings from the investments of the Company are currently expected to be reinvested by the Company to finance future acquisitions and investments. The Board of Directors of the Company may determine in its discretion to pay dividends on the Common Stock in the future, and any such determination will be dependent upon the Company's results of operations, financial condition, contractual restrictions and other factors deemed relevant at that time by the Company's Board of Directors. PRICE RANGE OF COMMON STOCK AND DIVIDEND HISTORY The Company's shares of Common Stock have been listed on the ASE since June 2, 1997 under the symbol WRP. On July 29, 1997, the last reported sale price of the shares of Common Stock on the ASE was $11.50. The following table sets forth the high and low closing sale prices for the shares of Common Stock for the fiscal periods indicated. No dividends were paid by the Company with respect to such periods. 1997 High Low ---- ---- --- June 2 to June 30 $11.19 $10.50 Third Quarter (through July 29, 1997) $11.50 $11.00 As of July 22, 1997, the Company transfer agent reported 347 record holders of Common Stock, and the Depository Trust Company held Common Stock on behalf of approximately 6,500 beneficial owners. CAPITALIZATION The following table sets forth the capitalization of the Company as of March 31, 1997 on a historical basis, reflecting ownership by Wellsford Residential of Palomino Park and the Sonterra Loan and Sonterra Option, and as adjusted to give effect to the (i) Private Placement and the application of the net proceeds therefrom, (ii) Contribution, Distribution and Merger, (iii) sale of shares of Class A Common to ERP Operating Limited Partnership for an aggregate purchase price of $3.5 million and the application of the net proceeds therefrom, and (iv) purchase of five commercial office properties and the $25 million investment in the 277 Park Loan. The information set forth in the table should be read in conjunction with the Company's combined financial statements and notes thereto, and the Company's pro forma combined financial statements and notes thereto, all of which are included herein. March 31, 1997 Actual As Adjusted ------ ----------- (In thousands) DEBT: Tax exempt mortgage note payable . . . . $14,755 $14,755 Note payable to Wellsford Residential. . 21,611 -- ------- -------- Total debt. . . . . . . . . . . . . . . 36,366 14,755 ------- -------- STOCKHOLDERS' EQUITY: Common Stock, $.01 par value per share; 197,650,000 shares authorized - 16,547,771 shares issued and outstanding, as adjusted . . . . . . . . . . . . . . . . 1 166 Class A Common Stock, $.01 par value per share; 350,000 shares authorized - 339,806 shares issued and outstanding, as adjusted . . . . . . . . . . . . . . -- 3 Series A 8% Convertible Redeemable Preferred Stock, $.01 par value per share; 2,000,000 shares authorized; no shares issued and outstanding . . . . -- -- Capital in excess of par value. . . . . . 30,321 173,764 Common Stock to be issued . . . . . . . . 2,250 -- ------- -------- Total stockholders' equity. . . . . . . 32,572 173,933 ------- -------- Total capitalization. . . . . . . . . . $68,938 $188,688 ======= ======== WELLSFORD REAL PROPERTIES, INC. (PREDECESSOR) SELECTED UNAUDITED COMBINED FINANCIAL DATA Pro Forma Historical Three Months Three Months Historical Ended Ended Year Ended March 31, March 31, December 31, 1997 1997 1996 ---- ---- ---- (Unaudited) (Unaudited) (In thousands except per share data) OPERATING DATA: Revenues: Rental income $ 762 Other income 40 Interest income 1,135 $ 401 $ 757 ------------------------------------------- 1,937 401 757 ------------------------------------------- Expenses: Property operating and maintenance 211 Real estate taxes 107 General and administrative 438 Depreciation 128 Property management 34 ------------------------------------------- 918 0 0 ------------------------------------------- Income before income taxes 1,019 401 757 Provision for income taxes 416 ------------------------------------------- Net income $ 603 $ 401 $ 757 =========================================== Net income per common share $0.04 Weighted average common shares outstanding 16,888 Pro Forma Historical Historical Historical March 31, March 31, December 31, December 31, 1997 1997 1996 1995 (Unaudited) (Unaudited) (In thousands) BALANCE SHEET DATA: Real estate (prior to depreciation) $ 129,889 $ 47,806 $ 21,306 $ 7,955 Mortgage notes and interest receivable $ 42,934 $ 17,934 $ 17,934 $ 0 Cash and cash equivalents $ 21,180 $ 0 $ 0 $ 0 Restricted cash $ 3,198 $ 3,198 $ 5,520 $ 10,414 Total assets $ 199,805 $ 68,938 $ 44,760 $ 18,369 Total debt $ 14,755 $ 36,366 $ 14,755 $ 14,755 Total equity $ 173,933 $ 32,572 $ 30,005 $ 3,614 Period from Pro Forma Historical Historical Historical March 22 to March 31, March 31, March 31, December 31, December 31, 1997 1997 1996 1996 1995 (Unaudited) (Unaudited) (Unaudited) (In thousands) OTHER DATA: Funds from operations $ 731 $ 401 $ 0 $ 757 $ 0 EBITDA $ 1,147 $ 401 $ 0 $ 757 $ 0 Cash flows from operating activities $ 2,925 $ 2,723 $ 1,082 $ 5,517 $ 4,341 Cash flows from investing activities $ (133,583) $ (26,500) $ (231) $ (31,151) $ (7,955) Cash flows from financing activities $ 152,040 $ 23,777 $ (851) $ 25,634 $ 3,614 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND ANALYSIS OF OPERATIONS The following discussion should be read in conjunction with the Selected Unaudited Combined Financial Data set forth above and the Combined Financial Statements and Notes thereto included herein. Results of Operations The operations of the predecessor to the Company (the "Predecessor") during the three months ended March 31, 1997 and the year ended December 31, 1996 consisted of owning the Sonterra mortgage note receivable originated in July, 1996, upon which the Predecessor earned $401,000 and $757,000, respectively, of interest income, and developing two phases of the Palomino Park multifamily community located in a suburb of Denver, Colorado with a total of 760 units under development. Liquidity and Capital Resources The Company expects to meet its short-term liquidity requirements generally through its working capital and cash flow provided by operations. The Company considers its ability to generate cash to be adequate and expects it to continue to be adequate to meet operating requirements both in the short and long terms. The Company expects to meet its long-term liquidity requirements such as refinancing mortgages, financing acquisitions and development, and financing capital improvements and debt and equity investments in real estate companies by long-term borrowings, through the issuance of debt and the offering of additional debt and equity securities. The Company has obtained a two-year $50 million credit facility from BankBoston and Morgan Guaranty which is available to fund acquisitions, debt and equity investments, development, capital expenditures, repayment of indebtedness and related expenditures. The credit facility bears interest at an annual rate of LIBOR plus 175 basis points and is extendible for an additional one-year. In December 1995, the Predecessor marketed and sold $14.8 million of tax- exempt bonds to fund construction at Palomino Park. The bonds have a variable rate of interest which is currently approximately 4% per annum and a term of 40 years. At March 31, 1997, $3.2 million of the bond proceeds were being held in escrow pending their use for the funding of development. BUSINESS AND PROPERTIES The Company's assets consist primarily of five office properties containing six buildings; the 277 Park Loan; the Sonterra Loan and the Sonterra Option; and an approximately 80% interest in Phases I, II and III of, and in options to acquire and develop Phases IV and V of, Palomino Park. Set forth below is a brief description of these assets and the Company's plans with respect thereto. In the opinion of the Company's management, all of the properties described below are adequately covered by insurance. Wellsford Commercial Properties Since its inception in January, 1997, the Company has acquired five commercial properties. All the properties are located in suburban areas of Northern New Jersey. These properties contain in the aggregate six office buildings with approximately 940,400 gross square feet (or approximately 913,000 net rentable square feet) located on approximately 260 acres. The aggregate purchase price for these properties was approximately $47.6 million or approximately $50 per gross square foot of building area. None of the properties is encumbered by mortgage liens. It is currently anticipated that the Company will invest approximately $15.8 million (approximately $17 per gross square foot of building) for renovation and repositioning of the properties, and will pay approximately $19.7 million (approximately $21 per gross square foot of building) for tenant improvements and leasing costs, for a total cost to the Company of approximately $83 million. As of July 1, 1997, the Company had invested approximately $3.3 million for renovation and repositioning of the properties and approximately $375,000 for tenant improvements and leasing costs. These acquisitions represent opportunities which the Company believes are impractical for REITs because they provide little or no immediate cash return. Cyanamid Office Portfolio The Company acquired the Cyanamid Office Portfolio ("Cyanamid") located in Wayne, N.J. in February 1997. Cyanamid, formerly the international headquarters for American Cyanamid Company, consists of (i) Point View Corporate Park consisting primarily of two office buildings ("Point View"); and (ii) Valley Executive Center, consisting primarily of two smaller office buildings, located at 1700 and 1800 Valley Road. All the buildings are currently vacant. It is expected that renovations to each of these buildings will be completed by mid-1998. Cyanamid was recently assessed for real estate tax purposes at approximately $61.0 million in the aggregate by the local governmental authority. Point View Point View consists of two parcels: (i) one parcel of approximately 194 acres on which two buildings consisting of an aggregate of approximately 560,000 gross square feet (approximately 530,000 net rentable square feet) are situated and (ii) an approximately 10 acre site directly across from the entrance to the two buildings which is zoned for approximately 7 - 8 single family houses and has no existing structures. The approximately 194-acre parcel is zoned for the development of an additional 1 million square feet of office or research space. The larger of the two buildings on Point View (the "Serpentine Building") was constructed in 1962, is a four-story class B+ building containing approximately 400,000 gross square feet. The Serpentine Building contains a fully functional cafeteria area seating 800, separate executive officer tower, separate executive dining area and overlooks a large reservoir and the heliport for the complex. The smaller building (the "West Building") was constructed in 1976, is a six-story class A building containing approximately 160,000 gross square feet. The West Building is connected to the Serpentine Building by an underground passageway and has a primarily moveable wall interior partitioning system, a fitness center and an auditorium. There are 1,720 parking spaces currently serving both buildings. On a pro forma basis, Point View had a federal tax basis equal to its purchase price of $15.8 million at December 31, 1996, and will be depreciated straight-line over a 40-year estimated life. The current annual real estate taxes on Point View are approximately $1.2 million, subject to pending negotiations with the municipality of Wayne to reduce such taxes. The Company currently contemplates a number of renovations to the Serpentine Building and the West Building to, among other things, refurbish the exterior, add new elevators, and renovate the lobby and other common areas. Other renovations will (i) enable the buildings to comply with current life safety and ADA requirements and become more energy efficient; and (ii) eliminate potentially hazardous materials (such as spray-on asbestos fireproofing in the Serpentine Building's structure). Removal of the spray-on asbestos fire proofing will cost approximately $3.5 million, and the estimated total cost of all planned renovations will be approximately $10.1 million. As of July 1, 1997, the Company had incurred approximately $2 million of expenses to renovate Point View. The Company is financing the renovations from its working capital. The purchase price for Point View was $15.8 million, or approximately $28.00 per gross square foot of building area, and together with the cost of planned renovations, is expected to be approximately $46.25 per gross square foot. Valley Executive Center 1700 Valley Road. The 1700 Valley Road property contains a two-story, class B+ building consisting of approximately 70,600 gross square feet (approximately 67,000 net rentable square feet) and is situated on a wooded nine acre site. The building was constructed in two stages, during 1972 and 1979, and the interior was completely refurbished in 1993. The building contains a full service dining area and 294 parking spaces. The Company contemplates renovation of the building's facade, upgrading of the HVAC system and various cosmetic improvements. The estimated cost of planned renovations is $200,000, and the Company will finance such renovations from its working capital. The property is zoned for the development of an additional 50,000 square feet of office space. The purchase price for 1700 Valley Road was $1.0 million, or $14.00 per gross square foot of building area, and together with the cost of planned renovations, is expected to be $17.00 per gross square foot. 1800 Valley Road. The 1800 Valley Road property contains a two-story, class B+ building consisting of approximately 54,800 gross square feet (approximately 53,000 net rentable square feet) and is situated on a wooded 14 acre site. The building was constructed in 1980, contains a full service dining area and has 260 parking spaces. The Company contemplates replacing the roof and upgrading the HVAC system, and other renovations to comply with existing life safety and ADA codes. The estimated cost of planned renovations is $900,000, excluding the renovations to be made pursuant to the lease with Reckitt & Coleman Inc. described below, and the Company will finance such renovations from its working capital. The Company has entered into a 6-year lease with Reckitt & Coleman Inc., a consumer products firm, for the entire 1800 Valley Road property at a net rental of $12.10 per square foot. Pursuant to the terms of lease, the Company has agreed to pay approximately $2.1 million for tenant improvements, renovations and other leasing costs. The purchase price for 1800 Valley Road was $2.0 million, or approximately $36.00 per gross square foot of building area, and together with the cost of planned renovations, is expected to be approximately $71.00 per gross square foot. Greenbrook Corporate Center The Company acquired The Greenbrook Corporate Center ("Greenbrook") in Fairfield, N.J. in April 1997. Greenbrook consists of (i) a class A suburban three-story office building with approximately 190,000 gross square feet situated on approximately 20 acres and (ii) a contiguous undeveloped approximately seven acre parcel zoned for development of an additional 50,000 square feet of office and light industrial use. The entrance to the building is a 35-foot atrium lobby and the second and third floors have terraces overlooking a country club which border the rear of the site. The Company intends to spend approximately $500,000 to renovate the building, and the Company will finance such renovations from its working capital and its Line of Credit. The renovations are expected to be completed by October, 1997. Greenbrook, as the Company's only occupied commercial property, accounted for 41% of the Company's pro forma revenues during the three months ended March 31, 1997. The occupancy rate for Greenbrook as of July 1, 1997 was approximately 88.6%, and the average annual gross rent per square foot is approximately $20. The current asking gross rental rate per square foot is approximately $23. On a pro forma basis, Greenbrook had a federal tax basis equal to its purchase price of $23.7 million at December 31, 1996, and will be depreciated straight-line over a 40-year estimated life. The current annual real estate taxes on Greenbrook are approximately $428,000. Greenbrook's two largest tenants are Information Resources, Inc. ("IRI"), a market research firm, and the S.B. Thomas division of CPC International, whose principal business is producing baked foods. IRI occupies 64,676 rentable square feet, with an annual rent of approximately $1.3 million (or approximately $20 per rentable square foot), under two leases that expire December 2003. The annual rent to be paid by IRI increases over the term of the leases to approximately $1.5 million (or approximately $23.5 per rentable square foot) by their expiration in December 2003. S.B. Thomas occupies 49,384 rentable square feet with an annual rent of approximately $.9 million (or $19 per rentable square foot), under a lease that expires in 2005. S.B. Thomas has the right to renew for two successive periods of five years each, at 95% of the fair market value rent as of October 1st of the last lease year prior to commencement of each renewal term. Greenbrook has nine additional tenants, with aggregate annual rents of approximately $1.2 million. The purchase price for this property was $23.7 million, or approximately $125.00 per gross square foot of building area, and together with the cost of planned renovations, is expected to be approximately $127.00 per gross square foot. Chatham, New Jersey In January 1997, the Company acquired a class A three-story suburban office building consisting of approximately 65,000 gross square feet (approximately 63,300 net rentable square feet) located on approximately five acres in Chatham, New Jersey. The Company currently intends to spend approximately $3.1 million to make various renovations to upgrade the building's status including, among other things, to add a first class lobby and improve other common areas, renovate the facade and replace the HVAC system and provide landscaping. The Company is financing such renovations from its working capital and its Line of Credit, and the renovations are expected to be completed by the end of the third quarter of 1997. As of July 1, 1997, the Company had incurred approximately $1.3 million of expenses to renovate this building. The Company is currently marketing the building for rental. The Company has entered into a lease with Quadrant HealthCom Inc., a publisher of medical specialty magazines, for approximately 22,000 gross square feet in the building which is approximately 33% of the gross leasable area of the building. The lease is for a term of ten years (terminable after seven years upon payment of six months' rent) at $26.00 per net rentable square foot for years one through five and at approximately $28.00 per net rentable square foot for years six through ten. The purchase price for the property was $5.1 million, or approximately $78.00 per gross square foot, of building area and together with the cost of planned renovations, is expected to be approximately $126.00 per gross square foot. Wellsford High Yield Investment Portfolio 277 Park Loan The Company and BankBoston have provided an $80 million loan to entities which own substantially all of the equity interests (the "Equity Interests") in the entity which owns a 52-story, approximately 1.75 million square foot gross leasable area, class A office building located in New York City in mid- town Manhattan at 277 Park Avenue (the "277 Park Property"). On April 25, 1997, the Company and BankBoston advanced $20 million and $60 million, respectively, pursuant to the 277 Park Loan. On June 19, 1997, the Company acquired from BankBoston an additional $5 million portion of the 277 Park Loan, after which the Company and BankBoston effectively advanced $25 million and $55 million, respectively, pursuant to the 277 Park Loan. The 277 Park Loan is secured primarily by a pledge of the Equity Interests owned by the borrowers. There is also a limited guarantee from the individual who indirectly owns all the Equity Interests. The 277 Park Loan is subordinated to a 10-year $345 million first mortgage loan (the "REMIC Loan") on the 277 Park Property, the proceeds for which were obtained by the sale of investment grade rated commercial mortgage pass-through certificates in a real estate mortgage investment conduit. The notes representing the REMIC Loan bear interest at different rates which equate to a weighted average interest rate of approximately 7 2/3% per annum. The 277 Park Loan bears interest at the rate of approximately 12% per annum for the first nine years of its term and at a floating annual rate during the tenth year equal to LIBOR plus 5.15% or BankBoston base rate plus 5.15%, as elected by the borrowers. Interest on the 277 Park Loan will be payable monthly to the extent of available cash after payment of interest on the REMIC Loan and the funding of various reserve accounts under the REMIC Loan and provided there is no event of default under the REMIC Loan. To the extent funds are not available to pay interest at a rate in excess of 10% per annum, such excess interest will accrue and be added to the principal amount of the 277 Park Loan. The principal amount of the 277 Park Loan and all accrued interest will be payable on May 1, 2007 which is also the due date of the REMIC Loan. The 277 Park Loan is prepayable only in full and then only after the fifth year of the loan and must be repaid if the REMIC Loan is repaid or the 277 Park Property is sold. Any prepayment during the sixth through ninth years of the loan must be accompanied by a yield maintenance payment. The 277 Park Property is currently 100% leased to 33 tenants, including Donaldson, Lufkin & Jenrette, Inc. which has leased approximately 47% of the gross leasable area pursuant to a lease expiring in 2016. The 277 Park Property was appraised for $555 million as of July 1, 1996 by an independent nationally recognized appraiser. The appraisal was not prepared on behalf of the Company. An appraisal is only an opinion of value made by experts, subject to the assumptions and limiting conditions contained therein (including assumptions relating to the discounted cash flow analysis contained therein). Sonterra Assets Sonterra Loan The Company holds a $17.8 million mortgage loan made to the owner of Sonterra, a 344-unit class A multifamily apartment complex located in Tucson, Arizona, construction of which was completed in June, 1996. The Sonterra Loan was originated in July, 1996 and the principal amount thereof is due on July 1, 1999. Until the maturity date, the borrower is to pay interest only, monthly, at the rate of 9% percent per annum. The loan is non-recourse and repayment of the loan is secured by a first mortgage on Sonterra and by a personal guaranty of an individual affiliated with the owner. Under certain circumstances, prepayment of the loan is subject to a prepayment premium equal to 5% percent of the principal amount of the loan. Sonterra Option Agreement The Company also owns an option to acquire Sonterra free and clear of all mortgages and other material liens for approximately $20.5 million through December 31, 1997 and for approximately $21 million if the sale is consummated during 1998. ERP Operating Partnership has a right of first offer to acquire the Sonterra Option and a right to acquire the option if the Company does not exercise it. If the Company acquires Sonterra, then the Company and ERP Operating Partnership will enter into a "Right of First/Last Offer Agreement" in substantially the same form as the Right of First/Last Offer Agreement entered into pursuant to the Agreement Regarding Palomino Park. See "Certain Agreements Between the Company and ERP Operating Partnership - Agreement Regarding Palomino Park." Wellsford Property Development Palomino Park Palomino Park is a master planned five-phase multifamily development project comprising approximately 182 acres, of which 65 acres have been developed, in suburban South East Denver, Colorado about 14 miles from Denver's central business district. It is situated within Highlands Ranch, a 22,000 acre master planned community. Palomino Park is intended to be developed as an integrated project comprising an 1,880-unit, class A multifamily apartment community constructed around a centrally located 24 acre park which will feature tennis courts, athletic fields, a putting green and an amphitheater. There is also a 29,000 square foot recreation center which has been completed and which includes a full-size gymnasium, fitness center, indoor golf range, racquet ball courts, and a baby-sitting facility and has an adjacent swimming pool. Palomino Park will also have a perimeter fence with a guard at the entry gate. Wellsford Park Highlands Corp. ("WPHC"), currently owned 80% by the Company and 20% by ERP Operating Partnership, acquired fixed-price options in 1995 to purchase the land underlying each of the phases (referred to collectively as "Phases" or individually as a "Phase" or specifically as "Phase I," "Phase II," "Phase III," "Phase IV" or "Phase V") of Palomino Park. The land underlying Phases I, II and III has been acquired. The land underlying Phases IV and V is subject to options which expire in May, 1998 and May, 1999, respectively. There can be no assurance that construction of Phase III, Phase IV or Phase V will be commenced or if commenced, that it will be completed. See "Risk Factors Risks of Acquisition, Development, Construction and Renovation Activities". The purchase price for land acquired with respect to any Phase is $73,500 per acre, subject to an increase of the purchase price by 6% per annum from and after November 30, 1994. The land options should reduce the Company's exposure to market cycles in Denver while enabling the Company to develop a signature residential community in one of the fastest growing counties in the country. Upon completion of any or all of the Phases, the Company will either operate and rent apartment units or convert all or a portion of them to condominium ownership, which a REIT could not do because of the adverse tax consequences thereof. The development of Palomino Park calls for construction of the 1,880 units over a period of five years at a total estimated cost of approximately $194 million. As of March 31, 1997, the Company had invested approximately $23.9 million in the development of Palomino Park, exclusive of amounts advanced under the existing construction loans for Phase I and II. Phase I, referred to as Blue Ridge, will consist of 456 units of which 312 are constructed, 294 are leased and 233 are occupied. Rents range from $760 per month for a one bedroom, one bathroom to $1,375 per month for a three bedroom, two bathroom unit. Garages are available and washer and dryer hook- ups exist in all the apartments. Completion of construction of this Phase is expected in late 1997. The total estimated cost of Blue Ridge is approximately $42.5 million. Phase II, referred to as Red Canyon, is expected to consist of 304 units. The total estimated cost of Red Canyon is approximately $33.6 million. Site preparation for construction of Phase II has recently begun and construction of Phase II is expected to be completed in late 1998 or early 1999. Blue Ridge is owned by Park at Highlands LLC ("Phase I LLC"), a limited liability company, the members of which are WPHC (99%) and Al Feld ("Feld") (1%). Red Canyon is owned by Red Canyon at Palomino Park LLC ("Phase II LLC"), a limited liability company, the members of which are WPHC (99%) and Feld (1%). Al Feld is a Denver-based developer specializing in the construction of luxury residential properties. He has constructed over 3,000 units since 1984. Various development, construction and property management and guarantee fees, as well as certain other fees designed to provide cost savings incentives in connection with property construction and stabilization, are being paid to Feld and his affiliates. These amounts are included in the cost estimates for Phase I and Phase II described above. Feld has unconditionally guaranteed completion of Phase I within 30 months and Phase II within 24 months, in each case after closing of the construction loan, and has agreed to a one-year guarantee of such Phases against construction defects. In addition, in the case of Blue Ridge, Feld has agreed, subject to certain conditions, to fund deficits in development and operating costs, and in the case of Red Canyon, Feld has agreed, subject to certain conditions, to fund deficits in development costs. To secure his obligations to make deficit payments and perform all of his other obligations under the operating agreements, Feld has pledged his interests in Phase I LLC and Phase II LLC to WPHC. The operating agreements provide that neither member may transfer, pledge or assign its interest in the Phase I LLC or Phase II LLC without the consent of the other member, except that (i) WPHC may transfer a portion of its interest provided it retains at least a 21% interest in Phase I LLC or Phase II LLC, as the case may be, and (ii) WPHC has an option to acquire Feld's 1% interest for fair market value at any time after completion of the Phase, and Feld has an option to compel WPHC to buy his 1% interest for fair market value upon completion of the Phase. The construction loan on Blue Ridge is for approximately $36.8 million, matures on December 31, 1998 (with a 6-month extension at the option of the Phase I LLC upon fulfillment of certain conditions), and bears interest at the prime rate, except that the Phase I LLC may elect to cause a portion of the previously advanced principal to bear interest at LIBOR plus 175 basis points. Feld has guaranteed repayment of this loan. The construction loan on Red Canyon is for approximately $29.5 million, matures on September 29, 1999 (with a 6-month extension at the option of the Phase II LLC upon fulfillment of certain conditions), and bears interest at the prime rate, except that the Phase II LLC may elect to cause a portion of the previously advanced principal to bear interest at LIBOR plus 165 basis points. Feld has also guaranteed repayment of this loan. ERP Operating Partnership has agreed to purchase the Phase I loan and the Phase II loan when due, assuming completion of construction, if they are not paid off by the Phase I LLC (in the case of the Phase I loan) or the Phase II LLC (in the case of the Phase II loan) or by Feld pursuant to his guaranties, for the lesser of the loan balance or the final agreed upon budget. See "Certain Agreements Between the Company and ERP Operating Partnership - Agreement Regarding Palomino Park." Palomino Park Public Improvements Corporation ("PPPIC"), a Colorado non- profit corporation, has issued $14.8 million of tax exempt bonds due on December 1, 2035 (the "Bonds") to finance the development of the park and certain parts of the infrastructure within Palomino Park, which have a total cost of approximately $18.3 million. The Bonds bear interest at a floating rate, which is currently approximately 4% per annum, but may be converted to a term rate or a fixed rate. Subject to certain restrictions, revenue assessment liens are imposed against the Phases to secure the obligation of the Phase owners to repay the portion of the Bonds' debt service attributed by PPPIC to their respective Phases. If it is determined to proceed with construction of Phases III, IV and/or V, the ownership and transaction structure of each such Phase is expected to be similar to that of Phases I and II, although neither Wellsford Residential nor Feld has any obligation to continue the relationship for future Phases. Legal Proceedings Neither the Company nor the Properties are presently subject to any material litigation nor, to the Company's knowledge, is any material litigation threatened against the Company or the Properties, other than routine litigation arising in the ordinary course of business and which is expected to be covered by liability insurance. INITIAL CAPITAL AND FINANCING Upon consummation of the Merger, ERP Operating Partnership acquired shares of the Company's Class A Common at a price per share equal to $10.30 (the book value per share of the Common Stock on the date of the Merger) and for an aggregate purchase price of $3.5 million. On June 2, 1997, the Company sold 12,000,000 shares of Common Stock in the Private Placement primarily to institutional investors at a price per share equal to $10.30 (the book value per share of Common Stock on the date of closing of the Private Placement) for an aggregate purchase price of $123.6 million. As of July 1, 1997, an aggregate of approximately $74.4 million of the proceeds from the sale of the shares of Class A Common and from the Private Placement had been applied by the Company to, among other things, repay loans, the proceeds of which were used by the Company to acquire its five commercial properties and make an investment of $20 million in the 277 Park Loan, and to pay for certain renovations to, and tenant fit-out for, the five office properties. As of July 1, 1997, approximately $52.7 million of such proceeds was available to the Company. In addition, the Company has available the following sources of capital, financing and credit support: o $25 million pursuant to the ERP Preferred Commitment to acquire up to 1,000,000 shares of the Series A Preferred at the request of the Company and subject to certain limited conditions. Each share of Series A Preferred is convertible into Common Stock at a price of $11.124 (representing a premium of $8% in excess of the book value per share of the Common Stock on the date of the Merger). The ERP Preferred Commitment is pledged as security for the Line of Credit. o $50 million under a two-year Line of Credit obtained from BankBoston and Morgan Guaranty. The Line of Credit initially bears interest at an annual rate equal to LIBOR plus 175 basis points and is extendible for an additional one-year period. See "Line of Credit" below. o $36.8 million, pursuant to an agreement with respect to the construction financing for Phase I of Palomino Park, and $29.5 million, pursuant to an agreement with respect to the construction financing for Phase II of Palomino Park, in each case guaranteed by a third-party developer and supported by the credit of ERP Operating Partnership pursuant to its stand-by obligations. o Approximately $14.8 million of credit enhancement from ERP Operating Partnership with respect to the bonds issued to finance certain public facilities at Palomino Park. See "Description of Capital Stock" and "Certain Agreements Between the Company and ERP Operating Partnership." Line of Credit The Company has a $50 million revolving line of credit from BankBoston and Morgan Guaranty as to which each has agreed to lend up to $25 million. The Line of Credit is currently secured inter alia by the Company's interest in the Sonterra Loan, the 277 Park Loan and the ERP Preferred Commitment. Under the Line of Credit, the Company pays interest only, monthly, at an annual rate equal to, at the Company's option, either (i) LIBOR plus 175 basis points or (ii) the higher of (A) the base rate of BankBoston or (B) 50 basis points above the federal funds effective rate. The Line of Credit is for a term of two years and is extendible by the Company with the consent of BankBoston and Morgan Guaranty for one additional year. It includes customary covenants, including, among others, (i) maintaining a ratio of liabilities to assets of not in excess of .60 to 1.0, (ii) maintaining a debt service coverage ratio of not less than 1.5 to 1.0, (iii) a prohibition on the payment of dividends until May 30, 1998 and (vi) a prohibition on ground-up development or construction (other than Palomino Park). The Company's other sources of capital to finance its acquisition, investment, development and other activities, may include retained earnings, funds derived from the issuance of debt and equity securities, sales of investments and bank borrowings. See "Policies with Respect to Certain Activities." POLICIES WITH RESPECT TO CERTAIN ACTIVITIES The following is a discussion of the Company's investment policies, financing policies and policies with respect to certain other activities. The Company's policies with respect to these activities have been determined by the directors of the Company and may be amended or revised from time to time at the discretion of the directors without a vote of the shareholders of the Company. Investment Policies The Company intends to invest in real estate directly or indirectly through entities that engage in real estate-related activities. These investments may be in the form of debt or equity. Debt investments may include the purchasing of mortgage loans, other financial instruments collateralized by real estate or real estate interests, or participations therein, real property tax liens or tax-exempt bonds collateralized by real estate or tax-increment finance districts. These debt instruments may be senior, junior or otherwise subordinated to the interests of others. Further, the Company may provide credit enhancement or guarantees of the obligations of others involved in real estate-related activities. The Company may also invest in participating or convertible mortgages if the Company concludes that it may benefit from the cash flow and/or any appreciation in the value of the property. Such mortgages may be similar to equity participations. The Company may also make mortgage loans or participate in such loans and contemporaneously or otherwise obtain related property purchase options. Equity investments may include development projects directly or through joint ventures, as well as the purchase of general or limited partnership interests in limited partnerships, shares in publicly-traded or privately-held corporations or interests in other entities that own real estate, make real estate-related loans or invest in real estate-related debt instruments or provide services or products to the real estate industry. The Company intends to engage in active real estate businesses, which may include land subdivisions, condominium conversions, property sales, and other businesses considered ineligible or impractical investments for REITs. The Company may also hold real estate or interests therein for investment. The Company may purchase substantially leased, mostly unleased or vacant properties of any type or geographic location. The Company intends to renovate and re-lease the mostly unleased or vacant properties. The activities described above often do not generate immediate cash flow, and cash flow generated may be non-recurring. These investments may be subject to existing debt financing and any such financing will have a priority over the equity interests of the Company. The Company may offer to exchange its securities for properties and securities of other entities. Further, it may, from time to time, repurchase its shares. The Company will seek investments generally with a duration of one to five years. Financing Policies The Company will seek to finance its investments through both public and private secured and unsecured debt financings, as well as public and private placements of its equity securities. The equity securities will include both common and preferred equity issuances of the Company and its subsidiaries. The Company does not have a policy limiting the number or amount of mortgages that may be placed on any particular property, but mortgage financing instruments usually limit additional indebtedness on such properties. There are currently no restrictions on the amount of debt that the Company may incur. Also, the Company does not plan to distribute dividends for the foreseeable future, which will permit it to accumulate for reinvestment cash flow from investments, disposition of investments and other business activities. The Company has a two-year $50 million line of credit from BankBoston and Morgan Guaranty. This facility is subject to certain financial and other covenants. In the future, the Company may seek to extend, expand, reduce or renew such facility, or obtain an additional or a replacement facility. See "Initial Capital and Financing." Policies with Respect to Other Activities The Company does not intend to qualify as a REIT, but it may, from time to time, invest in REITs, sell properties or entities to REITs for cash and/or securities. Further, it may spin-off to its common shareholders, shares of its subsidiaries or shares of other entities it has acquired through the sale of its properties, investments or otherwise. These spin-offs may be taxable or non-taxable, depending upon the facts and circumstances. The Company's policies with respect to its activities may be reviewed and modified from time to time by the Company's directors without notice to or vote of its shareholders. MANAGEMENT Directors and Executive Officers The executive officers and directors of the Company, their ages and their positions are as follows: Name Age Position Held Jeffrey H. Lynford 49 Chairman of the Board, Secretary and Director** Edward Lowenthal 52 President, Chief Executive Officer and Director* Gregory F. Hughes 34 Chief Financial Officer David Strong 38 Vice President for Development Douglas Crocker II 56 Director** Rodney F. Du Bois 60 Director* Mark S. Germain 46 Director** Frank J. Hoenemeyer 77 Director*** Frank J. Sixt 45 Director*** * Term expires 1998 ** Term expires 1999 *** Term expires 2000 Jeffrey H. Lynford has been the Chairman of the Board, Secretary and Director of the Company since its formation in January 1997. Mr. Lynford served as the Chairman of the Board and Secretary of Wellsford Residential from its formation in July 1992 until consummation of the Merger in May 1997 and was the Chief Financial Officer of Wellsford Residential from July 1992 until December 1994. Mr. Lynford currently serves as a trustee emeritus of the National Trust for Historic Preservation and as a director of four mutual funds: Cohen & Steers Total Return Realty Fund, Inc., Cohen & Steers Realty Shares, Inc., Cohen & Steers Realty Income Fund, Inc. and Cohen & Steers Special Equity Fund, Inc. He is also a member of the New York bar. Prior to founding WGI, Mr. Lynford gained real estate and investment banking experience as a partner of Bear Stearns & Co. and a managing director of A.G. Becker Paribas, Inc. Edward Lowenthal has been the President, Chief Executive Officer and Director of the Company since its formation in January 1997. Mr. Lowenthal served as the President and Chief Executive Officer and a trustee of Wellsford Residential from its formation in July 1992 until consummation of the Merger in May 1997. Mr. Lowenthal currently serves as a director of United American Energy Corporation, a developer, owner and operator of hydroelectric and other alternative energy facilities, a director of Corporate Renaissance Group, Inc., a mutual fund, a director of Omega Healthcare, Inc., a REIT, a director of Great Lakes REIT, Inc., a REIT that owns and operates office buildings, and a trustee of Corporate Realty Income Trust, a REIT. He is also a member of the executive committee and The Board of Governors of the NAREIT. Prior to founding WGI, Mr. Lowenthal gained real estate and investment banking experience as a partner of Bear Stearns & Co., a managing director of A.G. Becker Paribas, Inc., and a partner in the law firm of Robinson Silverman Pearce Aronsohn & Berman. Gregory F. Hughes has been the Chief Financial Officer of the Company since its formation in January 1997. Mr. Hughes served as a Vice President - Chief Financial Officer of Wellsford Residential from December 1994 until consummation of the Merger in May 1997. From March 1993 until December 1994 he was a Vice President and Chief Accounting Officer of Wellsford Residential. During 1992, Mr. Hughes was a controller with Jones Lang Wootton Realty Advisors, a firm that provides real estate asset management and investment consultation services. From 1985 to 1991, Mr. Hughes was a manager with Kenneth Leventhal & Company, a public accounting firm specializing in real estate and financial services. Mr. Hughes is a certified public accountant. David M. Strong has been a Vice President for Development of the Company since its formation in January 1997. Mr. Strong served as a Vice President of Wellsford Residential from July 1995 until consummation of the Merger in May 1997. From July 1994 until July 1995 he was Acquisitions and Development Associate of Wellsford Residential. From 1991 to 1994, Mr. Strong was President and owner of LPI Management, Inc., a commercial real estate company providing management and consulting services. From 1984 to 1991, he was a senior executive with the London Pacific Investment Group, a real estate development, investment and management firm active in Southern California and Western Canada. From 1979 to 1984, Mr. Strong was a manager with Arthur Young, a public accounting firm. Mr. Strong is a member of the Canadian Institute of Chartered Accountants. Douglas Crocker II has been a director of the Company since consummation of the Merger. Mr. Crocker has been President, Chief Executive Officer and a Trustee of EQR, the general partner of ERP Operating Partnership, since March 1993. He is also a director of Horizon Group Incorporated, an owner, developer and operator of outlet retail properties. Mr. Crocker has been President and Chief Executive Officer of First Capital Financial Corporation, a sponsor of public limited real estate partnerships ("First Capital"), since December 1992 and a director of First Capital since January 1993. He has been an executive vice president of Equity Financial and Management Company, a subsidiary of Equity Group Investments, Inc., an owner, manager and financier of real estate and corporations ("EGI"), providing strategic direction and services for EGI's real estate and corporate activities since November 1992. From September 1992 until November 1992, Mr. Crocker was a managing director of investment banking with Prudential Securities, an investment banking firm. He was a director and President of Republic Savings Bank, a national chartered savings and loan association ("Republic"), from December 1988 to June 1992, at which time the Resolution Trust Corporation took control of Republic. Rodney F. Du Bois has been a director of the Company since May 1997. Mr. Du Bois served as a trustee of Wellsford Residential from November 1992 until consummation of the Merger in May 1997. Mr. Du Bois also has been President and co-owner of Goshawk Corporation, which provides finance and general corporate services, since 1982. Mr. Du Bois was a founder of Mountain Cable Company, a cable TV multiple system operator, and its Chairman from 1985 until the company's sale in 1988. Previously Mr. Du Bois served as Executive Vice President and a director of C. Brewer and Co., Chairman of Alexander and Baldwin Agribusiness, Inc., a managing director of Warburg, Paribas, Becker, Inc. and a Professor of Real Estate at the Amos Tuck School of Business Administration at Dartmouth College. Mark S. Germain has been a director of the Company since May 1997. Mr. Germain served as a trustee of Wellsford Residential from November 1992 until consummation of the Merger in May 1997. Currently he is employed by Olmstead Group L.L.C., which is a consultant to biotechnology and other high technology companies. Mr. Germain also serves as a board member of several privately held biotechnology companies. Previously, from 1990 to 1994, Mr. Germain was employed by D. Blech & Company, Incorporated, a merchant bank. From 1986 to 1989, he was President and Chief Operating Officer of The Vista Organization, Ltd., and from 1989 to 1990, its President and Chief Executive Officer. Mr. Germain was a partner in a New York law firm prior to 1986. Frank J. Hoenemeyer has been a director of the Company since May 1997. Mr. Hoenemeyer served as a trustee of Wellsford Residential from November 1992 until consummation of the Merger in May 1997. Mr. Hoenemeyer also currently serves as a director of American International Group, Inc., Mitsui Trust Bank (U.S.A.), W.P. Carey Advisors, Inc. and Carey Fiduciary Advisors, Inc. (subsidiaries of W.P. Carey & Co., Inc.) and ARIAD Pharmaceuticals, Inc. and as Vice Chairman of the Investment Committee of W.P. Carey & Co., Inc. From 1947 to 1984, he was employed by The Prudential Insurance Company of America where he served as Vice Chairman and Chief Investment Officer prior to his retirement. Frank J. Sixt has been a director of the Company since May 1997. Mr. Sixt served as a trustee of Wellsford Residential from November 1992 until consummation of the Merger in May 1997. Mr. Sixt also currently serves as an executive director of Cheung Kong (Holdings) Limited, Cheung Kong Infrastructure Holdings Limited and Hutchinson Whampoa Limited Group of Companies. He also serves as a director of Husky Oil Limited, Concord Property and Financial Company Limited and World Financial Properties Limited. He is also a director of and Chairman of the Executive Committee of the Board of Directors of Gordon Capital Corporation. Previously, from 1987 to 1990, Mr. Sixt was a partner in the law firm of Stikeman Elliot. Key Employee Richard R. Previdi has been active in seeking to acquire commercial properties on behalf of the Company and its predecessor since September 1996. From May 1994 until June 1996, he was a managing director of Emmes & Company, a real estate investment company. From April 1990 until May 1994, Mr. Previdi was a managing director of Trammell Crow N.E., Inc., and Chief Executive Officer of that company's Northern Virginia Commercial Division. Previously, from October 1985 until April 1990, he was first a marketing principal, and later a partner, of Trammell Crow Company. From October 1982 until October 1985, Mr. Previdi was a manager with Arthur Young and Company, a public accounting firm. Compensation of Directors The Company pays to each of its directors who are not employees of the Company (i) an annual fee of $16,000, payable quarterly in shares of the Common Stock, and (ii) a fee of $2,250 payable in cash for each regular quarterly Board of Directors meeting at which such director is present in person or by telephone. Messrs. Du Bois, Germain, Hoenemeyer and Sixt also each received options to purchase 42,750 shares of Common Stock and Mr. Crocker received options to purchase 21,375 shares of Common Stock, all under the Company's 1997 Management Incentive Plan and each will be eligible along with other present and future directors to receive additional share options. See "-1997 Management Incentive Plan." Directors who are employees of the Company will not be paid any directors' fees. In addition, the Company will reimburse the directors for travel expenses incurred in connection with their activities on behalf of the Company. Board Committees The Board of Directors of the Company has established an Executive Committee, a Compensation Committee and an Audit Committee. The Board does not have a nominating committee or a committee performing the functions of a nominating committee; the entire Board performs the usual functions of such committee. Executive Committee. The Executive Committee consists of Messrs. Lynford, Lowenthal and Hoenemeyer. The Executive Committee has the authority to acquire, dispose of and finance investments for the Company and execute contracts and agreements, including those related to the borrowing of money by the Company, and generally to exercise all other powers of the directors except for those which require action by all directors or the independent directors under the Articles of Incorporation or Bylaws of the Company or under applicable law. Compensation Committee. The Compensation Committee consists of Messrs. Du Bois, Germain, Hoenemeyer and Sixt, none of whom are employees of the Company. The Compensation Committee reviews the Company's compensation and employee benefit plans, programs and policies, approves employment agreements and monitors the performance and compensation of the executive officers and other employees. Audit Committee. The Audit Committee consists of Messrs. Du Bois, Germain, Hoenemeyer and Sixt and makes recommendations concerning the engagement of independent public accountants, reviews with the independent public accountants the plans and results of the audit engagement, approves the professional services provided by the independent public accountants, reviews the independence of the independent public accountants, considers the range of audit and non-audit fees, reviews the adequacy of the Company's internal accounting controls and reviews related party transactions. Executive Compensation The following table sets forth certain information with respect to the Chief Executive Officer and each of the other executive officers of the Company whose cash compensation from the Company is expected to exceed $100,000 on an annualized basis during the fiscal year ending December 31, 1997, and all executive officers as a group. Name of Individual or Number in Group Capacities in Which Serve Compensation - ----------------------------- ------------------------- ------------ Jeffrey H. Lynford. . . . . Chairman of the Board and $275,000 Secretary Edward Lowenthal. . . . . . President and Chief $275,000 Executive Officer Gregory F. Hughes . . . . . Chief Financial Officer $200,000 David M. Strong . . . . . . Vice President for Development $125,000 All executive officers as a group (consisting of the four persons named above) . $875,000 The Company has also granted options to purchase 85,500 shares of Common Stock under the 1997 Management Investment Plan to each of Messrs. Lynford, Lowenthal, Hughes and Strong. See "-1997 Management Incentive Plan." Employment Agreements The Company has entered into employment agreements with Messrs. Lynford and Lowenthal (the "Senior Executives"), pursuant to which Mr. Lynford will serve as the Chairman of the Board of the Company and Mr. Lowenthal will serve as its President and Chief Executive Officer. The Company has also entered into employment agreements with Messrs. Hughes and Strong. The employment agreements with Messrs. Lynford and Lowenthal will expire on December 31, 2002, and the employment agreements with Messrs. Hughes and Strong on May 29, 1999. Each of the employment agreements is automatically extended for additional one-year periods unless either the executive officer or the Company gives prior notice not to extend the employment agreement, as specified in the agreement. Pursuant to the employment agreements, each of the executive officers is also entitled to incentive compensation to be determined by the Compensation Committee. Mr. Hughes is entitled to incentive compensation equal to at least 50% of his annual base salary. In the event that either of the Senior Executives dies during the term of his employment agreement, or if the Company elects to terminate his employment agreement as a result of the Senior Executive's total disability, the Company is required to pay additional compensation for the longer of 36 months after such termination or for the remaining term of his agreement at the rate of his then annual base salary. If a Senior Executive's employment agreement is terminated by the Senior Executive following a "change in control of the Company" (as defined in the agreements), then the Senior Executive shall be entitled to receive a lump sum cash payment generally equal to the sum of (i) the amount of compensation that he would have been entitled to had the agreement not been so terminated and (ii) 299% of his average annual compensation of every type and form includible in gross income received during the three year period preceding the calendar year in which employment is terminated. If a Senior Executive's employment agreement is terminated by the Company other than for "proper cause" (as defined in the agreements) or death or disability, then the Senior Executive shall be entitled to receive a lump sum cash payment generally equal to the greater of (i) the amount of compensation that he would have been entitled to had the agreement not been so terminated or (ii) 299% of his average annual compensation of every type and form includible in gross income received during the three year period preceding the calendar year in which employment is terminated. The Senior Executives are also entitled to reimbursement of income taxes on certain non-cash taxable income resulting from a change in control of the Company, including taxable income resulting from accelerated loan forgiveness or vesting of restricted shares or options. In addition, each Senior Executive is entitled to receive an additional sum to cover certain resulting income and excise tax liabilities that may be incurred on all of the foregoing. If following a "change in control of the Company" (as defined in the agreements), the employment agreement of either Mr. Hughes or Mr. Strong is terminated (a) by the Company, other than for "Cause" (as defined in the agreements) or (b) by Mr. Hughes or Mr. Strong, as the case may be, then Mr. Hughes or Mr. Strong, as the case may be, shall be entitled to receive a lump sum cash payment generally equal to the greater of (i) the amount of compensation that he would have been entitled to had the agreement not been so terminated and (ii) 200% of his average annual compensation of every type and form includible in gross income received during the three year period preceding the calendar year in which employment is terminated. 1997 Management Incentive Plan The Company has established its 1997 Management Incentive Plan (the "Management Incentive Plan") for the purpose of aligning the interests of the Company's directors, executive officers and employees with those of the shareholders and to enable the Company to attract, compensate and retain directors, executive officers and employees and provide them with appropriate incentives and rewards for their performance. The existence of the Management Incentive Plan should enable the Company to compete more effectively for the services of such individuals. The Management Incentive Plan provides for administration by a committee of two or more non-employee directors established for such purpose. Awards to directors, executive officers and other employees under the Management Incentive Plan may take the form of stock options, including corresponding stock appreciation rights and reload options, restricted stock awards and stock purchase awards. The Company may also provide stock purchase loans to enable Management Incentive Plan participants to pay for stock purchase awards. The maximum number of shares of Common Stock that may be the subject of awards under the Management Incentive Plan is 1,750,000 shares. Options to acquire 547,375 shares of Common Stock were granted under the Management Incentive Plan at the closing of the Merger to directors, executive officers and employees of the Company. Rollover Stock Option Plan The Company has established a Rollover Stock Option Plan (the "Rollover Plan"), which is substantially similar to the Management Incentive Plan, for the purpose of granting options and corresponding rights to purchase Common Stock in replacement for former Wellsford Residential share options. All 1,326,235 options issuable under the Rollover Plan were granted at the closing of the Merger principally to certain executive officers and directors of the Company. Compensation Committee Interlocks and Insider Participation The Compensation Committee consists of four independent directors of the Company: Rodney F. Du Bois, Mark S. Germain, Frank J. Hoenemeyer and Frank J. Sixt, none of whom is, or has been, an officer or employee of the Company. PRINCIPAL STOCKHOLDERS The following table sets forth information regarding the beneficial ownership of Common Stock by each person who is known by the Company to be the beneficial owner of more than 5% of the aggregate number of shares of Common Stock, by each director of the Company, by certain executive officers of the Company and by all directors and executive officers of the Company as a group. Each person named in the table has sole voting and investment power with respect to all the Common Stock shown as beneficially owned by such person. Name and Address of Amount and Nature of Percentage Beneficial Owner (1) Beneficial Ownership of Class (2) -------------------- -------------------- ----------- Jeffrey H. Lynford(3) . . . . . . . 623,085 3.57% Edward Lowenthal(4) . . . . . . . . 627,124 3.59% Gregory F. Hughes(5). . . . . . . . 202,074 1.18% David M. Strong(6). . . . . . . . . 130,487 * Rodney F. Du Bois(7) 32 Rip Road Hanover, New Hampshire 03755. . . 44,500 * Mark S. Germain(8) 6 Olmsted Road Scarsdale, New York 10583. . . . 111,411 * Frank J. Hoenemeyer(9) 7 Harwood Drive Madison, New Jersey 07940. . . . 43,683 * Frank J. Sixt(10) c/o Cheung Kung (Holdings), Ltd. China Building, 18-22 Floors 29 Queen's Road Central Hong Kong . . . . . . . . . . . . 81,265 * Douglas Crocker II(11) c/o Equity Residential Properties Trust Two North Riverside Plaza Chicago, Illinois 60606. . . . . 21,375 * Longleaf Partners Realty Fund 6075 Poplar Avenue Memphis, TN 38119. . . . . . . . 3,398,000 20.10% Mutual Qualified Fund(12) 51 John F. Kennedy Parkway Short Hills, NJ 07078. . . . . . 2,427,184 14.35% Morgan Stanley Asset Management Inc. 1221 Avenue of the Americas New York, NY 10036. . . . . . . . 2,427,184 14.35% Yale University 230 Prospect Street New Haven, CT 06511. . . . . . . 964,932 5.71% All directors and executive officers as a group (9 persons) . . 1,885,004 10.15% ___________________ *Less than 1.0% (1) Unless otherwise indicated, the address of each person is c/o Wellsford Real Properties, Inc., 610 Fifth Avenue, New York, New York 10020. (2) Assumes the conversion of 339,806 shares of Class A Common issued to ERP Operating Partnership pursuant to the Common Stock and Preferred Stock Purchase Agreement (the "Stock Purchase Agreement") into 339,806 shares of Common Stock. (3) Includes 538,205 shares of Common Stock issuable upon the exercise of options, none of which are currently exercisable. Options to purchase 452,705 of these shares represent replacement options for Wellsford Residential share options which had exercise prices ranging from $18.94 to $26.375. Also includes 1,701 shares of Common Stock held in the Company's 401(k) savings plan for the benefit of Mr. Lynford and 7,790 shares of Common Stock held by the Lynford Family Charitable Trust, u/a dated December 16, 1984; Mr. Lynford disclaims beneficial ownership of such shares. (4) Includes 538,205 shares of Common Stock issuable upon the exercise of options, none of which are currently exercisable. Options to purchase 452,705 of these shares represent replacement options for Wellsford Residential share options which had exercise prices ranging from $18.94 to $26.375. Also includes 786 shares of Common Stock held in the Company's 401(k) savings plan for the benefit of Mr. Lowenthal, 291 shares of Common Stock held by Ilene Lowenthal, Mr. Lowenthal's wife and 150 shares of Common Stock held by Jared Lowenthal, Mr. Lowenthal's son; Mr. Lowenthal disclaims beneficial ownership of such shares. (5) Includes 188,105 shares of Common Stock issuable upon the exercise of options, none of which are currently exercisable. Options to purchase 102,605 of these shares represent replacement options for Wellsford Residential share options which had exercise prices ranging from $18.94 to $29.375. (6) Includes 126,126 shares of Common Stock issuable upon the exercise of options, none of which are currently exercisable. Options to purchase 40,626 of these shares represent replacement options for Wellsford Residential share options which had exercise prices ranging from $18.94 to $22.50. (7) Includes 42,750 shares of Common Stock issuable upon the exercise of options, all of which are immediately exercisable. Also includes 1,500 shares of Common Stock held by Carol Du Bois, Mr. Du Bois' wife; Mr. Du Bois disclaims beneficial ownership of such shares. (8) Includes 81,265 shares of Common Stock issuable upon the exercise of options, all of which are immediately exercisable. Options to purchase 38,515 of these shares represent replacement options for Wellsford Residential share options which had exercise prices ranging from $18.94 to $26.375. Also includes 30,146 shares of Common Stock held by Margery Germain, Mr. Germain's wife; Mr. Germain disclaims beneficial ownership of such shares. (9) Includes 42,750 shares of Common Stock issuable upon the exercise of options, all of which are currently exercisable. Also includes 933 shares of Common Stock held by the Frank J. Hoenemeyer Individual Retirement Account. (10) Represents 81,265 shares of Common Stock issuable upon the exercise of options, all of which are immediately exercisable. Options to purchase 38,515 of these shares represent replacement options for Wellsford Residential share options which had exercise prices ranging from $18.94 to $26.375. (11) Represents 21,375 shares of Common Stock issuable upon exercise of options, all of which are immediately exercisable. Excludes 339,806 shares of Class A Common issued to ERP Operating Partnership pursuant to the Stock Purchase Agreement. Mr. Crocker is President and Chief Executive Officer of EQR, the general partner of ERP Operating Partnership, and disclaims beneficial ownership of such shares. (12) Mutual Qualified Fund is one of the series comprising Franklin Mutual Series Fund Inc., a publicly held open-end investment company registered with the Commission under the Investment Company Act of 1940, as amended. Its investment advisor is Franklin Mutual Advisers, Inc. ("FMAI"), an investment adviser registered with the Commission under the Investment Advisers Act of 1940, as amended. Pursuant to an investment advisory agreement with Mutual Qualified Fund, FMAI has sole investment discretion and voting authority with respect to the shares owned by Mutual Qualified Fund. FMAI has no interest in dividends or proceeds from the sale of such securities and disclaims beneficial ownership of all the securities owned by Mutual Qualified Fund. CERTAIN TRANSACTIONS The contracts to purchase Chatham, the Cyanamid Office Portfolio and Greenbrook were transferred to the Company by an entity ("Wellsford Commercial") of which Messrs. Lynford and Lowenthal, the wife of Mark Germain, and three unaffiliated parties are owners, for 218,447 shares of Common Stock having an aggregate value of approximately $2.25 million and the Company's agreement to repay a $1.0 million advance used for the down payment on the Cyanamid Office Portfolio. Upon liquidation of Wellsford Commercial, Mr. Lynford, Mr. Lowenthal and the wife of Mark Germain will each receive approximately 16.4%, 16.4% and 13.8%, respectively, of the shares of Common Stock to be issued to Wellsford Commercial, and the other three unaffiliated owners will receive the remainder of the shares. The aggregate purchase price for these commercial properties paid by the Company was approximately $47.6 million, including the approximately $2.25 million referred to above. The above transfers to the Company, along with the Contribution and the purchase of stock by ERP Operating Partnership under the Stock Purchase Agreement, were made as part of a single plan intended to qualify as a tax-free transaction. On May 30, 1997, the Company made short-term loans to Messrs. Lynford and Lowenthal in the amounts of $590,000 and $119,000, respectively. The proceeds of these loans, which were repaid on July 1, 1997, were used to satisfy certain withholding tax obligations. CERTAIN AGREEMENTS BETWEEN THE COMPANY AND ERP OPERATING PARTNERSHIP The following describes certain aspects of the agreements entered into by the Company and ERP Operating Partnership upon consummation of the Distribution and Merger. The following descriptions do not purport to be complete and are qualified in their entirety by reference to the full text of the agreements, copies of which have been filed with the Commission as exhibits to the Registration Statement of which this Prospectus is a part and are available from the Company upon request. Common Stock and Preferred Stock Purchase Agreement The Company has entered into the Stock Purchase Agreement with ERP Operating Partnership, providing for the sale of Class A Common and Series A Preferred to ERP Operating Partnership on the terms described below. Class A Common Stock. Pursuant to the terms of the Stock Purchase Agreement, ERP Operating Partnership purchased from the Company at the closing of the Merger 339,806 shares of Class A Common at a price per share equal to $10.30 for an aggregate purchase price of $3.5 million. For a description of the Class A Common, see "Description of Capital Stock - Class A Common." Series A Preferred Stock. Pursuant to the terms of the Stock Purchase Agreement, ERP Operating Partnership has agreed to purchase from the Company up to 1,000,000 shares of Series A Preferred at $25.00 per share as requested by the Company over the three-year period (the "Commitment Period") commencing on May 30, 1997. Purchases of Class A Preferred are to be in minimum aggregate amounts of $1 million and in multiples of $500,000 in excess thereof. The obligations of ERP Operating Partnership to acquire Series A Preferred are subject to, among other matters, certain representations and warranties being true and correct in all material respects and there being no event of default existing under the Stock Purchase Agreement. If at the end of the Commitment Period, ERP Operating Partnership has purchased less than 1,000,000 shares of Series A Preferred, ERP Operating Partnership has the right to purchase the remainder of the 1,000,000 shares of Series A Preferred not purchased prior to that time. In addition, the Company's rights to cause ERP Operating Partnership to purchase shares of Series A Preferred under the Stock Purchase Agreement have been pledged to the lenders under the Line of Credit as collateral to secure the Company's obligations under the Line of Credit. See "Initial Capital and Financing - Line of Credit". For a description of the Series A Preferred, see "Description of Capital Stock - Class A Preferred." Company Board Member Nominated or Elected by ERP Operating Partnership. Pursuant to the terms of the Stock Purchase Agreement, ERP Operating Partnership, as the holder of Class A Common, has agreed to nominate Douglas Crocker II, President of EQR, for election to the Company's Board of Directors. In the event Mr. Crocker (or other person subsequently nominated by ERP Operating Partnership for election to the Company's Board of Directors) is unable or unwilling to serve as a director or is no longer employed by ERP Operating Partnership, ERP Operating Partnership and the Company will agree to the nomination of another member of senior management of ERP Operating Partnership for election to the Company's Board of Directors (Crocker or such other individual being hereinafter referred to as the "Purchaser Nominee"). In the event the Purchaser Nominee is unable or unwilling to serve as a director if elected or is no longer employed by ERP Operating Partnership during such time as such person is a director of the Company, another member of senior management of ERP Operating Partnership determined by ERP Operating Partnership and the Company will have the right to attend all meetings and other proceedings of the Board of Directors to which all members of the Board of Directors have been invited until the next annual meeting of shareholders of the Company. In the event a Purchaser Nominee is not elected to the Board of Directors at any annual meeting of the shareholders of the Company, such Purchaser Nominee or other member of senior management of ERP Operating Partnership determined by ERP Operating Partnership and the Company will have the right to attend all meetings and other proceedings of the Board of Directors to which all members of the Board of Directors have been invited until the next annual meeting of shareholders of the Company. Upon the occurrence and continuation of an event of default under the Stock Purchase Agreement, if a Purchaser Nominee is not a member of the Board of Directors, the Company has agreed to amend its Bylaws to provide that the Board of Directors of the Company will consist of no fewer than 11 directors. In addition, upon the occurrence and continuation of an event of default under the Stock Purchase Agreement, or upon receipt by ERP Operating Partnership of a ruling from the Internal Revenue Service ("IRS") or an opinion of counsel that the right to elect a director to the Company's Board of Directors will not cause EQR to lose its status as a REIT under the Code, then ERP Operating Partnership agrees to elect (and not just nominate) Douglas Crocker II, President of EQR, to the Company's Board of Directors. In the event Mr. Crocker (or other person subsequently elected by ERP Operating Partnership to the Company's Board of Directors) is unable or unwilling to serve as a director or is no longer employed by ERP Operating Partnership, ERP Operating Partnership and the Company will agree to the election of another member of senior management of ERP Operating Partnership to the Company's Board of Directors (Crocker or such other individual elected by Class A Common shareholders, called the "Class A Director"). Holders of the Class A Common, as a class, may nominate or elect a director to the Board of Directors of the Company as described above until May 30, 1999 or, if later, so long as (i) ERP Operating Partnership is obligated to purchase preferred stock in the Company pursuant to the Stock Purchase Agreement; (ii) ERP Operating Partnership has obligations pursuant to the Agreement Regarding Palomino Park or pursuant to the Credit Enhancement Agreement; or (iii) the aggregate liquidation value of the shares of Series A Preferred owned by ERP Operating Partnership is greater than $10 million. Voting of Class A Common and Series A Preferred. Until May 30, 2007, the Company has the right to direct the voting of all shares of Series A Preferred, Class A Common and Common Stock owned by ERP Operating Partnership or any of its affiliates, except as to the election of the Class A Director or any matter relating to the rights, preferences and privileges of the Series A Preferred or the Class A Common. Sale of Stock. Until May 30, 2007, ERP Operating Partnership shall first offer, in writing (a "Notice of Proposed Sale"), to sell any shares of Common Stock, Class A Common, Series A Preferred or warrants to purchase Common Stock owned by it to the Company prior to selling such shares to any other entity. If the Company has not agreed to purchase such shares within 20 days of receipt of such notice, ERP Operating Partnership shall have the right to sell such shares to any person or other entity for a period of 90 days provided any sale is made on terms and conditions no more favorable to such person or entity than specified in the Notice of Proposed Sale. Events of Default. An event of default occurs under the Stock Purchase Agreement upon the occurrence of any of the following events, among others: (i) a judgment for the payment of money in an aggregate amount in excess of $250,000 is rendered against the Company and such judgement remains undischarged for 30 days; (ii) a change in control of the Company (as defined in the Stock Purchase Agreement); (iii) the Company fails to pay the dividend on the Series A Preferred on three separate instances; or (iv) a change resulting in or that could reasonably be expected to result in a material adverse effect on the Company. Remedies. Upon the occurrence of an event of default, all obligations of ERP Operating Partnership to purchase shares of Series A Preferred automatically terminate unless the Company delivers a notice to ERP Operating Partnership requesting the purchase by ERP Operating Partnership of Series A Preferred, and the proceeds of such sale would cure such event of default. In addition, in the event of the bankruptcy of the Company or if the Company fails to pay the dividend on the Series A Preferred on three separate instances, ERP Operating Partnership has the right to cause the Company to purchase the Series A Preferred then held by ERP Operating Partnership. Registration Rights Agreement The Company and ERP Operating Partnership have entered into a Registration Rights Agreement providing for registration rights at the Company's expense with respect to shares of Class A Common, Series A Preferred and Common Stock. Demand Registration. After May 30, 1998, upon request (a "Demand Notice") of ERP Operating Partnership, the Company has agreed to file a registration statement providing for the resale by ERP Operating Partnership of Registrable Securities and will use its best efforts to cause any such registration statement to be declared effective by the Commission. "Registrable Securities" means any of: (i) Series A Preferred issuable or issued; (ii) Common Stock issuable or issued upon conversion of shares of Series A Preferred or Class A Common, or (iii) Common Stock issuable or issued upon the exercise of warrants issued pursuant to the Articles Supplementary. The Company is entitled to postpone for a reasonable period of time (but not in excess of 60 days) the filing of any registration statement, if the Board of Directors of the Company determines that such registration and offering would materially interfere with any proposed material transaction involving the Company. ERP Operating Partnership has the right to deliver one Demand Notice during any calendar year, but not more than four Demand Notices during the period ending May 30, 2002. Incidental Registration. If the Company proposes to register any Common Stock for public sale pursuant to an underwritten offering it will give prompt written notice (a "Registration Notice") to ERP Operating Partnership and upon request from ERP Operating Partnership, the Company will include Registrable Securities in the registration statement. The Company will not be required to effect any registration if the Company is advised by a nationally recognized independent investment banking firm selected by the Company to act as lead underwriter, that a registration at that time of additional securities would materially and adversely affect the offering. ERP Operating Partnership has the right to deliver one Registration Notice during any calendar year, but not more than four Registration Notices during the period ending May 30, 2002. Limit in Aggregate Amount. The Company need not register Registrable Securities pursuant to a Demand Notice or Registration Notice unless the Registrable Securities being registered have an aggregate fair market value of (i) $5,000,000 during the period ending May 30, 2000 ("Initial Period"), or (ii) $7,500,000 at any time after the Initial Period. Lockup. In the event the Company proposes to effect the distribution of its securities through an underwritten public offering, beginning seven days prior to the pricing of such offering and ending thirty days after such pricing, ERP Operating Partnership, in the event it beneficially owns in excess of 100,000 shares, will cease any sale or other disposition of any of the Registrable Securities, if requested by the Company; provided, however, that ERP Operating Partnership will not be subject to more than one lockup period during any 12 month period. Agreement Regarding Palomino Park General. The Company currently owns 80% of the shares of WPHC, consisting of voting Class A Shares (the "Class A Shares"), and ERP Operating Partnership owns the remaining 20% of the shares of WPHC, consisting of non-voting Class B Shares (the "Class B Shares"). WPHC, together with Feld, are the two members of the limited liability companies - Park at Highlands LLC and Red Canyon at Palomino Park LLC - which own Phase I and Phase II, respectively. The Company and ERP Operating Partnership have entered into an agreement (the "Palomino Agreement") regarding their rights and obligations as shareholders of WPHC and certain aspects of the development of Palomino Park, including Phases I (Blue Ridge) and II (Red Canyon). Certain of the terms are summarized below. Capital Contributions. WPHC is obligated to make capital contributions to the Phase I LLC and Phase II LLC for certain acquisition costs, and to fund the deficit between construction costs and construction loan proceeds, respectively. These subsequent capital contribution obligations ("Phase Contributions") are limited to the deficits as projected in the budgets originally adopted for each Phase. The Company has guaranteed the Phase Contributions. ERP Operating Partnership has no obligation to contribute capital to WPHC. Issuance of Additional WPHC Shares to the Company; Anti-Dilution Provisions. If additional shares of WPHC are issued to the Company or to one of its subsidiaries, ERP Operating Partnership will have the right to purchase a sufficient number of such shares to retain a 20% interest in WPHC. Any Class A Shares acquired by ERP Operating Partnership will be converted into Class B Shares. Offers to Purchase Class A Shares or Class B Shares; Rights of First Refusal; The Company's Drag Along Right. ERP Operating Partnership may transfer all, but not part, of its Class B Shares, except in a Tag Along transaction (described below). The Company may transfer all or part of its Class A Shares after the expiration of the lock-up period (i.e., the period during which ERP Operating Partnership is liable to the construction lender under a Tri-Party Agreement, as described below). If the Company receives an offer to purchase all of the Class A Shares, the Company has the right ("Drag Along Right") to compel ERP Operating Partnership to sell all of its Class B Shares as part of that transaction to enable the Company to effectuate a total sale of WPHC to a third party. If ERP Operating Partnership or the Company shall receive an offer from a bona fide third party to purchase all (or in the case of the Company any part) of their shares in WPHC, then the selling shareholder shall be obligated to offer to sell its shares to the other shareholder (i.e. the non-selling shareholder) who shall have a preemptive right ("Right of First Refusal") to purchase the offered shares on the same terms. The Right of First Refusal granted to ERP Operating Partnership does not apply to a written offer from a bona fide purchaser that is not an affiliate of the Company to purchase all of the shares of WPHC owned by the Company and ERP Operating Partnership if the Company validly exercises its Drag Along Rights in connection therewith. ERP Operating Partnership's Tag Along Right. ERP Operating Partnership has a right ("Tag Along Right") to compel the Company to include ERP Operating Partnership's Class B Shares in a sale of the Class A Shares, in such amount as will preserve the 80%-20% ratio between the Class A Shares held by the Company and Class B Shares held by ERP Operating Partnership. The Put/Call Feature of One-Half of the Class B Shares. One-half of ERP Operating Partnership's Class B Shares (the "Put/Call Shares") are subject to a Put/Call agreement in favor of either ERP Operating Partnership (the Put feature) or the Company (the Call feature) at the Put/Call Price. Pursuant to its Put right, ERP Operating Partnership may compel the Company to purchase from ERP Operating Partnership the Put/Call Shares at any time after the fifth year for the Put/Call Price. Pursuant to its Call right, the Company may compel ERP Operating Partnership to sell to the Company the Put/Call Shares at any time for the Put/Call Price. The Put/Call Price equals $1.9 million (adjusted, in the case of the Call, for inflation after the fifth year), less any amounts previously received by ERP Operating Partnership from sale and refinancing proceeds. Consistent with the foregoing, one-half of the Class B Shares in any sale transaction effected by means of either the Drag Along Right or the Tag Along Right is deemed Put/Call Stock and (i) in the case of a sale transaction effected by means of the Drag Along Right, entitled to receive the Put/Call Price and (ii) in the case of a sale transaction effected by means of the Tag Along Right, entitled to receive the greater of the purchase price in such transaction or a pro-rated portion of the Put/Call Price. Future Acquisitions of the Remaining Overall Property. Any future Phase acquired by WPHC will be acquired by WPHC or in a Colorado limited liability company substantially similar to the Phase II LLC. ERP Operating Partnership's Right of First Offer if WPHC Elects to Assign its Interest in the Land Contract. If the Company, through WPHC, decides not to acquire a future Phase and instead to assign the land contract to a third party for such future Phase, then ERP Operating Partnership, subject to the similar interests of Feld, has a preemptive right of first offer with respect to such proposed assignment. ERP Operating Partnership's Right of First/Last Offer for Sale of Blue Ridge and Red Canyon. With the exception of sales pursuant to a condominium or townhome plan, ERP Operating Partnership is accorded certain rights of first and last offer with respect to a sale of either WPHC's interest in the Phase I LLC or the Phase II LLC, or the sale of fee title to Phase I or Phase II by either of said entities. The Company and WHPC Loss of Control. The Company has agreed not to lose its controlling interest in WPHC nor to permit WPHC to lose its controlling interest in Phase I LLC, Phase II LLC or any future entity formed with respect to another phase of Palomino Park without first releasing ERP Operating Partnership from its obligations with respect to the Credit Enhancement Agreement and ERP Guaranty (as defined below). Tri-Party Agreements and Standby Agreements. Phase I Tri-Party Agreement. With respect to the development of Phase I, NationsBank, N.A. ("NationsBank") has provided a construction loan of approximately $36.8 million. ERP Operating Partnership has agreed ("Phase I Tri-Party Agreement"), assuming completion of construction of Phase I, if the loan is not paid when due, to pay NationsBank the lesser of the loan balance or the final agreed upon budget. Phase II Tri-Party Agreement. With respect to the development of Phase II, NationsBank has provided a construction loan of approximately $29.5 million. ERP Operating Partnership has agreed ("Phase II Tri-Party Agreement"), assuming completion of construction of Phase II, if the loan is not paid when due, to pay NationsBank the lesser of the loan balance or the final agreed upon budget. ERP Operating Partnership will receive a fee of (i) 1% of the committed construction loan amount for each of the first two years and (ii) 1-1/2% of such amount for the third year. The Standby Agreements. If ERP Operating Partnership does, in fact, pay off the construction loan pursuant to its obligations under the Phase I Tri- Party Agreement or Phase II Tri-Party Agreement, ERP Operating Partnership shall be entitled to acquire fee title to the corresponding Phase for $100. Events of Default. Upon an event of default (as described below), ERP Operating Partnership may exercise all remedies available to it; provided, however, ERP Operating Partnership may not disaffirm its obligations under the Phase I Tri-Party Agreement or the Phase II Tri-Party Agreement. An event of default includes, among other things, a material misrepresentation by the Company, failure to make payments after a material default by the Company under the Palomino Agreement or any document entered into pursuant to the Palomino Agreement, an undischarged judgment against the Company in excess of $250,000 and a change in control of the Company. Credit Enhancement Agreement Pursuant to a certain agreement (the "Bank Reimbursement Agreement"), (i) Dresdner Bank, AG, NY Branch ("Dresdner") issued a letter of credit ("Dresdner Letter of Credit") to insure the repayment of the Bonds and (ii) the Company has undertaken to reimburse Dresdner if the Dresdner Letter of Credit is drawn upon. ERP Operating Partnership has entered into a Credit Enhancement Agreement with the Company (the "Credit Enhancement Agreement") under which ERP Operating Partnership has made its own credit available to Dresdner in the form of a guaranty to Dresdner of the Company's obligations under the Bank Reimbursement Agreement for a period of eight years from the consummation of the Merger (the "ERP Guaranty"). The ERP Guaranty will be revised and made available with respect to any similar letter of credit or credit facility issued in lieu or replacement of the Dresdner Letter of Credit. The Company has agreed to pay ERP Operating Partnership for the ERP Guaranty an annual credit enhancement fee, payable quarterly, equal to .5% of the face amount of the Dresdner Letter of Credit (or the face amount of any alternate credit arrangement). Following an event of default by the Company, ERP Operating Partnership will have the right, among other remedies, to select an alternate interest rate on the Bonds and to direct the actions of PPPIC under the Credit Enhancement Agreement. In addition, pursuant to the Credit Enhancement Agreement there are certain restrictions on the ability to convert the rate mode of the Bonds. The Company has agreed to reimburse ERP Operating Partnership for any amounts it pays under the ERP Guaranty or any amendment thereto, together with interest on such amount. DESCRIPTION OF CAPITAL STOCK The following summary of the terms of the Company's stock does not purport to be complete and is subject to and qualified in its entirety by reference to Maryland law and the Company's Charter and Bylaws, copies of which have been filed with the Commission as exhibits to the Registration Statement of which this Prospectus is a part and are available from the Company upon request. General The Charter provides that the Company may issue up to 200,000,000 shares of Common Stock, $.01 par value per share. The Board of Directors may reclassify any unissued shares of stock in one or more classes or series of stock. As of July 1, 1997, the Board of Directors had reclassified 350,000 shares of Common Stock as shares of Class A Common and 2,000,000 shares of Common Stock as shares of Series A Preferred. As of July 1, 1997, there were 16,572,043 shares of Common Stock issued and outstanding and 339,806 shares of Class A Common issued and outstanding. The Board of Directors has also authorized the issuance of up to 2,000,000 shares of the Series A Preferred of which 1,000,000 shares are subject to issuance pursuant to the Stock Purchase Agreement and 1,000,000 shares are subject to issuance pursuant to the Company's right to pay dividends on the Series A Preferred by the issuance of additional shares of the Series A Preferred. In addition, up to 1,750,000 shares of Common Stock have been reserved for issuance under the Company's 1997 Management Incentive Plan and 1,326,235 shares of Common Stock have been reserved for issuance under the Company's Rollover Stock Option Plan. Under Maryland law, shareholders generally are not liable for the corporation's debts and obligations. The Common Stock is listed on the American Stock Exchange. The United States Trust Company of New York acts as transfer agent and registrar of the Common Stock. The Company intends to furnish to its shareholders an annual report containing audited consolidated financial statements and an opinion thereon expressed by an independent public accounting firm. Common Stock All of the Shares have been duly authorized, and are fully paid, validly issued and nonassessable. Subject to the preferential rights of any other class or series of stock, holders of the Common Stock are entitled to receive dividends on such stock if, as and when authorized and declared by the Board of Directors of the Company out of assets legally available therefor and to share ratably in the assets of the Company legally available for distribution to its shareholders in the event of its liquidation, dissolution or winding up after payment of or adequate provision for all known debts and liabilities of the Company and payment of liquidation preferences to holders of preferred stock. Each outstanding share of Common Stock entitles the holder to one vote on all matters submitted to a vote of shareholders, including the election of directors, and, except as provided with respect to any other class or series of stock, the holders of such shares will possess exclusive voting power. There is no cumulative voting in the election of directors, which means that, except with respect to the director elected by the holders of Class A Common, the holders of a majority of the outstanding shares of Common Stock can elect all of the directors then standing for election and the holders of the remaining shares will not be able to elect any directors. See "- Class A Common Stock." Holders of shares of Common Stock have no preference, conversion, exchange, sinking fund, redemption or appraisal rights and have no preemptive rights to subscribe for any securities of the Company. Except for the rights of the Class A Common described below, shares of Common Stock will have equal dividend, liquidation and other rights. Under the Maryland General Corporation Law ("MGCL"), a Maryland corporation generally may not dissolve, amend its charter, merge, sell all or substantially all of its assets, engage in a share exchange or engage in similar transactions outside the ordinary course of business unless approved by the affirmative vote of shareholders holding at least two-thirds of the shares entitled to vote on the matter unless a lesser percentage (but not less than a majority of all of the votes entitled to be cast on the matter) is set forth in the corporation's charter. The Charter provides for approval of consolidations, share exchanges, mergers in which the Company is the successor, and amendments to the charter (except amendments to the provisions relating to the classification and removal of directors or any amendment reducing supermajority voting requirements) by the affirmative vote of holders of shares entitled to cast a majority of the votes entitled to be cast on the matter. Classification or Reclassification of Common Stock or Preferred Stock The Charter authorizes the Board of Directors to reclassify any unissued shares of stock from time to time in one or more classes or series of stock. Prior to issuance of shares of each series, the Board is required by MGCL and the Charter to set the terms, preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications and terms or conditions of redemption for each such series. Thus, the Board could authorize the issuance of shares of Preferred Stock with terms and conditions which could have the effect of delaying, deferring or preventing a transaction with or a change in control of the Company that might involve a premium price for the holders of Common Stock or otherwise be in their best interest. As of July 1, 1997, no shares of Preferred Stock were outstanding, and the Company had no plans to issue any Preferred Stock, other than pursuant to the Stock Purchase Agreement. Power to Issue Additional Shares of Common Stock and Preferred Stock The Company believes that the power of the Board of Directors to issue additional authorized but unissued shares of Common Stock and to reclassify any unissued shares of Common Stock and thereafter to cause the Company to issue such reclassified shares of stock will provide the Company with increased flexibility in structuring possible future financings and acquisitions and in meeting other needs which might arise. The additional classes or series, as well as the Common Stock, will be available for issuance without further action by the Company's shareholders, unless such action is required by applicable law or the rules of any stock exchange or automated quotation system on which the Company's securities may be listed or traded. Although the Board of Directors has no intention at the present time of doing so, it could authorize the Company to issue a class or series that could, depending on the terms of such class or series, delay, defer or prevent a transaction or a change of control of the Company that might involve a premium price for holders of common stock or otherwise be in their best interest. Class A Common Stock Rights Generally. Each share of Class A common stock, par value $.01 per share, entitles its holder to all the rights of a share of Common Stock in addition to the rights described below. Holders of Class A Common do not have any preemptive rights to acquire other securities of the Company. Voting Rights. Holders of Class A Common, as a class, may nominate or elect a director to the Board of Directors of the Company, as described in "Certain Agreements between the Company and ERP Operating Partnership - Common Stock and Preferred Stock Purchase Agreement". Optional and Automatic Conversion. Holders of Class A Common have the right, exercisable at any time and from time to time, to convert all or any shares of Class A Common into shares of Common Stock at a conversion rate of one share of Common Stock for each share of Class A Common, subject to adjustment. Any outstanding shares of Class A Common will automatically convert, at the conversion rate, into shares of Common Stock upon the sale, transfer, pledge or other disposition ("Transfer") of such shares of Class A Common to any entity other than an affiliate of EQR or ERP Operating Partnership. Adjustment of Conversion Rate. The conversion rate in effect at any time for Class A Common is subject to adjustment from time to time as follows: If the Company (a) reclassifies the outstanding shares of Common Stock into shares of some other class or series of stock of the Company, (b) subdivides the outstanding shares of Common Stock into a greater number of shares of Common Stock or (c) combines the outstanding shares of Common Stock into a smaller number of shares of Common Stock, the conversion rate immediately prior to such action shall be adjusted so that the holder of any shares of Class A Common thereafter surrendered for conversion shall be entitled to receive the number of shares of Common Stock which he would have owned immediately following such action had such shares of Class A Common been converted immediately prior thereto. Purchase of Shares of Voting Stock in Excess of REIT Ownership Limit. If an event which is undertaken or caused by the Company occurs resulting in ERP Operating Partnership, EQR or any of their affiliates collectively owning outstanding shares of Class A Common in excess of the REIT ownership limits (initially 9.9% of the value of the voting stock of the Company), then the Company will purchase such shares of Class A Common in excess of the REIT ownership limit at the market price thereof. Series A 8% Convertible Redeemable Preferred Stock General. The Board of Directors of the Company has reclassified and designated 2,000,000 shares of Common Stock as shares of a series of preferred stock designated Series A 8% Convertible Redeemable Preferred Stock, $.01 par value per share. The maximum number of authorized shares of Series A Preferred is 2,000,000. Seniority. With respect to the right to receive dividends and to participate in distributions or payments in the event of any liquidation, dissolution or winding up of the Company, the Series A Preferred will rank (i) junior to any other preferred stock of the Company ranking, as to dividends and upon liquidation, prior to the Series A Preferred, (ii) on a parity with any other preferred stock of the Company ranking, as to dividends and upon liquidation, on a parity with the Series A Preferred, and (iii) senior to the Common Stock and any other class or series of shares of stock of the Company ranking, as to dividends and upon liquidation, junior to the Series A Preferred (collectively the "Junior Shares"). Notwithstanding the foregoing, the Company may make distributions or pay dividends in the Common Stock or in any other shares of the Company ranking junior to the Series A Preferred as to distribution rights and liquidation preference at any time. Dividends. The holders of the Series A Preferred are entitled to receive, when and as declared by the Company's Board of Directors out of any funds legally available therefor, dividends at the rate of $2.00 per share per year, payable in cash, except as provided below, in equal amounts quarterly on the fifteenth (or, if not a business day, the next succeeding business day) of January, April, July and October each year (each such day being called a "Quarterly Dividend Date" and each period ending on a Quarterly Dividend Date being called a "Dividend Period"). The amount of any dividend payable for the initial Dividend Period and for any Dividend Period shorter than a full Dividend Period shall be prorated. Notwithstanding the foregoing, for any 12 Dividend Periods, the Company has the right to pay the dividend in additional shares of the Series A Preferred determined by dividing the total amount of the dividend to be paid in shares by $25.00. In the event the Company fails to pay any dividend on the Series A Preferred on any Quarterly Dividend Date, the Company shall not pay any dividends on any other class of stock of the Company other than (i) pro rata with other securities of the Company ranking pari passu with the Series A Preferred or (ii) with Junior Shares until such dividend on the Series A Preferred has been paid. Distributions Upon Liquidation, Dissolution or Winding Up. Upon the voluntary or involuntary dissolution, liquidation or winding up of the Company, the holders of shares of the Series A Preferred will be entitled to receive and to be paid out of the assets of the Company available for distribution to its shareholders, before any payment or distribution is made on any Junior Shares, the amount of $25.00 per share of the Series A Preferred ("Liquidation Value"), plus any accrued and unpaid dividends thereon. If, upon any dissolution, liquidation, or winding up of the Company, the amounts payable to the holders of shares of the Series A Preferred and holders of any other shares of stock of the Company ranking as to any such distribution on a parity with the Series A Preferred are not paid in full, the holders of the Series A Preferred and of such other shares will share ratably in such distribution of assets of the Company in proportion to the full respective preference amounts to which they are entitled. Redemption. Optional Redemption. On and after May 30, 2002, the Company may, at its option, redeem at any time all or any part of the outstanding the Series A Preferred at a price per share (the "Redemption Price") equal to $25.00 per share of the Series A Preferred, together with all accrued and unpaid dividends to and including the date fixed for redemption (the "Redemption Date"); provided, however, that no partial redemption of the Series A Preferred may be effected if after giving effect thereto the aggregate Liquidation Value of the Series A Preferred outstanding is less than $10,000,000. The Redemption Price and all accrued and unpaid dividends will be paid in cash; provided, however, that if (a) a holder of the Series A Preferred desires to convert any of its Series A Preferred called for redemption but such conversion would cause any direct or indirect holder which is classified as a REIT under Section 856 of the Code, to own, directly or indirectly, more than 9.9% of the outstanding voting stock of the Company or would otherwise cause any direct or indirect holder of such outstanding voting stock to lose its status as a REIT under the Code, and (b) such holder has so notified the Company in writing prior to the Redemption Date, stating the number of shares of the Series A Preferred which have been called for redemption which such holder is unable to convert for such reason (such shares being referred to as the "Unconvertible Shares"), then the Company shall pay, in cash, the Redemption Price plus all accrued and unpaid dividends for each Unconvertible Share and shall issue to such holder a warrant to purchase the number of shares of the Common Stock equal to (i) the fair market value of a share of the Common Stock on the Redemption Date (calculated pursuant to the terms of the Articles Supplementary) over the Redemption Price, multiplied by (ii) the number of shares of the Common Stock into which the Unconvertible Shares redeemed from such holder were convertible immediately prior to such redemption, and divided by (iii) the fair market value of a share of the Common Stock on the Redemption Date. Such warrant shall be exercisable without cost to the holder thereof at any time and from time to time for a period of 10 years from the date of issuance of such warrant. The warrant shall be on such terms and conditions as are customarily contained in like warrants, including provisions to protect the holder of the warrant from dilution. The Company shall have the right, at any time, to redeem such warrant at a price equal to the fair market value of such warrant on the date of any such redemption. Required Redemption. Upon the (A) (i) non-payment by the Company of any dividend on the Quarterly Dividend Date applicable to such dividend for three Dividend Periods which need not be consecutive or (ii) failure by the Company to comply with any term or obligations under the Articles Supplementary (the occurrences in (i) and (ii) each called an "Event of Default") or (B) on and after May 30, 2012, whichever comes first, the holder of any shares of the Series A Preferred may, at its option, cause the Company to redeem at any time all of the Series A Preferred held by such holder at $25.00 per share, payable in cash, together with all accrued and unpaid dividends to and including the Redemption Date. Notwithstanding the provisions of the previous sentence, provided an Event of Default has not occurred, the Company has the right to extend the date during which a required redemption is not permitted for three separate additional five year periods if the dividend rate on the Series A Preferred is changed to the then market rate of comparable preferred stock (the "Market Rate") on the first day of each such additional five year period; provided, however, in no event shall the dividend be reduced to less than $2.00 per share of the Series A Preferred. The Market Rate shall be determined by mutual agreement of the holders of the Series A Preferred Stock and the Company or, if they cannot agree, by an investment banking firm under the procedure set forth in the Articles Supplementary. Voting Rights. Until May 30, 2007, pursuant to the Stock Purchase Agreement, the Company has the right to direct the voting of all shares of Series A Preferred owned by ERP Operating Partnership or any of its affiliates, except as to any matter relating to the rights, preferences and privileges of the Series A Preferred. The holders of the Series A Preferred are not be entitled to vote on any matter except as provided below; provided, however, the holders of the Series A Preferred are not to have any voting rights to the extent such rights will cause any holder of the Series A Preferred to own more than 9.9% of the outstanding voting stock of the Company or otherwise cause any holder of the Series A Preferred that is classified as a REIT under Section 856 of the Code to lose its status as a REIT under the Code. So long as any shares of the Series A Preferred remain outstanding, the Company will not, without the affirmative vote of the holders of at least two- thirds of the shares of the Series A Preferred outstanding at the time, (i) authorize, create or issue, or increase the authorized or issued amount of any class or series of shares of stock ranking prior to the Series A Preferred with respect to the payment of dividends or the distribution of assets upon liquidation, dissolution or winding up or reclassify any authorized shares of stock of the Company into such shares, or create, authorize or issue any obligation or security convertible into or evidencing the right to purchase any such shares; or (ii) amend, alter or repeal the provisions of the Charter or the terms of the Articles Supplementary classifying the Series A Preferred, whether by merger, consolidation or otherwise (an "Event"), so as to materially and adversely affect any right, preference, privilege or voting power of the Series A Preferred or the holders thereof; provided, however, with respect to the occurrence of any of the Events set forth in (ii) above, so long as the shares of the Series A Preferred remain outstanding with the terms thereof materially unchanged, even if upon the occurrence of an Event, the Company may not be the surviving entity, the occurrence of any such Event will not be deemed to materially and adversely affect such rights, preferences, privileges or voting power of holders of the Series A Preferred and provided further that (x) any increase in the amount of the authorized or issued shares of preferred stock of the Company or the creation or issuance of any other preferred stock of the Company, or (y) any increase in the amount of authorized or issued shares of the Series A Preferred or any other preferred stock of the Company, in each case ranking on a parity with or junior to the Series A Preferred with respect to payment of dividends or the distribution of assets upon liquidation, dissolution or winding up, shall not be deemed to materially and adversely affect such rights, preferences, privileges or voting powers. Rights of Conversion. Holders of the Series A Preferred have the right, exercisable at any time and from time to time, except in the case of the Series A Preferred called for redemption, to convert all or any of such the Series A Preferred into the Common Stock at a conversion price per share of the Common Stock equal to $11.124 (representing a premium of 8% in excess of the book value per share of the Common Stock on the date of the Merger) (the "Conversion Price"). In the case of the Series A Preferred called for redemption, conversion rights will expire at the close of business on the last business day preceding the Redemption Date. Adjustments of Conversion Rate. The conversion rate in effect at any time for the Series A Preferred is subject to adjustment from time to time to protect against certain dilutive events. In case the Company (1) pays or makes a distribution in shares of Common Stock to holders of the Common Stock, (2) reclassifies the outstanding the Common Stock into shares of some other class or series of shares, (3) subdivides the outstanding the Common Stock into a greater number of shares of the Common Stock or (4) combines the outstanding Common Stock into a smaller number of shares of the Common Stock, the conversion rate immediately prior to such action shall be adjusted so that the holder of any shares of the Series A Preferred thereafter surrendered for conversion will be entitled to receive the number of shares of the Common Stock which he would have owned immediately following such action had such the Series A Preferred been converted immediately prior to such event. In case the Company issues rights, options or warrants to all holders of the Common Stock entitling them to subscribe for or purchase the Common Stock (or securities convertible into the Common Stock) at a price per share less than the current market price (as determined pursuant to the Articles Supplementary) of the Common Stock on such record date, the number of shares of the Common Stock into which each share of the Series A Preferred is convertible will be adjusted so that the same shall be equal to the number determined by multiplying the number of shares of the Common Stock into which such share of the Series A Preferred was convertible immediately prior to such record date by a fraction of which the numerator shall be the number of shares of the Common Stock outstanding on such record date plus the number of additional shares of the Common Stock offered (or into which the convertible securities so offered are convertible), and of which the denominator shall be the number of shares of the Common Stock outstanding on such record date, plus the number of shares of the Common Stock which the aggregate offering price of the additional shares of the Common Stock offered (or into which the convertible securities so offered are convertible) would purchase at such current market price. In case the Company distributes to all holders of the Common Stock any class of shares of capital stock other than the Common Stock, evidences of indebtedness or assets of the Company (other than cash distributions out of current or retained earnings), or distributes to all holders of the Common Stock rights or warrants to subscribe for securities other than those referred to in the immediately preceding paragraph, then in each case the number of shares of the Common Stock into which each share of the Series A Preferred will be convertible will be adjusted so that the same shall equal the number determined by multiplying the number of shares of the Common Stock into which such share of the Series A Preferred was convertible immediately prior to the date of such distribution by a fraction of which the numerator shall be the current market price of the Common Stock on the record date mentioned below, and of which the denominator shall be such current market price of the Common Stock, less the then fair market value (as determined by the Board of Directors) of the portion of the securities or assets so distributed or of such subscription rights or warrants applicable to one share of the Common Stock. Notwithstanding the foregoing, in the event that the Company distributes rights or warrants (other than those referred to in the immediately preceding paragraph) ("Rights") pro rata to holders of the Common Stock, the Company may, in lieu of making any adjustment described in this paragraph make proper provision so that each holder of a share of the Series A Preferred who converts such share after the record date for such distribution and prior to the expiration or redemption of the Rights shall be entitled to receive upon such conversion, in addition to the Common Stock issuable upon such conversion (the "Conversion Shares"), a number of Rights to be determined as follows: (1) if such conversion occurs on or prior to the date for the distribution to the holders of Rights of separate certificates evidencing such Rights (the "Distribution Date"), the same number of Rights to which a holder of a number of shares of the Common Stock equal to the number of Conversion Shares is entitled at the time of such conversion in accordance with the terms and provisions of and applicable to the Rights; and (2) if such conversion occurs after the Distribution Date, the same number of Rights to which a holder of the number of shares of the Common Stock into which a share of the Series A Preferred so converted was convertible immediately prior to the Distribution Date would have been entitled on the Distribution Date in accordance with the terms and provisions of and applicable to the Rights. Options. So long as any Series A Preferred is outstanding, the Company may not issue any options to purchase shares of the Company ("Employee Stock Options") to officers, directors or employees of, or consultants to, the Company, whether pursuant to employee stock option or purchase plans of the Company or employment or consulting agreements or otherwise for an exercise price which is less than the fair market value of such shares on the date of grant. In the event the number of shares of Common Stock subject to Employee Stock Options (excluding any Employee Stock Options issued on the date of the Merger in exchange for Wellsford Residential share options) at any time exceeds, in the aggregate, 10% of the Common Stock outstanding at such time, all Employee Stock Options outstanding at such time in excess of such 10%, shall be deemed for certain anti-dilution purposes to have an exercise price per share equal to 20% of the average fair market value of a share of the Common Stock on the date of grant of those shares subject to Employee Stock Options most recently granted in excess of such 10%. CERTAIN PROVISIONS OF MARYLAND LAW AND OF THE COMPANY'S CHARTER AND BYLAWS The following is a summary of certain provisions of Maryland law and the Company's Charter and Bylaws and is qualified in its entirety by reference to the Company's Charter and Bylaws, copies of which have been filed with the Commission as exhibits to the Registration Statement of which this Prospectus is a part and are available from the Company upon request. Classification of the Board of Directors The Bylaws provide that the number of directors of the Company may be established by the Board of Directors but may not be fewer than the minimum number required by Maryland law, which is three, nor more than 15. Any vacancy will be filled, at any regular meeting or at any special meeting called for that purpose, by a majority of the remaining directors. A vacancy resulting from an increase in the number of directors must be filled by a majority of the entire Board of Directors. Pursuant to the Charter, the Board of Directors is divided into three classes of directors. The initial terms of the first, second and third classes will expire at the annual meetings of shareholders to be held in 1998, 1999 and 2000, respectively. Beginning in 1998, directors of each class will be chosen for three-year terms upon the expiration of their current terms and each year one class of directors will be elected by the shareholders. The members of each such class will hold office until their successors are duly elected and qualified. The Company believes that classification of the Board of Directors will help to assure the continuity and stability of the Company's business strategies and policies as determined by the Board of Directors. Holders of shares of the Common Stock have no right to cumulative voting in the election of directors. Consequently, at each annual meeting of shareholders, the holders of a majority of the shares of the Common Stock are able to elect all of the successors of the class of directors whose terms expire at that meeting. Classification of the Board of Directors could have the effect of making the removal of incumbent directors more time-consuming and difficult, which could discourage a third party from making a tender offer or otherwise attempting to obtain control of the Company, even though such an attempt might be beneficial to the Company and its shareholders. At least two annual meetings of shareholders, instead of one, will generally be required to effect a change in a majority of the Board of Directors. Thus, the classified board provision could increase the likelihood that incumbent directors will retain their positions. Removal of Directors The Charter provides that, except as provided in the next sentence, a director may be removed only for cause and by the affirmative vote of at least two-thirds of the votes entitled to be cast for the election of directors (i.e., the votes attributable to all outstanding shares of the Common Stock). The Class A Director may be removed, without cause, only by the affirmative vote of at least a majority of the Class A Common electing such Class A Director. Business Combinations Under the MGCL, certain "business combinations" (including a merger, consolidation, share exchange or, in certain circumstances, an asset transfer or issuance or reclassification of equity securities) between a Maryland corporation and an Interested Stockholder or an affiliate of the corporation who, at any time within the two-year period prior to the date in question, was an Interested Stockholder or an affiliate of such an Interested Stockholder are prohibited for five years after the most recent date on which the Interested Stockholder becomes an Interested Stockholder. Thereafter, any such business combination must be recommended by the board of directors of such corporation and approved by the affirmative vote of at least (a) 80% of the votes entitled to be cast by holders of outstanding shares of voting stock of the corporation and (b) two-thirds of the votes entitled to be cast by holders of voting stock of the corporation other than shares held by the Interested Stockholder with whom (or with whose affiliate) the business combination is to be effected, unless, among other conditions, the corporation's common shareholders receive a minimum price (as defined in the MGCL) for their shares and the consideration is received in cash or in the same form previously paid by the Interested Stockholder for its shares. These provisions of Maryland law do not apply, however, to business combinations that are approved or exempted by the board of directors of the corporation prior to the time that the Interested Stockholder becomes an Interested Stockholder. The directors of the Company have exempted from the Maryland statute any business combinations with Jeffrey H. Lynford or Edward Lowenthal or any of their affiliates or any other person acting in concert or as a group with any of such persons. Amendment to the Charter and Bylaws The Charter may be amended only by the affirmative vote of a majority of all of the votes entitled to be cast on the matter, except that any amendment to the sections of the charter that address the number, classification or removal of directors, or any amendment providing that the shareholders may approve an action by a lesser percentage of votes than that required by law will be valid only if approved by the affirmative vote of two-thirds of all of the votes entitled to be cast on the matter. The Board of Directors of the Company has the exclusive power to adopt, alter or repeal any provision of the Bylaws and to make new Bylaws. Merger, Consolidation, Sale of Assets A sale of all or substantially all of the assets of the Company or a merger in which the Company is not the successor must be approved by the affirmative vote of two-thirds of all of the votes entitled to be cast on the matter. A consolidation or share exchange or a merger in which the Company is the successor need be approved only by the affirmative vote of holders of shares entitled to cast a majority of all votes entitled to be cast on the matter. Dissolution of the Company The dissolution of the Company must be approved by the affirmative vote of the holders of not less than two-thirds of all the votes entitled to be cast on the matter. Advance Notice of Director Nominations and New Business The Bylaws of the Company provide that (a) with respect to an annual meeting of shareholders, nominations of persons for election to the Board of Directors and the proposal of business to be considered by shareholders may be made only (i) pursuant to the Company's notice of the meeting, (ii) by or at the direction of the Board of Directors or (iii) by a stockholder who is entitled to vote at the meeting and has complied with the advance notice procedures set forth in the Bylaws and (b) with respect to special meetings of shareholders, only the business specified in the Company's notice of meeting may be brought before the meeting of shareholders and nominations of persons for election to the Board of Directors may be made only (i) pursuant to the Company's notice of the meeting, (ii) by or at the direction of the Board of Directors, or (iii) provided that the Board of Directors has determined that directors shall be elected at such meeting, by a stockholder who is entitled to vote at the meeting and has complied with the advance notice provisions set forth in the Bylaws. Meetings of Shareholders The Company's Bylaws provide that annual meetings of shareholders shall be held on a date and at the time set by the Board of Directors during the month of May each year (commencing in May 1998). Special meetings of the shareholders may be called by (i) the Chairman of the Board of the Company, (ii) the President of the Company, (iii) the Chief Executive Officer of the Company or (iv) the Board of Directors. As permitted by the MGCL, the Bylaws provide that special meetings must be called by the Secretary of the Company upon the written request of the holders of shares entitled also to cast not less than a majority of all of the votes entitled to be cast at the meeting. The Company's Bylaws provide that any stockholder of record wishing to nominate a director or have a stockholder proposal considered at an annual meeting (except for stockholder proposals included in the Company proxy materials pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) must provide written notice and certain supporting documentation to the Company relating to the nomination or proposal not later than 60 days nor earlier than 90 days prior to the anniversary date of the prior year's annual meeting or special meeting in lieu thereof (the "Anniversary Date"). In the event that the annual meeting is advanced by more than 30 calendar days before or delayed more than 60 days from the Anniversary Date, shareholders generally must provide written notice no earlier than 90 days prior to such annual meeting nor later than the later of 60 days prior to such annual meeting or 10 days following the date on which notice of the meeting is mailed to shareholders. The purpose of requiring shareholders to give the Company advance notice of nominations and other business is to afford the Board of Directors a meaningful opportunity to consider the qualifications of the proposed nominees or the advisability of the other proposed business and, to the extent deemed necessary or desirable by the Board of Directors, to inform shareholders and make recommendations about the qualifications or business, as well as to provide a more orderly procedure for conducting meetings of shareholders. Although the Company's Bylaws do not give the Board of Directors any power to disapprove stockholder nominations for the election of directors or proposals for action, they may have the effect of precluding a contest for the election of directors or the consideration of stockholder proposals if the proper procedures are not followed, and of discouraging or deterring a third party from conducting a solicitation of proxies to elect its own slate of directors or to approve its own proposal, without regard to whether consideration of the nominees or proposals might be harmful or beneficial to the Company and its shareholders. Limitation of Liability and Indemnification The MGCL permits a Maryland corporation to include in its charter a provision limiting the liability of its directors and officers to the corporation and its shareholders for money damages except for liability resulting from (a) actual receipt of an improper benefit or profit in money, property or services or (b) active and deliberate dishonesty established by a final judgment as being material to the cause of action. The Charter contains such a provision which eliminates such liability to the maximum extent permitted by Maryland law. The Charter authorizes the Company, to the maximum extent permitted by Maryland law, to obligate itself to indemnify and to pay or reimburse reasonable expenses in advance of final disposition of a proceeding to (a) any present or former director or officer or (b) any individual who, while a director of the Company, and at the request of the Company, serves or has served another corporation, partnership, joint venture, trust, employee benefit plan, limited liability company or any other enterprise as a director, officer, partner, trustee, manager or member of such corporation, partnership, joint venture, trust, employee benefit plan, limited liability company or other enterprise. The Bylaws of the Company obligate it, to the maximum extent permitted by Maryland law, to indemnify and to pay or reimburse reasonable expenses in advance of final disposition of a proceeding to (a) any present or former director or officer who is made a party to the proceeding by reason of his service in that capacity or (b) any individual who, while a director of the Company and at the request of the Company, serves or has served another corporation, partnership, joint venture, trust, employee benefit plan, limited liability company or any other enterprise as a director, officer, partner, trustee, manager or member of such corporation, partnership, joint venture, trust, employee benefit plan, limited liability company or other enterprise and who is made a party to the proceeding by reason of his service in that capacity. The Charter and Bylaws also permit the Company to indemnify and advance expenses to any person who served a predecessor of the Company in any of the capacities described above and to any employee or agent of the Company or a predecessor of the Company. The MGCL requires a corporation (unless its charter provides otherwise, which the Charter does not) to indemnify a director or officer who has been successful, on the merits or otherwise, in the defense of any proceeding to which he is made a party by reason of his service in that capacity. The MGCL permits a corporation to indemnify its present and former directors and officers, among others, against judgments, penalties, fines, settlements and reasonable expenses actually incurred by them in connection with any proceeding to which they may be made a party by reason of their service in those or other capacities unless it is established that (a) the act or omission of the director or officer was material to the matter giving rise to the proceeding and (i) was committed in bad faith or (ii) was the result of active and deliberate dishonesty, (b) the director or officer actually received an improper personal benefit in money, property or services or (c) in the case of any criminal proceeding, the director or officer had reasonable cause to believe that the act or omission was unlawful. However, a Maryland corporation may not indemnify for an adverse judgment in a suit by or in the right of the corporation. In addition, the MGCL requires the Company, as a condition to advancing expenses, to obtain (a) a written affirmation by the director or officer of his good faith belief that he has met the standard of conduct necessary for indemnification by the Company as authorized by the Bylaws and (b) a written statement by or on his behalf to repay the amount paid or reimbursed by the Company if it shall ultimately be determined that the standard of conduct was not met. SHARES AVAILABLE FOR FUTURE SALE As of July 1, 1997, there were 16,572,043 shares of Common Stock issued and outstanding and 339,806 shares of Class A Common issued and outstanding. In addition, 3,076,235 shares of Common Stock are available for issuance under the Company's Management Incentive Plan and Rollover Stock Option Plan (options to purchase 1,873,610 of such shares have been granted, 1,326,235 of which were granted in replacement for former Wellsford Residential share options), and approximately 5,000,000 shares of Common Stock have been reserved for issuance upon conversion of the Series A Preferred and Class A Common. Upon registration of the 12,242,719 Shares offered hereby, all of the shares of Common Stock will be freely tradeable without registration or other restrictions under the Securities Act, except for any of such shares of Common Stock issued to an "affiliate" of the Company. The 3,076,235 shares of Common Stock issuable under the Company's Management Incentive Plan and Rollover Stock Option Plan will also be freely tradeable upon the registration of such shares under the Securities Act. The shares of Class A Common and Series A Preferred that have been or will be issued to ERP Operating Partnership and the shares of Common Stock issuable upon conversion of the Class A Common and the Series A Preferred will be "restricted" securities ("Restricted Securities") within the meaning of Rule 144 under the Securities Act. The Company has agreed to file, subject to certain limitations, one or more registration statements with the Commission for the purpose of registering the sale of the shares of Common Stock and Series A Preferred issued or issuable to ERP Operating Partnership. Upon effectiveness of such registration statement, ERP Operating Partnership may sell such shares in the secondary market without being subject to the volume limitations or other requirements of Rule 144. See "Certain Agreements Between the Company and ERP Operating Partnership - Registration Rights Agreement". In general, under Rule 144 as currently in effect, if one year has elapsed since the later of the date of acquisition of Restricted Securities from the Company or the date of acquisition of Restricted Securities from any "affiliate" of the Company, as that term is defined under the Securities Act, the acquiror or subsequent holder is entitled to sell within any three-month period a number of shares of Common Stock that does not exceed the greater of 1% of the then-outstanding Common Stock or the average weekly trading volume of Common Stock on all exchanges and reported through the automated quotation system of a registered securities association during the four calendar weeks preceding the date on which notice of the sale is filed with the Commission. Sales under Rule 144 are also subject to certain restrictions on the manner of sales, notice requirements and the availability of current public information about the Company. If two years have elapsed since the date of acquisition of Restricted Securities from the Company or from an "affiliate" of the Company, and the acquiror or subsequent holder thereof is deemed not to have been an affiliate of the Company at any time during the 90 days preceding a sale, such person would be entitled to sell such Common Stock in the public market under Rule 144(k) without regard to the volume limitations, manner of sale provisions, public information requirements or notice requirements. The effect, if any, that future market sales of Restricted Stock or the availability of such Restricted Stock for sale will have on the market price prevailing from time to time cannot be predicted. Nevertheless, sales of substantial amounts of Restricted Stock in the public market might adversely affect prevailing market prices for the shares of Common Stock. CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS In the opinion of Robinson Silverman Pearce Aronsohn & Berman LLP, counsel to the Company, the following summarizes the material United States federal income tax consequences of the ownership and disposition of shares of Common Stock offered hereby applicable to U.S. Holders and Non-U.S. Holders of the Common Stock. In general a "U.S. Holder" includes (i) a citizen or resident of the United States, (ii) a corporation or partnership created or organized in the United States or under the law of the United States or any State, (iii) an estate or trust whose income is includible in gross income for United States federal income tax purposes regardless of its source or (iv) a trust if a court within the United States is able to exercise primary supervision of the administration of the trust and one or more United States fiduciaries have the authority to control all substantial decisions of the trust. In general, a "Non-U.S. Holder" is any holder other than a U.S. Holder. This summary is based on the Code, judicial decisions, administrative pronouncements, and existing and proposed Treasury regulations, changes to any of which after the date of this Prospectus could have retroactive effect. This summary is of a general nature only and is not intended to be legal or tax advice to any particular holder and no representation with respect to the United States federal income tax consequences to any particular holder is made. This summary does not address all aspects of federal income taxation and does not address any aspects of estate taxation or of state, local or non- U.S. tax laws, except as set forth below. This summary does not consider any specific facts or circumstances that may apply to a particular holder (such as banks, insurance companies, tax-exempt organizations, dealers in securities, or the fact that in the case of a Non-U.S. Holder that is a partnership, the United States tax consequences of holding and disposing of shares of Common Stock may be affected by certain determinations made at the partner level). Accordingly, prospective purchasers of Common Stock are urged to consult their tax advisors regarding the United States federal, state, local and non-U.S. income and other tax consequences of holding and disposing of shares of the Common Stock. The following discussion is based on the assumption that shares of Common Stock are held as capital assets within the meaning of Section 1221 of the Code. Dividends Distributions, if any (see "Dividend Policy"), paid on the Common Stock will be treated as dividends taxable as ordinary income to U.S. Holders to the extent of the Company's current or accumulated earnings and profits as determined under federal income tax principles. While the Company anticipates having earnings and profits for federal income tax purposes in the current and future years, there can be no assurance that the Company will have current or accumulated earnings and profits in any of such years. To the extent that the amount of distributions paid on the Common Stock exceeds the Company's current or accumulated earnings and profits, such distributions will be treated as a nontaxable return of capital and will be applied against and reduce the adjusted tax basis of the Common Stock in the hands of each U.S. Holder (but not below zero). The amount of any such distribution which exceeds the adjusted tax basis of the Common Stock in the hands of the U.S. Holder will be treated as capital gain and will be long-term capital gain if the U.S. Holder's holding period for the Common Stock exceeds one year. Under current law, long-term capital gains of noncorporate taxpayers are generally taxed at rates more favorable than those applicable to other types of income. Legislation has been proposed which, if passed, would further reduce the rate of tax on capital gains. Under Section 243 of the Code, corporate stockholders generally will be able, subject to certain exceptions and restrictions, to deduct 70% of the amount of any distribution qualifying as an ordinary income dividend. Distributions, if any (see "Dividend Policy"), paid to a Non-U.S. Holder generally will be subject to United States withholding tax at a 30% rate (or a lower rate as may be prescribed by an applicable tax treaty) unless the distributions are either (i) effectively connected with a trade or business of the Non-U.S. Holder within the United States or (ii) if a tax treaty applies, attributable to a United States permanent establishment maintained by the non- U.S. holder. Distributions effectively connected with a trade or business or attributable to such permanent establishment will generally not be subject to withholding (if the Non-U.S. Holder properly files an executed United States Internal Revenue Service Form 4224 with the payor of the distribution) and generally will be subject to United States federal income tax in the manner described above for U.S. Holders. In the case of a Non-U.S. Holder which is a corporation, such effectively connected income also may be subject to the branch profits tax (which is generally imposed on a foreign corporation at a rate of 30% on the deemed repatriation from the United States of effectively connected earnings and profits). The branch profits tax may not apply if the recipient is a qualified resident of certain countries with which the United States has an income tax treaty. To determine the applicability of a tax treaty providing for a lower rate of withholding distributions paid to a stockholder's address of record in a foreign country are presumed, under the current IRS positions, to be paid to a resident of that country, unless the payor has knowledge that such presumption is not warranted or an applicable tax treaty (or United States Treasury Regulations thereunder) requires some other method for determining a Non-U.S. Holder's residence. However, recently proposed U.S. Treasury Regulations, if adopted, would modify the forms and procedures for this certification. Sale or Other Disposition of Common Stock Gain or loss, if any, realized by a U.S. Holder on the sale or other disposition of shares of Common Stock will be subject to United States federal income taxation as capital gain or loss in an amount equal to the difference between the U.S. Holder's adjusted tax basis in the shares of Common Stock and the amount realized on the disposition. Any such gain or loss will generally be treated as long-term or short-term capital gain or loss, depending on whether the U.S. Holder's holding period with respect to the shares of Common Stock is longer than one year. For United States federal income tax purposes, capital losses are subject to limitations on deductibility. Generally, a Non-U.S. Holder will not be subject to United States federal income tax on any gain realized upon the sale or other disposition of such holder's shares of Common Stock unless (i) the gain is effectively connected with a trade or business carried on by the Non-U.S. Holder with the United States; (ii) the Non-U.S. Holder is an individual who holds the shares of Common Stock as a capital asset and is present in the United States for 183 days or more in the taxable year of the disposition and to whom such gain is United States source; (iii) the Non-U.S. Holder is subject to tax pursuant to the provisions of U.S. tax law applicable to certain former United States citizens or residents; or (iv) the Company is or has been a "United States real property holding corporation" for federal income tax purposes (which the Company believes could very well be the case) at any time during the five-year period ending on the date of disposition (or such shorter period that such shares were held) and, provided the Common Stock is "regularly traded" on an established securities market, the Non-U.S. Holder held, directly or indirectly, more than five percent of the Common Stock. Backup Withholding and Information Reporting In general, a noncorporate U.S. Holder of the Common Stock may be subject to backup withholding at the rate of 31% with respect to reportable payments of dividends accrued with respect to, or the proceeds of a sale, exchange or redemption of, the Common Stock. The payor will be required to deduct and withhold the prescribed amount with respect to all such reportable payments if (i) the payee fails to furnish a taxpayer identification number ("TIN") to the payor or (ii) the Secretary of the Treasury notifies the payor that the TIN furnished by the payee is incorrect. In addition, the payor will also be required to deduct and withhold the prescribed amount with respect to dividend payments if there has been a "notified payee underreporting," or there has been a failure of the payee to certify to the payor under the penalty of perjury that such payee is not subject to withholding. Amounts paid as backup withholding do not constitute an additional tax and will be credited against the U.S. Holder's federal income tax liabilities or may be refundable. Dividends paid to Non-U.S. Holders that are subject to United States withholding tax at the 30% statutory rate or at a reduced tax treaty rate and dividends that are effectively connected with the conduct of a trade or business in the United States (if certain certification and disclosure requirements are met) are exempt from backup withholding of U.S. federal income tax (although proposed U.S. Treasury Regulations would impose backup withholding in certain situations). The Company must report annually to the IRS and to each Non-U.S. Holder and to noncorporate U.S. Holders the amount of dividends paid to and the tax withheld, if any, with respect to such holder. These information reporting requirements apply regardless of whether withholding was reduced by an applicable tax treaty. Copies of these information returns may also be available under the provisions of a specific treaty or agreement with the tax authorities in the country in which the Non- U.S. Holder resides. The payment of the proceeds from the disposition of shares of Common Stock by a Non-U.S. Holder through the United States office of a broker will be subject to information reporting and backup withholding unless the holder, under penalties of perjury, certifies, among other things, its status as a Non-U.S.Holder, or otherwise establishes an exemption. Generally, the payment of the proceeds from the disposition of shares of Common Stock by a Non-U.S. Holder to or through a non-U.S. office of a broker will not be subject to backup withholding and will not be subject to information reporting. In the case of the payment of proceeds from the disposition of shares of Common Stock by a Non-U.S. Holder through a non-U.S. office of a broker that is a U.S. person or a "U.S.-related person," existing regulations require information reporting (but not backup withholding) on the payment unless the broker receives a statement from the owner, signed under penalties of perjury, certifying, among other things, its status as a Non-U.S. Holder, or the broker has documentary evidence in its files that the owner is a Non-U.S. Holder and the broker has no actual knowledge to the contrary. For tax purposes, a "U.S.-related person" is (i) a "controlled foreign corporation" for United States federal income tax purposes or (ii) a foreign person 50% or more of whose gross income from all sources for the three-year period ending with the close of its taxable year preceding the payment (or for such part of the period that the broker has been in existence) is derived from activities that are effectively connected with the conduct of a United States trade or business. Any amount withheld from a payment to a Non-U.S. Holder under the backup withholding rules will be allowed as a credit against such holder's United States federal income tax liability and may entitle such holder to a refund, provided that the required information is furnished to the IRS. Non-U.S. Holders should consult their tax advisors regarding the application of these rules to their particular situations, the availability of an exemption therefrom and the procedures for obtaining such an exemption, if available. State, Local and Foreign Taxation The Company and its shareholders may be subject to state, local or foreign taxation in various state, local or foreign jurisdictions, including those in which it or they transact business or reside. Such state, local or foreign taxation may differ from the Federal income tax treatment described above. Consequently, prospective holders of shares of Common Stock should consult their own tax advisors regarding the effect of state, local and foreign tax laws on an investment in the Company. PLAN OF DISTRIBUTION The Company will not receive any proceeds from the sale by the Selling Shareholders of the Shares offered hereby. The Shares may be sold from time to time to purchasers directly by any of the Selling Shareholders. Alternatively, any of the Selling Shareholders may from time to time offer the Shares through underwriters, dealers or agents who may receive compensation in the form of underwriting discounts, concessions or commissions from the Selling Shareholders and/or the purchasers of the Shares for whom they may act as agent. The Selling Shareholders and any such underwriters, dealers or agents who participate in the distribution of the Shares may be deemed to be underwriters, and any profits on the sale of the Shares by them and any discounts, commissions or concessions received by any such underwriters, dealers or agents might be deemed to be underwriting discounts and commissions under the Securities Act. The Shares may be sold from time to time in one or more transactions at a fixed offering price, which may be changed, or at varying prices determined at the time of sale or at negotiated prices. Such prices will be determined by the Selling Shareholders or by agreement between the Selling Shareholders and underwriters or dealers. The Company will pay substantially all of the expenses incident to the registration, offering and sale of the Shares to the public other than (i) discounts, commissions, fees and expenses of underwriters, dealers or agents and (ii) other fees and expenses of the Selling Shareholders. The Company also has agreed to indemnify the Selling Shareholders and any underwriter they may utilize against certain liabilities, including liabilities under the Securities Act. In order to comply with certain states' securities laws, if applicable, the Shares will be sold in such jurisdictions only through registered or licensed brokers or dealers. In certain states the Shares may not be sold unless the Shares have been registered or qualified for sale in such state, or unless an exemption from registration or qualification is available and is obtained. CERTAIN ERISA CONSIDERATIONS General Fiduciary Matters In considering an investment in the Company of a portion of the assets of any employee benefit plan (including a "Keogh" plan or an Individual Retirement Account), whether or not subject to Employee Retirement Income Security Act of 1974, as amended ("ERISA") or the Code (all hereinafter referred to as a "Qualified Plan"), a fiduciary should consider (i) whether the investment is in accordance with the documents and instruments governing the Qualified Plan; (ii) whether the investment satisfies the diversification requirements of Section 404(a)(1)(C) of ERISA, if applicable; (iii) whether the investment provides sufficient liquidity to permit benefit payments to be made as they become due; (iv) any requirement that the fiduciary annually value the assets of the Qualified Plan; (v) whether the investment is prudent, since there is a high degree of risk in purchasing the shares of Common Stock offered hereby; and (vi) whether the investment is for the exclusive purpose of providing benefits to participants and their beneficiaries. Furthermore, ERISA and the Code prohibit fiduciaries of certain Qualified Plans from engaging in various acts of self-dealing. Accordingly, absent an exemption, the fiduciaries of a Qualified Plan should not purchase shares of Common Stock with assets of any Qualified Plan if the Company or any of its affiliates are a "party in interest" or "disqualified person" with respect to the Qualified Plan. Plan Assets If the underlying assets of the Company (as opposed to shares of Common Stock thereof) were to be deemed to be "plan assets" under ERISA, (i) the prudence and other fiduciary responsibility standards of Part 4 of Subtitle B of Title I of ERISA would extend to investments made by the Company; and (ii) certain transactions in which the Company might seek to engage could constitute "prohibited transactions" under ERISA and the Code. Under the final regulation (Reg. Section 2510.3-101) (the "Final Regulation") issued by the Department of Labor ("DOL"), the assets and properties of corporations, partnerships and certain other entities in which a plan makes an equity investment (other than an investment in a "publicly- offered security" or a security issued by an investment company registered under the 1940 Act) would be deemed to be assets of the investing plan unless (i) the entity is an "operating company" (including a "venture capital operating company" or a "real estate operating company") or (ii) equity participation by benefit plan investors (e.g., Qualified Plans) is less than 25% of any class of equity of the entity, excluding equity interests held by any person (other than a benefit plan investor) with discretionary authority or control over the assets of the entity or any person who provides investment advice for a fee (direct or indirect) with respect to such assets and any affiliate thereof. For purposes of the 25% test, "benefit plan investors" include all employee benefit plans, whether or not subject to ERISA or the Code, including "Keogh" plans, Individual Retirement Accounts and pension plans maintained by governmental entities or foreign corporations, as well as any entity of which 25% or more of the value of any class of equity interests is held by employee benefit plans. At such time, if ever, that the Company registers the shares of Common Stock sold in the Offering, the Company believes that the shares of Common Stock should constitute a "publicly-offered security" and, therefore, the assets of the Company should not be deemed to constitute "plan assets" of any Qualified Plan that invests in the Common Stock. Because of the factual nature of the legal issues involved, however, the Company can offer no assurances in this regard. The Company expects that upon completion of this Offering, the exception described in (ii) above will apply, and will continue to apply, until such time, if ever, that the shares qualify as "publicly traded securities." The Company cannot, however, give any assurance that this exception will be deemed to apply. Plan Asset Consequences - Prohibited Transactions If the Company's assets were to constitute "plan assets" and a prohibited transaction were to occur, or the acquisition of shares of Common Stock in the Company by a Qualified Plan were to constitute a prohibited transaction, then any fiduciary or other "party in interest" which has engaged in any such prohibited transaction or caused the Company to engage in any such prohibited transaction could be required (i) to restore to the Qualified Plan any profit realized on the transaction and (ii) to reimburse the Qualified Plan for any losses suffered by the Qualified Plan as a result of such investment. In addition, each "party in interest" involved could be subject to an excise tax equal to 5% of the amount involved in the prohibited transaction for each year such transaction continues and, unless such transaction were corrected within statutorily required periods, to an additional tax of 100%. Plan fiduciaries who make the decision to invest in shares of Common Stock of the Company could, under certain circumstances, be liable for investing in the Company or as co-fiduciaries for actions taken by the Company. Furthermore, unless appropriate administrative exemptions were available or were obtained, the Company would be restricted from acquiring an otherwise desirable investment or from entering into an otherwise favorable transaction, if such acquisition or transaction would constitute a "prohibited transaction." ANY FIDUCIARY FOR A QUALIFIED PLAN SHOULD CONSULT ITS LEGAL ADVISOR CONCERNING THE ERISA CONSIDERATIONS DISCUSSED ABOVE BEFORE MAKING AN INVESTMENT IN THE COMPANY. LEGAL MATTERS Certain legal matters will be passed upon for the Company by Robinson Silverman Pearce Aronsohn & Berman LLP, New York, New York. The legal authorization and issuance of the Common Stock, as well as certain other legal matters concerning Maryland law, will be passed upon for the Company by Ballard Spahr Andrews & Ingersoll, Baltimore, Maryland. In addition, the summary of Federal income tax consequences contained in this Prospectus in the section captioned "Certain United States Federal Income Tax Considerations" is based upon the opinion of Robinson Silverman Pearce Aronsohn & Berman LLP. EXPERTS The combined financial statements of Wellsford Real Properties, Inc. (Predecessor) at December 31, 1996 and 1995 and for the year ended December 31, 1996, and for the period from March 22, 1995 to December 31, 1995, appearing in this Prospectus and Registration Statement have been audited by Ernst & Young LLP, independent auditors, as set forth in their report thereon appearing elsewhere herein, and are included in reliance upon such report given upon the authority of such firm as experts in accounting and auditing. ADDITIONAL INFORMATION The Company is subject to the informational requirements of the Exchange Act and, in accordance therewith, files reports, proxy statements and other information with the Commission. Such reports, proxy statements and information filed by the Company with the Commission pursuant to the informational requirements of the Exchange Act may be inspected and copied at the public reference facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's regional offices located at Seven World Trade Center, 13th Floor, New York, New York 10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can be obtained from the Public Reference Section of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The Commission maintains a Web sit that contains reports, proxy and information statements and other information regarding registrants that file electronically with the Commission. The address of the commission's Web site is: http://www.sec.gov. In addition, the Common Stock is listed on the American Stock Exchange and information concerning the Company may also be inspected and copied at the offices of the American Stock Exchange, 86 Trinity Place, New York, New York 10006. The Company has filed with the Commission a registration statement (the "Registration Statement," which term shall include any amendments thereto) on Form S-11 under the Securities Act, with respect to the Shares. This Prospectus does not contain all the information set forth in the Registration Statement and the exhibits thereto, certain parts of which are omitted in accordance with the rules and regulations of the Commission. Statements contained in this Prospectus as to the content of any contract or other document are not necessarily complete, and in each instance reference is made to the copy of such contract or other document filed as an exhibit to the Registration Statement, each such statement being qualified in all respects by such reference and the exhibits thereto. For further information, reference is hereby made to the Registration Statement and the exhibits thereto. The Company is required to furnish holders of the Common Stock with annual reports containing audited financial statements, with a report thereon by the Company's independent certified public accountants. INDEX TO FINANCIAL STATEMENTS WELLSFORD REAL PROPERTIES, INC. (PREDECESSOR) HISTORICAL Report of Independent Auditors. . . . . . . . . . . . . . . .F-2 Combined Balance Sheets as of March 31, 1997 (Unaudited) and December 31, 1996 and 1995. . . . . . . . .F-3 Combined Statements of Income and Equity For the Three Months Ended March 31, 1997 (Unaudited) and Year Ended December 31, 1996. . . . . . . . . . . . . .F-4 Combined Statements of Cash Flows For the Three Months Ended March 31, 1997 and 1996 (Unaudited), the Year Ended December 31, 1996 and the Period From March 22 to December 31, 1995. . . . . . . . . . . . .F-5 Notes to Combined Financial Statements. . . . . . . . F-6 to F-10 PRO FORMA Combined Income Statement For the Three Months Ended March 31, 1997 (Unaudited). . . . . . . . . F-11 to F-12 Notes to Unaudited Combined Income Statement. . . . . . . . F-13 Combined Balance Sheet, March 31, 1997 (Unaudited) . . . . . . . . . . . . . . . . . . . F-14 to F-15 Notes to Unaudited Combined Balance Sheet . . . . . . . . . F-16 REPORT OF INDEPENDENT AUDITORS To the Shareholders and Board of Directors of Wellsford Real Properties, Inc. We have audited the accompanying combined balance sheets of the Predecessor to Wellsford Real Properties, Inc. (the "Company") as of December 31, 1996 and 1995, and the related combined statements of income and equity for the year ended December 31, 1996, and cash flows for the year ended December 31, 1996 and for the period from March 22, 1995 (the date the assets were acquired and liabilities incurred) to December 31, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. As described in Note 1, no operating revenues or expenses were incurred in the period from March 22, 1995 through December 31, 1995. Accordingly, the statement of income for the period ended December 31, 1995 has been omitted. In our opinion, the combined financial statements referred to above present fairly, in all material respects, the combined financial position of the Company at December 31, 1996 and 1995, and the combined results of its operations for the year ended December 31, 1996 and its cash flows for the year ended December 31, 1996 and for the period from March 22, 1995 to December 31, 1995, in conformity with generally accepted accounting principles. /s/ ERNST & YOUNG LLP ----------------------------- New York, New York February 28, 1997 WELLSFORD REAL PROPERTIES, INC. (PREDECESSOR) COMBINED BALANCE SHEETS (In thousands) March 31, December 31, December 31, 1997 1996 1995 ---- ---- ---- (Unaudited) ASSETS Real estate assets, at cost: Land $ 3,159 $ 0 $ 0 Buildings and improvements 17,902 0 0 ------------------------------------ 21,061 0 0 Construction in process 23,945 21,306 7,955 ------------------------------------ 45,006 21,306 7,955 Property held for sale 2,800 0 0 ------------------------------------ 47,806 21,306 7,955 Restricted cash 3,198 5,520 10,414 Mortgage note and interest receivable 17,934 17,934 0 ------------------------------------ Total Assets $ 68,938 $ 44,760 $ 18,369 ==================================== LIABILITIES AND EQUITY Tax exempt mortgage note payable $ 14,755 $ 14,755 $14,755 Note payable to Wellsford 21,611 0 0 ------------------------------------ Total Liabilities 36,366 14,755 14,755 ------------------------------------ Commitments and contingencies -- -- -- Stockholders' Equity: 30,005 3,614 Common stock, $.01 par value per share, 100 shares issued and outstanding 1 0 0 Paid in capital in excess of par value 30,321 0 0 Common stock to be issued 2,250 0 0 ------------------------------------ Total Equity 32,572 30,005 3,614 ------------------------------------ Total Liabilities and Equity $ 68,938 $ 44,760 $18,369 ==================================== See accompanying notes. WELLSFORD REAL PROPERTIES, INC. (PREDECESSOR) COMBINED STATEMENTS OF INCOME AND EQUITY (In thousands) Three Months Year Ended Ended March 31, December 31, 1997 1996 ---- ---- (Unaudited) Interest income $ 401 $ 757 ---------- --------- Net income 401 757 ---------- --------- Equity, beginning of period 30,005 3,614 Equity contributions (distributions) 2,166 25,634 ---------- --------- Equity, end of period $ 32,572 $ 30,005 ========== ========= See accompanying notes. WELLSFORD REAL PROPERTIES, INC. (PREDECESSOR) COMBINED STATEMENTS OF CASH FLOWS (In thousands) Three Three Period Months Months Year From Ended Ended Ended March 22 to March 31, March 31, December 31, December 31, 1997 1996 1996 1995 ---- ---- ---- ---- (Unaudited) (Unaudited) CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 401 $ 0 $ 757 $ 0 Adjustments to reconcile net income to net cash provided by operating activities: Decrease (increase) in assets: Debt service reserve 2,322 1,082 4,894 4,341 Interest receivable 0 0 (134) 0 --------------------------------------------- Net cash provided by operating activities 2,723 1,082 5,517 4,341 CASH FLOWS FROM INVESTING ACTIVITIES: Investments in real estate assets (26,500) (231) (13,351) (7,955) Investment in mortgage note receivable 0 0 (17,800) 0 --------------------------------------------- Net cash (used) in investing activities (26,500) (231) (31,151) (7,955) --------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of note payable to Wellsford 21,611 0 0 0 Proceeds from tax exempt mortgage note payable 0 0 0 14,755 Funding of restricted cash accounts 0 0 0 (14,755) Equity contributions 2,166 0 25,634 3,614 Equity distributions 0 (851) 0 0 --------------------------------------------- Net cash provided by financing activities 23,777 (851) 25,634 3,614 --------------------------------------------- Net increase (decrease) in cash and cash equivalents 0 0 0 0 Cash and cash equivalents, beginning of period 0 0 0 0 --------------------------------------------- Cash and cash equivalents, end of period $ 0 $ 0 $ 0 $ 0 ============================================= Cash paid during the period for interest $ 343 $ 99 $ 663 $ 335 ============================================= See accompanying notes. WELLSFORD REAL PROPERTIES, INC. (PREDECESSOR) NOTES TO COMBINED FINANCIAL STATEMENTS [Information pertaining to the three months ended March 31, 1997 and 1996 is unaudited] (1) Organization and Basis of Presentation Wellsford Real Properties, Inc. (the "Company") was formed on January 8, 1997, as a corporate subsidiary of Wellsford Residential Property Trust ("Wellsford"). On May 30, 1997, Wellsford merged (the "Merger") with Equity Residential Properties Trust ("EQR"). Immediately prior to the Merger, Wellsford contributed certain of its assets to the Company and the Company assumed certain liabilities of Wellsford (the "Contribution"). Immediately after the contribution of assets to the Company and immediately prior to the Merger, Wellsford distributed to its common shareholders all the outstanding shares of the Company owned by Wellsford (the "Spin-off"). The common shareholders of Wellsford received 0.25 common share of the Company for each common share of Wellsford owned. Upon consummation of the Spin-off, the Company had issued and outstanding approximately 4,572,043 shares of Common Stock and 339,806 shares of Class A Common Stock. The Class A Common Stock was issued to ERP Operating Limited Partnership of which EQR is the general partner and through which EQR conducts substantially all of its operations (unaudited). The accompanying combined financial statements of the Company or its predecessor (the "Predecessor") include the assets and liabilities contributed to and assumed by the Company from the time the assets and liabilities were acquired or incurred, respectively, by Wellsford or the applicable subsidiary of Wellsford. Such financial statements have been prepared using the historical basis of the assets and liabilities and the historical results of operations related to the Company's assets and liabilities. For the purpose of the Company, the assets were acquired and liabilities incurred beginning on March 22, 1995. During the period from March 22, 1995 through December 31, 1996 the Company was principally involved in the initial phase of construction development activities with no operating revenues or expenses incurred. Accordingly, the income statements for the three month period ended March 31, 1996 and the period from March 22, 1995 through December 31, 1995 have been omitted. The Company has earned interest income on the Sonterra Mortgage (see Note 4) during the year ended December 31, 1996. (2) Summary of Significant Accounting Policies Principles of Combination. All significant intercompany transactions between Wellsford and its majority owned or controlled subsidiaries relating to the assets and liabilities that were contributed to or assumed by the Company have been eliminated in combination. Income Recognition. Residential communities are leased under operating leases with terms generally one year or less; rental revenue is recognized monthly as it is earned. Commercial properties are leased under operating leases; rental revenue is recognized on a straight-line basis over the terms of the leases. Cash and Cash Equivalents. The Company considers all demand and money market accounts and short term investments in government funds with an original maturity of three months or less to be cash and cash equivalents. Real Estate and Depreciation. Costs directly related to the acquisition and improvement of real estate are capitalized, including interest expense incurred during and related to construction and including all improvements identified during the underwriting of a property acquisition. Depreciation is computed over the expected useful lives of depreciable property on a straight line basis, principally 40 years for buildings and improvements and 5 to 12 years for furnishings and equipment. The Company has adopted Statement of Financial Accounting Standard ("SFAS") 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed of" which requires that long-lived assets to be held and used be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable and that long-lived assets to be disposed of be measured at the lower of carrying amount or net realizable value. The adoption of SFAS 121 has not had an impact on the Company's combined financial position or results of operations. Mortgage Note Receivable Impairment. The Company considers a note impaired if, based on current information and events, it is probable that all amounts due under the note agreement are not collectable. Impairment is measured based upon the fair value of the underlying collateral. No impairment has been recorded through March 31, 1997. Financing Costs. Financing and refinancing costs are capitalized and amortized over the term of the related loan under the interest method. Credit facility fees are capitalized and amortized over the term of the commitment on a straight-line basis. Estimates. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Earnings per Share. In February 1997, the Financial Accounting Standards Board issued Statement No. 128, "Earnings per Share," which is required to be adopted on December 31, 1997. At that time, the Company will be required to change the method currently used to compute earnings per share and to restate all prior periods. Under the new requirements for calculating primary earnings per share, the dilutive effect of stock options will be excluded. The Company has not yet determined the impact of Statement No. 128 on the calculation of primary and fully diluted earnings per share. (3) Restricted Cash Restricted cash primarily consists of the remaining proceeds from the Palomino Park tax-exempt mortgage note (Note 5) which are restricted in their use to construction costs and capitalized interest related to the Palomino Park development project (Note 4). (4) Multifamily Communities and Note Receivable The Company holds a $17.8 million mortgage on a 344 unit, newly constructed community in Tucson, Arizona known as Sonterra at Williams Centre (the "Sonterra Mortgage"). The Sonterra Mortgage was originated in July 1996, bears interest at 9% per annum and matures in July 1999. The Company also has the exclusive option to purchase the community for $20.5 million through December 1997 and $21 million during 1998. Interest receivable of $0.1 million is included in the March 31, 1997 balance. The fair market value of the Company's mortgage note receivable, estimated by using a discounted cash flow analysis, approximates the carrying amount. The Company currently has two multifamily projects under development in a suburb of Denver, Colorado, totaling 760 apartment units (collectively, the "Development Communities"). The Development Communities are the first two of five communities at Palomino Park, a 1,880 unit master-planned, security controlled apartment/townhome community. The Company has the option to develop phases three through five, but is not obligated to do so. The 181.8 acre master site surrounds an amenity-filled, 24 acre park and an approximately 29,000 square foot recreational center to be shared by all phases. The Development Communities are being constructed pursuant to fixed-price contracts, with a local developer, and are estimated to cost approximately $76.1 million in total, including certain development and incentive fees payable to the developer. The Company is committed to purchase 100% of the Development Communities upon completion and the achievement of certain occupancy levels. At March 31, 1997 the Company had invested $24 million related to the land for the Development Communities, the recreation center and general infrastructure work. A portion of such infrastructure will become the property of certain local governmental entities at the date of completion and retirement of the tax- exempt mortgage note payable described in Note 5. In addition, approximately $26.5 million was outstanding at March 31, 1997 on a construction loan to the developer, which the Company would repay upon purchase assuming completion and achievement of certain occupancy levels. During the periods ended March 31, 1997, December 31, 1996, March 31, 1996, and December 31, 1995, respectively, the Company capitalized $0.3 million, $0.7 million, $0.1 million and $0.3 million of interest to the Development Communities. The Company expects to fund the construction of its Development Communities from its working capital and with proceeds from a credit facility and a $14.8 million tax-exempt mortgage note (Note 5). Subsequent to December 31, 1996, the Company entered into contracts on five commercial office properties for $47.6 million in aggregate, and had closed on four of the properties as of March 31, 1997. The purchase prices for these commercial properties include approximately $2.25 million in value of shares of Common Stock of the Company issued to an entity in consideration for the assignment of the purchase contracts entered into by such entity. This amount has been classified as Common Stock to be Issued at March 31, 1997. Upon liquidation of such entity, each of the Chairman of the Board and President of Wellsford, Messrs. Lynford and Lowenthal, will receive approximately 16.4% of such shares, and the wife of Mark Germain, a trustee of Wellsford, will receive approximately 13.8% of such shares. Each are owners of such entity. The cash portion of the purchase prices for these commercial properties was funded with a loan from Wellsford which bore interest at LIBOR plus 1.50% and was repaid on the closing of the Merger (unaudited). Greenbrook Corporate Center ($23.7 million) is a Class A, three-story office building with a 35 foot atrium, located in Fairfield, NJ, and comprising approximately 190,000 rentable square feet. It is situated on a 20 acre developed site with 7 acres of additional, contiguous undeveloped land. The purchase of this building closed in April 1997 (unaudited). Point View ($15.8 million) consists of 194 acres containing two office buildings, totaling approximately 560,000 square feet, an adjacent 10-acre undeveloped site, and a central utility plant located in Wayne, NJ. The site is currently undergoing a major renovation. The purchase of this building was closed in February 1997. 1700 Valley Road ($1.0 million) is a Class B+, two-story vacant office building located in Wayne, NJ and comprising approximately 70,600 square feet. It is situated on a nine acre site. The purchase of this building was closed in February 1997. 1800 Valley Road ($2.0 million) is a Class B+, two-story vacant office building located in Wayne, NJ and comprising approximately 54,800 square feet. It is situated on a 14 acre site. The purchase of this building was closed in February 1997. The Chatham Building ($5.1 million) is a three-story office building located in Chatham, NJ and comprising approximately 65,000 square feet. The site is currently undergoing a major renovation. The purchase of this building was closed in January 1997. (5) Tax Exempt Mortgage Notes Payable At March 31, 1997 and December 31, 1996, the Company had $14.8 million of tax exempt mortgage notes payable outstanding. The Company's tax exempt mortgage note payable is secured by certain infrastructure at the Company's Palomino Park development and bears interest-only payments at a variable rate (which approximates the Standard & Poor's / J.J. Kenney index for short-term high grade tax-exempt bonds, currently approximately 3.65 %) until it matures in December 2035. The tax-exempt mortgage note payable is security for tax-exempt bonds which are backed by a letter of credit from a AAA rated financial institution. Subsequent to the Merger, the Company and EQR guaranteed the reimbursement of the financial institution in the event that the letter of credit is drawn upon (unaudited). The fair market value of the variable rate tax exempt mortgage note is considered to be the carrying amount. (6) Commitments and Contingencies The Company has entered into employment agreements with certain of its officers. Such agreements are for terms which expire between 1999 and 2002, and provide for aggregate annual fixed payments of approximately $1.0 million, $1.0 million and $0.6 million in 1997, 1998 and 1999 through 2002, respectively. The Company is obligated under an operating lease covering its corporate headquarters for $0.2 million in 1997, $0.2 million in 1998, and $0.2 million in 1999, plus certain operating expense escalations. As a commercial real estate owner, the Company is subject to potential environmental costs. The Company's Point View site contains asbestos containing materials ("ACMs"); the Company is proceeding with the removal of all ACMs in such property which is anticipated to cost approximately $3.5 million. At this point in time, management of the Company is not aware of any environmental concerns that would have a material adverse effect on the Company's financial position or future results of operations except as just described. In 1997, the Company will adopt a defined contribution savings plan pursuant to Section 401 of the Internal Revenue Code. Under such a plan there are no prior service costs. All employees will be eligible to participate in the plan after one year of service. Employer contributions will be made based on a discretionary amount determined by the Company's management. Employer contributions, if any, will be based upon the amount contributed by an employee. (7) Subsequent Events (unaudited) Subsequent to March 31, 1997, the Company has loaned $25 million of an $80 million secured subordinated mezzanine loan to entities which own substantially all of the equity interests (the "Equity Interests") in the owner of a 52-story, approximately 1.75 million sq.ft. Class A office building located at 277 Park Avenue, New York City (the "277 Park Loan"). The loan is secured primarily by a pledge of the Equity Interests owned by the Borrowers. The 277 Park Loan is due in April 2007 and bears interest at the rate of approximately 12% per annum. In April, 1997, the Company established its 1997 Management Incentive Plan (the "Management Incentive Plan") for the purpose of aligning the interests of the Company's directors, executive officers and employees with those of the shareholders and to enable the Company to attract, compensate and retain directors, executive officers and employees and provide them with appropriate incentives and rewards for their performance. The existence of the Management Incentive Plan should enable the Company to compete more effectively for the services of such individuals. The Management Incentive Plan provides for administration by a committee of two or more non-employee directors established for such purpose. Awards to directors, executive officers and other employees under the Management Incentive Plan may take the form of stock options, including corresponding stock appreciation rights and reload options, restricted stock awards and stock purchase awards. The Company may also provide stock purchase loans to enable Management Incentive Plan participants to pay for stock purchase awards. The maximum number of shares of Common Stock that may be the subject of awards under the Management Incentive Plan is 1,750,000 shares. Options to acquire 547,375 shares of Common Stock were granted under the Management Incentive Plan at the closing of the Merger to directors, executive officers and employees of the Company. The Company has established a Rollover Stock Option Plan (the "Rollover Plan"), which is substantially similar to the Management Incentive Plan, for the purpose of granting options and corresponding rights to purchase Common Stock in replacement for former Wellsford share options. All 1,326,235 options issuable under the Rollover Plan were granted at the closing of the Merger principally to certain executive officers and directors of the Company. WELLSFORD REAL PROPERTIES, INC. (PREDECESSOR) PRO FORMA COMBINED INCOME STATEMENT For the Three Months Ended March 31, 1997 (In Thousands Except Per Share Data) (Unaudited) During the period from January 1, 1997 to June 30, 1997, the Company consummated the 277 Park Loan and purchased five commercial office properties. One of the commercial office properties, the Greenbrook Corporate Center, is currently occupied. This unaudited Pro Forma Combined Income Statement is presented as if the Company's transactions, each as referred to above, and the Merger, Distribution and Private Placement had been consummated on January 1, 1997. All of the pro forma adjustments shown are solely attributed to the transactions described. In the opinion of the Company's management, all adjustments necessary to reflect the effects of these transactions have been made. This unaudited Pro Forma Combined Income Statement is presented for comparative purposes only, and is not necessarily indicative of what the actual results of operations of the Company would have been for the period presented; nor does it purport to represent the results for future periods, particularly because four of the five commercial office properties were vacant on March 31, 1997. This unaudited Pro Forma Combined Income Statement should be read in conjunction with, and is qualified in its entirety by, the historical combined financial statements and notes thereto of the Company included in this Prospectus. Wellsford Real Properties, Inc. (Predecessor) Pro Forma Combined Income Statement Three Months Ended March 31, 1997 (In thousands) (Unaudited) Pro Forma Historical Adjustments Pro Forma ---------- ----------- --------- REVENUE Rental income $762(A) $762 Other income 40(A) 40 Interest income $401 734(B) 1,135 ---------------------------------- Total Revenue 401 1,536 1,937 ---------------------------------- EXPENSES Property operating and maintenance 211(A) 211 Real estate taxes 107(A) 107 General and administrative 438(C) 438 Depreciation 128(D) 128 Property management 34(A) 34 ---------------------------------- Total Expenses 0 918 918 ---------------------------------- Income before income taxes $401 $618 1,019 =================== Provision for income taxes 416(E) --- Net Income $603 ==== Net income per common share $0.04(F) ===== Weighted average common shares outstanding 16,888(F) ====== Wellsford Real Properties, Inc. (Predecessor) Notes to Unaudited Pro Forma Combined Income Statement March 31, 1997 (A) Represents historical operating revenues and expenses of Greenbrook Corporate Center, which was acquired in April 1997, for the three months ended March 31, 1997. The Company's other four commercial properties are currently vacant. (B) Represents interest income on the 277 Park Loan for three months ($25 million at approximately 12%). (C) Represents the estimated general and administrative costs of the Company for three months. (D) Represents depreciation on Greenbrook Corporate Center for the three months ended March 31, 1997 utilizing a 40 year estimated useful life. (E) Represents provision for federal and state income taxes at rates of 35% and 9%, respectively. (F) Represents the aggregate of the shares of Common Stock issued in connection with the Private Placement, the Distribution, the acquisition of the commercial properties, and the purchase of Class A Common Stock by ERP Operating Limited Partnership. WELLSFORD REAL PROPERTIES, INC. (PREDECESSOR) PRO FORMA COMBINED BALANCE SHEET March 31, 1997 (In Thousands) (Unaudited) This unaudited Pro Forma Combined Balance Sheet is presented as if the Merger, Contribution, Distribution, Private Placement, the sale of the Class A Common Stock to ERP Operating Limited Partnership (the "Class A Sale") and the credit facility agreement with BankBoston and Morgan Guaranty had been consummated on March 31, 1997, the 277 Park Loan had been originated on March 31, 1997 and the commercial office properties purchased by the Company and Phase I of Palomino Park had been purchased on March 31, 1997, utilizing proceeds from the Merger, Contribution, Private Placement and Class A Sale. All of the assets and liabilities of the Company which are being transferred to the Company in connection with the Merger, Contribution and Distribution are recorded at their respective historical costs. This unaudited Pro Forma Combined Balance Sheet is presented for comparative purposes only, and is not necessarily indicative of what the actual combined financial position of the Company would have been at March 31, 1997; nor does it purport to represent the future combined financial position of the Company. This unaudited Pro Forma Combined Balance Sheet should be read in conjunction with, and is qualified in its entirety by, the historical combined financial statements and notes thereto of the Company included in this Prospectus. Wellsford Real Properties, Inc. (Predecessor) Pro Forma Combined Balance Sheet March 31, 1997 (In thousands) (Unaudited) Pro Forma Historical Adjustments Pro Forma ---------- ----------- --------- ASSETS Real estate assets, at cost: Land $ 3,159 $ 10,350 $ 13,509 Buildings and improvements 17,902 77,210 95,112 --------- --------- --------- 21,061 87,560 108,621 Construction in process 23,945 (2,677) 21,268 --------- --------- --------- 45,006 84,883 129,889 Property held for sale 2,800 (2,800) --------- --------- --------- 47,806 82,083(A) 129,889 Cash and cash equivalents 0 21,180(B) 21,180 Restricted cash 3,198 3,198 Mortgage notes and interest receivable 17,934 25,000(C) 42,934 Other assets 0 2,604(D) 2,604 --------- --------- --------- Total Assets $ 68,938 $ 130,867 $ 199,805 ========= ========= ========= LIABILITIES AND EQUITY Liabilities: Tax exempt mortgage note payable $ 14,755 $ 14,755 Note payable to Wellsford 21,611 ($ 21,611)(E) 0 Other liabilities 0 711 (D) 711 --------- --------- --------- Total Liabilities 36,366 (20,900) 15,466 --------- --------- --------- Commitments and contingencies -- -- -- Minority interest 0 10,406(F) 10,406 Equity: Common stock, $.01 par value per share; 197,650,000 shares authorized - 16,547,771 shares issued and outstanding, as adjusted 1 165 166 Class A Common Stock, $.01 par value per share; 350,000 shares authorized - 339,806 shares issued and outstanding, as adjusted -- 3 3 Series A 8% Convertible Redeemable Preferred Stock, $.01 par value per share; 2,000,000 shares authorized; no shares issued and outstanding, as adjusted -- -- -- Paid in capital in excess of par value 30,321 143,443 173,764 Common stock to be issued 2,250 (2,250) 0 --------- --------- --------- Total Equity 32,572 141,361(G) 173,933 --------- --------- --------- Total Liabilities and Equity $ 68,938 $ 130,867 $ 199,805 ========= ========= ========= Wellsford Real Properties, Inc. (Predecessor) Notes to Unaudited Pro Forma Combined Balance Sheet March 31, 1997 (A) Represents the following: Property Construction Held Land Building in Process for Sale Total ---- -------- ---------- -------- ----- Purchase of Greenbrook Corp. Ctr. $3,555 $20,145 $23,700 Palomino Park construction 4/1/97-5/30/97 $3,023 3,023 Purchase of Palomino Park Phase I 6,375 36,125 (5,700) 36,800 Commercial property improvements and tenant fit-out 18,560 18,560 Reclassification of 1800 Valley Road 420 2,380 ($2,800) ------- ------- ------ ------- ------- $10,350 $77,210 ($2,677) ($2,800) $82,083 ======= ======= ====== ====== ======= Greenbrook Corporate Center is currently in operation. The Company's other four commercial properties are currently vacant. The purchase prices and commercial property improvements and tenant fit-out are being funded primarily with proceeds from the Private Placement. (B) Reflects the net cash effect of the following transactions (in thousands): o Private Placement proceeds $123,025 o Cash contribution to the Company at Contribution 12,966 o ERP Operating Limited Partnership's purchase of Class A Common Stock 3,500 o Acquisition and improvement of properties (71,700) o Acquisition of 277 Park Loan (25,000) o Repayment of Loan from Wellsford (21,611) -------- $21,180 ======== (C) Represents the 277 Park Loan, a $25 million portion of an $80 million subordinated mezzanine loan bearing interest at approximately 12% per annum. (D) Represents miscellaneous assets and liabilities acquired in the Contribution. (E) Represents repayment of the loan from Wellsford. (F) Represents ERP Operating Limited Partnership's 20% minority interest in Palomino Park, which has been combined in the Company's Pro Forma Combined Balance Sheet. (G) Represents the aggregate of the shares of Common Stock issued in connection with the Distribution, the acquisition of the commercial properties, the purchase of Class A Common Stock by ERP Operating Limited Partnership, and the Private Placement. =============================================================================== No dealer, salesperson or other individual has been authorized to give any information or make any representations not contained in this Prospectus in connection with the offering covered by this Prospectus. If given or made, such information or representations must not be relied upon as having been authorized by the Company. This Prospectus does not constitute an offer to sell or a solicitation of an offer to buy the Shares in any jurisdiction where, or to any person to whom, it is unlawful to make such offer or solicitation. Neither the delivery of this Prospectus, nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the facts set forth in this Prospectus or in affairs of the Company since the date hereof. _________________ SUMMARY TABLE OF CONTENTS Page Prospectus Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Risk Factors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11 The Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24 Selling Shareholders. . . . . . . . . . . . . . . . . . . . . . . . . . . . .24 Dividend Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26 Price Range of Common Stock and Dividend History. . . . . . . . . . . . . . .26 Capitalization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27 Selected Unaudited Combined Financial Data. . . . . . . . . . . . . . . . . .28 Management's Discussion and Analysis of Financial Conditions and Analysis of Operations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30 Business and Properties . . . . . . . . . . . . . . . . . . . . . . . . . . .30 Initial Capital and Financing . . . . . . . . . . . . . . . . . . . . . . . .37 Policies with Respect to Certain Activities . . . . . . . . . . . . . . . . .38 Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40 Principal Stockholders. . . . . . . . . . . . . . . . . . . . . . . . . . . .45 Certain Transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . .47 Certain Agreements Between The Company and ERP Operating Partnership. . . . . . . . . . . . . . . . . . . . . .47 Description of Capital Stock. . . . . . . . . . . . . . . . . . . . . . . . .54 Certain Provisions of Maryland Law and of the Company's Charter and Bylaws . . . . . . . . . . . . . . . . . . . . . .61 Shares Available for Future Sale. . . . . . . . . . . . . . . . . . . . . . .64 Certain United States Federal Tax Considerations. . . . . . . . . . . . . . .65 Plan of Distribution. . . . . . . . . . . . . . . . . . . . . . . . . . . . .68 Certain ERISA Considerations. . . . . . . . . . . . . . . . . . . . . . . . .68 Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .70 Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .70 Additional Information. . . . . . . . . . . . . . . . . . . . . . . . . . . .70 Index to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . F-1 12,242,719 Shares WELLSFORD REAL PROPERTIES, INC. Common Stock _________________ PROSPECTUS _________________ July __, 1997 PART II. INFORMATION NOT REQUIRED IN PROSPECTUS Item 31. Other Expenses of Issuance and Distribution. The following table itemizes the expenses incurred by the Company in connection with the offering of the Common Stock. All the amounts shown are estimates except the Securities and Exchange Commission registration fee. Item Amount ---- ------ Registration Fee -- Securities and Exchange Commission $ 41,041 Legal Fees and Expenses (other than Blue Sky) 50,000 Accounting Fees and Expenses 20,000 Printing and Engraving Expenses 5,000 Blue Sky Fee and Expenses (including fees of counsel) 5,000 Miscellaneous Expenses 1,000 Total $122,041 ======== Item 32. Sales to Special Parties. See Item 33. Item 33. Recent Sales of Unregistered Securities. The following table is a summary of certain information relating to all securities of the Company sold by the Company within the past three years that were not registered under the Securities Act (the "Private Placements"): Date Amount of Person or Type of of Securities Class of Persons to Securities Sold Sale Sold Whom Securities Sold Consideration - --------------- ------- ---------- -------------------- ------------- Common Stock 2/28/97 218,447(1) Wellsford Commercial (2) Properties, L.L.C. Class A 5/30/97 339,806 ERP Operating $3,500,000 Common Stock Partnership Common Stock 5/30/97 24,272 William M. Cockrum, $250,000 Trustee of the William M. Cockrum Trust dated 8/1/79 Common Stock 6/2/97 12,000,000 "qualified institutional $123.6 buyers" and other million "accredited investors" (each as defined under the rules of the Securities Act) (1) Reflects the adjustment made to the original number of shares issued to Wellsford Commercial Properties, L.L.C., based upon the book value per share of Common Stock on the date of the Merger. (2) Wellsford Commercial Properties, L.L.C. transferred the contracts to purchase the Cyanamid Office Portfolio, Greenbrook and Chatham in exchange for shares of Common Stock having an aggregate value of approximately $2.25 million and the Company's agreement to repay a $1.0 million advance used for the down payment on the Cyanamid Office Portfolio. The Company conducted the Private Placements pursuant to Section 4(2) of the Securities Act. There was no underwriter involved in the Private Placements. Item 34. Indemnification of Directors and Officers. The Maryland General Corporation Law ("MGCL") permits a Maryland corporation to include in its charter a provision limiting the liability of its directors and officers to the corporation and its stockholders for money damages except for liability resulting from (a) actual receipt of an improper benefit or profit in money, property or services or (b) active and deliberate dishonesty established by a final judgment as being material to the cause of action. The Charter contains such a provision which eliminates such liability to the maximum extent permitted by Maryland law. The Charter authorizes the Company, to the maximum extent permitted by Maryland law, to obligate itself to indemnify and to pay or reimburse reasonable expenses in advance of final disposition of a proceeding to (a) any present or former director or officer or (b) any individual who, while a director of the Company, and at the request of the Company, serves or has served another corporation, partnership, joint venture, trust, employee benefit plan, limited liability company or any other enterprise as a director, officer, partner, trustee, manager or member of such corporation, partnership, joint venture, trust, employee benefit plan, limited liability company or other enterprise. The Bylaws of the Company obligate it, to the maximum extent permitted by Maryland law, to indemnify and to pay or reimburse reasonable expenses in advance of final disposition of a proceeding to (a) any present or former director or officer who is made a party to the proceeding by reason of his service in that capacity or (b) any individual who, while a director of the Company and at the request of the Company, serves or has served another corporation, partnership, joint venture, trust, employee benefit plan, limited liability company or any other enterprise as a director, officer, partner, trustee, manager or member of such corporation, partnership, joint venture, trust, employee benefit plan, limited liability company or other enterprise and who is made a party to the proceeding by reason of his service in that capacity. The Charter and Bylaws also permit the Company to indemnify and advance expenses to any person who served a predecessor of the Company in any of the capacities described above and to any employee or agent of the Company or a predecessor of the Company. The MGCL requires a corporation (unless its charter provides otherwise, which the Charter does not) to indemnify a director or officer who has been successful, on the merits or otherwise, in the defense of any proceeding to which he is made a party by reason of his service in that capacity. The MGCL permits a corporation to indemnify its present and former directors and officers, among others, against judgments, penalties, fines, settlements and reasonable expenses actually incurred by them in connection with any proceeding to which they may be made a party by reason of their service in those or other capacities unless it is established that (a) the act or omission of the director or officer was material to the matter giving rise to the proceeding and (i) was committed in bad faith or (ii) was the result of active and deliberate dishonesty, (b) the director or officer actually received an improper personal benefit in money, property or services or (c) in the case of any criminal proceeding, the director or officer had reasonable cause to believe that the act or omission was unlawful. However, a Maryland corporation may not indemnify for an adverse judgment in a suit by or in the right of the corporation. In addition, the MGCL requires the Company, as a condition to advancing expenses, to obtain (a) a written affirmation by the director or officer of his good faith belief that he has met the standard of conduct necessary for indemnification by the Company as authorized by the Bylaws and (b) a written statement by or on his behalf to repay the amount paid or reimbursed by the Company if it shall ultimately be determined that the standard of conduct was not met. Item 35. Treatment of Proceeds from Stock Being Registered. Not applicable. Item 36. Financial Statements and Exhibits. (a) Financial Statements all of which are in the Prospectus WELLSFORD REAL PROPERTIES, INC. HISTORICAL Combined Balance Sheets as of March 31, 1997 (Unaudited) and December 31, 1996 and 1995 Combined Statements of Income and Equity for the Three Months Ended March 31, 1997 (Unaudited) and the Year Ended December 31, 1996 Combined Statements of Cash Flows For the Three Months Ended March 31, 1997 and 1996 (Unaudited), the Year Ended December 31, 1996 and the Period From March 22 to December 31, 1995 Notes to Combined Financial Statements PRO FORMA Combined Income Statement For the Three Months Ended March 31, 1997 (Unaudited) Notes to Unaudited Combined Income Statement Combined Balance Sheet, March 31, 1997 (Unaudited) Notes to Unaudited Combined Balance Sheet (b) Financial Statement Schedules. None (c) Exhibits. Exhibit No. Description 3.1 Articles of Amendment and Restatement of the Company. 3.2 Articles Supplementary Classifying 335,000 Shares of Common Stock as Class A Common Stock. 3.3 Articles Supplementary Classifying 2,000,000 Shares of Common Stock as Series A 8% Convertible Redeemable Preferred Stock. 3.4 Bylaws of the Company. 4.1 Specimen certificate for Common Stock.*** 4.2 Specimen certificate for Class A Common Stock. 4.3 Specimen certificate for Series A 8% Convertible Redeemable Preferred Stock. 5.1 Opinion of Ballard Spahr Andrews & Ingersoll regarding legality. 10.1 $17.8 million Loan Agreement, dated as of June 28, 1996, by and between Wellsford Residential Property Trust, as lender, and Specified Properties VIII, L.P., as borrower, relating to Sonterra.* 10.2 Option Agreement between Wellsford Residential Property Trust, as purchaser, and Specified Properties VIII, as seller, dated as of June 28, 1996, relating to Sonterra.* 10.3 Sonterra Agreement by and between the Company and ERP Operating Limited Partnership dated as of May 30, 1997. 10.4 Agreement Regarding Palomino Park by and between the Company and ERP Operating Limited Partnership dated as of May 30, 1997 10.5 Operating Agreement of Park at Highlands LLC, dated as of April 27, 1995, between Wellsford Park Highlands Corp. and Al Feld, relating to Blue Ridge.** 10.6 First Amendment to Operating Agreement of Park at Highlands LLC, dated as of December 29, 1995, between Wellsford Park Highlands Corp. and Al Feld, relating to Blue Ridge.* 10.7 Tri-Party Agreement by and among Park at Highlands LLC, NationsBank of Texas, N.A., Wellsford Park Highlands Corp., Wellsford Residential Property Trust and Al Feld dated December 29, 1995, relating to Blue Ridge.* 10.8 Assignment and Assumption of Tri-Party Agreement by and among Wellsford Residential Property Trust, ERP Operating Limited Partnership, Park at Highlands LLC, Wellsford Park Highlands Corp., The Feld Company, Al Feld and Nationsbank of Texas, N.A. dated May 30, 1997, relating to Blue Ridge. 10.9 Agreement and Acknowledgement Regarding Tri-Party Agreement by and among Nationsbank of Texas, N.A., Park at Highlands LLC, Wellsford Park Highlands Corp. and ERP Operating Limited Partnership dated May 30, 1997, relating to Blue Ridge. 10.10 Operating Agreement of Red Canyon at Palomino Park LLC between Wellsford Park Highlands Corp. and Al Feld, dated as of April 17, 1996, relating to Red Canyon.* 10.11 First Amendment to Operating Agreement of Red Canyon at Palomino Park LLC between Wellsford Park Highlands Corp. and Al Feld, dated as of May 19, 1997, relating to Red Canyon. 10.12 Tri-Party Agreement by and among NationsBank of Texas, N.A., Red Canyon at Palomino Park LLC, Wellsford Park Highlands Corp., Wellsford Residential Property Trust, Al Feld and The Feld Company, dated May 29, 1997, relating to Red Canyon. 10.13 Assignment and Assumption of Tri-Party Agreement by and among Wellsford Residential Property Trust, ERP Operating Limited Partnership, Red Canyon at Palomino Park LLC, Wellsford Park Highlands Corp., The Feld Company, Al Feld and Nationsbank of Texas, N.A. dated May 30, 1997, relating to Red Canyon. 10.14 Agreement and Acknowledgement Regarding Tri-Party Agreement by and among Nationsbank of Texas, N.A., Red Canyon at Palomino Park LLC, Wellsford Park Highlands Corp. and ERP Operating Limited Partnership dated May 30, 1997, relating to Red Canyon. 10.15 Second Amended and Restated Vacant Land Purchase and Sale Agreement between Mission Viejo Company and The Feld Company dated March 23, 1995, as amended by First Amendment, dated May 1, 1996, relating to the land underlying Palomino Park.* 10.16 Trust Indenture, dated as of December 1, 1995, between Palomino Park Public Improvements Corporation ("PPPIC") and United States Trust Company of New York, as trustee, securing Wellsford Residential Property Trust's Assessment Lien Revenue Bonds Series 1995 - $14,755,000.** 10.17 Letter of Credit Reimbursement Agreement, dated as of December 1, 1995, between PPPIC, Wellsford Residential Property Trust and Dresdner Bank AG, New York Branch.** 10.18 First Amendment to Letter of Credit Reimbursement Agreement, dated as of May 30, 1997, between PPPIC, Wellsford Residential Property Trust, Dresdner Bank AG, New York Branch and the Company. 10.19 Amendment to Wellsford Reimbursement Agreement by and between PPPIC, Wellsford Residential Property Trust and the Company, dated as of May 30, 1997. 10.20 Assignment and Assumption Agreement by and between Wellsford Residential Property Trust and the Company, dated as of May 30, 1997. 10.21 Credit Enhancement Agreement by and between the Company and ERP Operating Limited Partnership, dated as of May 30, 1997, relating to Palomino Park. 10.22 Reimbursement and Indemnification Agreement by and among the Company and ERP Operating Limited Partnership, dated as of May 30, 1997, relating to Palomino Park. 10.23 Guaranty by ERP Operating Limited Partnership for the benefit of Dresdner Bank AG, New York Branch, dated as of May 30, 1997, relating to Palomino Park. 10.24 Amended and Restated Promissory Note of the Company to the order of Dresdner Bank AG, New York Branch, dated May 30, 1997, relating to Palomino Park. 10.25 Contribution and Distribution Agreement by and between Wellsford Residential Property Trust and the Company dated as of May 30, 1997. 10.26 Common Stock and Preferred Stock Purchase Agreement by and between the Company and ERP Operating Limited Partnership dated as of May 30, 1997. 10.27 Registration Rights Agreement by and between the Company and ERP Operating Limited Partnership dated as of May 30, 1997. 10.28 Purchase and Sale Agreement, dated as of November 21, 1996, between Wellsford Commercial Properties, L.L.C. and American Cyanamid Company relating to Cyanamid Office Portfolio, as amended by Amendment dated January 13, 1997, Second Amendment dated February 13, 1997 and Third Amendment dated February 28, 1997 and Indemnification and Stock Transfer Agreement, dated February 28, 1997, between American Cyanamid Company and Wellsford Wayne Corp.* 10.29 Agreement of Sale, dated December 2, 1996, between Wellsford Commercial Properties, L.L.C. and Barlax, relating to Chatham, as amended by Amendment dated December 23, 1996 and Second Amendment dated April 1, 1997.* 10.30 Agreement of Sale, dated December 23, 1996, between Wellsford Commercial Properties, L.L.C. and N.J. Greenbrook Partners, L.P, relating to Greenbrook.* 10.31 Credit Agreement, dated as of April 25, 1997, between Park Avenue Financing Company LLC, PAMC Co-Manager Inc., PAFC Management, Inc., Stanley Stahl, The First National Bank of Boston, the Company, Other Banks that may become parties to the Agreement and The First National Bank of Boston, as Agent, relating to 277 Park Avenue.** 10.32 Assignment of Member's Interest, dated as of April 25, 1997, by PAFC Management, Inc. and Stanley Stahl to The First National Bank of Boston, relating to 277 Park Avenue (relating to interests in the Park Avenue Financing Company, LLC).** 10.33 Assignment of Member's Interest, dated as of April 25, 1997, by PAMC Co-Manager Inc. and Park Avenue Financing, LLC to The First National Bank of Boston, relating to 277 Park Avenue (relating to interests in 277 Park Avenue, LLC).** 10.34 Stock Pledge Agreement, dated as of April 25, 1997, by Stanley Stahl to The First National Bank of Boston, relating to 277 Park Avenue (relating to stock in Park Avenue Management Corporation).** 10.35 Stock Pledge Agreement, dated as of April 25, 1997, by Stanley Stahl to The First National Bank of Boston, relating to 277 Park Avenue (relating to stock in PAMC Co-Manager Inc.).** 10.36 Stock Pledge Agreement, dated as of April 25, 1997, by Stanley Stahl to The First National Bank of Boston, relating to 277 Park Avenue (relating to stock in PAFC Management, Inc.).** 10.37 Conditional Guaranty of Payment and Performance, dated as of April 25, 1997, by Stanley Stahl, relating to 277 Park Avenue.** 10.38 Cash Collateral Account Security, Pledge and Assignment Agreement, dated as of April 25, 1997, between 277 Park Avenue, LLC, Park Avenue Management Corporation, Park Avenue Financing Company LLC, PAMC Co- Manager Inc., Stanley Stahl and The First National Bank of Boston, relating to 277 Park Avenue.** 10.39 Recognition Agreement, dated as of April 25, 1997, between The First National Bank of Boston, the Company, Column Financial, Inc., Park Avenue Financing Company LLC, PAMC Co-Manager, Inc. and 277 Park Avenue, LLC, relating to 277 Park Avenue.** 10.40 Intercreditor Agreement, dated as of April 25, 1997, between the Company and The First National Bank of Boston, as Agent, relating to 277 Park Avenue.** 10.41 Assignment and Acceptance Agreement, dated June 19, 1997, between BankBoston, N.A. (formerly known as The First National Bank of Boston) ("BankBoston") and the Company, relating to 277 Park Avenue. 10.42 Revolving Credit Agreement by and among the Company, BankBoston, Morgan Guaranty Trust Company of New York ("Morgan Guaranty"), other banks which may become parties and BankBoston, as agent, and Morgan Guaranty, as co-agent dated as of May 30, 1997. 10.43 Agreement Regarding Common Stock and Preferred Stock Purchase Agreement, dated as of May 30, 1997, among ERP Operating Limited Partnership, the Company and BankBoston, as agent. 10.44 Assignment of Common Stock Agreements, dated as of May 30, 1997, between the Company and BankBoston, as agent. 10.45 Collateral Assignment of Documents, Rights and Claims (including Collateral Assignment of Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing), made as of May 30, 1997, by the Company to BankBoston, as agent. 10.46 1997 Management Incentive Plan of the Company.** 10.47 Rollover Stock Option Plan of the Company.** 10.48 Employment Agreement between the Company and Jeffrey H. Lynford. 10.49 Employment Agreement between the Company and Edward Lowenthal. 10.50 Employment Agreement between the Company and Gregory F. Hughes. 10.51 Employment Agreement between the Company and David M. Strong. 21.1 Subsidiaries of the Registrant. 23.1 Consent of Ballard Spahr Andrews & Ingersoll (contained in Exhibit 5.1). 23.2 Consent of Robinson Silverman Pearce Aronsohn & Berman LLP. 23.3 Consent of Ernst & Young LLP. 24.1 Powers of Attorney (included on signature page). ______________________________ * Previously filed as an exhibit to the Form 10 filed on April 23, 1997. ** Previously filed as an exhibit to the Form 10/A Amendment No. 1 filed on May 21, 1997. *** Previously filed as an exhibit to the Form 10/A Amendment No. 2 filed on May 28, 1997. **** The Company acquired its interest in a number of these documents by assignment. Item 37. Undertakings. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to Directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a Trustee, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such Director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. The undersigned registrant hereby undertakes that: (1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 24(b)((1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective. (2) For the purposes of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all the requirements for filing on Form S-11 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New York, State of New York on July 30, 1997. WELLSFORD REAL PROPERTIES, INC. By: /s/ Jeffrey H. Lynford -------------------------------- Jeffrey H. Lynford Chairman of the Board, Secretary and Director POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Jeffrey H. Lynford and Edward Lowenthal, and each or any of them, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto each said attorney-in- fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent or either of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated: Signature Title Date --------- ----- ---- /s/ Jeffrey H. Lynford Chairman of the Board, July 30, 1997 - ------------------------------ Secretary and Director Jeffrey H. Lynford /s/ Edward Lowenthal President, Chief Executive July 30, 1997 - ------------------------------ Officer and Director Edward Lowenthal /s/ Gregory F. Hughes Chief Financial Officer July 30, 1997 - ------------------------------ Gregory F. Hughes /s/ David M. Strong Vice President for Development July 30, 1997 - ------------------------------ David M. Strong /s/ Douglas Crocker Director July 30, 1997 - ------------------------------ Douglas Crocker /s/ Rodney F. Du Bois Director July 30, 1997 - -------------------------------- Rodney F. Du Bois /s/ Mark S. Germain Director July 30, 1997 - ------------------------------ Mark S. Germain /s/ Frank J. Hoenemeyer Director July 30, 1997 - ------------------------------ Frank J. Hoenemeyer /s/ Frank J. Sixt Director July 30, 1997 - ------------------------------ Frank J. Sixt EXHIBIT INDEX Exhibit Number Description of Document**** - ------ ----------------------- 3.1 Articles of Amendment and Restatement of the Company. 3.2 Articles Supplementary Classifying 335,000 Shares of Common Stock as Class A Common Stock. 3.3 Articles Supplementary Classifying 2,000,000 Shares of Common Stock as Series A 8% Convertible Redeemable Preferred Stock. 3.4 Bylaws of the Company. 4.1 Specimen certificate for Common Stock.*** 4.2 Specimen certificate for Class A Common Stock. 4.3 Specimen certificate for Series A 8% Convertible Redeemable Preferred Stock. 5.1 Opinion of Ballard Spahr Andrews & Ingersoll regarding legality. 10.1 $17.8 million Loan Agreement, dated as of June 28, 1996, by and between Wellsford Residential Property Trust, as lender, and Specified Properties VIII, L.P., as borrower, relating to Sonterra.* 10.2 Option Agreement between Wellsford Residential Property Trust, as purchaser, and Specified Properties VIII, as seller, dated as of June 28, 1996, relating to Sonterra.* 10.3 Sonterra Agreement by and between the Company and ERP Operating Limited Partnership dated as of May 30, 1997. 10.4 Agreement Regarding Palomino Park by and between the Company and ERP Operating Limited Partnership dated as of May 30, 1997 10.5 Operating Agreement of Park at Highlands LLC, dated as of April 27, 1995, between Wellsford Park Highlands Corp. and Al Feld, relating to Blue Ridge.** 10.6 First Amendment to Operating Agreement of Park at Highlands LLC, dated as of December 29, 1995, between Wellsford Park Highlands Corp. and Al Feld, relating to Blue Ridge.* 10.7 Tri-Party Agreement by and among Park at Highlands LLC, NationsBank of Texas, N.A., Wellsford Park Highlands Corp., Wellsford Residential Property Trust and Al Feld dated December 29, 1995, relating to Blue Ridge.* 10.8 Assignment and Assumption of Tri-Party Agreement by and among Wellsford Residential Property Trust, ERP Operating Limited Partnership, Park at Highlands LLC, Wellsford Park Highlands Corp., The Feld Company, Al Feld and Nationsbank of Texas, N.A. dated May 30, 1997, relating to Blue Ridge. 10.9 Agreement and Acknowledgement Regarding Tri-Party Agreement by and among Nationsbank of Texas, N.A., Park at Highlands LLC, Wellsford Park Highlands Corp. and ERP Operating Limited Partnership dated May 30, 1997, relating to Blue Ridge. 10.10 Operating Agreement of Red Canyon at Palomino Park LLC between Wellsford Park Highlands Corp. and Al Feld, dated as of April 17, 1996, relating to Red Canyon.* 10.11 First Amendment to Operating Agreement of Red Canyon at Palomino Park LLC between Wellsford Park Highlands Corp. and Al Feld, dated as of May 19, 1997, relating to Red Canyon. 10.12 Tri-Party Agreement by and among NationsBank of Texas, N.A., Red Canyon at Palomino Park LLC, Wellsford Park Highlands Corp., Wellsford Residential Property Trust, Al Feld and The Feld Company, dated May 29, 1997, relating to Red Canyon. 10.13 Assignment and Assumption of Tri-Party Agreement by and among Wellsford Residential Property Trust, ERP Operating Limited Partnership, Red Canyon at Palomino Park LLC, Wellsford Park Highlands Corp., The Feld Company, Al Feld and Nationsbank of Texas, N.A. dated May 30, 1997, relating to Red Canyon. 10.14 Agreement and Acknowledgement Regarding Tri-Party Agreement by and among Nationsbank of Texas, N.A., Red Canyon at Palomino Park LLC, Wellsford Park Highlands Corp. and ERP Operating Limited Partnership dated May 30, 1997, relating to Red Canyon. 10.15 Second Amended and Restated Vacant Land Purchase and Sale Agreement between Mission Viejo Company and The Feld Company dated March 23, 1995, as amended by First Amendment, dated May 1, 1996, relating to the land underlying Palomino Park.* 10.16 Trust Indenture, dated as of December 1, 1995, between Palomino Park Public Improvements Corporation ("PPPIC") and United States Trust Company of New York, as trustee, securing Wellsford Residential Property Trust's Assessment Lien Revenue Bonds Series 1995 - $14,755,000.** 10.17 Letter of Credit Reimbursement Agreement, dated as of December 1, 1995, between PPPIC, Wellsford Residential Property Trust and Dresdner Bank AG, New York Branch.** 10.18 First Amendment to Letter of Credit Reimbursement Agreement, dated as of May 30, 1997, between PPPIC, Wellsford Residential Property Trust, Dresdner Bank AG, New York Branch and the Company. 10.19 Amendment to Wellsford Reimbursement Agreement by and between PPPIC, Wellsford Residential Property Trust and the Company, dated as of May 30, 1997. 10.20 Assignment and Assumption Agreement by and between Wellsford Residential Property Trust and the Company, dated as of May 30, 1997. 10.21 Credit Enhancement Agreement by and between the Company and ERP Operating Limited Partnership, dated as of May 30, 1997, relating to Palomino Park. 10.22 Reimbursement and Indemnification Agreement by and among the Company and ERP Operating Limited Partnership, dated as of May 30, 1997, relating to Palomino Park. 10.23 Guaranty by ERP Operating Limited Partnership for the benefit of Dresdner Bank AG, New York Branch, dated as of May 30, 1997, relating to Palomino Park. 10.24 Amended and Restated Promissory Note of the Company to the order of Dresdner Bank AG, New York Branch, dated May 30, 1997, relating to Palomino Park. 10.25 Contribution and Distribution Agreement by and between Wellsford Residential Property Trust and the Company dated as of May 30, 1997. 10.26 Common Stock and Preferred Stock Purchase Agreement by and between the Company and ERP Operating Limited Partnership dated as of May 30, 1997. 10.27 Registration Rights Agreement by and between the Company and ERP Operating Limited Partnership dated as of May 30, 1997. 10.28 Purchase and Sale Agreement, dated as of November 21, 1996, between Wellsford Commercial Properties, L.L.C. and American Cyanamid Company relating to Cyanamid Office Portfolio, as amended by Amendment dated January 13, 1997, Second Amendment dated February 13, 1997 and Third Amendment dated February 28, 1997 and Indemnification and Stock Transfer Agreement, dated February 28, 1997, between American Cyanamid Company and Wellsford Wayne Corp.* 10.29 Agreement of Sale, dated December 2, 1996, between Wellsford Commercial Properties, L.L.C. and Barlax, relating to Chatham, as amended by Amendment dated December 23, 1996 and Second Amendment dated April 1, 1997.* 10.30 Agreement of Sale, dated December 23, 1996, between Wellsford Commercial Properties, L.L.C. and N.J. Greenbrook Partners, L.P, relating to Greenbrook.* 10.31 Credit Agreement, dated as of April 25, 1997, between Park Avenue Financing Company LLC, PAMC Co-Manager Inc., PAFC Management, Inc., Stanley Stahl, The First National Bank of Boston, the Company, Other Banks that may become parties to the Agreement and The First National Bank of Boston, as Agent, relating to 277 Park Avenue.** 10.32 Assignment of Member's Interest, dated as of April 25, 1997, by PAFC Management, Inc. and Stanley Stahl to The First National Bank of Boston, relating to 277 Park Avenue (relating to interests in the Park Avenue Financing Company, LLC).** 10.33 Assignment of Member's Interest, dated as of April 25, 1997, by PAMC Co-Manager Inc. and Park Avenue Financing, LLC to The First National Bank of Boston, relating to 277 Park Avenue (relating to interests in 277 Park Avenue, LLC).** 10.34 Stock Pledge Agreement, dated as of April 25, 1997, by Stanley Stahl to The First National Bank of Boston, relating to 277 Park Avenue (relating to stock in Park Avenue Management Corporation).** 10.35 Stock Pledge Agreement, dated as of April 25, 1997, by Stanley Stahl to The First National Bank of Boston, relating to 277 Park Avenue (relating to stock in PAMC Co-Manager Inc.).** 10.36 Stock Pledge Agreement, dated as of April 25, 1997, by Stanley Stahl to The First National Bank of Boston, relating to 277 Park Avenue (relating to stock in PAFC Management, Inc.).** 10.37 Conditional Guaranty of Payment and Performance, dated as of April 25, 1997, by Stanley Stahl, relating to 277 Park Avenue.** 10.38 Cash Collateral Account Security, Pledge and Assignment Agreement, dated as of April 25, 1997, between 277 Park Avenue, LLC, Park Avenue Management Corporation, Park Avenue Financing Company LLC, PAMC Co-Manager Inc., Stanley Stahl and The First National Bank of Boston, relating to 277 Park Avenue.** 10.39 Recognition Agreement, dated as of April 25, 1997, between The First National Bank of Boston, the Company, Column Financial, Inc., Park Avenue Financing Company LLC, PAMC Co-Manager, Inc. and 277 Park Avenue, LLC, relating to 277 Park Avenue.** 10.40 Intercreditor Agreement, dated as of April 25, 1997, between the Company and The First National Bank of Boston, as Agent, relating to 277 Park Avenue.** 10.41 Assignment and Acceptance Agreement, dated June 19, 1997, between BankBoston, N.A. (formerly known as The First National Bank of Boston) ("BankBoston") and the Company, relating to 277 Park Avenue. 10.42 Revolving Credit Agreement by and among the Company, BankBoston, Morgan Guaranty Trust Company of New York ("Morgan Guaranty"), other banks which may become parties and BankBoston, as agent, and Morgan Guaranty, as co-agent dated as of May 30, 1997. 10.43 Agreement Regarding Common Stock and Preferred Stock Purchase Agreement, dated as of May 30, 1997, among ERP Operating Limited Partnership, the Company and BankBoston, as agent. 10.44 Assignment of Common Stock Agreements, dated as of May 30, 1997, between the Company and BankBoston, as agent. 10.45 Collateral Assignment of Documents, Rights and Claims (including Collateral Assignment of Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing), made as of May 30, 1997, by the Company to BankBoston, as agent. 10.46 1997 Management Incentive Plan of the Company.** 10.47 Rollover Stock Option Plan of the Company.** 10.48 Employment Agreement between the Company and Jeffrey H. Lynford. 10.49 Employment Agreement between the Company and Edward Lowenthal. 10.50 Employment Agreement between the Company and Gregory F. Hughes. 10.51 Employment Agreement between the Company and David M. Strong. 21.1 Subsidiaries of the Registrant. 23.1 Consent of Ballard Spahr Andrews & Ingersoll (contained in Exhibit 5.1). 23.2 Consent of Robinson Silverman Pearce Aronsohn & Berman LLP. 23.3 Consent of Ernst & Young LLP. 24.1 Powers of Attorney (included on signature page). ______________________________ * Previously filed as an exhibit to the Form 10 filed on April 23, 1997. ** Previously filed as an exhibit to the Form 10/A Amendment No. 1 filed on May 21, 1997. *** Previously filed as an exhibit to the Form 10/A Amendment No. 2 filed on May 28, 1997. **** The Company acquired its interest in a number of these documents by assignment. EX-3.1 2 WELLSFORD REAL PROPERTIES, INC. ------------------------------- ARTICLES OF AMENDMENT AND RESTATEMENT FIRST: Wellsford Real Properties, Inc., a Maryland corporation (the "Corporation"), desires to amend and restate its charter as currently in effect and as hereinafter amended. SECOND: The following provisions are all the provisions of the charter currently in effect and as hereinafter amended: ARTICLE I INCORPORATOR The undersigned, Tracy A. Bacigalupo, whose address is c/o Ballard Spahr Andrews & Ingersoll, 300 East Lombard Street, Baltimore, Maryland 21202, being at least 18 years of age, does hereby form a corporation under the general laws of the State of Maryland. ARTICLE II NAME The name of the corporation (the "Corporation") is: Wellsford Real Properties, Inc. ARTICLE III PURPOSE The purposes for which the Corporation is formed are to engage in any lawful act or activity for which corporations may be organized under the general laws of the State of Maryland as now or hereafter in force. ARTICLE IV PRINCIPAL OFFICE IN STATE AND RESIDENT AGENT The address of the principal office of the Corporation in the State of Maryland is c/o Ballard Spahr Andrews & Ingersoll, 300 East Lombard Street, Baltimore, Maryland 21202, Attention: James J. Hanks, Jr. The name of the resident agent of the Corporation in the State of Maryland is James J. Hanks, Jr., whose post address is c/o Ballard Spahr Andrews & Ingersoll, 300 East Lombard Street, Baltimore, Maryland 21202. The resident agent is a citizen of and resides in the State of Maryland. ARTICLE V PROVISIONS FOR DEFINING, LIMITING AND REGULATING CERTAIN POWERS OF THE CORPORATION AND OF THE STOCKHOLDERS AND DIRECTORS Section 5.1 Number and Classification of Directors. The business and affairs of the Corporation shall be managed under the direction of the Board of Directors. The number of directors of the Corporation initially shall be seven, which number may be increased or decreased pursuant to the Bylaws, but shall never be less than the minimum number required by the Maryland General Corporation Law. The names of the directors who shall serve until the first annual meeting of stockholders and until their successors are duly elected and qualify and the class of directors to which each is assigned are: Name Class ---- ----- Jeffrey H. Lynford II Mark S. Germain II Frank J. Hoenemeyer III Frank J. Sixt III Edward Lowenthal I Rodney F. DuBois I These directors may increase the number of directors and may fill any vacancy, whether resulting from an increase in the number of directors or otherwise, on the Board of Directors occurring before the first annual meeting of stockholders in the manner provided in the Bylaws. The directors (other than any director elected solely by holders of one or more classes or series of Preferred Stock) shall be classified, with respect to the terms for which they severally hold office, into three classes, the Class I directors to hold office initially for a term expiring at the annual meeting of stockholders in 1998, the Class II directors to hold office initially for a term expiring at the annual meeting of stockholders in 1999 and the Class III directors to hold office initially for a term expiring at the annual meeting of stockholders in 2000, with the members of each class to hold office until their successors are duly elected and qualify. At each annual meeting of the stockholders, the successors to the class of directors whose term expires at such meeting shall be elected to hold office for a term expiring at the annual meeting of stockholders held in the third year following the year of their election. Section 5.2 Mergers, Consolidations and Share Exchanges. Notwithstanding any provision of law permitting or requiring such action to be taken or authorized by the affirmative vote of the holders of shares entitled to cast a greater number of votes, a consolidation or share exchange or a merger in which the Corporation is the successor need be approved only by the affirmative vote of holders of shares entitled to cast a majority of all the votes entitled to be cast on the matter. Section 5.3 Authorization by Board of Stock Issuance. The Board of Directors may authorize the issuance from time to time of shares of stock of the Corporation of any class or series, whether now or hereafter authorized, or securities or rights convertible into shares of its stock of any class or series, whether now or hereafter authorized, for such consideration as the Board of Directors may deem advisable (or without consideration in the case of a stock split or stock dividend), subject to such restrictions or limitations, if any, as may be set forth in the charter or the Bylaws. Section 5.4 Preemptive Rights. Except as may be provided by contract or by the Board of Directors in setting the terms of classified or reclassified shares of stock pursuant to Section 6.2, no holder of shares of stock of the Corporation shall, as such holder, have any preemptive right to purchase or subscribe for any additional shares of stock of the Corporation or any other security of the Corporation which it may issue or sell. Section 5.5 Removal of Directors. Subject to the rights of holders of one or more classes or series of stock to nominate or elect one or more directors, any director, or the entire Board of Directors, may be removed, but only for cause and then only by the affirmative vote of the holders of at least two thirds of the votes entitled to be cast in the election of directors. For the purpose of this Section 5.5, "cause" shall mean with respect to any particular director a final judgment of a court of competent jurisdiction holding that such director caused demonstrable, material harm to the Corporation through bad faith or active and deliberate dishonesty. Section 5.6 Transactions Between the Corporation and its Directors, Officers, Employees and Agents. Subject to any express restrictions in this charter or adopted by the Directors in the Bylaws or by resolution, the Corporation may enter into any contract or transaction of any kind (including, without limitation, for the purchase or sale of property or for any type of services, including those in connection with underwriting the offer or sale of securities of the Corporation) with any person or entity, including any director, officer, employee or agent of the Corporation or any person or entity affiliated with a director, officer, employee or agent of the Corporation, whether or not any of them has a financial interest in such transaction. Section 5.7 Ambiguity. In case of any ambiguity in any provision of this charter, the Board of Directors of the Corporation shall have the power to determine the application of such provision with respect to any situation based on the facts known to the Board and such determination shall be final and conclusive. ARTICLE VI STOCK Section 6.1 Authorized Shares. The Corporation has authority to issue 200,000,000 shares of Common Stock, $.01 par value per share ("Common Stock"). The aggregate par value of all authorized shares of stock having par value is $2,000,000. Section 6.2 Reclassified Shares. The Board of Directors may reclassify any unissued shares of stock from time to time in one or more classes or series of stock. Prior to issuance of reclassified shares of any class or series, the Board of Directors by resolution shall: (a) designate that class or series to distinguish it from all other classes and series of stock of the Corporation; (b) specify the number of shares to be included in the class or series; (c) set or change, subject to the express terms of any class or series of stock of the Corporation outstanding at the time, the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications and terms and conditions of redemption for each class or series; and (d) cause the Corporation to file articles supplementary with the State Department of Assessments and Taxation of Maryland ("SDAT"). Any of the terms of any class or series of stock set or changed pursuant to clause (c) of this Section 6.2 may be made dependent upon facts or events ascertainable outside the charter (including determinations by the Board of Directors or other facts or events within the control of the Corporation) and may vary among holders thereof, provided that the manner in which such facts, events or variations shall operate upon the terms of such class or series of stock is clearly and expressly set forth in the articles supplementary filed with the SDAT. Section 6.3 Charter and Bylaws. All persons who shall acquire stock in the Corporation shall acquire the same subject to the provisions of the charter and the Bylaws. ARTICLE VII INDEMNIFICATION AND ADVANCE OF EXPENSES The Corporation shall have the power, to the maximum extent permitted by Maryland law in effect from time to time, to obligate itself to indemnify, and to pay or reimburse reasonable expenses in advance of final disposition of a proceeding to, (a) any individual who is a present or former director or officer of the Corporation or (b) any individual who, while a director of the Corporation and at the request of the Corporation, serves or has served as a director, officer, partner, trustee, manager or member of another corporation, partnership, joint venture, trust, employee benefit plan, limited liability company or any other enterprise from and against any claim or liability to which such person may become subject or which such person may incur by reason of his status as a present or former director or officer of the Corporation. The Corporation shall have the power, with the approval of the Board of Directors, to provide such indemnification and advancement of expenses to a person who served a predecessor of the Corporation in any of the capacities described in (a) or (b) above and to any employee or agent of the Corporation or a predecessor of the Corporation. ARTICLE VIII AMENDMENTS The Corporation reserves the right from time to time to make any amendment to its charter, now or hereafter authorized by law, including any amendment altering the terms or contract rights, as expressly set forth in this charter, of any shares of outstanding stock. All rights and powers conferred by the charter on stockholders, directors and officers are granted subject to this reservation. Except as set forth in the following sentence, any amendment to the charter shall be valid only if approved by the affirmative vote of a majority of all the votes entitled to be cast on the matter. Any amendment to Section 5.1, Section 5.5 or this sentence of the charter or any amendment to the charter providing that the stockholders of the Corporation may approve an action by a lesser percentage of votes than that required by law shall be valid only if approved by the affirmative vote of two thirds of all the votes entitled to be cast on the matter. ARTICLE IX LIMITATION OF LIABILITY To the maximum extent that Maryland law in effect from time to time permits limitation of the liability of directors and officers of a corporation, no director or officer of the Corporation shall be liable to the Corporation or its stockholders for money damages. Neither the amendment nor repeal of this Article IX, nor the adoption or amendment of any other provision of the charter or Bylaws inconsistent with this Article IX, shall apply to or affect in any respect the applicability of the preceding sentence with respect to any act or failure to act which occurred prior to such amendment, repeal or adoption. THIRD: The amendment to and restatement of the charter as hereinabove set forth has been duly advised by the Board of Directors and approved by the stockholders of the Corporation as required by law. FOURTH: The current address of the principal office of the Corporation is as set forth in Article IV of the foregoing amendment and restatement of the charter. FIFTH: The name and address of the Corporation's current resident agent is as set forth in Article IV of the foregoing amendment and restatement of the charter. SIXTH: The number of directors of the Corporation and the names of those currently in office are as set forth in Article V of the foregoing amendment and restatement of the charter. SEVENTH: The total number of shares of stock which the Corporation had authority to issue immediately prior to this amendment and restatement was 10,000 shares, $.01 par value per share. The aggregate par value of all shares of stock having par value was $100.00. EIGHTH: The total number of shares of stock which the Corporation has authority to issue pursuant to the foregoing amendment and restatement of the charter is 200,000,000, consisting of 200,000,000 shares of Common Stock, $.01 par value per share. The aggregate par value of all authorized shares of stock having par value is $2,000,000. NINTH: The undersigned President acknowledges these Articles of Amendment and Restatement to be the corporate act of the Corporation and as to all matters or facts required to be verified under oath, the undersigned President acknowledges that to the best of his knowledge, information and belief, these matters and facts are true in all material respects and that this statement is made under the penalties for perjury. IN WITNESS WHEREOF, the Corporation has caused these Articles of Amendment and Restatement to be signed in its name and on its behalf by its Chairman of the Board and attested to by its Assistant Secretary on this 30th day of May, 1997. ATTEST: WELLSFORD REAL PROPERTIES, INC. /s/ Gregory F. Hughes By:/s/ Jeffrey H. Lynford(SEAL) - ----------------------------- -------------------------------- Gregory F. Hughes Jeffrey H. Lynford Assistant Secretary Chairman of the Board EX-3.2 3 WELLSFORD REAL PROPERTIES, INC. ARTICLES SUPPLEMENTARY 350,000 SHARES CLASS A COMMON STOCK Wellsford Real Properties, Inc., a Maryland corporation (the "Corporation"), hereby certifies to the State Department of Assessments and Taxation of Maryland that: FIRST: Under a power contained in Section 6.2 of the charter of the Corporation (the "Charter"), the Board of Directors of the Corporation (the "Board of Directors"), by unanimous written consent dated May 28, 1997, reclassified and designated 350,000 shares (the "Shares") of Common Stock (as defined in the Charter) as shares of Class A Common Stock, $.01 par value per share (the "Class A Common Stock"), with the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications and terms and conditions of redemption as set forth as follows, which, upon any restatement of the Charter shall be made part of Article VI, with any necessary or appropriate changes to the enumeration or lettering of sections or subsections hereof. CLASS A COMMON STOCK Section 1. Certain Definitions. For purposes of the terms of the Class A Common Stock the following terms 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. "Beneficial Ownership" shall mean ownership of stock by a REIT who would be treated as an owner of such shares of stock under Section 856(c)(5) of the Code. The terms "Beneficial Owner", "Beneficially Owns" and "Beneficially Owned" shall have correlative meanings. "Business Day" shall mean any day, other than a Saturday or Sunday, that is neither a legal holiday nor a day on which banking institutions in New York City are authorized or required by law, regulation or executive order to close. "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. "Common Stock" shall mean the common stock, $.01 par value per share, of the Corporation. "Class A Common Stock" shall mean the Class A common stock, $.01 par value per share, of the Corporation. "Closing Date" shall mean May 30, 1997. "Control" including the terms "Controlling", "Controlled by" and "under common Control with", shall mean the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. "Corporation" shall mean Wellsford Real Properties, Inc. "Liquidation Value", when used in connection with Series A 8% Convertible Redeemable Preferred Stock, shall mean $25.00 per share. "Person" shall mean any natural person, corporation, business or real estate investment trust, joint venture, association, company, partnership, or government, or any agency or political subdivision thereof. "Preferred Stock" shall mean all shares of stock of the Corporation having a preference in the payment of dividends or any distribution of assets upon liquidation, dissolution or winding-up of the Corporation to the Common Stock or Class A Common Stock. "REIT" shall mean a real estate investment trust under Section 856 of the Code. "REIT Ownership Limit" shall initially mean nine and nine-tenths percent (9.9%) of the value of the outstanding Voting Stock of the Corporation. "Responsible Officer" of any corporation shall mean any executive officer of such corporation, and any other officer or similar official thereof responsible for the administration of the obligations of such corporation in respect of the terms of the Class A Common Stock. "Transfer" shall mean any sale, transfer, redemption, gift, hypothecation, pledge, assignment, devise or other disposition of Voting Stock, whether voluntary or involuntary, whether of record, constructively or beneficially and whether by operation of law or otherwise. "Triggering Event" shall mean any event undertaken or caused by the Corporation, which would result in ERP Operating Limited Partnership ("ERP Operating Partnership"), Equity Residential Properties Trust or any Affiliate of either of them collectively to Beneficially Own outstanding shares of Class A Common Stock in excess of the REIT Ownership Limit. "Voting Stock" shall mean the Class A Common Stock, the Common Stock and any other outstanding shares of stock of the Corporation entitled to vote generally in the election of directors. Section 2. Rights. The holders of Class A Common Stock shall have all rights, including, but not limited to, voting, dividend, distribution, liquidation and other rights of holders of shares of Common Stock; provided, however, holders of Class A Common Stock shall have such additional rights as provided herein. Section 3. (a) Nomination Rights. The holders of the Class A Common Stock, as a class, shall be entitled to nominate one (1) nominee for election to the Board of Directors of the Corporation at each annual meeting of shareholders of the Corporation at which the Class II Directors are to be elected so long as (i) ERP Operating Partnership is obligated to purchase Preferred Stock pursuant to that certain Common Stock and Preferred Stock Purchase Agreement dated as of May 30, 1997, between ERP Operating Partnership and the Corporation; (ii) ERP Operating Partnership has obligations pursuant to that certain Agreement Regarding Palomino Park dated as of May 30, 1997 between ERP Operating Partnership and the Corporation; (iii) ERP Operating Partnership has obligations pursuant to that certain Credit Enhancement Agreement dated as of May 30, 1997 between ERP Operating Partnership and the Corporation; or (iv) the aggregate Liquidation Value of the shares of Series A 8% Convertible Redeemable Preferred Stock of the Corporation owned by ERP Operating Partnership is greater than $10,000,000; provided, however, in no event shall the period during which the holders of the Class A Common Stock are entitled to nominate one (1) nominee for election to the Board of Directors be less than two (2) years from the Closing Date. (b) Appointment Rights. Upon (i) the occurrence and continuation of an Event of Default (as such term is defined in that certain Common Stock and Preferred Stock Purchase Agreement dated as of May 30, 1997 between ERP Operating Partnership and the Corporation) or (ii) the receipt by Equity Residential Properties Trust ("EQR") of a ruling from the Internal Revenue Service or an opinion of counsel satisfactory to EQR that the rights in this Section 3(b) will not cause EQR to lose its status as a REIT under the Code, and in the event a person nominated by the holders of the Class A Common Stock is not a member of the Board of Directors of the Corporation at such time, the holders of the Class A Common Stock, as a class, shall be entitled to elect one (1) member (the "Class A Director") of the Board of Directors of the Corporation so long as (i) ERP Operating Partnership is obligated to purchase Preferred Stock pursuant to that certain Common Stock and Preferred Stock Purchase Agreement dated as of May 30, 1997 between ERP Operating Partnership and the Corporation; (ii) ERP Operating Partnership has obligations pursuant to that certain Agreement Regarding Palomino Park dated as of May 30, 1997 between ERP Operating Partnership and the Corporation; (iii) ERP Operating Partnership has obligations pursuant to that certain Credit Enhancement Agreement dated as of May 30, 1997 between ERP Operating Partnership and the Corporation; or (iv) the aggregate Liquidation Value of the shares of Series A 8% Convertible Redeemable Preferred Stock of the Corporation owned by ERP Operating Partnership is greater than $10,000,000; provided, however, (x) in no event shall the period during which the holders of the Class A Common Stock are entitled to elect the Class A Director be less than two (2) years from the Closing Date, and (v) a Class A Director may not hold office as such a director at the same time as a person nominated by the holders of the Class A Common Stock pursuant to Section 3(a). The Class A Director may be removed without cause, only by the affirmative vote of a majority of the Class A Common Stock. Section 4. Optional Conversion. (a) Holders of Class A Common Stock shall have the right, exercisable at any time and from time to time to convert all or any shares of Class A Common Stock into shares of Common Stock at a conversion rate of one share of Common Stock for each share of Class A Common Stock, subject to adjustment (the "Conversion Rate"). Upon conversion, no adjustment or payment will be made for distributions, but if any holder surrenders Class A Common Stock for conversion after the close of business on the record date for the payment of a dividend or distribution and prior to the opening of business on the related payment date of such dividend or distribution then, notwithstanding such conversion, the dividend or distribution payable on such payment date will be paid to the registered holder of such shares on such record date. (b) Any holder of one or more shares of Class A Common Stock electing to convert such share or shares shall deliver the certificate or certificates therefor to the principal office of any transfer agent for the Common Stock, with the form of notice of election to convert as the Corporation shall prescribe fully completed and duly executed and (if so required by the Corporation or any conversion agent) accompanied by instruments of transfer in form satisfactory to the Corporation and to any conversion agent, duly executed by the registered holder or his duly authorized attorney, and transfer taxes, stamps or funds therefor or evidence of payment thereof. The conversion right with respect to any such shares shall be deemed to have been exercised at the date upon which the certificates therefor accompanied by such duly executed notice of election and instruments of transfer and such taxes, stamps, funds or evidence of payment shall have been so delivered, and the person or persons entitled to receive the shares of the Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of the Common Stock upon said date. (c) If a holder converts shares of Class A Common Stock, the Corporation shall pay any documentary, stamp or similar issue or transfer tax due on the issuance of shares of Common Stock upon the conversion. The holder, however, shall pay to the Corporation the amount of any tax which is due (or shall establish to the satisfaction of the Corporation payment thereof) if the shares are to be issued in a name other than the name of such holder and shall pay to the Corporation any amount required by the last sentence of Section 4(a) hereof. (d) The Corporation shall reserve and shall at all times have reserved out of its authorized but unissued shares of Common Stock a sufficient number of shares of Common Stock to permit the conversion of the then outstanding shares of Class A Common Stock. All shares of Common Stock which may be issued upon conversion of shares of Class A Common Stock shall be validly issued, fully paid and nonassessable, and not subject to preemptive or other similar rights. In order that the Corporation may issue shares of Common Stock upon conversion of shares of Class A Common Stock, the Corporation will endeavor to comply with all applicable federal and state securities laws and will endeavor to list such Common Stock to be issued upon conversion on each securities exchange on which the Common Stock is listed. (e) The Conversion Rate in effect at any time shall be subject to adjustment from time to time as follows: (i) If the Corporation shall (1) reclassify the outstanding shares of Common Stock into shares of some other class or series of stock of the Corporation, (2) subdivide the outstanding shares of Common Stock into a greater number of shares of Common Stock or (3) combine the outstanding shares of Common Stock into a smaller number of shares of Common Stock, the conversion rate immediately prior to such action shall be adjusted so that the holder of any shares of Class A Common Stock thereafter surrendered for conversion shall be entitled to receive the number of shares of Common Stock which he would have owned immediately following such action had such shares of Class A Common Stock been converted immediately prior thereto. An adjustment made pursuant to this Section 4(e)(i) shall become effective immediately after the effective date of a subdivision, combination or reclassification. (ii) The Market Price per share of the Common Stock on any date shall be deemed to be the average of the daily closing prices for 30 consecutive trading days commencing 45 trading days before the date in question. The closing price for each day shall be the last reported sales price or, in case no such reported sale takes place on such date, the average of the reported closing bid and asked prices, regular way, in either case on the New York Stock Exchange, or if the Common Stock is not listed or admitted to trading on such Exchange, on the principal national securities exchange on which the Common Stock is listed or admitted to trading or, if not listed or admitted to trading on any national securities exchange, the closing sale price of the Common Stock or, in case no reported sale takes place, the average of the closing bid and asked prices, on NASDAQ or any comparable system, or if the Common Stock is not quoted on NASDAQ or any comparable system, the closing sale price or, in case no reported sale takes place, the average of the closing bid and asked prices, as furnished by any two members of the National Association of Securities Dealers, Inc. selected from time to time by the Corporation for that purpose. (iii) In any case in which this Section 4 shall require that an adjustment be made immediately following a record date, the Corporation may elect to defer (but only until five Business Days following the mailing of the notice described in Section 4(j)) issuing to the holder of any Class A Common Stock converted after such record date the Common Stock and other shares of stock of the Corporation issuable upon such conversion over and above the Common Stock and other shares of stock of the Corporation issuable upon such conversion only on the basis of the conversion rate prior to adjustment; and, in lieu of the shares the issuance of which is so deferred, the Corporation shall issue or cause its transfer agents to issue appropriate evidence of the right to receive such shares. (f) No adjustment in the Conversion Rate shall be required until cumulative adjustments result in a change of 1% or more of the conversion price as in effect prior to the last adjustment of the Conversion Rate; provided, however, that any adjustment which by reason of this Section 4(f) is not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 4 shall be made to the nearest cent ($.01) or the nearest one-hundredth (1/100) of a share, as the case may be. (g) If, as a result of an adjustment made pursuant to Section 4(e), the holder of any Class A Common Stock thereafter surrendered for conversion shall become entitled to receive any shares of stock of the Corporation other than Common Stock, thereafter the number of such other shares so receivable upon conversion of any Class A Common Stock shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Common Stock contained in this Section 4. (h) The Corporation may make such increases in the Conversion Rate, in addition to those required by Section 4(e), as is considered to be advisable in order that any event treated for federal income tax purposes as a distribution of shares or share rights shall not be taxable to the recipients thereof. (i) Whenever the Conversion Rate is adjusted, the Corporation shall promptly mail to all holders of record of Class A Common Stock a notice of the adjustment and shall cause to be prepared a certificate signed by the principal financial officer of the Corporation setting forth the adjusted Conversion Rate and a brief statement of the facts requiring such adjustment and the computation thereof; such certificate shall forthwith be filed with each transfer agent for the Class A Common Stock. (j) If: (i) the Corporation takes any action which would require an adjustment in the Conversion Rate, or (ii) the Corporation consolidates or merges with, or transfers all or substantially all of its assets to, another corporation and shareholders of the Corporation must approve the transaction, the Corporation shall mail to holders of shares of Class A Common Stock a notice stating the proposed record or effective date of the transaction, as the case may be. The Corporation shall mail the notice at least 10 days before such date; however, failure to mail such notice or any defect therein shall not affect the validity of any transaction referred to in clauses (i) or (ii) of this Section 4(j). (k) If any of the following shall occur, namely: (i) any reclassification or change of outstanding shares of Common Stock issuable upon conversion of Class A Common Stock (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination), (ii) any consolidation or merger to which the Corporation is a party other than a consolidation or merger in which the Corporation is the continuing corporation and which does not result in any reclassification of, or change (other than a change in name, or par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination) in, outstanding shares of Common Stock or (iii) any sale, transfer or lease of all or substantially all of the property or business of the Corporation as an entirety, then the Corporation, or such successor or purchasing corporation, as the case may be, shall, as a condition precedent to such reclassification, change, consolidation, merger, sale, transfer or lease, provide in its charter that each share of Class A Common Stock shall be convertible into the kind and amount of shares of stock and other securities and property (including cash) receivable upon such reclassification, change, consolidation, merger, sale, transfer or lease by a holder of the number of shares of Common Stock deliverable upon conversion of such shares of Class A Common Stock immediately prior to such reclassification, change, consolidation, merger, sale, transfer or lease. Such provision in the charter document shall provide for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section 4. If, in the case of any such reclassification, change, consolidation, merger, sale, transfer or lease, the shares of stock or other securities and property (including cash) receivable thereupon by a holder of the Common Stock includes shares of stock or beneficial interest or other securities and property of a corporation or other entity other than the successor or purchasing corporation, as the case may be, in such reclassification, change, consolidation, merger, sale, transfer or lease, then the charter of such other corporation, as a condition precedent to such transaction, shall contain such additional provisions to protect the interests of the holders of Class A Common Stock as the Board of Directors shall reasonably consider necessary by reason of the foregoing. The provisions of this Section 4(k) shall similarly apply to successive consolidations, mergers, sales, transfers or leases. No holder of Class A Common Stock will possess any preemptive rights to subscribe for or acquire any unissued shares of the Corporation (whether now or hereafter authorized) or securities of the Corporation convertible into or carrying a right to subscribe to or acquire shares of stock of the Corporation. Section 5. Automatic Conversion. Any outstanding shares of Class A Common Stock shall automatically convert, at the Conversion Rate, into shares of Common Stock upon the Transfer of such shares of Class A Common Stock to any Person other than an Affiliate of Equity Residential Properties Trust or ERP Operating Partnership. Such automatic conversion shall be deemed to have occurred on the date of such Transfer. Section 6. Purchase of Shares of Voting Stock in Excess of REIT Ownership Limit. If, notwithstanding the other provisions contained in the terms of the Class A Common Stock, a Triggering Event shall occur, then the Corporation shall (i) immediately deliver written notice of such Triggering Event to each of Equity Residential Properties Trust and ERP Operating Partnership and (ii) purchase such shares of Class A Common Stock in excess of the REIT Ownership Limit at a price per share equal to the Market Price per share of the Common Stock no later than 25 days following the date of the Triggering Event which resulted in the REIT Beneficially Owning shares of Class A Common Stock in excess of the REIT Ownership Limit. SECOND: The Shares have been classified and designated by the Board of Directors under the authority contained in the Charter. THIRD: These Articles Supplementary have been approved by the Board of Directors in the manner and by the vote required by law. FOURTH: The undersigned President of the Corporation acknowledges these Articles Supplementary to be the corporate act of the Corporation and, as to all matters or facts required to be verified under oath, the undersigned President acknowledges that to the best of his knowledge, information and belief, these matters and facts are true in all material respects and that this statement is made under the penalties for perjury. IN WITNESS WHEREOF, the Corporation has caused these Articles Supplementary to be executed under seal in its name and on its behalf by its Chairman of the Board and attested to by its Assistant Secretary on this 30th of May, 1997. ATTEST: WELLSFORD REAL PROPERTIES, INC /s/ Gregory F. Hughes By:/s/ Jeffrey H.Lynford(SEAL) - --------------------------- ------------------------------ Gregory F. Hughes Jeffrey H. Lynford Assistant Secretary Chairman of the Board EX-3.3 4 WELLSFORD REAL PROPERTIES, INC. ARTICLES SUPPLEMENTARY 2,000,000 SHARES SERIES A 8% CONVERTIBLE REDEEMABLE PREFERRED STOCK Wellsford Real Properties, Inc, a Maryland corporation (the "Corporation"), hereby certifies to the State Department of Assessments and Taxation of Maryland that: FIRST: Under a power contained in Section 6.2 of the charter of the Corporation (the "Charter"), the Board of Directors of the Corporation (the "Board of Directors"), by unanimous written consent dated May 28, 1997, reclassified and designated 2,000,000 shares (the "Shares") of Common Stock (as defined in the Charter) as shares of Series A 8% Convertible Redeemable Preferred Stock, $.01 par value per share (the "Series A Preferred Stock"), with the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications and terms and conditions of redemption as set forth as follows, which upon any restatement of the Charter shall be made part of Article VI, with any necessary or appropriate changes to the enumeration or lettering of sections or subsections hereof. SERIES A PREFERRED STOCK Section 1. Certain Definitions Unless the context otherwise requires, the terms defined in this Section 1 shall have, for all purposes of determining the terms of the Series A Preferred Shares, the meanings herein specified (with terms defined in the singular having comparable meanings when used in the plural). "Business Day" shall mean any day, other than a Saturday or Sunday, that is neither a legal holiday nor a day on which banking institutions in New York City are authorized or required by law, regulation or executive order to close. "Closing Date" shall mean May 30, 1997. "Code" shall mean the Internal Revenue Code of 1986, as amended. "Common Stock" shall mean the common stock, $.01 par value per share, of the Corporation. "Class A Common Stock" shall mean the Class A common stock, $.01 par value per share, of the Corporation. "Dividend Period" shall have the meaning set forth in Section 4 below. "Event of Default" shall mean (i) the non-payment of any dividend on the Quarterly Dividend Date applicable to such dividend for three (3) Dividend Periods which need not be consecutive; or (ii) the failure to comply with any term, condition or obligation or failure to provide any right under the terms of the Series A Preferred Shares. "Gross Sales Price of a Share of Common Stock" shall mean (a) the gross proceeds from all sales of Common Stock to institutional purchasers taking place on or prior to the Closing Date and subject to written commitments to purchase from institutional purchasers received on or prior to the Closing Date, divided by (b) the aggregate number of shares so sold and subject to such commitments. "Junior Shares" shall have the meaning set forth in Section 3 below. "Person" shall mean any natural person, corporation, business trust, joint venture, association, company, partnership, or government, or any agency or political subdivision thereof. "Liquidation Value" shall have the meaning set forth in Section 5 below. "Net Book Value Per Share of Common Stock" shall mean the stockholders' equity of the Corporation determined in accordance with generally accepted accounting principles as adjusted for all liabilities, including all costs related to the formation of the Corporation, as set forth in the financial statements of the Corporation, less the Liquidation Value of all outstanding Preferred Stock including Series A Preferred Stock, divided by the number of shares of Common Stock of the Corporation outstanding on such date, excluding the shares of Class A Common Stock being purchased by ERP Operating Limited Partnership on the Closing Date. Net Book Value Per Share of Common Stock shall be determined in accordance with the provisions in Section 2.1 of that certain Common Stock and Preferred Stock Purchase Agreement dated as of May 30, 1997 between ERP Operating Limited Partnership and the Corporation. "Preferred Stock" shall mean all shares of stock having a preference in any manner to the Common Stock or Class A Common Stock. "Quarterly Dividend Date" shall have the meaning set forth in Section 4 below. "Record Date" shall have the meaning set forth in Section 4 below. "Redemption Date" shall have the meaning set forth in Section 6 below. "Redemption Price" shall have the meaning set forth in Section 6 below. "Responsible Officer" of any corporation shall mean any executive officer of such corporation, and any other officer or similar official thereof responsible for the administration of the obligations of such corporation in respect of the terms of the Series A Preferred Shares. "Series A Preferred Stock" shall mean the Series A 8% Convertible Redeemable Preferred Stock, $.01 par value per share, of the Corporation. Section 2. Number. The maximum number of authorized shares of Series A Preferred Stock shall be 2,000,000. Section 3. Relative Seniority. In respect of rights to receive dividends and to participate in distributions or payments in the event of any liquidation, dissolution or winding up of the Corporation, the Series A Preferred Stock shall rank (i) junior to any other Preferred Stock of the Corporation ranking, as to dividends and upon liquidation, prior to the Series A Preferred Stock, (ii) pari passu with any other Preferred Stock of the Corporation ranking, as to dividends and upon liquidation, on parity with the Series A Preferred Stock, and (iii) senior to the Common Stock and any other class or series of shares of stock of the Corporation ranking, as to dividends and upon liquidation, junior to the Series A Preferred Stock (collectively, "Junior Shares"). Notwithstanding the foregoing, the Corporation may make distributions or pay dividends in shares of Common Stock or in any other shares of the Corporation ranking junior to the Series A Preferred Stock as to distribution rights and liquidation preference at any time; provided, however, the Corporation may make distributions or pay dividends on the Series A Preferred Stock in shares of the Corporation only as provided herein. Section 4. Dividends. The holders of the then outstanding Series A Preferred Stock shall be entitled to receive, when and as declared by the Board of Directors of the Corporation out of any funds legally available therefor, dividends at the rate of $2.00 per share per year, payable in cash, except as provided below, in equal amounts quarterly on the fifteenth day, or if not a Business Day, the next succeeding Business Day, of January, April, July and October in each year, beginning July 15, 1997 (each such day being hereinafter called a "Quarterly Dividend Date" and each period ending on a Quarterly Dividend Date being hereinafter called a "Dividend Period"), to shareholders of record at the close of business on such date as shall be fixed by the Board of Directors of the Corporation at the time of authorization of the dividend (the "Record Date"), which shall be not fewer than 10 nor more than 30 days preceding the Quarterly Dividend Date. The amount of any dividend payable for the initial Dividend Period and for any other Dividend Period shorter than a full Dividend Period shall be prorated and computed on the basis of a 360-day year of twelve 30-day months. Dividends paid on the Series A Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a per share basis among all such shares at the time outstanding. Notwithstanding the foregoing, for any twelve Dividend Periods the Company shall have the right to pay the dividend in additional shares of Series A Preferred Stock determined by dividing the total amount of the dividend to be paid in shares of Series A Preferred Stock by the Liquidation Value (as defined herein) per share of Series A Preferred Stock. The issuance of additional shares of Series A Preferred Stock pursuant to this Section 4 shall be evidenced by a stock certificate representing such shares issued on the related Quarterly Dividend Date and delivered on or immediately thereafter. Notwithstanding any other provision hereof, no fractional shares of the Corporation shall be issued in connection with the payment of any dividend on Series A Preferred Stock in additional shares of Series A Preferred Stock. Instead, any holder of outstanding Series A Preferred Stock having a fractional interest arising upon the payment of a dividend in additional shares of Series A Preferred Stock shall, on the related Quarterly Dividend Date, be paid an amount in cash equal to the Liquidation Value times the fraction of a share of Series A Preferred Stock to which such holder would otherwise be entitled. In the event the Company fails to pay any dividend on the Series A Preferred Stock on any Quarterly Dividend Date, the Company shall not pay any dividends on any other class of stock of the Company (other than (i) pro rata with other securities of the Company ranking pari passu with the Series A Preferred Stock or (ii) with Junior Shares) until such dividend on the Series A Preferred Stock has been paid. Except as provided in the terms of the Series A Preferred Stock, the Series A Preferred Stock shall not be entitled to participate in the earnings or assets of the Corporation. Section 5. Liquidation Rights (a) Upon the voluntary or involuntary dissolution, liquidation or winding up of the Corporation, the holders of shares of the Series A Preferred Stock then outstanding shall be entitled to receive and to be paid out of the assets of the Corporation available for distribution to its shareholders, before any payment or distribution shall be made on any Junior Shares, the amount of $25.00 per share of Series A Preferred Stock ("Liquidation Value"), plus any accrued and unpaid dividends thereon. (b) After the payment to the holders of the Series A Preferred Stock of the full preferential amounts provided for in this Section 5, the holders of shares of the Series A Preferred Stock as such shall have no right or claim to any of the remaining assets of the Corporation. (c) If, upon any voluntary or involuntary dissolution, liquidation, or winding up the Corporation, the amounts payable to the holders of shares of the Series A Preferred Stock pursuant to this Section 5 and holders of any other shares of stock of the Corporation ranking as to any such distribution on a parity with the Series A Preferred Stock are not paid in full, the holders of the Series A Preferred Stock and of such other shares will share ratably in any such distribution of assets of the Corporation in proportion to the full respective preference amounts to which they are entitled. (d) Neither the sale of all or substantially all the property or business of the Corporation, nor the merger or consolidation of the Corporation into or with any other entity or the merger or consolidation of any other entity into or with the Corporation, nor any dissolution, liquidation, winding up or reorganization of the Corporation immediately followed by the incorporation of another corporation to which the Corporation's assets are distributed shall be deemed to be a dissolution, liquidation or winding up, voluntary or involuntary, for the purposes of the terms of the Series A Preferred Stock. (e) In determining whether a distribution by dividend, redemption or other acquisition of shares of the Corporation or otherwise is permitted under Maryland law, no effect shall be given to amounts that would be needed, if the Corporation were to be dissolved at the time of the distribution, to satisfy the preferential rights upon dissolution of shareholders whose preferential rights on dissolution are superior to those receiving the distribution. Section 6. Redemption (a) Optional Redemption. On and after May 30, 2002, the Corporation may, at its option, redeem at any time all of the outstanding Series A Preferred Stock or a part of the outstanding Series A Preferred Stock at a price per share (the "Redemption Price"), equal to $25.00 per share of Series A Preferred Stock, together with all accrued and unpaid dividends to and including the date fixed for redemption (the "Redemption Date"); provided, however, that no partial redemption of the Series A Preferred Stock may be effected if after giving effect thereto the aggregate Liquidation Value of the Series A Preferred Stock outstanding is less than $10,000,000. The Redemption Price and all accrued and unpaid dividends shall be paid in cash; provided, however, that if (a) a holder of Series A Preferred Stock desires to convert any of its Series A Preferred Stock called for redemption but such conversion would cause any direct or indirect holder which is classified as a real estate investment trust ("REIT") under Section 856 of the Code to own, directly or indirectly, more than 9.9% of the outstanding voting stock of the Corporation or would otherwise cause any direct or indirect holder of such outstanding voting stock to lose its status as a REIT under the Code, and (b) such holder has so notified the Corporation in writing prior to the Redemption Date, stating the number of shares of Series A Preferred Stock which have been called for redemption which such holder is unable to convert for such reason (such shares being referred to as the "Unconvertible Shares"), then the Corporation shall pay, in cash, the Redemption Price plus all accrued and unpaid dividends for each Unconvertible Share and shall issue to such holder a warrant to purchase the number of shares of Common Stock equal to (i) the fair market value of a share of Common Stock on the Redemption Date over the Redemption Price, multiplied by (ii) the number of shares of Common Stock into which the Unconvertible Shares redeemed from such holder were convertible immediately prior to such redemption, and divided by (iii) the fair market value of a share of Common Stock on the Redemption Date. Such warrant shall be exercisable without cost to the holder thereof at any time and from time to time for a period of ten (10) years from the date of issuance of such warrant. The warrant shall be on such terms and conditions as are customarily contained in like warrants, including provisions to protect the holder of the warrant from dilution. The Corporation shall have the right, at any time, to redeem such warrant at a price equal to the fair market value of such warrant on the date of any such redemption. The fair market value of a share of Common Stock on the Redemption Date shall be deemed to be the average of the daily closing prices of the Common Stock for 30 consecutive trading days commencing 45 trading days before the Redemption Date. The closing price for each day shall be the last reported sales price or, in case no such reported sale takes place on such date, the average of the reported closing bid and asked prices regular way, in either case on the New York Stock Exchange, or if the Common Stock is not listed or admitted to trading on such Exchange, on the principal national securities exchange on which the Common Stock is listed or admitted to trading or, if not listed or admitted to trading on any national securities exchange, the closing sale price of the Common Stock or, in case no reported sale takes place, the average of the closing bid and asked prices, on Nasdaq or any comparable system, or if the Common Stock is not quoted on Nasdaq or any comparable system, the closing sale price or, in case no reported sale takes place, the average of the closing bid and asked prices, as furnished by any two members of the National Association of Securities Dealers, Inc. selected from time to time by the Corporation for that purpose. (b) Procedures for Redemption (i) Notice of any redemption will be mailed by the Corporation, postage prepaid, not less than 30 nor more than 90 days prior to the Redemption Date, addressed to the holders of record of the Series A Preferred Stock to be redeemed at their addresses as they appear on the share transfer records of the Corporation. No failure to give such notice or any defect therein or in the mailing thereof shall affect the validity of the proceedings for the redemption of any Series A Preferred Stock except as to the holder to whom the Corporation has failed to give notice or except as to the holder to whom notice was defective. In addition to any information required by law or by the applicable rules of any exchange upon which Series A Preferred Stock may be listed or admitted to trading, such notice shall state: (a) the Redemption Date; (b) the Redemption Price; (c) the number of shares of Series A Preferred Stock to be redeemed; (d) the place or places where certificates for such shares are to be surrendered for payment of the Redemption Price; (e) the date on which conversion rights shall expire, the conversion price and the place or places where certificates for such shares are to be surrendered for conversion; and (f) the number of shares of Common Stock of the Corporation outstanding on the date of such notice. (ii) If notice has been mailed in accordance with Section 6(b)(i) above and provided that on or before the Redemption Date specified in such notice all funds necessary for such redemption shall have been irrevocably set aside by the Corporation, separate and apart from its other funds, in trust for the pro rata benefit of the holders of the Series A Preferred Stock so called for redemption, so as to be, and to continue to be available therefor, then, from and after the Redemption Date, distributions shall no longer accrue on said shares and said shares shall no longer be deemed to be outstanding and shall not have the status of Series A Preferred Stock and all rights of the holders thereof as shareholders of the Corporation (except the right to receive the Redemption Price) shall cease. Upon surrender, in accordance with said notice, of the certificates for any shares of Series A Preferred Stock so redeemed (properly endorsed or assigned for transfer, if the Corporation shall so require and the notice shall so state), such shares of Series A Preferred Stock shall be redeemed by the Corporation at the Redemption Price. In case fewer than all the Series A Preferred Stock represented by any such certificate are redeemed, a new certificate or certificates shall be issued representing the unredeemed Series A Preferred Stock without cost to the holder thereof. (iii) Any funds deposited with a bank or trust company for the purpose of redeeming shares of Series A Preferred Stock shall be irrevocable except that: (A) the Corporation shall be entitled to receive from such bank or trust company the interest or other earnings, if any, earned on any money so deposited in trust, and the holders of any shares redeemed shall have no claim to such interest or other earnings; (B) any balance of monies so deposited by the Corporation and unclaimed by the holders of the Series A Preferred Stock entitled thereto at the expiration of one year from the applicable Redemption Date shall be repaid, together with any interest or other earnings earned thereon, to the Corporation, and after any such repayment, the holders of the shares entitled to the funds so repaid to the Corporation shall look only to the Corporation for payment without interest or other earnings; and (C) any funds set aside to redeem Series A Preferred Stock that is converted into Common Stock prior to the Redemption Date shall be immediately delivered to the Corporation. (iv) No Series A Preferred Stock may be redeemed except with funds legally available for the payment of the Redemption Price. (v) Unless a sum sufficient for the payment of the then current dividend due for the then current Dividend Period is set apart, no shares of Series A Preferred Stock shall be redeemed (unless all outstanding shares of Series A Preferred Stock are simultaneously redeemed) or purchased or otherwise acquired directly or indirectly (except by conversion into or exchange for shares of the Corporation ranking junior to the shares of Series A Preferred Stock as to dividends and upon liquidation); provided, however, that the foregoing shall not prevent the purchase or acquisition of Series A Preferred Stock pursuant to a purchase or exchange offer made on the same terms to holders of all outstanding shares of Series A Preferred Stock. (vi) If the Redemption Date is after a Record Date and before the related Quarterly Dividend Date, the dividend payable on such Quarterly Dividend Date shall be paid to the holder in whose name the Shares of Series A Preferred Stock to be redeemed are registered at the close of business on such Record Date notwithstanding the redemption thereof between such Record Date and the related Quarterly Dividend Date or the Corporation's default in the payment of the dividend due. (vii) In case of redemption of less than all of the shares of Series A Preferred Stock at the time outstanding, the shares of Series A Preferred Stock to be redeemed shall be selected pro rata from the holders of record of such shares in proportion to the number of shares of Series A Preferred Stock held by such holders (with adjustments to avoid redemption of fractional shares) or by any other equitable method determined by the Corporation. (c) Required Redemption. Upon the occurrence of an Event of Default or on and after May 30, 2012, whichever comes first, the holder of any shares of Series A Preferred Stock may, at its option, cause the Corporation to redeem at any time all of the Series A Preferred Stock held by such holder at the Redemption Price, payable in cash, together with all accrued and unpaid dividends to and including the Redemption Date. Notwithstanding the provisions of this subsection (c), provided an Event of Default has not occurred, the Corporation shall have the right to extend the date during which a required redemption is not permitted under this subsection (c) for three separate additional five (5) year periods if the dividend rate on the Series A Preferred Stock is changed to the then market rate of comparable preferred stock (the "Market Rate") on the first day of each such additional five year period; provided, however, in no event shall the dividend be reduced to less than $2.00 per share of Series A Preferred Stock. The Market Rate shall be determined ten (10) days prior to the first Business Day of each such additional five (5) year period by mutual agreement of the holders of Series A Preferred Stock and the Corporation. In the event the holders of Series A Preferred Stock and the Corporation cannot agree on such determination prior to the first Business Day of such additional five (5) year period, the Market Rate shall be determined as of the first Business Day of each such additional five (5) year period as follows: (i) a majority of the holders of the Series A Preferred Stock then outstanding shall choose an investment banking firm of nationally recognized status and the Corporation shall choose an investment banking firm of nationally recognized status; (ii) the investment banking firms chosen by a majority of the holders of the Series A Preferred Stock then outstanding and the Corporation shall mutually choose a third investment banking firm of nationally recognized status (the "Independent Investment Banker"); (iii) the Independent Investment Banker shall then determine, in its sole discretion, the Market Rate and shall advise the holders of Series A Preferred Stock and the Corporation of its determination; and (iv) the fees of the Independent Investment Banker for making such determination shall be borne fifty percent (50%) by the holders of Series A Preferred Stock and fifty percent (50%) by the Corporation. (d) Procedures for Required Redemption (i) Notice of any required redemption shall be mailed by the holder of the Series A Preferred Stock requesting redemption, postage prepaid, not less than 30 nor more than 90 days prior to the Redemption Date, addressed to the Corporation. In addition to any information required by law or by the applicable rules of any exchange upon which Series A Preferred Stock may be listed or admitted to trading, such notice shall state: (a) the Redemption Date; (b) the Redemption Price; and (c) the number of shares of Series A Preferred Stock to be redeemed. (ii) If notice has been mailed in accordance with Section 6(d)(i) above on or before the Redemption Date specified in such notice all funds necessary for such redemption shall have been irrevocably set aside by the Corporation, separate and apart from its other funds in trust for the pro rata benefit of the holders of the Series A Preferred Stock requesting redemption, so as to be, and to continue to be available therefor, then, from and after the Redemption Date, said shares shall no longer be deemed to be outstanding and shall not have the status of Series A Preferred Stock and all rights of the holders thereof as shareholders of the Corporation (except the right to receive the Redemption Price) shall cease. Upon surrender, in accordance with said notice, of the certificates for any shares of Series A Preferred Stock so redeemed, such shares of Series A Preferred Stock shall be redeemed by the Corporation at the Redemption Price. In case fewer than all the Series A Preferred Stock represented by any such certificate are redeemed, a new certificate or certificates shall be issued representing the unredeemed Series A Preferred Stock without cost to the holder thereof. (iii) Any funds deposited with a bank or trust company for the purpose of redeeming shares of Series A Preferred Stock shall be irrevocable except that: (A) the Corporation shall be entitled to receive from such bank or trust company the interest or other earnings, if any, earned on any money so deposited in trust, and the holders of any shares redeemed shall have no claim to such interest or other earnings; and (B) any balance of monies so deposited by the Corporation and unclaimed by the holders of the Series A Preferred Stock entitled thereto at the expiration of one year from the applicable Redemption Date shall be repaid, together with any interest or other earnings earned thereon, to the Corporation, and after any such repayment, the holders of the shares entitled to the funds so repaid to the Corporation shall look only to the Corporation for payment without interest or other earnings. (iv) No Series A Preferred Stock may be redeemed except with funds legally available for the payment of the Redemption Price. (v) If the Redemption Date is after a Record Date and before the related Quarterly Dividend Date, the dividend payable on such Quarterly Dividend Date shall be paid to the holder in whose name the Series A Preferred Stock to be redeemed are registered at the close of business on such Record Date notwithstanding the redemption thereof between such Record Date and the related Quarterly Dividend Date or the Corporation's default in the payment of the dividend due. (e) The Series A Preferred Stock redeemed, repurchased or retired pursuant to the provisions of this Section 6(b) or surrendered to the Corporation upon conversion shall thereupon be retired and may not be reissued as Series A Preferred Stock but shall thereafter have the status of authorized but unissued shares of the Corporation. Section 7. Voting Rights. The holders of Series A Preferred Stock shall not be entitled to vote on any matter except as provided below; provided, however, the holders of Series A Preferred Stock shall not have any voting rights to the extent such rights will cause any holder of a Series A Preferred Stock to own more than 9.9 % of the outstanding voting stock of the Corporation or otherwise cause any holder of Series A Preferred Stock that is classified as a REIT under Section 856 of the Code to lose its status as a REIT under the Code. (a) So long as any shares of Series A Preferred Stock remain outstanding, the Corporation will not, without the affirmative vote or consent of the holders of at least two-thirds of the shares of Series A Preferred Stock outstanding at the time, given in person or by proxy, either in writing or at a meeting (such series voting separately as a class), (i) authorize, create or issue, or increase the authorized or issued amount of any class or series of shares of stock ranking prior to the Series A Preferred Stock with respect to the payment of dividends or the distribution of assets upon liquidation, dissolution or winding up or reclassify any authorized shares of stock of the Corporation into such shares, or create, authorize or issue any obligation or security convertible into or evidencing the right to purchase any such shares; or (ii) amend, alter or repeal the provisions of the Charter or the terms of the Series A Preferred Stock, whether by merger, consolidation or otherwise (an "Event"), so as to materially and adversely affect any right, preference, privilege or voting power of the Series A Preferred Stock or the holders thereof; provided, however, with respect to the occurrence of any of the Events set forth in (ii) above, so long as the shares of Series A Preferred Stock remain outstanding with the terms thereof materially unchanged, even if upon the occurrence of an Event the Corporation may not be the surviving entity, the occurrence of any such Event shall not be deemed to materially and adversely affect such rights, preferences, privileges or voting power of holders of Series A Preferred Stock and provided further that (x) any increase in the amount of the authorized or issued shares of Preferred Stock or the creation or issuance of any other Preferred Stock, or (y) any increase in the amount of authorized or issued Series A Preferred Stock or any other Preferred Stock, in each case ranking on a parity with or junior to the Series A Preferred Stock with respect to payment of dividends or the distribution of assets upon liquidation, dissolution or winding up, shall not be deemed to materially and adversely affect such rights, preferences, privileges or voting powers. Nothing herein contained shall require such a vote or consent (i) in connection with any increase in the total number of authorized or issued shares of Common Stock, or (ii) in connection with the authorization or issuance of any class or series of shares of stock ranking, as to distribution rights and the liquidation preference, on a parity with or junior to the Series A Preferred Stock. The foregoing voting provisions will not apply if, at or prior to the time when the act with respect to which such vote would otherwise be required shall be effected, all outstanding shares of Series A Preferred Stock shall have been redeemed or called for redemption and sufficient funds shall have been deposited in trust to effect such redemption. Section 8. Conversion (a) Holders of Series A Preferred Stock shall have the right, exercisable at any time and from time to time, except in the case of Series A Preferred Stock called for redemption as set forth in Section 6 hereof, to convert all or any of such Series A Preferred Stock into Common Stock at a conversion price per share of Common Stock equal to (i) the Net Book Value Per Share of Common Stock on the Closing Date or (ii) in the event any sales of Common Stock to any institutional purchasers have taken place on or prior to the Closing Date or are subject to a commitment to purchase from an institutional purchaser made on or prior to the Closing Date, the Gross Sales Price of a Share of Common Stock; multiplied by 1.08 (the "Conversion Price"). In the case of Series A Preferred Stock called for redemption, conversion rights will expire at the close of business on the last Business Day preceding the Redemption Date. Notice of redemption at the option of the Corporation must be mailed not less than 60 days and not more than 90 days prior to the Redemption Date as provided in Section 6(b) hereof. Upon conversion, no adjustment or payment will be made for distributions, but if any holder surrenders Class A Preferred Stock for conversion after the close of business on the Record Date for the payment of a distribution and prior to the opening of business on the related Quarterly Dividend Date, then, notwithstanding such conversion, the distribution payable on such Quarterly Dividend Date will be paid to the registered holder of such shares on such Record Date. In such event, such shares, when surrendered for conversion during the period between the close of business on any Record Date and the opening of business on the corresponding Quarterly Dividend Date, must be accompanied by payment of an amount equal to the distribution payable on such Quarterly Dividend Date on the shares so converted (unless such shares were converted after the issuance of a notice of redemption with respect to such shares, in which event such shares shall be entitled to the distribution payable thereon on such Quarterly Dividend Date without making such payment). (b) Any holder of one or more shares of Series A Preferred Stock electing to convert such share or shares shall deliver the certificate or certificates therefor to the principal office of any transfer agent for the Common Stock, with the form of notice of election to convert as the Corporation shall prescribe fully completed and duly executed and (if so required by the Corporation or any conversion agent) accompanied by instruments of transfer in form satisfactory to the Corporation and to any conversion agent, duly executed by the registered holder or his duly authorized attorney, and transfer taxes, stamps or funds therefor or evidence of payment thereof. The conversion right with respect to any such shares shall be deemed to have been exercised at the date upon which the certificates therefor accompanied by such duly executed notice of election and instruments of transfer and such taxes, stamps, funds or evidence of payment shall have been so delivered, and the person or persons entitled to receive the shares of the Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of the Common Stock upon said date. (c) No fractional shares of Common Stock or scrip representing a fractional share shall be issued upon conversion of Series A Preferred Stock. If more than one share of Series A Preferred Stock shall be surrendered for conversion at one time by the same holder, the number of full shares of Common Stock which shall be issuable upon conversion thereof shall be computed on the basis of the aggregate number of shares of Series A Preferred Stock so surrendered. Instead of any fractional shares of Common Stock which would otherwise be issuable upon conversion of any shares of Series A Preferred Stock, the Corporation shall pay a cash adjustment in respect of such fraction in an amount equal to the same fraction of the closing price for the Common Stock on the last trading day preceding the date of conversion. The closing price for such day shall be the last reported sales price regular way or, in case no such reported sale takes place on such date, the average of the reported closing bid and asked prices regular way, in either case on the New York Stock Exchange, or if the Common Stock is not listed or admitted to trading on such Exchange, on the principal national securities exchange on which the Common Stock is listed or admitted to trading or, if not listed or admitted to trading on any national securities exchange, the closing sale price of the Common Stock or in case no reported sale takes place, the average of the closing bid and asked prices, on Nasdaq or any comparable system. If the Common Stock is not quoted on Nasdaq or any comparable system, the Board of Directors shall in good faith determine the current market price on the basis of such quotation as it considers appropriate. (d) If a holder converts shares of Series A Preferred Stock, the Corporation shall pay any documentary, stamp or similar issue or transfer tax due on the issuance of shares of Common Stock upon the conversion. The holder, however, shall pay to the Corporation the amount of any tax which is due (or shall establish to the satisfaction of the Corporation payment thereof) if the shares are to be issued in a name other than the name of such holder and shall pay to the Corporation any amount required by the last sentence of Section 8(a) hereof. (e) The Corporation shall reserve and shall at all times have reserved out of its authorized but unissued Common Stock a sufficient number of shares of Common Stock to permit the conversion of the then outstanding Series A Preferred Stock. All Common Stock which may be issued upon conversion of Series A Preferred Stock shall be validly issued, fully paid and nonassessable, and not subject to preemptive or other similar rights. In order that the Corporation may issue Common Stock upon conversion of Series A Preferred Stock, the Corporation will endeavor to comply with all applicable federal and state securities laws and will endeavor to list such Common Stock to be issued upon conversion on each securities exchange on which the Common Stock is listed. (f) The conversion rate in effect at any time shall be subject to adjustment from time to time as follows: (i) In case the Corporation shall (1) pay or make a distribution in shares of Common Stock to holders of the Common Stock, (2) reclassify the outstanding Common Stock into shares of some other class or series of shares, (3) subdivide the outstanding Common Stock into a greater number of shares of Common Stock or (4) combine the outstanding Common Stock into a smaller number of shares of Common Stock, the conversion rate immediately prior to such action shall be adjusted so that the holder of any shares of Series A Preferred Stock thereafter surrendered for conversion shall be entitled to receive the number of shares of Common Stock which he would have owned immediately following such action had such Series A Preferred Stock been converted immediately prior thereto. An adjustment made pursuant to this Section 8(f)(i) shall become effective immediately after the record date in the case of a distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or reclassification. (ii) In case the Corporation shall issue rights, options or warrants to all holders of the Common Stock entitling them to subscribe for or purchase Common Stock (or securities convertible into Common Stock) at a price per share less than the current market price (as determined pursuant to Section 8(f)(iv)) of the Common Stock on such record date, the number of shares of Common Stock into which each share of Series A Preferred Stock shall be convertible shall be adjusted so that the same shall be equal to the number determined by multiplying the number of shares of Common Stock into which such share of Series A Preferred Stock was convertible immediately prior to such record date by a fraction of which the numerator shall be the number of shares of Common Stock outstanding on such record date plus the number of additional shares of Common Stock offered (or into which the convertible securities so offered are convertible), and of which the denominator shall be the number of shares of Common Stock outstanding on such record date, plus the number of shares of Common Stock which the aggregate offering price of the additional shares of Common Stock offered (or into which the convertible securities so offered are convertible) would purchase at such current market price. Such adjustments shall become effective immediately after such record date for the determination of the holders of the Common Stock entitled to receive such distribution. For purposes of this subsection (ii), the number of shares of Common Stock at any time outstanding shall not include shares of Common Stock held in the treasury of the Corporation. (iii) In case the Corporation shall distribute to all holders of the Common Stock any class of shares of stock other than Common Stock, evidences of indebtedness or assets of the Corporation (other than cash distributions out of current or retained earnings), or shall distribute to all holders of the Common Stock rights or warrants to subscribe for securities (other than those referred to in Section 8(f)(ii)), then in each such case the number of Common Stock into which each share of Series A Preferred Stock shall be convertible shall be adjusted so that the same shall equal the number determined by multiplying the number of shares of Common Stock into which such share of Series A Preferred Stock was convertible immediately prior to the date of such distribution by a fraction of which the numerator shall be the current market price (determined as provided in Section 8(f)(iv)) of the Common Stock on the record date mentioned below, and of which the denominator shall be such current market price of the Common Stock, less the then fair market value (as determined by the Board of Directors, whose determination shall be conclusive evidence of such fair market value) of the portion of the securities or assets so distributed or of such subscription rights or warrants applicable to one share of Common Stock. Such adjustment shall become effective immediately after the record date for the determination of the holders of the Common Stock entitled to receive such distribution. Notwithstanding the foregoing, in the event that the Corporation shall distribute rights or warrants (other than those referred to in Section 8(f)(ii)) ("Rights") pro rata to holders of the Common Stock, the Corporation may, in lieu of making any adjustment pursuant to this Section 8(f)(iii), make proper provision so that each holder of a share of Series A Preferred Stock who converts such share after the record date for such distribution and prior to the expiration or redemption of the Rights shall be entitled to receive upon such conversion, in addition to the Common Stock issuable upon such conversion (the "Conversion Shares"), a number of Rights to be determined as follows: (1) if such conversion occurs on or prior to the date for the distribution to the holders of Rights of separate certificates evidencing such Rights (the "Distribution Date"), the same number of Rights to which a holder of a number of shares of Common Stock equal to the number of Conversion Shares is entitled at the time of such conversion in accordance with the terms and provisions of and applicable to the Rights; and (2) if such conversion occurs after the Distribution Date, the same number of Rights to which a holder of the number of shares of Common Stock into which a share of Series A Preferred Stock so converted was convertible immediately prior to the Distribution Date would have been entitled on the Distribution Date in accordance with the terms and provisions of and applicable to the Rights. (iv) The current market price per share of the Common Stock on any date shall be deemed to be the average of the daily closing prices for 30 consecutive trading days commencing 45 trading days before the date in question. The closing price for each day shall be the last reported sales price or, in case no such reported sale takes place on such date, the average of the reported closing bid and asked prices regular way, in either case on the New York Stock Exchange, or if the Common Stock is not listed or admitted to trading on such Exchange, on the principal national securities exchange on which the Common Stock is listed or admitted to trading or, if not listed or admitted to trading on any national securities exchange, the closing sale price of the Common Stock or, in case no reported sale takes place, the average of the closing bid and asked prices, on Nasdaq or any comparable system, or if the Common Stock is not quoted on Nasdaq or any comparable system, the closing sale price or, in case no reported sale takes place, the average of the closing bid and asked prices, as furnished by any two members of the National Association of Securities Dealers, Inc. selected from time to time by the Corporation for that purpose. (v) In any case in which this Section 8 shall require that an adjustment be made immediately following a record date, the Corporation may elect to defer (but only until five Business Days following the mailing of the notice described in Section 8(j)) issuing to the holder of any Series A Preferred Stock converted after such record date the Common Stock and other shares of stock of the Corporation issuable upon such conversion over and above the Common Stock and other shares of stock of the Corporation issuable upon such conversion only on the basis of the conversion rate prior to adjustment; and, in lieu of the shares the issuance of which is so deferred, the Corporation shall issue or cause its transfer agents to issue appropriate evidence of the right to receive such shares. (g) No adjustment in the conversion rate shall be required until cumulative adjustments result in a change of 1% or more of the conversion price as in effect prior to the last adjustment of the conversion rate; provided, however, that any adjustment which by reason of this Section 8(g) is not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 8 shall be made to the nearest cent ($.01) or the nearest one-hundredth (1/100) of a share, as the case may be. No adjustment to the conversion rate shall be made for cash dividends. (h) In the event that, as a result of an adjustment made pursuant to Section 8(f), the holder of any Series A Preferred Stock thereafter surrendered for conversion shall become entitled to receive any shares of stock of the Corporation other than Common Stock, thereafter the number of such other shares so receivable upon conversion of any Series A Preferred Stock shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Common Stock contained in this Section 8. (i) The Corporation may make such increases in the conversion rate, in addition to those required by Sections 8(f)(i), (ii) and (iii), as is considered to be advisable in order that any event treated for federal income tax purposes as a distribution of shares or share rights shall not be taxable to the recipients thereof. (j) Whenever the conversion rate is adjusted, the Corporation shall promptly mail to all holders of record of Series A Preferred Stock a notice of the adjustment and shall cause to be prepared a certificate signed by a principal financial officer of the Corporation setting forth the adjusted conversion rate and a brief statement of the facts requiring such adjustment and the computation thereof; such certificate shall forthwith be filed with each transfer agent for the Series A Preferred Stock. (k) In the event that: (i) the Corporation takes any action which would require an adjustment in the conversion rate, (ii) the Corporation consolidates or merges with, or transfers all or substantially all of its assets to, another corporation and shareholders of the Corporation must approve the transaction, or (iii) there is a dissolution, winding up or liquidation of the Corporation, a holder of Series A Preferred Stock may wish to convert some or all of such shares into Common Stock prior to the record date for, or the effective date of, the transaction so that he may receive the rights, warrants, securities or assets which a holder of Common Stock on that date may receive. Therefore, the Corporation shall mail to holders of Series A Preferred Stock a notice stating the proposed record or effective date of the transaction, as the case may be. The Corporation shall mail the notice at least ten days before such date; however, failure to mail such notice or any defect therein shall not affect the validity of any transaction referred to in clauses (i), (ii) or (iii) of this Section 8(k). (l) If any of the following shall occur, namely: (i) any reclassification or change of outstanding Common Stock issuable upon conversion of Series A Preferred Stock (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination), (ii) any consolidation or merger to which the Corporation is a party other than a consolidation or merger in which the Corporation is the continuing corporation and which does not result in any reclassification of, or change (other than a change in name, or par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination) in, outstanding Common Stock or (iii) any sale, transfer or lease of all or substantially all of the property or business of the Corporation as an entirety, then the Corporation, or such successor or purchasing corporation, as the case may be, shall, as a condition precedent to such reclassification, change, consolidation, merger, sale, transfer or lease, provide in its charter document that each share of Series A Preferred Stock shall be convertible into the kind and amount of shares of stock and other securities and property (including cash) receivable upon such reclassification, change, consolidation, merger, sale, transfer or lease by a holder of the number of shares of Common Stock deliverable upon conversion of such shares of Series A Preferred Stock immediately prior to such reclassification, change, consolidation, merger, sale, transfer or lease. Such charter document shall provide for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section 8. The foregoing, however, shall not in any way affect the right that a holder of Series A Preferred Stock may otherwise have, pursuant to clause (2) of the last sentence of Section 8(f)(iii), to receive Rights upon conversion of Series A Preferred Stock. If, in the case of any such reclassification, change, consolidation, merger, sale, transfer or lease, the shares of stock or other securities and property (including cash) receivable thereupon by a holder of the Common Stock includes shares of stock or beneficial interest or other securities and property of a corporation or other entity other than the successor or purchasing corporation, as the case may be, in such reclassification, change, consolidation, merger, sale, transfer or lease, then the charter document of such other corporation shall contain such additional provisions to protect the interests of the holders of Series A Preferred Stock as the Board of Directors shall reasonably consider necessary by reason of the foregoing. The provisions of this Section 8(l) shall similarly apply to successive consolidations, mergers, sales, transfers or leases. No holder of Series A Convertible Preferred Stock will possess any preemptive rights to subscribe for or acquire any unissued shares of the Corporation (whether now or hereafter authorized) or securities of the Corporation convertible into or carrying a right to subscribe to or acquire shares of the Corporation. Section 9. So long as any Series A Preferred Stock is outstanding, the Corporation shall not issue any options to purchase shares of the Corporation ("Employee Stock Options") to officers, directors or employees of, or consultants to, the Corporation, whether pursuant to employee stock option or purchase plans of the Corporation or employment or consulting agreements or otherwise for an exercise price which is less than the fair market value of such shares on the date of grant. In the event the number of shares of Common Stock subject to Employee Stock Options, excluding any Employee Stock Options which were issued on the Closing Date in exchange for options to purchase shares of Wellsford Residential Property Trust, at any time exceeds, in the aggregate, 10% of the Common Stock outstanding at such time, all Employee Stock Options outstanding at such time in excess of such 10%, shall be deemed for purposes of Section 8 hereof to have an exercise price per share equal to 20% of the average fair market value of a share of Common Stock on the date of grant of those shares subject to Employee Stock Options most recently granted in excess of such 10%. Section 10. Exclusion of Other Rights. The Series A Preferred Stock shall not have any voting powers, preferences and relative, participating, optional or other special rights, other than those specifically set forth in the terms of the Series A Preferred Stock (as such terms may be amended from time to time) or in the charter of the Corporation. The Series A Preferred Stock shall have no preemptive or subscription rights. Section 11. Headings of Subdivisions. The headings of the various subdivisions hereof are for convenience of reference only and shall not affect the interpretation of any of the provisions hereof. Section 12. Severability of Provisions. If any voting powers, preferences and relative, participating, optional and other special rights of the Series A Preferred Stock and qualifications, limitations and restrictions thereof set forth in the terms of the Series A Preferred Stock (as such terms may be amended from time to time) are invalid, unlawful or incapable of being enforced by reason of any rule of law or public policy, all other voting powers, preferences and relative, participating, optional and other special rights of Series A Preferred Stock and qualifications, limitations and restrictions thereof set forth in the terms of the Series A Preferred Stock (as so amended) which can be given effect without the invalid, unlawful or unenforceable voting powers, preferences and relative, participating, optional or other special rights of Series A Preferred Stock and qualifications, limitations and restrictions thereof herein set forth shall not be deemed dependent upon any other such voting powers, preferences and relative, participating, optional or other special right of Series A Preferred Stock and qualifications, limitations and restrictions thereof unless so expressed herein. SECOND: The Shares have been classified and designated by the Board of Directors under the authority contained in the Charter. THIRD: These Articles Supplementary have been approved by the Board of Directors in the manner and by the vote required by law. FOURTH: The undersigned President of the Corporation acknowledges these Articles Supplementary to be the corporate act of the Corporation and, as to all matters or facts required to be verified under oath, the undersigned President acknowledges that to the best of his knowledge, information and belief, these matters and facts are true in all material respects and that this statement is made under the penalties for perjury. IN WITNESS WHEREOF, the Corporation has caused these Articles Supplementary to be executed under seal in its name and on its behalf by its Chairman of the Board and attested to by its Assistant Secretary on this 30th of May, 1997. ATTEST: WELLSFORD REAL PROPERTIES, INC /s/ Gregory F. Hughes By:/s/ Jeffrey H. Lynford(SEAL) - ----------------------------- ------------------------------- Gregory F. Hughes Jeffrey H. Lynford Assistant Secretary Chairman of the Board EX-3.4 5 WELLSFORD REAL PROPERTIES, INC. BYLAWS ARTICLE I OFFICES Section 1. PRINCIPAL OFFICE. The principal office of the Corporation shall be located at such place or places as the Board of Directors may designate. Section 2. ADDITIONAL OFFICES. The Corporation may have additional offices at such places as the Board of Directors may from time to time determine or the business of the Corporation may require. ARTICLE II MEETINGS OF STOCKHOLDERS Section 1. PLACE. All meetings of stockholders shall be held at the principal office of the Corporation or at such other place within the United States as shall be stated in the notice of the meeting. Section 2. ANNUAL MEETING. An annual meeting of the stockholders for the election of directors and the transaction of any business within the powers of the Corporation shall be held on a date and at the time set by the Board of Directors during the month of May in each year. Section 3. SPECIAL MEETINGS. The chairman of the board, president, chief executive officer or Board of Directors may call special meetings of the stockholders. Special meetings of stockholders shall also be called by the secretary of the Corporation upon the written request of the holders of shares entitled to cast not less than a majority of all the votes entitled to be cast at such meeting. Such request shall state the purpose of such meeting and the matters proposed to be acted on at such meeting. The secretary shall inform such stockholders of the reasonably estimated cost of preparing and mailing notice of the meeting and, upon payment to the Corporation by such stockholders of such costs, the secretary shall give notice to each stockholder entitled to notice of the meeting. Section 4. NOTICE. Not less than ten nor more than 90 days before each meeting of stockholders, the secretary shall give to each stockholder entitled to vote at such meeting and to each stockholder not entitled to vote who is entitled to notice of the meeting written or printed notice stating the time and place of the meeting and, in the case of a special meeting or as otherwise may be required by any statute, the purpose for which the meeting is called, either by mail or by presenting it to such stockholder personally or by leaving it at his residence or usual place of business. If mailed, such notice shall be deemed to be given when deposited in the United States mail addressed to the stockholder at his post office address as it appears on the records of the Corporation, with postage thereon prepaid. Section 5. SCOPE OF NOTICE. Any business of the Corporation may be transacted at an annual meeting of stockholders without being specifically designated in the notice, except such business as is required by any statute to be stated in such notice. No business shall be transacted at a special meeting of stockholders except as specifically designated in the notice. Section 6. ORGANIZATION. At every meeting of stockholders, the chairman of the board, if there be one, shall conduct the meeting or, in the case of vacancy in office or absence of the chairman of the board, one of the following officers present shall conduct the meeting in the order stated: the vice chairman of the board, if there be one, the president, the vice presidents in their order of rank and seniority, or a chairman chosen by the stockholders entitled to cast a majority of the votes which all stockholders present in person or by proxy are entitled to cast, shall act as chairman, and the secretary, or, in his absence, an assistant secretary, or in the absence of both the secretary and assistant secretaries, a person appointed by the chairman shall act as secretary. Section 7. QUORUM. At any meeting of stockholders, the presence in person or by proxy of stockholders entitled to cast a majority of all the votes entitled to be cast at such meeting shall constitute a quorum; but this section shall not affect any requirement under any statute or the charter of the Corporation for the vote necessary for the adoption of any measure. If, however, such quorum shall not be present at any meeting of the stockholders, the stockholders entitled to vote at such meeting, present in person or by proxy, shall have the power to adjourn the meeting from time to time to a date not more than 120 days after the original record date without notice other than announcement at the meeting. At such adjourned meeting at which a quorum shall be present, any business may be transacted which might have been transacted at the meeting as originally notified. Section 8. VOTING. Unless otherwise provided in the charter, a plurality of all the votes cast at a meeting of stockholders duly called and at which a quorum is present shall be sufficient to elect a director. Each share may be voted for as many individuals as there are directors to be elected and for whose election the share is entitled to be voted. A majority of the votes cast at a meeting of stockholders duly called and at which a quorum is present shall be sufficient to approve any other matter which may properly come before the meeting, unless more than a majority of the votes cast is required by statute or by the charter of the Corporation. Unless otherwise provided in the charter, each outstanding share, regardless of class, shall be entitled to one vote on each matter submitted to a vote at a meeting of stockholders. Section 9. PROXIES. A stockholder may cast the votes entitled to be cast by the shares of the stock owned of record by him either in person or by proxy executed in writing by the stockholder or by his duly authorized attorney in fact. Such proxy shall be filed with the secretary of the Corporation before or at the time of the meeting. No proxy shall be valid after eleven months from the date of its execution, unless otherwise provided in the proxy. Section 10. VOTING OF STOCK BY CERTAIN HOLDERS. Stock of the Corporation registered in the name of a corporation, partnership, trust or other entity, if entitled to be voted, may be voted by the president or a vice president, a general partner or trustee thereof, as the case may be, or a proxy appointed by any of the foregoing individuals, unless some other person who has been appointed to vote such stock pursuant to a bylaw or a resolution of the governing body of such corporation or other entity or agreement of the partners of a partnership presents a certified copy of such bylaw, resolution or agreement, in which case such person may vote such stock. Any director or other fiduciary may vote stock registered in his name as such fiduciary, either in person or by proxy. Shares of stock of the Corporation directly or indirectly owned by it shall not be voted at any meeting and shall not be counted in determining the total number of outstanding shares entitled to be voted at any given time, unless they are held by it in a fiduciary capacity, in which case they may be voted and shall be counted in determining the total number of outstanding shares at any given time. The Board of Directors may adopt by resolution a procedure by which a stockholder may certify in writing to the Corporation that any shares of stock registered in the name of the stockholder are held for the account of a specified person other than the stockholder. The resolution shall set forth the class of stockholders who may make the certification, the purpose for which the certification may be made, the form of certification and the information to be contained in it; if the certification is with respect to a record date or closing of the stock transfer books, the time after the record date or closing of the stock transfer books within which the certification must be received by the Corporation; and any other provisions with respect to the procedure which the Board of Directors considers necessary or desirable. On receipt of such certification, the person specified in the certification shall be regarded as, for the purposes set forth in the certification, the stockholder of record of the specified stock in place of the stockholder who makes the certification. Notwithstanding any other provision of the charter of the Corporation or these Bylaws, Title 3, Subtitle 7 of the Corporations and Associations Article of the Annotated Code of Maryland (or any successor statute) shall not apply to any acquisition by any person of shares of stock of the Corporation. This section may be repealed, in whole or in part, at any time, whether before or after an acquisition of control shares and, upon such repeal, may, to the extent provided by any successor bylaw, apply to any prior or subsequent control share acquisition. Section 11. INSPECTORS. At any meeting of stockholders, the chairman of the meeting may appoint one or more persons as inspectors for such meeting. Such inspectors shall ascertain and report the number of shares represented at the meeting based upon their determination of the validity and effect of proxies, count all votes, report the results and perform such other acts as are proper to conduct the election and voting with impartiality and fairness to all the stockholders. Each report of an inspector shall be in writing and signed by him or by a majority of them if there is more than one inspector acting at such meeting. If there is more than one inspector, the report of a majority shall be the report of the inspectors. The report of the inspector or inspectors on the number of shares represented at the meeting and the results of the voting shall be prima facie evidence thereof. Section 12. NOMINATIONS AND PROPOSALS BY STOCKHOLDERS. (a) Annual Meetings of Stockholders. (1) Nominations of persons for election to the Board of Directors and the proposal of business to be considered by the stockholders may be made at an annual meeting of stockholders (i) pursuant to the Corporation's notice of meeting, (ii) by or at the direction of the Board of Directors or (iii) by any stockholder of the Corporation who was a stockholder of record both at the time of giving of notice provided for in this Section 12(a) and at the time of the annual meeting, who is entitled to vote at the meeting and who complied with the notice procedures set forth in this Section 12(a). (2) For nominations or other business to be properly brought before an annual meeting by a stockholder pursuant to clause (iii) of paragraph (a)(1) of this Section 12, the stockholder must have given timely notice thereof in writing to the secretary of the Corporation and such other business must otherwise be a proper matter for action by stockholders. To be timely, a stockholder's notice shall be delivered to the secretary at the principal executive offices of the Corporation not later than the close of business on the 60th day nor earlier than the close of business on the 90th day prior to the first anniversary of the preceding year's annual meeting; provided, however, that in the event that the date of the annual meeting is advanced by more than 30 days or delayed by more than 60 days from such anniversary date or if the Corporation has not previously held an annual meeting, notice by the stockholder to be timely must be so delivered not earlier than the close of business on the 90th day prior to such annual meeting and not later than the close of business on the later of the 60th day prior to such annual meeting or the tenth day following the day on which public announcement of the date of such meeting is first made by the Corporation. In no event shall the public announcement of a postponement or adjournment of an annual meeting to a later date or time commence a new time period for the giving of a stockholder's notice as described above. Such stockholder's notice shall set forth (i) as to each person whom the stockholder proposes to nominate for election or reelection as a director all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors in an election contest, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the "Exchange Act") (including such person's written consent to being named in the proxy statement as a nominee and to serving as a director if elected); (ii) as to any other business that the stockholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest in such business of such stockholder and of the beneficial owner, if any, on whose behalf the proposal is made; and (iii) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made, (x) the name and address of such stockholder, as they appear on the Corporation's books, and of such beneficial owner and (y) the number of shares of each class of stock of the Corporation which are owned beneficially and of record by such stockholder and such beneficial owner. (3) Notwithstanding anything in the second sentence of paragraph (a)(2) of this Section 12 to the contrary, in the event that the number of directors to be elected to the Board of Directors is increased and there is no public announcement by the Corporation naming all of the nominees for director or specifying the size of the increased Board of Directors at least 70 days prior to the first anniversary of the preceding year's annual meeting, a stockholder's notice required by this Section 12(a) shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the secretary at the principal executive offices of the Corporation not later than the close of business on the tenth day following the day on which such public announcement is first made by the Corporation. (b) Special Meetings of Stockholders. Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the Corporation's notice of meeting. Nominations of persons for election to the Board of Directors may be made at a special meeting of stockholders at which directors are to be elected (i) pursuant to the Corporation's notice of meeting, (ii) by or at the direction of the Board of Directors or (iii) provided that the Board of Directors has determined that directors shall be elected at such special meeting, by any stockholder of the Corporation who is a stockholder of record both at the time of giving of notice provided for in this Section 12(b) and at the time of the special meeting, who is entitled to vote at the meeting and who complied with the notice procedures set forth in this Section 12(b). In the event the Corporation calls a special meeting of stockholders for the purpose of electing one or more directors to the Board of Directors, any such stockholder may nominate a person or persons (as the case may be) for election to such position as specified in the Corporation's notice of meeting, if the stockholder's notice containing the information required by paragraph (a)(2) of this Section 12 shall be delivered to the secretary at the principal executive offices of the Corporation not earlier than the close of business on the 90th day prior to such special meeting and not later than the close of business on the later of the 60th day prior to such special meeting or the tenth day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at such meeting. In no event shall the public announcement of a postponement or adjournment of a special meeting to a later date or time commence a new time period for the giving of a stockholder's notice as described above. (c) General. (1) Only such persons who are nominated in accordance with the procedures set forth in this Section 12 shall be eligible to serve as directors and only such business shall be conducted at a meeting of stockholders as shall have been brought before the meeting in accordance with the procedures set forth in this Section 12. The chairman of the meeting shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made or proposed, as the case may be, in accordance with the procedures set forth in this Section 12 and, if any proposed nomination or business is not in compliance with this Section 12, to declare that such nomination or proposal shall be disregarded. (2) For purposes of this Section 12, "public announcement" shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act. (3) Notwithstanding the foregoing provisions of this Section 12, a stockholder shall also comply with all applicable requirements of state law and of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this Section 12. Nothing in this Section 12 shall be deemed to affect any rights of stockholders to request inclusion of proposals in, nor the rights of the Corporation to omit a proposal from, the Corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act. Section 13. VOTING BY BALLOT. Voting on any question or in any election may be viva voce unless the presiding officer shall order or any stockholder shall demand that voting be by ballot. ARTICLE III DIRECTORS Section 1. GENERAL POWERS. The business and affairs of the Corporation shall be managed under the direction of its Board of Directors. Section 2. NUMBER, TENURE AND QUALIFICATIONS. At any regular meeting or at any special meeting called for that purpose, a majority of the entire Board of Directors may establish, increase or decrease the number of directors, provided that the number thereof shall never be less than the minimum number required by the Maryland General Corporation Law, nor more than 15, and further provided that the tenure of office of a director shall not be affected by any decrease in the number of directors. Section 3. ANNUAL AND REGULAR MEETINGS. An annual meeting of the Board of Directors shall be held immediately after and at the same place as the annual meeting of stockholders, no notice other than this Bylaw being necessary. The Board of Directors may provide, by resolution, the time and place, either within or without the State of Maryland, for the holding of regular meetings of the Board of Directors without other notice than such resolution. Section 4. SPECIAL MEETINGS. Special meetings of the Board of Directors may be called by or at the request of the chairman of the board, president or by a majority of the directors then in office. The person or persons authorized to call special meetings of the Board of Directors may fix any place, either within or without the State of Maryland, as the place for holding any special meeting of the Board of Directors called by them. Section 5. NOTICE. Notice of any special meeting of the Board of Directors shall be delivered personally or by telephone, facsimile transmission, United States mail or courier to each director at his business or residence address. Notice by personal delivery, by telephone or a facsimile transmission shall be given at least two days prior to the meeting. Notice by mail shall be given at least five days prior to the meeting and shall be deemed to be given when deposited in the United States mail properly addressed, with postage thereon prepaid. Telephone notice shall be deemed to be given when the director is personally given such notice in a telephone call to which he is a party. Facsimile transmission notice shall be deemed to be given upon completion of the transmission of the message to the number given to the Corporation by the director and receipt of a completed answer-back indicating receipt. Neither the business to be transacted at, nor the purpose of, any annual, regular or special meeting of the Board of Directors need be stated in the notice, unless specifically required by statute or these Bylaws. Section 6. QUORUM. A majority of the directors shall constitute a quorum for transaction of business at any meeting of the Board of Directors, provided that, if less than a majority of such directors are present at said meeting, a majority of the directors present may adjourn the meeting from time to time without further notice, and provided further that if, pursuant to the charter of the Corporation or these Bylaws, the vote of a majority of a particular group of directors is required for action, a quorum must also include a majority of such group. The directors present at a meeting which has been duly called and convened may continue to transact business until adjournment, notwithstanding the withdrawal of enough directors to leave less than a quorum. Section 7. VOTING. The action of the majority of the directors present at a meeting at which a quorum is present shall be the action of the Board of Directors, unless the concurrence of a greater proportion is required for such action by applicable statute. Section 8. TELEPHONE MEETINGS. Directors may participate in a meeting by means of a conference telephone or similar communications equipment if all persons participating in the meeting can hear each other at the same time. Participation in a meeting by these means shall constitute presence in person at the meeting. Section 9. INFORMAL ACTION BY DIRECTORS. Any action required or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting, if a consent in writing to such action is signed by each director and such written consent is filed with the minutes of proceedings of the Board of Directors. Section 10. VACANCIES. If for any reason any or all the directors cease to be directors, such event shall not terminate the Corporation or affect these Bylaws or the powers of the remaining directors hereunder (even if fewer than three directors remain). Any vacancy on the Board of Directors for any cause other than an increase in the number of directors shall be filled by a majority of the remaining directors, although such majority is less than a quorum. Any vacancy in the number of directors created by an increase in the number of directors may be filled by a majority vote of the entire Board of Directors. Any individual so elected as director shall hold office until the next annual meeting of stockholders and until his successor is elected and qualifies. Section 11. COMPENSATION. Directors shall not receive any stated salary for their services as directors but, by resolution of the Board of Directors, may receive compensation per year and/or per meeting and/or per visit to real property or other facilities owned or leased by the Corporation and for any service or activity they performed or engaged in as directors. Directors may be reimbursed for expenses of attendance, if any, at each annual, regular or special meeting of the Board of Directors or of any committee thereof and for their expenses, if any, in connection with each property visit and any other service or activity they performed or engaged in as directors; but nothing herein contained shall be construed to preclude any directors from serving the Corporation in any other capacity and receiving compensation therefor. Section 12. LOSS OF DEPOSITS. No director shall be liable for any loss which may occur by reason of the failure of the bank, trust company, savings and loan association, or other institution with whom moneys or stock have been deposited. Section 13. SURETY BONDS. Unless required by law, no director shall be obligated to give any bond or surety or other security for the performance of any of his duties. Section 14. RELIANCE. Each director, officer, employee and agent of the Corporation shall, in the performance of his duties with respect to the Corporation, be fully justified and protected with regard to any act or failure to act in reliance in good faith upon the books of account or other records of the Corporation, upon an opinion of counsel or upon reports made to the Corporation by any of its officers or employees or by the adviser, accountants, appraisers or other experts or consultants selected by the Board of Directors or officers of the Corporation, regardless of whether such counsel or expert may also be a director. Section 15. CERTAIN RIGHTS OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS. The directors shall have no responsibility to devote their full time to the affairs of the Corporation. Any director or officer, employee or agent of the Corporation, in his personal capacity or in a capacity as an affiliate, employee, or agent of any other person, or otherwise, may have business interests and engage in business activities similar to or in addition to or in competition with those of or relating to the Corporation. ARTICLE IV COMMITTEES Section 1. NUMBER, TENURE AND QUALIFICATIONS. The Board of Directors may appoint from among its members an Executive Committee, an Audit Committee, a Compensation Committee and other committees, composed of one or more directors, to serve at the pleasure of the Board of Directors. Section 2. POWERS. The Board of Directors may delegate to committees appointed under Section 1 of this Article any of the powers of the Board of Directors, except as prohibited by law. Section 3. MEETINGS. Notice of committee meetings shall be given in the same manner as notice for special meetings of the Board of Directors. A majority of the members of the committee shall constitute a quorum for the transaction of business at any meeting of the committee. The act of a majority of the committee members present at a meeting shall be the act of such committee. The Board of Directors may designate a chairman of any committee, and such chairman or any two members of any committee may fix the time and place of its meeting unless the Board shall otherwise provide. In the absence of any member of any such committee, the members thereof present at any meeting, whether or not they constitute a quorum, may appoint another director to act in the place of such absent member. Each committee shall keep minutes of its proceedings. Section 4. TELEPHONE MEETINGS. Members of a committee of the Board of Directors may participate in a meeting by means of a conference telephone or similar communications equipment if all persons participating in the meeting can hear each other at the same time. Participation in a meeting by these means shall constitute presence in person at the meeting. Section 5. INFORMAL ACTION BY COMMITTEES. Any action required or permitted to be taken at any meeting of a committee of the Board of Directors may be taken without a meeting, if a consent in writing to such action is signed by each member of the committee and such written consent is filed with the minutes of proceedings of such committee. Section 6. VACANCIES. Subject to the provisions hereof, the Board of Directors shall have the power at any time to change the membership of any committee, to fill all vacancies, to designate alternate members to replace any absent or disqualified member or to dissolve any such committee. ARTICLE V OFFICERS Section 1. GENERAL PROVISIONS. The officers of the Corporation shall include a chief executive officer, a president, a secretary and a treasurer and may include a chairman of the board, a vice chairman of the board, one or more vice presidents, a chief operating officer, a chief financial officer, one or more assistant secretaries and one or more assistant treasurers. In addition, the Board of Directors may from time to time appoint such other officers with such powers and duties as they shall deem necessary or desirable. The officers of the Corporation shall be elected annually by the Board of Directors at the first meeting of the Board of Directors held after each annual meeting of stockholders, except that the chief executive officer may appoint one or more vice presidents, assistant secretaries and assistant treasurers. If the election of officers shall not be held at such meeting, such election shall be held as soon thereafter as may be convenient. Each officer shall hold office until his successor is elected and qualifies or until his death, resignation or removal in the manner hereinafter provided. Any two or more offices except president and vice president may be held by the same person. In its discretion, the Board of Directors may leave unfilled any office except that of president, treasurer and secretary. Election of an officer or agent shall not of itself create contract rights between the Corporation and such officer or agent. Section 2. REMOVAL AND RESIGNATION. Any officer or agent of the Corporation may be removed by the Board of Directors if in its judgment the best interests of the Corporation would be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. Any officer of the Corporation may resign at any time by giving written notice of his resignation to the Board of Directors, the chairman of the board, the president or the secretary. Any resignation shall take effect at any time subsequent to the time specified therein or, if the time when it shall become effective is not specified therein, immediately upon its receipt. The acceptance of a resignation shall not be necessary to make it effective unless otherwise stated in the resignation. Such resignation shall be without prejudice to the contract rights, if any, of the Corporation. Section 3. VACANCIES. A vacancy in any office may be filled by the Board of Directors for the balance of the term. Section 4. CHIEF EXECUTIVE OFFICER. The Board of Directors may designate a chief executive officer. The chief executive officer shall have general responsibility for implementation of the policies of the Corporation, as determined by the Board of Directors, and for the management of the business and affairs of the Corporation. Section 5. CHIEF OPERATING OFFICER. The Board of Directors may designate a chief operating officer. The chief operating officer shall have the responsibilities and duties as set forth by the Board of Directors or the chief executive officer. Section 6. CHIEF FINANCIAL OFFICER. The Board of Directors may designate a chief financial officer. The chief financial officer shall have the responsibilities and duties as set forth by the Board of Directors or the chief executive officer. Section 7. CHAIRMAN OF THE BOARD. The Board of Directors shall designate a chairman of the board. The chairman of the board shall preside over the meetings of the Board of Directors and of the stockholders at which he shall be present and shall in general oversee all of the business and affairs of the Corporation. The Chairman of the Board may execute any deed, mortgage, bond, contract or other instrument, except in cases where the execution thereof shall be expressly delegated by the directors or these Bylaws to some other officer of the Corporation or shall be required by law to be otherwise executed. The chairman of the board shall perform such other duties as may be assigned to him or them by the Board of Directors. Section 8. PRESIDENT. The president or chief executive officer, as the case may be, shall in general supervise and control all of the business and affairs of the Corporation. In the absence of a designation of a chief operating officer by the Board of Directors, the president shall be the chief operating officer. He may execute any deed, mortgage, bond, contract or other instrument, except in cases where the execution thereof shall be expressly delegated by the Board of Directors or by these Bylaws to some other officer or agent of the Corporation or shall be required by law to be otherwise executed; and in general shall perform all duties incident to the office of president and such other duties as may be prescribed by the Board of Directors from time to time. Section 9. VICE PRESIDENTS. In the absence of the president or in the event of a vacancy in such office, the vice president (or in the event there be more than one vice president, the vice presidents in the order designated at the time of their election or, in the absence of any designation, then in the order of their election) shall perform the duties of the president and when so acting shall have all the powers of and be subject to all the restrictions upon the president; and shall perform such other duties as from time to time may be assigned to him by the chairman of the board, the president or the Board of Directors. The Board of Directors may designate one or more vice presidents as executive vice president or as vice president for particular areas of responsibility. Section 10. SECRETARY. The secretary shall (a) keep the minutes of the proceedings of the stockholders, the Board of Directors and committees of the Board of Directors in one or more books provided for that purpose; (b) see that all notices are duly given in accordance with the provisions of these Bylaws or as required by law; (c) be custodian of the corporate records and of the seal of the Corporation; (d) keep a register of the post office address of each stockholder which shall be furnished to the secretary by such stockholder; (e) have general charge of the share transfer books of the Corporation; and (f) in general perform such other duties as from time to time may be assigned to him by the chief executive officer, the president or by the Board of Directors. Section 11. TREASURER. The treasurer shall have the custody of the funds and securities of the Corporation and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors. In the absence of a designation of a chief financial officer by the Board of Directors, the treasurer shall be the chief financial officer of the Corporation. The treasurer shall disburse the funds of the Corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the president and Board of Directors, at the regular meetings of the Board of Directors or whenever it may so require, an account of all his transactions as treasurer and of the financial condition of the Corporation. If required by the Board of Directors, the treasurer shall give the Corporation a bond in such sum and with such surety or sureties as shall be satisfactory to the Board of Directors for the faithful performance of the duties of his office and for the restoration to the Corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, moneys and other property of whatever kind in his possession or under his control belonging to the Corporation. Section 12. ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. The assistant secretaries and assistant treasurers, in general, shall perform such duties as shall be assigned to them by the secretary or treasurer, respectively, or by the chairman of the board, the president or the Board of Directors. The assistant treasurers shall, if required by the Board of Directors, give bonds for the faithful performance of their duties in such sums and with such surety or sureties as shall be satisfactory to the Board of Directors. Section 13. SALARIES. The salaries and other compensation of the officers shall be fixed from time to time by the Board of Directors and no officer shall be prevented from receiving such salary or other compensation by reason of the fact that he is also a director. ARTICLE VI CONTRACTS, LOANS, CHECKS AND DEPOSITS Section 1. CONTRACTS. The Board of Directors may authorize any officer or agent to enter into any contract or to execute and deliver any instrument in the name of and on behalf of the Corporation and such authority may be general or confined to specific instances. Any agreement, deed, mortgage, lease or other document executed by one or more of the directors or by an authorized person shall be valid and binding upon the Board of Directors and upon the Corporation when authorized or ratified by action of the Board of Directors. Section 2. CHECKS AND DRAFTS. All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the Corporation shall be signed by such officer or agent of the Corporation in such manner as shall from time to time be determined by the Board of Directors. Section 3. DEPOSITS. All funds of the Corporation not otherwise employed shall be deposited from time to time to the credit of the Corporation in such banks, trust companies or other depositories as the Board of Directors may designate. ARTICLE VII STOCK Section 1. CERTIFICATES. Each stockholder shall be entitled to a certificate or certificates which shall represent and certify the number of shares of each class of stock held by him in the Corporation. Each certificate shall be signed by the chief executive officer, the president or a vice president and countersigned by the secretary or an assistant secretary or the treasurer or an assistant treasurer and may be sealed with the seal, if any, of the Corporation. The signatures may be either manual or facsimile. Certificates shall be consecutively numbered; and if the Corporation shall, from time to time, issue several classes of stock, each class may have its own number series. A certificate is valid and may be issued whether or not an officer who signed it is still an officer when it is issued. Each certificate representing shares which are restricted as to their transferability or voting powers, which are preferred or limited as to their dividends or as to their allocable portion of the assets upon liquidation or which are redeemable at the option of the Corporation, shall have a statement of such restriction, limitation, preference or redemption provision, or a summary thereof, plainly stated on the certificate. If the Corporation has authority to issue stock of more than one class, the certificate shall contain on the face or back a full statement or summary of the designations and any preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications and terms and conditions of redemption of each class of stock and, if the Corporation is authorized to issue any preferred or special class in series, the differences in the relative rights and preferences between the shares of each series to the extent they have been set and the authority of the Board of Directors to set the relative rights and preferences of subsequent series. In lieu of such statement or summary, the certificate may state that the Corporation will furnish a full statement of such information to any stockholder upon request and without charge. If any class of stock is restricted by the Corporation as to transferability, the certificate shall contain a full statement of the restriction or state that the Corporation will furnish information about the restrictions to the stockholder on request and without charge. Section 2. TRANSFERS. Upon surrender to the Corporation or the transfer agent of the Corporation of a stock certificate duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, the Corporation shall issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. The Corporation shall be entitled to treat the holder of record of any share of stock as the holder in fact thereof and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such share or on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of the State of Maryland. Notwithstanding the foregoing, transfers of shares of any class of stock will be subject in all respects to the charter of the Corporation and all of the terms and conditions contained therein. Section 3. REPLACEMENT CERTIFICATE. Any officer designated by the Board of Directors may direct a new certificate to be issued in place of any certificate previously issued by the Corporation alleged to have been lost, stolen or destroyed upon the making of an affidavit of that fact by the person claiming the certificate to be lost, stolen or destroyed. When authorizing the issuance of a new certificate, an officer designated by the Board of Directors may, in his discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or the owner's legal representative to advertise the same in such manner as he shall require and/or to give bond, with sufficient surety, to the Corporation to indemnify it against any loss or claim which may arise as a result of the issuance of a new certificate. Section 4. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE. The Board of Directors may set, in advance, a record date for the purpose of determining stockholders entitled to notice of or to vote at any meeting of stockholders or determining stockholders entitled to receive payment of any dividend or the allotment of any other rights, or in order to make a determination of stockholders for any other proper purpose. Such date, in any case, shall not be prior to the close of business on the day the record date is fixed and shall be not more than 90 days and, in the case of a meeting of stockholders, not less than ten days, before the date on which the meeting or particular action requiring such determination of stockholders of record is to be held or taken. In lieu of fixing a record date, the Board of Directors may provide that the stock transfer books shall be closed for a stated period but not longer than 20 days. If the stock transfer books are closed for the purpose of determining stockholders entitled to notice of or to vote at a meeting of stockholders, such books shall be closed for at least ten days before the date of such meeting. If no record date is fixed and the stock transfer books are not closed for the determination of stockholders, (a) the record date for the determination of stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day on which the notice of meeting is mailed or the 30th day before the meeting, whichever is the closer date to the meeting; and (b) the record date for the determination of stockholders entitled to receive payment of a dividend or an allotment of any other rights shall be the close of business on the day on which the resolution of the directors, declaring the dividend or allotment of rights, is adopted. When a determination of stockholders entitled to vote at any meeting of stockholders has been made as provided in this section, such determination shall apply to any adjournment thereof, except when (i) the determination has been made through the closing of the transfer books and the stated period of closing has expired or (ii) the meeting is adjourned to a date more than 120 days after the record date fixed for the original meeting, in either of which case a new record date shall be determined as set forth herein. Section 5. STOCK LEDGER. The Corporation shall maintain at its principal office or at the office of its counsel, accountants or transfer agent, an original or duplicate share ledger containing the name and address of each stockholder and the number of shares of each class held by such stockholder. Section 6. FRACTIONAL STOCK; ISSUANCE OF UNITS. The Board of Directors may issue fractional stock or provide for the issuance of scrip, all on such terms and under such conditions as they may determine. Notwithstanding any other provision of the charter or these Bylaws, the Board of Directors may issue units consisting of different securities of the Corporation. Any security issued in a unit shall have the same characteristics as any identical securities issued by the Corporation, except that the Board of Directors may provide that for a specified period securities of the Corporation issued in such unit may be transferred on the books of the Corporation only in such unit. ARTICLE VIII ACCOUNTING YEAR The Board of Directors shall have the power, from time to time, to fix the fiscal year of the Corporation by a duly adopted resolution. ARTICLE IX DISTRIBUTIONS Section 1. AUTHORIZATION. Dividends and other distributions upon the stock of the Corporation may be authorized and declared by the Board of Directors, subject to the provisions of law and the charter of the Corporation. Dividends and other distributions may be paid in cash, property or stock of the Corporation, subject to the provisions of law and the charter. Section 2. CONTINGENCIES. Before payment of any dividends or other distributions, there may be set aside out of any assets of the Corporation available for dividends or other distributions such sum or sums as the Board of Directors may from time to time, in its absolute discretion, think proper as a reserve fund for contingencies, for equalizing dividends or other distributions, for repairing or maintaining any property of the Corporation or for such other purpose as the Board of Directors shall determine to be in the best interest of the Corporation, and the Board of Directors may modify or abolish any such reserve in the manner in which it was created. ARTICLE X INVESTMENT POLICY Subject to the provisions of the charter of the Corporation, the Board of Directors may from time to time adopt, amend, revise or terminate any policy or policies with respect to investments by the Corporation as it shall deem appropriate in its sole discretion. ARTICLE XI SEAL Section 1. SEAL. The Board of Directors may authorize the adoption of a seal by the Corporation. The seal shall contain the name of the Corporation and the year of its incorporation and the words "Incorporated Maryland." The Board of Directors may authorize one or more duplicate seals and provide for the custody thereof. Section 2. AFFIXING SEAL. Whenever the Corporation is permitted or required to affix its seal to a document, it shall be sufficient to meet the requirements of any law, rule or regulation relating to a seal to place the word "(SEAL)" adjacent to the signature of the person authorized to execute the document on behalf of the Corporation. ARTICLE XII INDEMNIFICATION AND ADVANCE OF EXPENSES To the maximum extent permitted by Maryland law in effect from time to time, the Corporation shall indemnify and, without requiring a preliminary determination of the ultimate entitlement to indemnification, shall pay or reimburse reasonable expenses in advance of final disposition of a proceeding to (a) any individual who is a present or former director or officer of the Corporation and who is made a party to the proceeding by reason of his service in that capacity or (b) any individual who, while a director of the Corporation and at the request of the Corporation, serves or has served another corporation, partnership, joint venture, trust, employee benefit plan, limited liability company or any other enterprise as a director, officer, partner, trustee, manager or member of such corporation, partnership, joint venture, trust, employee benefit plan, limited liability company or other enterprise and who is made a party to the proceeding by reason of his service in that capacity. The Corporation may, with the approval of its Board of Directors, provide such indemnification and advance for expenses to a person who served a predecessor of the Corporation in any of the capacities described in (a) or (b) above and to any employee or agent of the Corporation or a predecessor of the Corporation. Neither the amendment nor repeal of this Article, nor the adoption or amendment of any other provision of the Bylaws or charter of the Corporation inconsistent with this Article, shall apply to or affect in any respect the applicability of the preceding paragraph with respect to any act or failure to act which occurred prior to such amendment, repeal or adoption. ARTICLE XIII WAIVER OF NOTICE Whenever any notice is required to be given pursuant to the charter of the Corporation or these Bylaws or pursuant to applicable law, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. Neither the business to be transacted at nor the purpose of any meeting need be set forth in the waiver of notice, unless specifically required by statute. The attendance of any person at any meeting shall constitute a waiver of notice of such meeting, except where such person attends a meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened. ARTICLE XIV AMENDMENT OF BYLAWS The Board of Directors shall have the exclusive power to adopt, alter or repeal any provision of these Bylaws and to make new Bylaws. EX-4.2 6 NUMBER INCORPORATED UNDER THE LAWS OF THE STATE OF MARYLAND SHARES A WELLSFORD REAL PROPERTIES, INC. SEE REVERSE FOR CERTAIN DEFINITIONS 350,000 SHARES OF $0.1 PAR VALUE EACH CLASS A COMMON STOCK THIS CERTIFIES THAT IS THE OWNER OF FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK OF WELLSFORD REAL PROPERTIES, INC. transferable on the books of the Corporation by the holder hereof in person or by duly authorized Attorney upon surrender of this Certificate properly endorsed. Witness, the seal of the Corporation and the signatures of its duly authorized officers. Dated - --------------------------- -------------------- SECRETARY PRESIDENT The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM -- as tenants in common TEN ENT - as tenants by the entireties JT TEN - as joint tenants with right of survivorship and not as tenants in common UNIF GIFT MIN ACT--_________ Custodian_______ (Cust) (Minor) under Union Gifts to Minors Act_______________________ (State) Additional abbreviations may also be used though not in the above list. For value received _________________________________ hereby sell, assign and transfer unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE _______________________________ | | |_____________________________| _____________________________________________________________________________ (PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING POSTAL ZIP CODE OF ASSIGNEE) _____________________________________________________________________________ _____________________________________________________________________________ _______________________________________________________________________Shares of the Common Stock represented by the within Certificate, and do hereby irrevocably constitute and appoint ______________________________________________________Attorney to transfer the said Shares on the books of the within named Corporation with full power of substitution in the premises. Dated_________________ 19______ In presence of ____________________________ _______________________________ NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER. EX-4.3 7 NUMBER INCORPORATED UNDER THE LAWS OF THE STATE OF MARYLAND SHARES P WELLSFORD REAL PROPERTIES, INC. SEE REVERSE FOR CERTAIN DEFINITIONS 2,000,000 SHARES $.01 PAR VALUE EACH SERIES A 8% CONVERTIBLE REDEEMABLE PREFERRED STOCK THIS CERTIFIES THAT IS THE OWNER OF FULLY PAID AND NON-ASSESSABLE SERIES A 8% CONVERTIBLE REDEEMABLE PREFERRED STOCK OF WELLSFORD REAL PROPERTIES, INC. transferable on the books of the Corporation by the holder hereof in person or by duly authorized Attorney upon surrender of this Certificate properly endorsed. Witness, the seal of the Corporation and the signatures of its duly authorized officers. Dated - --------------------------- -------------------- SECRETARY PRESIDENT The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM -- as tenants in common TEN ENT - as tenants by the entireties JT TEN - as joint tenants with right of survivorship and not as tenants in common UNIF GIFT MIN ACT--_________ Custodian_______ (Cust) (Minor) under Union Gifts to Minors Act_______________________ (State) Additional abbreviations may also be used though not in the above list. For value received, _________________________________ hereby sell, assign and transfer unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE _______________________________ | | |_____________________________| _____________________________________________________________________________ (PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING POSTAL ZIP CODE OF ASSIGNEE) _____________________________________________________________________________ _____________________________________________________________________________ _______________________________________________________________________Shares of the Common Stock represented by the within Certificate, and do hereby irrevocably constitute and appoint ______________________________________________________Attorney to transfer the said Shares on the books of the within named Corporation with full power of substitution in the premises. Dated_________________ 19______ In presence of ____________________________ _______________________________ NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER. EX-5.1 8 July 30, 1997 Wellsford Real Properties, Inc. 610 Fifth Avenue New York, New York 10020 Re: Registration Statement on Form S-11 relating to 12,242,719 Shares of Common Stock Ladies and Gentlemen: We have served as Maryland counsel to Wellsford Real Properties, Inc., a Maryland corporation (the "Company"), in connection with certain matters of Maryland law arising out of the registration of 12,242,719 shares of Common Stock, $.01 par value per share, of the Company (the "Shares"), being sold for the account of certain stockholders of the Company and covered by the above-referenced Registration Statement, and all amendments thereto (the "Registration Statement"), under the Securities Act of 1933, as amended (the "1933 Act"). Unless otherwise defined herein, capitalized terms used herein shall have the meanings assigned to them in the Registration Statement. In connection with our representation of the Company and as a basis for the opinion hereinafter set forth, we have examined originals, or copies certified or otherwise identified to our satisfaction, of the following documents (hereinafter collectively referred to as the "Documents"): 1. The Registration Statement and the related form of prospectus included therein in the form in which it was transmitted to the Securities and Exchange Commission under the 1933 Act; 2. The charter of the Company, certified as of a recent date by the State Department of Assessments and Taxation of Maryland (the "SDAT"); 3. The Bylaws of the Company, certified as of a recent date by an officer of the Company; 4. Resolutions adopted by the Board of Directors of the Company relating to the issuance of the Shares, certified as of a recent date by an officer of the Company; 5. The form of certificate representing a Share, certified as of a recent date by an officer of the Company; 6. The Assignment and Assumption Agreement, dated February 28, 1997, between Wellsford Commercial Properties, L.L.C., a Delaware limited liability company, and the Company; 7. A certificate of the SDAT as to the good standing of the Company, dated as of a recent date; 8. A certificate executed by Edward Lowenthal, President of the Company, dated as of the date hereof; and 9. Such other documents and matters as we have deemed necessary or appropriate to express the opinion set forth in this letter, subject to the assumptions, limitations and qualifications stated herein. In expressing the opinion set forth below, we have assumed, and so far as is known to us there are no facts inconsistent with, the following: 1. Each individual executing any of the Documents, whether on behalf of such individual or any other person, is legally competent to do so. 2. Each individual executing any of the Documents on behalf of a party (other than the Company) is duly authorized to do so. 3. Each of the parties (other than the Company) executing any of the Documents has duly and validly executed and delivered each of the Documents to which such party is a signatory, and such party's obligations set forth therein are legal, valid and binding. 4. All Documents submitted to us as originals are authentic. All Documents submitted to us as certified or photostatic copies conform to the original documents. All signatures on all such Documents are genuine. All public records reviewed or relied upon by us or on our behalf are true and complete. All statements and information contained in the Documents are true and complete. There are no oral or written modifications or amendments to the Documents, by action or conduct of the parties or otherwise. The phrase "known to us" is limited to the actual knowledge, without independent inquiry, of the lawyers at our firm who have performed legal services in connection with the issuance of this opinion. Based on the foregoing, and subject to the assumptions, limitations and qualifications stated herein, it is our opinion that: 1. The Company is a corporation duly incorporated and existing under and by virtue of the laws of the State of Maryland and is in good standing with the SDAT. 2. The Shares are duly authorized, validly issued, fully paid and nonassessable. The foregoing opinion is limited to the substantive laws of the State of Maryland and we do not express any opinion herein concerning any other law. We express no opinion as to compliance with the securities (or "blue sky") laws or the real estate syndication laws of the State of Maryland. We assume no obligation to supplement this opinion if any applicable law changes after the date hereof or if we become aware of any fact that might change the opinion expressed herein after the date hereof. This opinion is being furnished to you solely for submission to the Securities and Exchange Commission as an exhibit to the Registration Statement and, accordingly, may not be relied upon by, quoted in any manner to, or delivered to any other person or entity without, in each instance, our prior written consent. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the use of the name of our firm in the Registration Statement. In giving this consent, we do not admit that we are within the category of persons whose consent is required by Section 7 of the 1933 Act. Very truly yours, BALLARD SPAHR ANDREWS & INGERSOLL EX-10.3 9 ============================================================================== Sonterra Agreement between ERP OPERATING LIMITED PARTNERSHIP and WELLSFORD REAL PROPERTIES, INC. Dated as of May 30, 1997 ============================================================================== SONTERRA AGREEMENT THIS AGREEMENT (this "Agreement") is made and entered into as of May 30, 1997 by and between ERP OPERATING LIMITED PARTNERSHIP, an Illinois limited partnership ("ERQ OP"), and WELLSFORD REAL PROPERTIES, INC., 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 ("WRPT"), pursuant to the Contribution Agreement dated as of May 30, 1997 (the "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 EQR OP ("EQR"), and WRPT. B. Pursuant to that certain Option Agreement dated as of June 28, 1996 (the "Option Agreement") by and between Specified Properties VIII, L.P., a Texas limited partnership ("Specified"), and WRPT, a copy of which Option Agreement is attached hereto as Exhibit A and made a part hereof, Specified granted WRPT an option to purchase the land (the "Land") which is more fully described on Exhibit B attached hereto and made a part hereof, together with the buildings and improvements thereon erected, known as Sonterra at Williams Centre, an apartment property located in the City of Tucson, County of Pima, State of Arizona (the "Improvements") (the Land and the Improvements are collectively referred to herein as the "Premises"), upon the terms and conditions described in the Option Agreement. C. Concurrently with the execution of the Option Agreement, WRPT and Specified entered into that certain Loan Agreement dated as of June 28, 1996 (the "Loan Agreement") pursuant to which WRPT made a loan to Specified in the original principal amount of $17,800,000.00, which loan is secured by the Premises. D. Pursuant to the Contribution Agreement, WRPT has assigned to Newco, among other things, all of WRPT's rights and obligations under the Option Agreement. E. EQR OP and Newco are entering 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: (1) Assignment of Option. In the event that Newco has decided not to exercise its option under the Option Agreement to purchase the Premises and Newco has received an offer (an "Offer") from a prospective assignee, other than Newco or the Surviving Trust (as defined in the Merger Agreement) or any affiliate of either of such parties (each, an "Acceptable Assignee"), to purchase all of Newco's rights and obligations under the Option Agreement, Newco shall first offer in writing (a "Notice of Proposed Assignment") to assign the Option Agreement to EQR OP. Any such assignment of the Option Agreement to EQR OP shall be on the same terms and conditions as the Offer, which terms and conditions shall be set forth in the Notice of Proposed Assignment. If EQR OP does not provide Newco with written notice of its intention to purchase Newco's rights and obligations under the Option Agreement on or before the earlier of the date when notice of exercise of the option must be given within thirty (30) days after the Notice of Proposed Assignment, then Newco shall have the right to assign all of its rights and obligations under the Option Agreement to such prospective assignee in accordance with the terms of the Offer. If Newco fails to consummate such assignment within one hundred fifty (150) days following EQR OP's rejection of the offer in the Notice of Proposed Assignment, then the Option Agreement shall again be subject to the restrictions of this Paragraph 1. (2) Lapse of Option. In the event that Newco has decided not to exercise its option to the purchase the Premises under the Option Agreement and Newco has not received an offer to purchase all of Newco's rights and obligations under the Option Agreement within thirty (30) days prior to the last day for giving notice of exercise of the expiration of the option, then Newco shall give EQR OP thirty (30) days written notice of such expiration of the option. Upon timely giving such notice, EQR OP shall have the right to require Newco to immediately assign all of its rights and obligations under the Option Agreement to ERQ OP for One Hundred and 00/100 Dollars ($100.00). (3) Exercise of Option. In the event that Newco, or the Acceptable Assignee then holding the option under the Option Agreement, shall elect to exercise its right under the Option Agreement to purchase the Premises, Newco (i) as the exercising party, shall cause title to the Premises to be acquired by Newco or a subsidiary or affiliate of Newco only or (ii) shall cause the Acceptable Assignee exercising such option to cause the Premises to be so titled. Newco shall give EQR OP written notice of the acquisition of the Premises pursuant to the terms of the Option Agreement within ten (10) days after acquisition. For the purposes hereof, an "affiliate" of Newco shall be any entity controlled by, controlling or under common control with Newco. (4) Right of First Offer Agreement. Promptly following (a) the acquisition of the Premises by Newco or a subsidiary of Newco in accordance with Paragraph 3 hereof or (b) the taking of title to the Premises by Newco or a subsidiary or affiliate of Newco by virtue of a foreclosure on the Premises, or the taking of a deed in lieu of foreclosure on the Premises, based upon a default under the Loan Agreement, Newco shall enter, or shall cause such subsidiary, as titleholder to the Premises, to enter into, without further consideration, a Right of First/Last Offer Agreement (the "Right of First/Last Offer Agreement"), which shall be prepared by counsel to EQR OP and shall be in form and substance satisfactory to EQR OP in the exercise of EQR OP's commercially reasonable judgment, which agreement shall be in substantially the same form as the Right of First/Last Offer Agreements entered into or required to be entered into pursuant to Article 2 of that certain Agreement Regarding Palomino Park of even date herewith. (5) Memorandum. Upon execution of the Right of First/Last Offer Agreement, Newco shall record, or shall cause the subsidiary of Newco holding title to the Premises to record, a memorandum thereof against title to the Premises. (6) 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: (i) if to Newco: Wellsford Real Properties, Inc. 610 Fifth Avenue, 7th Floor New York, New York 10020 Attn: Edward Lowenthal Telecopy No.: (212) 333-2323 with a copy to: Robinson Silverman Pearce Aronsohn & Berman LLP 1290 Avenue of the Americas New York, New York 10104-0053 Attn: Alan S. Pearce, Esq. Telecopy No.: (212) 541-1411 (ii) if to EQR OP: c/o Equity Residential Properties Trust Two North Riverside Plaza, Suite 400 Chicago, Illinois 60606 Attn: President Telecopy No.: (312) 207-5243 with a copy to: Equity Residential Properties Trust Two North Riverside Plaza, Suite 400 Chicago, Illinois 60606 Attn: Bruce C. Strohm, Esq. Telecopy No.: (312) 454-0039 and to: Rudnick & Wolfe 203 North LaSalle Street Suite 1800 Chicago, Illinois 60601 Attn: Errol R. Halperin, Esq. Telecopy No.: (312) 236-7516 (7) Binding Effect. This Agreement shall become effective when it shall have been executed by Newco and EQR OP, and thereafter shall be binding upon and inure to the benefit of Newco, EQR OP 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 EQR OP. (8) Applicable Law. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF ILLINOIS. (9) Waivers; Amendment. (i) No failure or delay of EQR OP 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 EQR OP for a breach hereof 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 Newco 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 Newco in any case shall entitle Newco to any other or further notice or demand in similar or other circumstances. (ii) 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 EQR OP. (10) 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. (11) 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. (12) 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. (13) 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. (14) Time is of the essence of this Agreement. (15) Nothing in this Agreement shall require Newco to take any action that would create any default under, or breach of any representations or covenants under, the Option Agreement or the Loan Agreement or any documents relating to either of the same. (16) Jurisdiction; Consent to Service of Process. (i) 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. (ii) 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, EQR OP and Newco have caused this Agreement to be signed by their respective officers hereunto duly authorized all as of the date first written above. ERQ OP: ERP OPERATING LIMITED PARTNERSHIP, an Illinois limited partnership By: Equity Residential Properties Trust, a Maryland real estate investment trust and its general partner By:/s/ Bruce C. Strohm _________________________________________ Name: Bruce C. Strohm Title: Executive Vice President NEWCO: WELLSFORD REAL PROPERTIES, INC., a Maryland corporation By:/s/ Edward Lowenthal ______________________________________________ Name: Edward Lowenthal Title: President EXHIBIT A OPTION AGREEMENT See Exhibit 10.2 to this Registration Statement EXHIBIT B DESCRIPTION OF THE LAND BLOCKS 19, 21, 22, 23 OF THE RESUBDIVISION OF WILLIAMS CENTRE, PIMA COUNTY, ARIZONA ACCORDING TO THE PLAT OF RECORD IN THE OFFICE OF THE PIMA COUNTY RECORDER IN BOOK 39 OF MAPS AT PAGE 28. EX-10.4 10 =========================================================================== Agreement Regarding Palomino Park between ERP OPERATING LIMITED PARTNERSHIP and WELLSFORD REAL PROPERTIES, INC. Dated as of May 30, 1997 =========================================================================== 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 Feld Company, a Colorado corporation ("Feld Company"), relative to the purchase and sale of certain property (the "Overall Property") containing approximately 181.803 acres located in Douglas County, Colorado and legally described as Lots 1, 2, 3, 4 and 5, Highlands Ranch Filing 126-A. Feld 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 Feld 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 Al Feld, an individual ("Al Feld"), as amended by First Amendment to Operating Agreement of Park at Highlands LLC dated as of December 29, 1995 by and between WPHC and Al Feld (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 Lot 1 ("Lot 1"), Highlands Ranch Filing 126-A. Park at Highlands subsequently acquired Lot 1 and Park at Highlands is constructing on a portion of Lot 1, known as Lot 1A, Highlands Park Filing No. 126-A, First Amendment ("Lot 1A"), 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 Lot 1B, Highlands Ranch 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 Al Feld, 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 Lot 2A, Highlands Ranch Filing No. 126-A, Douglas County, Colorado ("Lot 2A"). 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 Lot 1B. K. On May 1, 1997, WPHC acquired certain land known as Lot 3A, Highlands Ranch Filing No. 126-A, Douglas County, Colorado ("Lot 3A"). 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 Lots 1A, 1B, 2A, and 3A and Tracts A and B are sometimes referred to herein collectively as the "Remaining Overall Property". M. Palomino 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, Al Feld and Feld 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 Al Feld, 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. 610 Fifth Avenue, 7th Floor New York, New York 10020 Attn: Edward Lowenthal Telecopy No.: (212) 333-2323 with a copy to: Robinson Silverman Pearce Aronsohn & Berman LLP 1290 Avenue of the Americas New York, New York 10104-0053 Attn: Alan S. Pearce, Esq. Telecopy No.: (212) 541-1411 (b) if to the ERP Operating Partnership: ERP Operating Partnership c/o Equity Residential Properties Trust Two North Riverside Plaza, Suite 400 Chicago, Illinois 60606 Attn: President Telecopy No.: (312) 207-5243 with a copy to: Equity Residential Properties Trust Two North Riverside Plaza, Suite 400 Chicago, Illinois 60606 Attn: Bruce C. Strohm, Esq. Telecopy No.: (312) 454-0039 and: Rudnick & Wolfe 203 N. LaSalle St., Suite 1800 Chicago, Illinois 60601 Attn: Errol R. Halperin, Esq. Telecopy No.: (312) 236-7516 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/ Bruce C. Strohm ----------------------------- Name: Bruce C. Strohm Title: Executive Vice President and General Counsel WELLSFORD REAL PROPERTIES, INC. By:/s/ Edward Lowenthal --------------------------------- Name: Edward Lowenthal Title: President EXHIBIT A FORM OF TAX SHARING AGREEMENT SCHEDULE I PRELIMINARY PLANS EX-10.8 11 ASSIGNMENT AND ASSUMPTION OF TRI-PARTY AGREEMENT THIS ASSIGNMENT AND ASSUMPTION OF TRI-PARTY AGREEMENT (this "Assignment"), is made and entered into as of the ______ day of May, 1997, by and between WELLSFORD RESIDENTIAL PROPERTY TRUST, a Maryland real estate investment trust (hereinafter called "Assignor"), ERP OPERATING LIMITED PARTNERSHIP, an Illinois limited partnership (hereinafter called "Assignee"), PARK AT HIGHLANDS LLC, a Colorado limited liability company ("Park at Highlands"), WELLSFORD PARK HIGHLANDS CORP., a Colorado corporation ("WPHC"), THE FELD COMPANY, a Colorado corporation ("Feld Company"), AL FELD, an individual and NATIONSBANK OF TEXAS, N.A., a national banking association ("Nationsbank"). RECITALS 10 Reference is hereby made to that certain Tri-Party Agreement dated December 29, 1995, by and among Nationsbank, Assignor, Park at Highlands, WPHC, Al Feld, and Feld Company (the "Phase I Tri-Party Agreement"). The Phase I Tri-Party Agreement was executed in connection with that certain construction loan in the original principal amount of $36,757,533.00 from Nationsbank to Park at Highlands for the development of a 456-unit apartment complex and related facilities in Highlands Ranch, Douglas County, Colorado (the "Project"). 11 Subsequent to the execution of the Phase I Tri-Party Agreement, Assignor entered into that certain Agreement and Plan of Merger (the "Merger Agreement") dated as of January 16, 1997, by and between Equity Residential Properties Trust, a Maryland real estate investment trust ("ERPT"), and Assignor in connection with the merger of ERPT with and into Assignor. 12 ERPT is the general partner of Assignee. 13 Pursuant to the Merger Agreement, Assignor is obligated to assign to Assignee, and Assignee has agreed to assume, all of Assignor's rights, interests and obligations under the Phase I Tri-Party Agreement. 14 The parties hereto now desire to enter into this Assignment in order to effectuate the above-referenced assignment and assumption of Assignor's rights, interests and obligations under the Phase I Tri-Party Agreement and to evidence the consent to such assignment and assumption by the parties hereto. NOW, THEREFORE, in consideration of the above recitals and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby covenant and agree as follows: 14.1 Assignment. Assignor does hereby transfer, assign, grant, delegate and convey to Assignee, its successors and assigns, and Assignee, for itself and its successors and assigns, does hereby assume, all of Assignor's rights, interests and obligations in, to and under the Phase I Tri-Party Agreement from and after the date hereof. 14.2 Consent To Assignment. Nationsbank and each other party hereto does hereby consent to and acknowledge the above assignment and agrees to look solely to Assignee from and after the date hereof for the performance of all duties and obligations that were previously the responsibility of Assignor under the Phase I Tri-Party Agreement. Any further assignment of the Phase I Tri-Party Assignment shall require the prior written consent of Nationsbank. 14.3 Original Documents. Concurrently with the execution and delivery of this Assignment, Assignor shall deliver to Assignee any original copies of the Phase I Tri-Party Agreement, together with all exhibits, addenda and amendments thereto, in Assignor's possession. 14.4 Notice to Assignee. The parties hereto agree that from and after the date hereof, a copy of any notice or communication required or permitted to be given to Assignor pursuant to the Phase I Tri-Party Agreement, shall now be sent to ERP Operating Limited Partnership, 2 North Riverside Plaza, Suite 400, Chicago, Illinois 60606, attention: President, with a copy to (i) Equity Residential Properties Trust, Two North Riverside Plaza, Suite 400, Chicago, Illinois 60606, Attention: President and Bruce C. Strohm, Esq. and (ii) Rudnick & Wolfe, 203 N. LaSalle St., Suite 1800, Chicago, Illinois 60601, Attention: Errol R. Halperin, Esq. 14.5 Governing Law. This Assignment shall be governed by and construed in accordance with the laws of the State of Colorado. 14.6 Successors and Assigns. This Assignment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. 14.7 Headings. The headings of the paragraphs of this Assignment have been included only for convenience, and shall not be deemed in any manner to modify or limit any of the provisions of this Assignment or be used in any manner in the interpretation of this Assignment. 14.8 Interpretation. Whenever the context so requires in this Assignment, all words used in the singular shall be construed to have been used in the plural (and vice versa), each gender shall be construed to include any other genders, and the word "person" shall be construed to include a natural person, a corporation, a firm, a partnership, a joint venture, a trust, an estate or any other entity. 14.9 Partial Invalidity. Each provision of this Assignment shall be valid and enforceable to the fullest extent permitted by law. If any provision of this Assignment or the application of such provision to any person or circumstance shall, to any extent, be invalid or unenforceable, then the remainder of this Assignment, or the application of such provision to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected by such invalidity or unenforceability. 14.10 Further Agreements. Assignor agrees to execute and deliver to Assignee such additional documents, instruments or agreements as may be necessary or appropriate to effectuate the purposes of this Assignment. 14.11 Limitation of Liability. This Assignment and all documents, agreements, understandings and arrangements relating to this Assignment have been executed by the undersigned on behalf of Assignor in his/her capacity as an officer or trustee of Assignor which has been formed as a Maryland real estate investment trust pursuant to a Declaration of Trust of Assignor dated as of July 10, 1992, and not individually, and neither the trustees, officers or shareholders of Assignor shall be bound by or have any personal liability hereunder or thereunder. The beneficiary of this Assignment shall look solely to the assets of Assignor for satisfaction of any liability of Assignor in respect of this Assignment and all documents, agreements, understandings and arrangements relating to this transaction and will not seek recourse or commence any action against any of the trustees, officers or shareholders of Assignor or any of their personal assets for the performance or payment of any obligation hereunder or thereunder. The foregoing shall also apply to all and any future documents, agreements, understandings, arrangements and transactions between the parties hereto with respect to the this Assignment or any matter related thereto. 14.12 Counterparts. This Assignment may be executed in one or more counterparts, all of which when taken together shall constitute the entire agreement of the parties. [SIGNATURE PAGE FOLLOWS] IN WITNESS WHEREOF, the parties hereto have executed this Assignment as of the date above first written. WELLSFORD RESIDENTIAL PROPERTY TRUST, a Maryland real estate investment trust By: /s/ David M. Strong ------------------------------------- Name: David M. Strong Title: Vice President ERP OPERATING LIMITED PARTNERSHIP, an Illinois limited partnership By: EQUITY RESIDENTIAL PROPERTIES TRUST, its general partner By: /s/ Bruce C. Strohm -------------------------------- Name: Bruce C. Strohm Title: Executive Vice President NATIONSBANK OF TEXAS, N.A., a national banking association By: /s/ Sondra E. Teilborg ------------------------------------- Name: Sondra E. Teilborg Title: Vice President PARK AT HIGHLANDS LLC, a Colorado limited liability company By: /s/ Al Feld, Manager -------------------------------------- Al Feld, Manager WELLSFORD PARK HIGHLANDS CORP., a Colorado corporation By: /s/ David M. Strong -------------------------------------- David M. Strong, Vice President THE FELD COMPANY, a Colorado corporation By: /s/ Al Feld -------------------------------------- Al Feld, President -------------------------------------- Al Feld EX-10.9 12 AGREEMENT AND ACKNOWLEDGEMENT REGARDING TRI-PARTY AGREEMENT This Agreement (this "Agreement") is made and entered into as of this 30th day of May, 1997, by and between Nationsbank of Texas, N.A., a national banking association ("Nationsbank"), Park at Highlands LLC, a Colorado limited liability company ("Borrower"), Wellsford Park Highlands Corp., a Colorado corporation ("WPHC"), and ERP Operating Limited Partnership, an Illinois limited partnership ("ERP Operating Partnership"). RECITALS 15 Reference is hereby made to that certain Tri-Party Agreement dated December 29, 1995, by and among Nationsbank, Borrower, Wellsford Park Highlands Corp., a Colorado corporation, Wellsford Residential Property Trust, a Maryland real estate investment trust ("WRPT"), Al Feld, an individual and the Feld Company, a Colorado corporation (the "Phase I Tri-Party Agreement"), executed in connection with that certain construction loan in the original principal amount of $36,757,533.00 from Nationsbank to Borrower for the development of a 456-unit apartment complex and related facilities in Highlands Ranch, Douglas County, Colorado (the "Project"). 16 Subsequent to the execution of the Phase I Tri-Party Agreement, WRPT entered into that certain Agreement and Plan of Merger dated as of January 16, 1997, by and between Equity Residential Properties Trust, a Maryland real estate investment trust ("ERPT"), and WRPT in connection with the merger of ERPT with and into WRPT. 17 ERPT is the general partner of ERP Operating Partnership. 18 The obligations of WRPT pursuant to the Phase I Tri-Party Agreement have been or will be assigned to and assumed by ERP Operating Partnership pursuant to that certain Assignment and Assumption of Tri-Party Agreement (the "Tri-Party Assignment"). 19 The parties hereto now desire to enter into this Agreement in order to confirm the status of certain items contained in the Phase I Tri-Party Agreement. NOW, THEREFORE, for and in consideration of the above recitals and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree to and confirm the following: 19.1 The Phase I Tri-Party Agreement (including all Exhibits thereto) is in full force and effect and has not been assigned, modified, supplemented or amended in any way, except as described in Paragraph 4 below. 19.2 Nationsbank has not delivered to WRPT any Default Notice (as defined in the Phase I Tri-Party Agreement) pursuant to Paragraph 9(a) of the Phase I Tri-Party Agreement with respect to WRPT that has not been cured. 19.3 Subject to Nationsbank's rights under Paragraph 3(b) of the Phase I Tri-Party Agreement, the total amount of the Final Project Budget (as defined in the Phase I Tri-Party Agreement) as it relates to the Project has not been modified, supplemented or amended in any way. 19.4 Nationsbank acknowledges that obligations of WRPT pursuant to the Phase I Tri-Party Agreement have been assigned to and assumed by ERP Operating Partnership pursuant to the Tri-Party Assignment. 19.5 The parties hereto shall look solely to ERP Operating Partnership for the performance of all obligations of WRPT pursuant to the Phase I Tri- Party Agreement. 19.6 All obligations of ERP Operating Partnership, as assignee of WRPT, to Nationsbank with respect to the Project are as set forth in the Phase I Tri-Party Agreement and have not been amended or modified in any way. 19.7 From and after the date hereof, a copy of any notice or communication required or permitted to be given to WRPT pursuant to the Phase I Tri-Party Agreement, shall now be sent to ERP Operating Limited Partnership, 2 North Riverside Plaza, Suite 400, Chicago, Illinois 60606, attention: President, with a copy to (i) Equity Residential Properties Trust, Two North Riverside Plaza, Suite 400, Chicago, Illinois 60606, Attention: President and Bruce C. Strohm, Esq. and (ii) Rudnick & Wolfe, 203 N. LaSalle St., Suite 1800, Chicago, Illinois 60601, Attention: Errol R. Halperin, Esq. 19.8 This Agreement shall be governed by and construed in accordance with the laws of the State of Colorado. 19.9 Except as set forth herein and in the Tri-Party Assignment, the Phase I Tri-Party Agreement is hereby ratified and confirmed and shall not be otherwise amended or modified by this or any other instrument. 19.10 This Agreement may be executed in one or more counterparts, all of which when taken together shall constitute the entire Agreement of the parties. [SIGNATURE PAGE FOLLOWS] IN WITNESS WHEREOF, the parties hereto have duly executed this agreement as of the day and year first above written. NATIONSBANK OF TEXAS, N.A., a national banking association By:/s/ Sondra E. Teilborg ---------------------------------- Name: Sondra E. Teilborg Title: Vice President PARK AT HIGHLANDS LLC, a Colorado limited liability company By:/s/ al Feld ---------------------------------- Al Feld, Manager WELLSFORD PARK HIGHLANDS CORP., a Colorado corporation By:/s/ David M. Strong --------------------------------- David M. Strong Vice President ERP OPERATING LIMITED PARTNERSHIP, an Illinois limited partnership By: EQUITY RESIDENTIAL PROPERTIES TRUST, its general partner By:/s/ Bruce C. Strohm ----------------------------------- Name: Bruce C. Strohm Title: Executive Vice President EX-10.11 13 FIRST AMENDMENT TO OPERATING AGREEMENT OF RED CANYON AT PALOMINO PARK LLC THIS FIRST AMENDMENT TO OPERATING AGREEMENT OF RED CANYON AT PALOMINO PARK LLC (this "First Amendment") is made as of the 19th day of May, 1997, by and between AL FELD, an individual ("Feld") and WELLSFORD PARK HIGHLANDS CORP., a Colorado corporation ("WPHC"). RECITALS A. Feld and WPHC constitute all of the members (collectively, the "Members") of Red Canyon at Palomino Park LLC, a Colorado limited liability company (the "Company"), which is governed by that certain Operating Agreement of Red Canyon at Palomino Park LLC (the "Operating Agreement") dated as of April 17, 1996. B. The Members now desire to amend the Operating Agreement as set forth herein. C. Capitalized terms not otherwise defined herein shall have the definitions set forth in the Operating Agreement. NOW, THEREFORE, for and in consideration of the above recitals and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Feld and WPHC hereby agree to amend the Operating Agreement as follows: 15. Operating Deficit Guaranty. a. Section 6.4 of the Operating Agreement, which provides for the making of the Operating Deficit Guaranty by Feld, is hereby deleted in its entirety. b. The definition of Operating Deficit Payments which appears in Section 1(bn) of the Operating Agreement is hereby deleted. c. Section 4.4 of the Operating Agreement, which provides for Operating Deficit Payments by Feld, is hereby deleted in its entirety. d. The phrase "Feld shall make either a Development Deficit Payment or an Operating Deficit Payment" which appears in the second sentence of Section 6.16 of the Operating Agreement is hereby deleted and the following is substituted therefor: "Feld shall make a Development Deficit Payment." e. The phrase "and Operating Deficits" which appears in the fifth sentence of Section 7.6 of the Operating Agreement is hereby deleted. f. Section 12.12.1.5 of the Operating Agreement, which provides a cause for removal of Feld as the manager, and as a member, of the Company, is hereby deleted in its entirety and the following is substituted therefor: "12.12.1.5 The Project having incurred any Operating Deficits after the Conversion Date; provided, however, that the Company will remain liable to Feld for payment of certain fees to Feld pursuant to Article 7 of this Agreement and WPHC will remain liable to continue making Capital Contributions to fund Operating Deficits pursuant to Section 4.1.2(b) of this Agreement; provided, further, that all such obligations shall survive Feld's removal;" g. The phrase "or the Operating Deficit Guaranty," which appears in Section 18.9 of the Operating Agreement is hereby deleted in its entirety. 16. Operating Deficit Capital Contributions. a. Section 4.1.2(b) of the Operating Agreement is hereby denoted as Section 4.1.2(c) and the following Section 4.1.2(b) is hereby added to the Operating Agreement: "(b) WPHC shall have the right, but not the obligation, to make Capital Contributions from time to time in its sole and absolute discretion to fund Operating Deficits or other expenses incurred by the Company. Notwithstanding the foregoing, so long as: (i) Feld is not in material default under this Agreement, and (ii) Feld has personally guaranteed the Construction Loan pursuant to Section 5.2.4 and is not in material default under such guaranty, then WPHC shall be obligated to make Capital Contributions to fund: (y) prior to Final Completion, the amount (if any) by which Operating Expenses exceed Gross Operating Revenue, and (z) Operating Deficits which were incurred during the period between Final Completion and payment in full of the Construction Loan." b. The phrase "to the Members in accordance with their respective Percentage Interests", which describes the distribution of Cash Flow and appears in Section 10.1 of the Operating Agreement, is hereby deleted in its entirety and the following is substituted therefor: "to the Members as follows: (i) first, to WPHC, until it has received aggregate distributions equal to the amount of Capital Contributions made by it pursuant to Section 4.1.2(b), (ii) then, to the Members in accordance with their respective Percentage Interests". c. The phrase "all fees paid to Feld or its Affiliates (excluding the property management fee paid to The Feld Company after the Conversion Date)" which appears in the definition of Development Costs in Section 1(ac)(v) of the Operating Agreement is hereby deleted in its entirety and the following is substituted therefor: "all fees paid to Feld or its Affiliates (excluding the property management fee paid to The Feld Company)". d. The phrase "all Operating Expenses incurred prior to the Conversion Date" which appears in the definition of Development Costs in Section 1(ac)(viii) of the Operating Agreement is hereby deleted in its entirety and the following is substituted therefor: "all Operating Expenses incurred prior to the Conversion Date, excluding all Operating Expenses (except real estate taxes, assessments, personal property taxes and insurance) incurred in buildings which have achieved Substantial Completion with respect to their units and have been made available to the property management company for immediate leasing and occupancy". 17. Construction Loan. a. The phrase "the Construction Loan Closing must take place on or before October 31, 1996, provided, however, such date shall be extended to a date not later than December 31, 1996" which appears in Section 5.2.4 of the Operating Agreement is hereby deleted in its entirety and the following is substituted therefor: "the Construction Loan Closing must take place on or before May 31, 1997, provided, however, such date shall be extended to a date not later than June 30, 1997". b. The following definition is hereby added to Section 1 of the Operating Agreement: ""Budgeted Construction Loan Interest" means that amount which appears in the line item of the Final Project Budget (attached hereto as Exhibit O) denoted as "CONSTR. LOAN INTEREST"". c. The following text is hereby appended to the end of Section 5.2.7 of the Operating Agreement: "Feld's obligation to the Company and to WPHC to guarantee interest payments on the Construction Loan applies to payments which are due and payable through Substantial Completion; Feld shall not be responsible for guaranteeing payments which come due after Substantial Completion. Nothing in this Section 5.2.7 shall relieve Feld of those obligations which accrue prior to Substantial Completion." d. The following text is hereby appended to the end of Section 6.3 of the Operating Agreement: "Notwithstanding anything to the contrary in this Agreement, the Members agree that, prior to the Substantial Completion, all debt service expenses shall be paid only from the funds reserved for Budgeted Construction Loan Interest and from Development Deficit Payments, not from any other funds of the Company (including, without limitation, Net Operating Income); provided, however, that Net Operating Income shall be used to pay debt service expenses if so requested by either the Construction Lender or WPHC (such payments are herein referred to as "NOI Construction Loan Interest Payments"). Without the prior written consent of WPHC, the funds reserved as Budgeted Construction Loan Interest will be used for the sole purpose of debt service expenses on the Construction Loan and for no other purpose (including, without limitation, the payment of Development Deficits). Any funds remaining after the payment of debt service on the Construction Loan will be treated as net Cash Flow." e. The following definition is hereby added to Section 1 of the Operating Agreement: "NOI Construction Loan Interest Payments" has the definition given it in Section 6.3 hereof." f. The definition of "Development Deficits" which appears in Section 1(ad) of the Operating Agreement is hereby deleted in its entirety and the following is substituted therefor: ""Development Deficits" means the positive amount, if any, by which Development Costs exceed the sum of: (a) the Capital Contributions of the Members required to be made at the Initial Closing, (b) the Final Closing Capital Contribution, and (c) the aggregate NOI Construction Loan Interest Payments, for the period prior to the Conversion Date." 18. No Incentive Fee. a. Section 7.5 of the Operating Agreement, which provides for the Incentive Fee to Feld, is hereby deleted in its entirety. The definition of Incentive Fee which appears in Section 1(as) of the Operating Agreement will remain a part of the Operating Agreement, but solely for the purpose of allocating Infrastructure Costs as described in Section 1(ai)(i) of the Operating Agreement. b. The phrase "and accrued but unpaid Incentive Fees" which appears in Section 1(ai)(i)(B) of the Operating Agreement is hereby deleted. c. The second sentence of Section 1(bk) is hereby deleted in its entirety. d. Exhibit P of the Operating Agreement shall remain a part of the Operating Agreement, but solely for the purpose of calculating the allocation of Infrastructure Costs. e. The phrase "except the Incentive Fee" which appears in the third and sixth sentences of Section 7.6 of the Operating Agreement is hereby deleted from each such sentence. f. The phrase ", excluding, however the Incentive Fee" which appears in the first sentence of Section 8.3.3 of the Operating Agreement is hereby deleted in its entirety. 19. Cost Savings. a. The phrase "twenty-five percent (25%)" which appears in Sections 7.4 and 4.1.2(c) of the Operating Agreement is hereby replaced with the phrase "fifty percent (50%)" in each of said Sections of the Operating Agreement. b. The definition of "Cost Savings" which appears in Section 1(z) of the Operating Agreement is hereby deleted in its entirety and the following is substituted therefor: ""Cost Savings" means the positive amount, if any, equal to: (i) Total Budgeted Development Costs, minus (ii) the undisbursed amount of Budgeted Construction Loan Interest through the Final Closing, adjusted by subtracting therefrom the aggregate NOI Construction Loan Interest Payments, minus (iii) the actual Development Costs incurred on the Final Closing Date." 20. Feld Reimbursable Expenses. The Members hereby agree that Feld had no Reimbursable Expenses and that Exhibit A (indicating no Reimbursable Expenses), a copy of which is attached hereto, is hereby attached to and made a part of the Operating Agreement as Exhibit A thereto, to the same effect as if it had been fully set forth in the Operating Agreement at the date the Operating Agreement was executed by the Members. 21. Initial Project Budget. The Members hereby agree that there was no Initial Project Budget and that Exhibit I (indicating no Initial Project Budget), a copy of which is attached hereto, is hereby attached to and made a part of the Operating Agreement as Exhibit I thereto, to the same effect as if it had been fully set forth in the Operating Agreement at the date the Operating Agreement was executed by the Members. 22. Property Management Agreement. The Members hereby agree that the Property Management Agreement, a copy of which is attached hereto, is hereby attached to and made a part of the Operating Agreement as Exhibit J thereto, to the same effect as if it had been fully set forth in the Operating Agreement at the date the Operating Agreement was executed by the Members. 23. Description of Infrastructure. The Members hereby agree that the Description of Infrastructure, a copy of which is attached hereto, is hereby attached to and made a part of the Operating Agreement as Exhibit E thereto, to the same effect as if it had been fully set forth in the Operating Agreement at the date the Operating Agreement was executed by the Members. 24. Description of Infrastructure Land. The Members hereby agree that the Description of Infrastructure Land, a copy of which is attached hereto, is hereby attached to and made a part of the Operating Agreement as Exhibit F thereto, to the same effect as if it had been fully set forth in the Operating Agreement at the date the Operating Agreement was executed by the Members. 25. Pledge and Security Agreement by Feld. The Members hereby agree that the Pledge and Security Agreement by Feld, a copy of which is attached hereto, is hereby attached to and made a part of the Operating Agreement as Exhibit L thereto, to the same effect as if it had been fully set forth in the Operating Agreement at the date the Operating Agreement was executed by the Members. 26. Pledge and Security Agreement by WPHC. The Members hereby agree that the Pledge and Security Agreement by WPHC, a copy of which is attached hereto, is hereby attached to and made a part of the Operating Agreement as Exhibit M thereto, to the same effect as if it had been fully set forth in the Operating Agreement at the date the Operating Agreement was executed by the Members. 27. Plans and Specifications. The Members hereby agree that the Plans and Specifications, a copy of which is attached hereto, is hereby attached to and made a part of the Operating Agreement as Exhibit N thereto, to the same effect as if it had been fully set forth in the Operating Agreement at the date the Operating Agreement was executed by the Members. 28. Final Project Budget. The Members hereby agree that the Final Project Budget, a copy of which is attached hereto, is hereby attached to and made a part of the Operating Agreement as Exhibit O thereto, to the same effect as if it had been fully set forth in the Operating Agreement at the date the Operating Agreement was executed by the Members. 29. Infrastructure Budget. The Members hereby agree that the Infrastructure Budget, a copy of which is attached hereto, is hereby attached to and made a part of the Operating Agreement as Exhibit T thereto, to the same effect as if it had been fully set forth in the Operating Agreement at the date the Operating Agreement was executed by the Members. 30. Substitution Agreement. The Members hereby agree that the Substitution Agreement, a copy of which is attached hereto, is hereby attached to and made a part of the Operating Agreement as Exhibit U thereto, to the same effect as if it had been fully set forth in the Operating Agreement at the date the Operating Agreement was executed by the Members. 31. Headings and Captions. The headings and captions of this First Amendment are inserted for convenience only and are in no way intended to describe, interpret, define, or limit the scope, extent or intent of this First Amendment, the Operating Agreement or any provisions thereof. 32. Full Force and Effect. The Operating Agreement, as specifically amended herein, is hereby ratified by the Members and shall remain in full force and effect. 33. Counterparts. This First Amendment may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which, when taken together, shall constitute one agreement binding on the parties hereto, notwithstanding that all the parties may not have signed the same counterpart. Signature pages from one counterpart may be removed and attached to another counterpart to create one fully-executed document. [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] IN WITNESS WHEREOF, the parties hereto, being all of the Members of the Company, have executed this First Amendment as of the date first written above. /s/ Al Feld _____________________________________ Al Feld WELLSFORD PARK HIGHLANDS CORP., a Colorado corporation By:/s/ David M. Strong __________________________________ David M. Strong, Vice President EXHIBIT A FELD REIMBURSABLE EXPENSES None. EXHIBIT E DESCRIPTION OF INFRASTRUCTURE EXHIBIT F DESCRIPTION OF INFRASTRUCTURE LAND EXHIBIT I INITIAL PROJECT BUDGET None. EXHIBIT J PROPERTY MANAGEMENT AGREEMENT (See attached) RED CANYON AT PALOMINO PARK, LLC PROPERTY MANAGEMENT AGREEMENT This agreement (the "Agreement") is executed on the 6th day of May, 1997 by and between RED CANYON AT PALOMINO PARK, LLC ("Owner"), and THE FELD COMPANY, a Colorado corporation ("Manager"). FOR GOOD AND VALUABLE CONSIDERATION, the receipt and sufficiency of which is hereby acknowledged, Owner and Manager mutually agree as follows: 1. APPOINTMENT OF MANAGER On and subject to the terms and conditions of this Agreement, Owner hereby retains Manager commencing on January 1, 1997 (the "Commencement Date") to manage and lease on behalf of Owner the following properties (individually or collectively the "Property"): Red Canyon at Palomino Park, Highlands Ranch, Colorado. 2. TERM This Agreement shall commence on the Commencement Date and, subject to Section 8 below, shall expire on the "Termination Date" (as defined below). "Termination Date" shall mean the earlier of Final Closing or removal of Feld as defined in the Operating Agreement of Red Canyon at Palomino Park, LLC dated as of April 17, 1996 ("Operating Agreement"). 3. MANAGEMENT FEES In consideration of the performance by the Manager of its duties and obligations hereunder, the Owner shall pay to the Manager a management fee equal to 2.5% of "Gross Operating Revenues" (as defined below) payable the last day of each calendar month with respect to that calendar month. Manager shall submit to Owner an invoice detailing the calculation of the management fee each month. "Gross Operating Revenues" means the actual monthly cash collections from the customary operations of the Property consisting of rental and vending machine receipts, forfeited deposits, late charges, rent claim settlements net of any collection fees, lease termination or modification payments and other operating receipts, excluding applicable sales tax and refundable deposits); Gross Operating Revenues shall not include any revenues from condemnation or casualty proceeds, from the sale of any personal or real property of Owner or from any source other than the customary operations of the Property. Manager shall submit to Owner's or Owner's accounting agent an invoice detailing the calculation of the management fee each month. 4. AUTHORITY AND RESPONSIBILITIES OF MANAGER 4.01 Independent Contractor. In the performance of its duties hereunder, the Manager shall be and act as an independent contractor, with the sole duty to supervise, manage, operate, control and direct performance of the details of its duties incident to the specified duties and obligations hereunder, subject to the rights of the Owner, as described herein. Nothing contained in this Agreement shall be deemed or construed to create a partnership, joint venture, employment relationship, or otherwise to create any liability for one party with respect to indebtedness, liabilities or obligations of the other party except as otherwise may be expressly set forth herein. 4.02 Standard of Care. Manager shall perform its duties and obligations in a professional, competent, businesslike and efficient Manager as would a first class property manager of apartment projects similar to the Property. 4.03 Depository Account. Manager shall open, for the benefit of Owner, a special, separate, FDIC insured, interest bearing account in a savings institution identified by Owner (the "Depository Account") upon which the only persons with signatory authority shall be the following employees of Owner: Jeffrey Lynford, Chairman; Ed Lowenthal, President; and Gregory Hughes, Vice President. The Depository Account shall be the sole and exclusive property of the Owner, and Manager shall have no interest (legal or equitable) therein. Owner shall have the right to change the signatories to the Depository Account in its sole discretion. 4.04 Business Plan. (a) Manager shall prepare and present to Owner in the computer model and word processing and spreadsheet software approved by Owner, within thirty days of the Commencement Date and prior to November 15 of each year thereafter during the term of this Agreement, an annual business plan for the following calendar year, which once approved by Owner shall be the business plan governing the management of the Property (the "Business Plan"). (b) Manager shall include in the Business Plan the following: (i) a twelve-month operating budget, using Owners' chart of accounts (see Schedule B) for the following calendar year, which once approved by Owner, shall be the budget ("Budget"); (ii) a 5-year budget for planned improvements based on a detailed annual physical inspection of the Property completed by Manager; (iii) a preventative maintenance plan for the Property outlining the management plan to minimize long term operating costs and to avoid deferred maintenance; (iv) a marketing plan for the Property, including print and other forms of advertising, use of apartment locators and promotional activities and apartment pricing; (v) market surveys; (vi) tenant selection criteria to be used in the selection of prospective tenants, including appropriate references, income and credit history; (vii) a copy of Manager's current policies and procedures which shall include the following: (x) an environmental compliance plan outlining policies and procedures for managing the disposal or storage of hazardous materials and toxic substances (such plan shall require that the Property shall not be the source of a release or dispose of any hazardous materials or toxic substances except as may be incidental to the operation of an apartment project (e.g. cleaning supplies, fertilizers, paint); and (y) a legal compliance plan of actions necessary to comply with all "Applicable Laws" (as defined below). "Applicable laws shall mean any and all statutes, ordinances, laws, rules, regulations, orders and requirements of any federal, state or municipal government, and appropriate departments, commissions, boards and officers having jurisdiction over the use, maintenance or operation of the Property, including without limitation (A) laws prohibiting discrimination based on race, religion, national origin, color, gender, disability, age, sexual preference or any other classification, (B) employment laws of any kind or description, (C) laws regarding tenant security deposits, (D) laws regarding the storage, release, and disposal of hazardous materials, petroleum products, and toxic substances, (E) laws and orders relating to the use of minority business enterprises, to the extent any such laws and orders are applicable in the performance of work or furnishing of services, materials, equipment or supplies hereunder, and (F) all orders and requirements of local board of fire underwriters, or any other body which may hereafter exercise similar functions including any and all forms, reports and returns required by law to be filed with any governmental authority in connection with the use, maintenance or operation of the Property; and (viii) any other information, plan, survey, policies or procedures as Owner may request. (c) The Business plan shall be approved by the Owner before implementation. All actions outlined in the Business Plan shall be implemented by Manager on behalf of and at the expense of Owner, subject to the limitations on expenses enumerated in the Budget. The Budget shall be Managers's guideline for Owner's expectations of rental rates; however, Manager shall be expected to continually test new rental levels and to make adjustments with prompt notification to Owner as the market shall permit or require. The Business Plan in conjunction with the Budget, shall constitute a major control under which Manager shall operate, and Manager shall submit a report to Owner setting forth the reasons for any variance therefrom as required under Owner's policies and procedures attached hereto, and made a part hereof, as Schedule B ("Owners' Policies and Procedures"). 4.05 Leasing, Collection of Rents, etc. (a) Manager shall use its best efforts consistent with the standard of care set forth herein to lease apartments units, retain residents and maximize Gross Operating Revenues. (b) Manager shall sign apartment leases on behalf of Owner in its capacity as property manager hereunder. Manager shall only sign leases in the form of lease approved by Owner and subject to Owner's Policies and Procedures. Manager shall not enter into any lease which has a term greater than 24 months. Manager shall attach as a rider to all leases the text as presented in Schedule A. Manager shall investigate tenant references and tenant credit histories and shall select tenants in accordance with tenant selection criteria outlined in the Business Plan, and shall apply resident selection criteria fairly to all prospective tenants. Manager shall not discriminate against or segregate any person or group of persons on account of race, color, religion, creed, sex, national origin, age, or disability in leasing or managing the Property nor shall Manager permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use, or occupancy of tenants. Manager shall assess the leasing practices on a regular basis to assure that no such practices of discrimination are occurring on the Property. Manager shall report any such incidents or claims of discrimination to Owner immediately. (c) Manager shall collect rents, security deposits and other charges payable by tenants in accordance with the tenant leases, and shall collect income due Owner with respect to the Property from all other sources, and shall deposit all such income received immediately upon receipt in the Depository Account for each Property (d) Manager shall, at Owner's expense, subject to limits set forth in the Budget and the Business Plan, terminate leases, evict tenants, institute and settle suits for delinquent payments as Manager deems advisable. In connection therewith, Manager may, at Owner's expense and subject to the limitations on expenses enumerated in the Budget, consult and retain legal counsel. 4.06 Repair, Maintenance and Service. (a) Manager shall, at Owner's expense and subject to the limitations set forth in the Budget and the Business Plan, maintain the Property in good repair and condition. (b) In name of Owner and subject to the other terms and conditions of this Agreement, Manager in its capacity hereunder shall execute contracts for water, electricity, gas, telephone, television, vermin or pest extermination and any other services which are necessary to properly maintain the Property. Manager shall include in any such contracts the text in Schedule A. Manager shall, in Owner's name and at Owner's expense, hire and discharge independent contractors for the repair and maintenance of the Property and shall include in any such contract the text as presented in Schedule A. Other than leases, Manager shall not, without the prior written consent of the Owner, enter into any contract in name of Owner which may not be terminated with 30 days notice. Manager shall act at arms length with all contractors and shall employ no affiliated entities without Owner's prior written consent. Notwithstanding the foregoing, Owner shall have the right to require Manager to use certain contractors and suppliers for any service, supply, maintenance, repair or utility for the Property, including cable, landscaping or security service. 4.07 Manager's Employees. (a) Manager shall have in its employ at all times a sufficient number of employees to enable it to professionally manage the Property in accordance with the terms of this Agreement. Owner shall have the right to require that Manager have a minimum or maximum number of employees at the Property and to approve or require the removal or replacement of any employee working at the Property. Manager shall prepare, execute and file all forms, reports and returns required by Applicable Laws. All payroll costs for on-site employees shall be at Owner's expense. All matters pertaining to the employment and supervision of such employees shall be the sole responsibility of the Manager, which in all respects shall be the employer of such employees, and Owner shall have no liability with respect to such matters. Notwithstanding the foregoing, Manager shall not, without consent of Owner, transfer any employee from the Property to a similar on-site position at a property in the area managed by Manager on behalf of a third party. (b) Manager shall employ at its sole expense a regional manager to oversee the operations of the Property who shall frequently, but not less than bi-weekly, visit the Property performing inspections and providing guidance and training to the on-site staff. The assignment of this regional manager to oversee the Property shall be approved by Owner. The regional manager's supervision of more than seven (7) properties including the Property or other considerations may be cause for Owner to withhold or rescind said approval. (c) Manager shall maintain, at Owner's expense, workers compensation (or other private insurance acceptable to Owner) for all on-site employees at limits not less than the statutory amount. Manager shall prepare, execute and file all forms, reports and returns required by Applicable Laws. 4.08 Insurance. (a) Manager shall, at its sole cost and expense, procure and maintain in full force and effect, throughout the existence of this Agreement, policies of insurance as detailed below in subsection (b), on which Owner shall be named insured. These policies shall be issued by an insurance company licensed to do business in the state in which the Property is located with an AM Best rating of A-, V or better. Manager shall be covered under such policies for its indemnity obligations hereunder subject to the limits set forth below. Manager shall promptly furnish to Owner certificates of insurance acceptable to Owner as evidence of the insurance coverage required hereunder. Manager shall obtain a written obligation on the part of each insurance carrier to notify Owner at least 30 days prior to any cancellation or material change of any such policy. (b) The following policies of insurance shall be procured and maintained by Manager: 1. Employer's liability insurance in an amount not less than $250,000 per occurrence. 2. Blanket crime coverage, including employee dishonesty and depositor's forgery endorsements, protecting Manager against fraudulent or dishonest acts of its employees, whether acting alone or with others, with limits of liability of not less than $25,000 per Property, not to exceed $100,000 in aggregate if more than one Property is managed, on which Owner shall be loss payee. 3. Professional liability insurance covering the activities of Manager written on a "claims made" basis with limits of at least $1,000,000 with a maximum deductible of $10,000. Any loss within the deductible shall be borne by Manager. Coverage shall be maintained in effect during the period of the Agreement and for not less than two (2) years after termination of the Agreement. 4.09 Reports. Manager shall prepare and send to Owner reports in accordance with Owner's Policies and Procedures, including, i) monthly status report (Owner's form); ii) monthly statements approved by Manager showing all receipts and disbursements; iii) an accompanying letter explaining any significant events at the Property, as well as any variances from budget in excess of +/- 10% on any operating statement detailed item; iv) planned improvement logs (Owner's form); v) market study; vi) copies of significant incident reports; and, vii) other analyses as should from time to time be reasonably requested by Owner. 4.10 Operating Expenses. (a) Manager shall cause the Property to incur proper operating expenses in exercising its authority and performing all of its duties and obligations hereunder. Manager shall use reasonable efforts to minimize such expenses by obtaining competitive pricing on all services and obtaining at least three bids on major expenditures. Manager shall use reasonable efforts to comply with the limitations on expenditures set forth in the Budget. Manager shall obtain Owner's prior written consent before incurring on behalf of Owner any single expenditure in excess of two thousand five hundred dollars ($2,500) excluding utility bills and other normal and recurring expenses included in the Budget, except in an emergency in which case Manager may incur expenses reasonably necessary to protect life and property. Manager shall notify Owner of any such emergency expenses as soon as practicable after they are incurred. (b) Manager shall timely request payment by Owner of all proper costs and expenses incurred by the operation of the Property as contemplated herein. All costs for which payment is requested shall be coded by the on-site manager in accordance with Owner's standard chart of accounts, attached in Schedule B. Manager shall not request payment of invoices to itself other than for the following items: i) the cost of sending Property related material by overnight courier at Owner's request ii) forms and other items ordered in bulk by Manager and used by the Property, iii) third-party payroll processing, and iv) the Management Fee. Manager shall not request payment of any invoices, whether to itself or a third party, marked-up above cost. Manager is not required to monitor or request payment for taxes, escrows or debt service, which costs Owner will monitor and pay. 4.11 Legal Proceedings and Compliance with Applicable Laws. (a) Manager shall promptly notify Owner in writing of the service of any legal process upon Manager (although Manager is not authorized to accept service of process on behalf of the Owner), or the occurrence of any casualty loss, injury or damage on or about the Property; (b) Manager shall fully comply with all Applicable Laws in connection with this Agreement, the performance of its obligations hereunder, its own operations and its hiring, discharge and retention of employees. Manager shall perform, on behalf and upon approval of Owner and at Owner's expense, all such acts in and about the Property which shall be reasonably necessary to comply with Applicable Laws. 4.12 Policies and Procedures. (a) Manager shall maintain files of all original documents relating to leases, vendors and all other business of the Property in an orderly fashion at the Property, which files shall be the property of Owner and shall at all times be open to Owner's inspection. (b) Manager shall comply with the policies and procedures attached hereto as Schedule B. Owner may periodically make alterations to these policies and procedures and will provide such updates to Manager. 5. RESPONSIBILITIES OF OWNER 5.01 Accounting. Owner shall provide accounting services for the payment of all proper expenses of the property, and shall provide to Manager all accounting reports necessary for Manager to discharge its obligations hereunder by the 5th of each month or the next subsequent business day. 5.02 Liability. Owner shall maintain sole and primary public liability and property damage insurance with respect to occurrences on or about the Property, with liability limits of not less than $1,000,000 per person and per occurrence, and excess liability with limits of not less than $10,000,000, and rental income insurance, and naming the Manager as an additional insured. Owner shall maintain such fire, hazard and other insurance in such amounts as are proper in judgment of Owner. The maintenance of fire, hazard and other insurance shall be the sole responsibility of Owner and not Manager. 6. INDEMNIFICATION 6.01 Indemnification of Owner. The Manager shall indemnify, defend and hold harmless Owner against any and all liabilities, costs, expenses, damages, penalties, interest, injuries and obligations, including reasonable attorneys' fees ("Claims") incurred by Owner as a result of (a) any act by Manager outside the scope of its authority hereunder, (b) any act or failure to act constituting negligence, misconduct, fraud or breach of this Agreement, (c) Claims made by current or former employees or applicants for employment arising from hiring, supervising or firing same, or (d) any act by Manager, its employees, agents or contractors in violation of any Applicable Law. 6.02 Indemnification of Manager. Owner shall indemnify and hold harmless Manager against any and all Claims incurred by Manager as a result of acts of Manager made within the scope of its authorities, excluding, however, (a) Claims which arise from the negligence, misconduct, fraud or breach of this Agreement by Manager, (b) Claims made by current or former employees or applicants for employment arising from hiring, supervising or firing of same, or (c) any act by Manager, its employees, agents or contractors in violation of any Applicable Law. 6.03 General Provisions. The provisions of this Section shall survive the termination of this Agreement. 7. DEFAULTS 7.01 Manager's Event of Default. Manager shall be deemed to be in default hereunder upon the happening of any of the following ("Manager's Event of Default"): (a) The failure by Manager to keep, observe or perform any covenant, agreement, term or provision of this Agreement to be kept, observed or performed by Manager relating to any of the Properties, and such default shall continue, in full or in part, for a period of ten (10) days after written notice thereof by Owner to Manager, including without limitation, the following: (i) failure to make any payment or perform any financial obligation required hereby; (ii) failure to prepare and present a complete Budget or Business Plan as required hereby; (iii) failure to collect Gross Operating Revenue as required hereby; (iv) failure to deposit Gross Operating Revenue due Owner as required hereby; (v) failure to maintain the Property as required hereby; (vi) an act or omission of Manager in violation of any Applicable Law; or (vii) failure to comply with Owner's Policies and Procedures. (b) Notwithstanding paragraph (a), the occurrence of any of the following shall be a Manager's Event of Default and Manager shall not have the right to cure such action: (i) The request by Manager of payment of any invoice, whether to itself or a third party, marked-up above cost as prohibited herein. (ii) The aggregate operating expenses excluding real estate taxes and improvements as reported for any Property on an accrual basis shall: (x) in any consecutive three month period exceed by 10% or more the aggregate amount included in the Budget for those same expenses for such three-month period; or (y) in any one-month period exceed by 20% or more the amount included in the Budget for those same expenses for such month. (iii) The failure by Manager to meet the standard of care set forth herein for the performance of its duties at any of the Properties. (c) The making of a general assignment by Manager for benefit of its creditors, the filing by Manager with any bankruptcy court of competent jurisdiction of a voluntary petition under Title 11 of U.S. Code, as amended from time to time, the filing by Manager of any petition or answer seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution, or similar relief under any present or future federal or state act or law relating to bankruptcy, insolvency, or other relief for debtors, Manager being the subject of any order for relief issued under such Title 11 of the U.S. Code, as amended from time to time, or the dissolution or liquidation of Manager; and (d) The misapplication or misappropriation of funds held by Manager in trust for Owner. 7.02 Remedies of Owner. Upon the occurrence of a Manager's Event of Default, Owner shall be entitled (i) to terminate in writing this Agreement effective as of the date designated by Owner (which may be the date upon which notice is given), and/or (ii) to pursue any remedy at law or in equity, including without limitation, specific performance. All of Owner's rights and remedies shall be cumulative. 7.03 Owner's Event of Default. Owner shall be deemed to be in default hereunder (an "Owner's Event of Default") if Owner shall fail to keep, observe or perform any covenant, agreement, term or provision of this Agreement to be kept, observed or performed by Owner, and such default shall continue for a period of thirty (30) days after written notice thereof by Manager to Owner, or if such default cannot be cured within such thirty (30) day period, then such additional period as shall be reasonable, provided Owner commences to cure such default within such thirty (30) day period and proceeds diligently to prosecute such cure to completion. 7.04 Remedies of Manager. Upon the occurrence of an Owner's Event of Default or upon a termination of this Agreement by Owner without cause pursuant to Section 8.04 hereof, Manager shall be entitled (i) to terminate in writing this Agreement effective as of the date designated by Owner which is at least 10 days after receipt of such notice of termination by Owner, and/or (ii) to pursue an action for the actual compensatory damages incurred by Manager. Manager expressly agrees that termination and monetary damages are its sole rights and remedies with respect to an Owner's Event of Default and Owner expressly waives and releases the right to seek equitable relief, including specific performance or injunctive relief, and to sue for any consequential or punitive damages. 8. TERMINATION RIGHTS 8.01 Expiration of Term. If not sooner terminated, this Agreement shall terminate on the expiration of its term set forth in Section 2 hereof. 8.02 Termination By Owner Upon Manager Event of Default. Upon a Manager Event of Default, Owner may terminate this Agreement as specified in Section 7.02 hereof. 8.03 Termination By Manager Upon Owner Event of Default. Upon an Owner Event of Default, Manager may terminate this Agreement as specified in Section 7.04 hereof. 8.04 Termination By Owner Without Cause. Even in the absence of an express right to terminate this Agreement and after the "Conversion Date" as defined in ___________, Owner may terminate this Agreement upon written notice at any time delivered to Manager effective as of the date designated by Owner (which may be the date upon which notice is given); provided that in such event Manager shall be entitled to pursue its remedy for compensatory damages for early termination pursuant to Section 7.04 hereof. 8.05 Termination Upon Sale of the Property. If the Property is sold, conveyed or transferred during the term hereof, this Agreement shall term. 8.06 Termination After Initial Term. If the parties hereto agree to continue this Agreement after the initial term hereof, Owner shall then be entitled to terminate this Agreement upon thirty (30) days written notice. 8.07 Effect of Termination Upon Payment of Fees. Upon the termination of this Agreement for any reason, Manager shall be entitled to its earned, but unpaid fees, for the period prior to the termination. Manager shall not be entitled to any fees relating to the period after the date of termination of this Agreement; provided that in the case of termination by Owner pursuant to Section 8.04, Manager shall be entitled to actual, compensatory damages as specified in Section 7.04. 8.08 Delivery of Property Upon Termination. Immediately after termination of this Agreement for any reason, Manager shall deliver to or as directed by Owner all funds, checks, keys, lease files, books and records and other Confidential Information to Owner. Immediately after termination, Manager shall leave the Property and cause its employees to leave the Property without causing any damage thereto. Under no circumstances shall any default by Owner give rise to any lien on the Property or give rise to a right of Manager to stay on the Property after the date of termination without the express consent of Owner. 8.09 Effect of Termination on Village at the Bear LLC. The termination of this Agreement shall not affect or impair the rights and remedies of the parties to the Operating Agreement of Village at the Bear LLC under such Operating Agreement, including any right of a party to receive fees, compensation or distributions under such Operating Agreement. 9. CONFIDENTIALITY 9.01 Preservation of Confidentiality. In connection with the performance of obligations hereunder, Manager acknowledges that it will have access to "Confidential Information" (as defined below). Manager shall treat such Confidential Information as proprietary to Owner and private, and shall preserve the confidentiality thereof and not disclose, or cause or permit its employees, agents or contractors to disclose, such Confidential Information. Notwithstanding the foregoing, Manager shall have the right to disclose Confidential Information if and to the extent it is required by legal process or by operation of law to disclose any Confidential Information. "Confidential Information" shall mean the books, records, business practices, methods of operations, computer software, financial models, financial information, policies and procedures, and other information relating to Owner and the Property (including any such information relating to the Property generated by the Manager), which are not available to the public. 9.02 Property Right in Confidential Information. All Confidential Information shall remain the property of Owner and Manager shall have no ownership interest therein. 10. SURVIVAL OF AGREEMENT All indemnity obligations set forth herein, all obligations to pay earned and accrued fees and expenses, all confidentiality obligations, and all obligations to perform and duties accrued prior to the date of termination shall survive the termination of this Agreement. 11. ENFORCEMENT OF AGREEMENT This Agreement, its interpretation, performance and enforcement, and the rights and remedies of the parties hereto, shall be governed and construed by and in accordance with the law of the State in which the Property is located. If any action at law or in equity is brought to enforce or interpret the provisions of this Agreement, the prevailing party shall be entitled to recover reasonable costs, including attorney's fees, incurred to maintain such action, from the prevailing party. 12. ASSIGNMENT Manager shall not sell, assign or otherwise transfer by operation of law or otherwise all or any part of its rights or obligations under this Agreement. Owner may assign this Agreement to a successor owner of the Property. 13. NOTICES Any notice required by this Agreement shall be deemed to be delivered when delivered, if delivered by overnight courier, personal delivery or registered or certified mail, return receipt requested, addressed to the parties at the following addresses or such changed address as such party may fix by notice thereof: If to Owner: Red Canyon at Palomino Park, LLC c/o Wellsford Residential Property Trust 370 17th Street, Suite 3100 Denver, CO 80202 Attention: David M. Strong - Vice President If to Manager: The Feld Company 4600 S. Ulster Street Parkway, Suite 350 Denver, CO 80237 Attention: Mr. Al Feld - President 14. MISCELLANEOUS 14.01 Captions. The captions of this Agreement are inserted only for the purpose of convenient reference and do not define, limit or prescribe the scope or intent of this Agreement or any part hereof. 14.02 Schedules. Each schedule attached hereto forms a material part of this Agreement and is incorporated herein by reference. 14.03 Modifications and Changes. This Agreement cannot be changed or modified except by another agreement in writing, signed by the parties sought to be charged therewith. 14.04 Entire Agreement. This Agreement embodies the entire understanding of the parties, and there are no further agreements or understandings, written or oral, in effect between the parties relating to the subject matter hereof. EXECUTED as of the date set forth above. OWNER: MANAGER: RED CANYON AT PALOMINO PARK, LLC THE FELD COMPANY a Colorado corporation By:/s/ Al Feld By:/s/ Daniel B. Levin ---------------------- ------------------------------ Al Feld Name: Daniel B. Levin Manager Title: VP INDEX TO SCHEDULES Schedule A - Attachment to All Contracts Executed by Manager on Behalf of Owner Schedule B - Owner's Policies and Procedures to be Followed by Manager. SCHEDULE A This Agreement and all documents, agreements, understandings and arrangements have been executed or entered into by _____________________________ as agent of Wellsford Residential Property Trust (the Company) which has been formed as a Maryland real estate investment trust pursuant to a Declaration of Trust dated as of July 10, 1992, as amended, and not individually, and neither the trustees, officers or shareholders of the Company shall be bound or have any personal liability hereunder or thereunder. All persons dealing with the company shall look solely to the assets of this Agreement and all related documents, agreements, understandings and arrangements and will not seek recourse or commence any action against any of the trustees, officers or shareholders of the Company or any of their personal assets for the performance or payment of any obligation hereunder or thereunder. The foregoing shall also apply to any future documents, agreements, understandings, arrangements and transactions between the parties hereto. SCHEDULE B OWNER'S POLICIES AND PROCEDURES TO BE FOLLOWED BY MANAGER EXHIBIT L PLEDGE AND SECURITY AGREEMENT BY FELD (See attached) PLEDGE AND SECURITY AGREEMENT THIS PLEDGE AND SECURITY AGREEMENT (this "Agreement") is made as of the 17th day of April, 1996, by AL FELD, an individual, having an address of 4600 South Ulster Street, Suite 350, Denver, Colorado 80237 ("Pledgor"), for the benefit of WELLSFORD PARK HIGHLANDS CORP., a Colorado corporation, having an office at 370 Seventeenth Street, Suite 3100, Denver, Colorado 80202 ("Pledgee"). RECITALS A. Pledgor is the Manager and a Member of Red Canyon at Palomino Park LLC, a Colorado limited liability company (the "Limited Liability Company"), which Limited Liability Company is governed by its Operating Agreement dated as of April 17, 1996 (the "Operating Agreement"), by and between Pledgee and Pledgor. B. Pledgee is also a Member in the Limited Liability Company. C. In order to secure the full payment and performance by Pledgor of all of Pledgor's obligations under the Operating Agreement, as such Operating Agreement may be now or hereafter amended, modified or restated (said obligations under the Operating Agreement are hereinafter referred to as the "Obligations"), Pledgor is entering into this Agreement for the benefit of Pledgee. AGREEMENT NOW, THEREFORE, in consideration of the recitals, covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows: 1. Definitions. a. "Collateral" shall mean: (i) All of Pledgor's right, title and interest in the ownership interests of Pledgor in the Limited Liability Company, whether now owned or hereafter acquired, including, without limitation, its Interest (as defined in the Operating Agreement) in the Limited Liability Company, the right of Pledgor, if any, to any benefits to which Pledgor may be entitled pursuant to the Operating Agreement or the Colorado Limited Liability Company Act, Colo. Rev. Statutes Sections 7-80-101 to 7-80-913, as amended from time to time (the "Act"), and Pledgor's right to receive payments, fees, distributions and allocations under or in connection with the Operating Agreement (whether as Member or as Manager), as such Operating Agreement may be modified or extended from time to time with the consent of the Pledgee; and (ii) All proceeds, whether cash proceeds or noncash proceeds, and products of any and all of the foregoing. b. "Event of Default" shall mean an event of default described in Section 8 herein. 2. Pledge of Collateral and Grant of Security Interest. Pledgor does hereby unconditionally and irrevocably assign, pledge, convey, transfer, deliver, set over and grant unto Pledgee, its successors and assigns, as security for Pledgor's complete and timely payment and performance of the Obligations, a continuing first lien security interest under the Uniform Commercial Code of the State of Colorado in the Collateral. Pledgor hereby further grants to Pledgee all rights in the Collateral as are available to a secured party of such collateral under the Uniform Commercial Code of the State of Colorado (being the principal place of business of Pledgor and the location of Pledgor's residence) and, concurrently herewith, shall deliver to Pledgee duly executed UCC-1 financing statements suitable for filing in the State of Colorado with respect to the Collateral. 3. Delivery to Pledgee. a. Pledgor agrees to execute and to use its best efforts to cause all other necessary parties, and any successors and assigns thereof, to execute and deliver to Pledgee such other agreements, instruments and documentation as Pledgee may reasonably request from time to time to effect the conveyance, transfer, and grant to Pledgee of Pledgor's right, title and interest in and to the Collateral as security for the Obligations. b. Concurrently with the execution of this Agreement, Pledgor has caused each of the Members of the Limited Liability Company, other than Pledgee, to execute the Consent to Security Interest and Agreement in the form attached hereto as Schedule A (the "Consent") evidencing the consent of the Members to the assignment of Pledgor's Limited Liability Company interests and their agreement to be bound by Section 4 of this Agreement, and Pledgor covenants to execute, if required by Pledgee, an amendment to the Operating Agreement in such form as Pledgee may reasonably require to reflect the substitution of Pledgee in place of Pledgor as Manager of the Limited Liability Company upon the occurrence of an Event of Default. Pledgor further agrees to execute and to cause the other Members of the Limited Liability Company to execute and deliver to Pledgee such other agreements, instruments and documentation as Pledgee may reasonably request from time to time to effectuate the conveyance, transfer, assignment and grant to Pledgee of all of Pledgor's right, title and interest in and to the Collateral and to evidence the substitution of the Pledgee in place of Pledgor as Manager in the Limited Liability Company. 4. Proceeds and Products of the Collateral. a. Notwithstanding any of the foregoing, unless and until there occurs an Event of Default, Pledgee agrees to forbear from exercising its right to receive all benefits pertaining to the Collateral (except as otherwise permitted under the Operating Agreement), and Pledgor shall be permitted to exercise all rights and to receive all benefits of the Collateral, including, without limitation, the right to exercise all voting, approval, consent and similar rights of Pledgor pertaining to the Collateral, payments due under, proceeds, whether cash proceeds or noncash proceeds, and products of the Collateral and to retain and enjoy the same. b. Pledgor acknowledges and agrees with Pledgee, that unless Pledgee otherwise consents, in Pledgee's sole discretion, Pledgor shall not exercise any voting, approval, consent or other rights with respect to the Collateral at any time after (i) the occurrence of an Event of Default and (ii) receipt of notice from Pledgee instructing Pledgor not to exercise any such voting, approval, consent or other rights with respect to the Collateral, provided, however, that Pledgor shall exercise any such right it may have under the agreements comprising the Collateral with respect to the business affairs of the Limited Liability Company as is reasonably necessary to protect and preserve the Collateral. c. Upon or at any time after the occurrence of an Event of Default, Pledgee, at its option, to be exercised in its sole discretion by written notice to Pledgor, may exercise all rights and remedies granted under this Agreement, including, without limitation, the right to require the obligors under the Collateral to make all payments due under and to pay all proceeds, whether cash proceeds or noncash proceeds, and products of the Collateral to Pledgee. Upon the giving of any such notice, the security constituted by this Agreement shall become immediately enforceable by Pledgee, without any presentment, further demand, protest or other notice of any kind, all of which are hereby expressly and irrevocably waived by Pledgor. Pledgor hereby authorizes and directs each respective obligor under the agreements constituting the Collateral, that upon receipt of written notice from Pledgee of an Event of Default by Pledgor hereunder, to assign, set over, transfer, distribute, pay and deliver any and all Collateral or said payments, proceeds or products of the Collateral to Pledgee, at such address as Pledgee may direct, at such time and in such manner as the Collateral and such payments, proceeds and products of the Collateral would otherwise be distributed, transferred, paid or delivered to Pledgor. The respective obligors under the agreements constituting the Collateral shall be entitled to conclusively rely on such notice and make all such assignments and transfers of the Collateral and all such payments with respect to the Collateral and pay all such proceeds and products of the Collateral to Pledgee and shall have no liability to Pledgor for any loss or damage Pledgor may incur by reason of said reliance. 5. No Assumption. Notwithstanding any of the foregoing, whether or not an Event of Default shall have occurred, and whether or not Pledgee elects to foreclose on its security interest in the Collateral as set forth herein, neither the execution of this Agreement, receipt by Pledgee of any of Pledgor's right, title and interest in and to the Collateral and the payments, proceeds and products of the Collateral, now or hereafter due to Pledgor from any obligor of the Collateral, nor Pledgee's foreclosure of its security interest in the Collateral, shall in any way be deemed to obligate Pledgee to assume any of Pledgor's obligations, duties or liabilities under the Collateral or any agreements constituting the Collateral, as presently existing or as hereafter amended, or under any and all other agreements now existing or hereafter drafted or executed (collectively, the "Pledgor's Liabilities"), unless Pledgee otherwise agrees to assume any or all of Pledgor's Liabilities in writing. In the event of foreclosure by Pledgee of its security interest in the Collateral, Pledgor shall remain bound and obligated to perform the Pledgor's Liabilities to the extent required under the Operating Agreement, and Pledgee shall not be deemed to have assumed any of the Pledgor's Liabilities, except as provided in the preceding sentence. In the event the entity or person acquiring the Collateral at a foreclosure sale elects to assume the Pledgor's Liabilities, such assignee shall agree to be bound by the terms and provisions of the applicable agreement. 6. Indemnification. Pledgor hereby agrees to indemnify, defend and hold Pledgee, its successors and assigns harmless from and against any and all damages, losses, claims, costs or expenses (including without limitation, reasonable attorneys' fees) and any other liabilities whatsoever that Pledgee or its successors or assigns may incur by reason of Pledgor's failure to comply with the terms and conditions of this Agreement or by reason of any unpermitted assignment of Pledgor's right, title and interest in and to any or all of the Collateral. 7. Representations, Warranties and Covenants. In addition to the representations made by Pledgor in the Operating Agreement, Pledgor makes the following representations and warranties, and Pledgor covenants and agrees to provide written notices to Pledgee within ten (10) days after Pledgor becomes aware that any of the following is no longer true and correct and to perform diligently all acts reasonably necessary to maintain or restore the truth and correctness, in all material respects, of the following: a. Pledgor acknowledges that the Operating Agreement and any other agreements constituting the Collateral, currently are in full force and effect and have not been amended or modified, except by Pledgor and Pledgee in writing. b. Pledgor has the full right and title to its interest in the Collateral and has the full power, legal right and authority to pledge, convey, transfer and assign such interest. None of the Collateral is subject to any existing assignment, claim, lien, pledge, transfer or other security interest of any character, or to any attachment, levy, garnishment or other judicial process or to any claim for set-off, counterclaim, deduction or discount. Pledgor shall not, without the prior written consent of Pledgee, which consent may be granted or denied in Pledgee's sole discretion, further convey, transfer, set over or pledge to any party any of its interests in the Collateral. Pledgor agrees to (i) warrant and defend its title to the Collateral and the security interest created by this Agreement against all claims of all persons, and (ii) maintain and preserve the Collateral and such security interests. c. The pledge of the Collateral pursuant to this Agreement creates a valid first priority security interest in the Collateral, securing the performance of the Obligations, which security interest shall be perfected upon the filing of the UCC-1 Financing Statements referred to in Paragraph 2 of this Agreement. d. Pledgor's Social Security Number is: ###-##-####, and Pledgor's principal residence is located at One Dexter Street, Denver, Colorado 80220. e. Pledgor agrees that it shall not, without at least thirty (30) days' prior written notification to Pledgee, move or otherwise change its place of residence. f. To the best knowledge of Pledgor, neither the execution and delivery of this Agreement by Pledgor nor the consummation of the transactions herein contemplated nor the fulfillment of the terms hereof (i) violate the terms of any agreement, indenture, mortgage, deed of trust, equipment lease, instrument or other document to which Pledgor is a party, or (ii) conflict with any law, order, rule or regulation applicable to Pledgor or any court or any government, regulatory body or administrative agency or other governmental body having jurisdiction over Pledgor or its properties, or (iii) result in or require the creation or imposition of any lien (other than the first priority lien of Pledgee in the Collateral contemplated hereby). g. No consent or approval which has not been obtained prior to the date hereof of any other person or entity and no authorization, approval or other action by, and no notice to or filing with any governmental body, regulatory authority or securities exchange, was or is necessary as a condition to the validity of the pledge hereunder of the Collateral and such pledge is effective to vest in the Pledgee the rights of Pledgee in the Collateral as set forth herein. h. Pledgor shall comply in all material respects with all requirements of law applicable to the Collateral or any part thereof. i. Pledgor shall pay and discharge all taxes, assessments and governmental charges or levies against any Collateral prior to delinquency thereof and shall keep all Collateral free of all unpaid charges whatsoever. 8. Event of Default. Each of the following shall constitute an Event of Default hereunder: a. A breach of any representation, warranty, covenant or obligation of Pledgor shall have occurred under the Operating Agreement and such breach shall not have been cured within any applicable grace period provided therein; or b. Any warranty, representation or statement of the Pledgor in this Agreement proves to have been false in any material respect when made or furnished; or c. There occurs the issuance of a writ, order of attachment or garnishment with respect to any of the Collateral and such writ, order of attachment or garnishment is not dismissed and removed within thirty (30) days thereafter; or d. A material breach or violation of any covenant or agreement contained herein shall have occurred, which is not cured within thirty (30) days after notice has been given to Pledgor by Pledgee. Any Event of Default under this Agreement shall be an event of default by Pledgor under the Operating Agreement. 9. Remedies. a. Upon the occurrence of an Event of Default, Pledgee may by giving notice of such Event of Default, at its option, do any one or more of the following: (i) Take control of the Collateral and thereafter exercise all rights and powers of Pledgor with respect to the Collateral; and (ii) Without notice to or demand upon Pledgor, make such payments and do such acts as Pledgee may deem necessary to protect its security interest in the Collateral, including, without limitation, paying, purchasing, contesting or compromising any encumbrance, charge or lien which is prior to or superior to the security interest granted hereunder, and in exercising any such powers or authority to pay all expenses incurred in connection therewith; and (iii) Require Pledgor to take all actions necessary to deliver such Collateral to Pledgee, or an agent or representative designated by Pledgee; and (iv) Foreclose upon this Agreement as herein provided or in any commercially reasonable manner permitted by law, and exercise any and all of the rights and remedies conferred upon Pledgee by the Operating Agreement, or in any other document executed by Pledgor in connection with the Obligations secured hereby; and sell or cause to be sold the Collateral, without affecting in any way the rights or remedies to which Pledgee may be entitled under the other such instruments; and (v) Sell or otherwise dispose of the Collateral at public sale, without having the Collateral at the place of sale, and upon terms and in such manner as is commercially reasonable; Pledgee may be a purchaser at any sale; and (vi) Exercise any remedies of a secured party under the Uniform Commercial Code of the State of Colorado or any other applicable law; and (vii) Exercise any remedies available to Pledgee under the Operating Agreement, including, but not limited to, the removal of the Pledgor as the Manager and a Member of the Limited Liability Company and exercise of any rights of offset in favor of Pledgee as the Manager and a Member of the Limited Liability Company; and (viii) Notwithstanding anything to the contrary contained in this Agreement, at any time after an Event of Default Pledgee may, by delivering written notice to the Limited Liability Company and to Pledgor, succeed, or designate its nominee or designee to succeed, to all right, title and interest of Pledgor (including, without limitation, the right, if any, to vote on or take any action with respect to the matters of the Limited Liability Company) as the Manager and/or a Member of the Limited Liability Company in respect of the Collateral. Pledgor hereby irrevocably authorizes and directs the Limited Liability Company on receipt of any such notice (a) to deem and treat Pledgee or such nominee or designee in all respects as the Manager and/or a Member (and not merely an assignee of the Manager and/or a Member) of such Limited Liability Company, entitled to exercise all the rights, powers and privileges (including the right to vote on or take any action with respect to Limited Liability Company matters pursuant to the Operating Agreement, to receive all distributions, to be credited with the capital account and to have all other rights, powers and privileges appertaining to the Collateral to which Pledgor would have been entitled had the Collateral not been transferred to Pledgee or such nominee or designee), and (b) to file amended Articles of Organization for such Limited Liability Company, if required, admitting Pledgee or such nominee or designee as the Manager and/or a Member of the Limited Liability Company in place of Pledgor; and (ix) The rights granted to Pledgee under this Agreement are of a special, unique, unusual and extraordinary character. The loss of any of such rights cannot be reasonably or adequately compensated by way of damages in any action at law, and any material breach by Pledgor of any of Pledgor's covenants, agreements, obligations representations or warranties under this Agreement will cause Pledgee irreparable injury and damage. In the event of any such breach, Pledgee shall be entitled, as a matter of right, to injunctive relief or other equitable relief in any court of competent jurisdiction to prevent the violation or contravention of any of the provisions of this Agreement or to compel compliance with the terms of this Agreement by Pledgor. Pledgee is absolutely and irrevocably authorized and empowered by Pledgor to demand specific performance of each of the covenants, agreements, representations and warranties of Pledgor in this Agreement. Pledgor hereby irrevocably waives any defense based on the adequacy of any remedy at law which might otherwise be asserted by Pledgor as a bar to the remedy of specific performance in any action brought by Pledgee against Pledgor to enforce any of the covenants or agreements of Pledgor in this Agreement. b. Unless the Collateral is perishable or threatens to decline speedily in value or is of a type customarily sold on a recognized market, Pledgee shall give Pledgor at least ten (10) days' prior written notice of the time and place of any public sale of the Collateral subject to this Agreement or other intended disposition thereof to be made. Such notice shall be conclusively deemed to have been delivered to Pledgor at the address set forth in subsection 7(d) of this Agreement, unless Pledgor shall notify Pledgee in writing of any change of its place of residence and provide Pledgee with the address of its new place of residence. c. The proceeds of any sale under Subsections 9(a)(iv) and (v) above shall be applied as follows: (i) To the repayment of all reasonable costs and expenses of retaking, holding and preparing for the sale and the selling of the Collateral (including actual reasonable legal expenses and attorneys' fees) and the discharge of all assessments, encumbrances, charges or liens, if any, on the Collateral prior to the lien hereof (except any taxes, assessments, encumbrances, charges or liens subject to which such sale shall have been made); (ii) To the payment of the whole amount, if any, of the Obligations, as and when the same become due; and (iii) The aggregate surplus, if any, shall be paid to Pledgor in a lump sum, without recourse to Pledgee, or as a court of competent jurisdiction may direct. d. Pledgee shall have the right to enforce one or more remedies under this Agreement and under the Operating Agreement, successively or concurrently, and such action shall not operate to estop or prevent Pledgee from pursuing any further remedy which it may have, and any repossession or retaking or sale of the Collateral pursuant to the terms hereof shall not operate to release Pledgor until full payment of any deficiency has been made in cash. e. PLEDGOR ACKNOWLEDGES THAT PLEDGEE MAY BE UNABLE TO EFFECT A PUBLIC SALE OF ALL OR ANY PART OF THE COLLATERAL AND MAY BE COMPELLED TO RESORT TO ONE OR MORE PRIVATE SALES TO A RESTRICTED GROUP OF PURCHASERS WHO WILL BE OBLIGATED TO AGREE, AMONG OTHER THINGS, TO ACQUIRE THE COLLATERAL FOR ITS OWN ACCOUNT, FOR INVESTMENT AND NOT WITH A VIEW TO THE DISTRIBUTION OR RESALE THEREOF. PLEDGOR FURTHER ACKNOWLEDGES THAT ANY SUCH PRIVATE SALES MAY BE AT PRICES AND ON TERMS LESS FAVORABLE THAN THOSE OF PUBLIC SALES, AND AGREES THAT PROVIDED SUCH PRIVATE SALES ARE MADE IN A COMMERCIALLY REASONABLE MANNER, PLEDGEE SHALL HAVE NO OBLIGATION TO DELAY SALE OF ANY COLLATERAL TO PERMIT THE ISSUER THEREOF TO REGISTER IT FOR PUBLIC SALE UNDER THE SECURITIES ACT OF 1933. PLEDGOR AGREES THAT PLEDGEE SHALL BE PERMITTED TO TAKE SUCH ACTIONS AS PLEDGEE DEEMS REASONABLY NECESSARY IN DISPOSING OF THE COLLATERAL TO AVOID CONDUCTING A PUBLIC DISTRIBUTION OF SECURITIES IN VIOLATION OF THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE, AS NOW ENACTED OR AS THE SAME MAY IN THE FUTURE BE AMENDED, PROVIDED THAT ANY SUCH ACTIONS SHALL BE COMMERCIALLY REASONABLE. IN ADDITION, PLEDGOR AGREES TO EXECUTE, FROM TIME TO TIME, ANY AMENDMENT TO THIS AGREEMENT OR OTHER DOCUMENT AS PLEDGEE MAY REASONABLY REQUIRE TO EVIDENCE THE ACKNOWLEDGEMENTS AND CONSENTS OF PLEDGOR SET FORTH IN THIS SECTION. 10. Attorneys Fees. Pledgor agrees to pay to Pledgee, without demand, reasonable attorneys' fees and all reasonable costs and other reasonable expenses which Pledgee expends or incurs in collecting any amounts payable by Pledgor with respect to an Event of Default, hereunder or in enforcing this Agreement against Pledgor whether or not suit is filed. 11. Further Documentation. Pledgor hereby agrees to execute, from time to time, one or more financing statements and such other instruments as may be required to perfect the security interest created hereby, including any continuation or amendments of such financing statements, and pay the cost of filing or recording the same in the public records specified by Pledgee. 12. Waiver and Estoppel. Pledgor represents and acknowledges that it knowingly waives each and every one of the following rights, and agrees that it will be estopped from asserting any argument to the contrary: (a) any promptness in making any claim or demand hereunder; (b) any defense that may arise by reason of the incapacity, lack of authority, death or disability of Pledgor; (c) any defense based upon an election of remedies by Pledgee which destroys or otherwise impairs any or all of the Collateral; (d) the right of Pledgor to proceed against Pledgee or any other person, for reimbursement; and (e) all duty or obligation of the Pledgee to perfect, protect, retain or enforce any security for the payment of amounts payable by Pledgor hereunder. TO THE FULLEST EXTENT PERMITTED BY LAW, EACH PARTY TO THIS AGREEMENT SEVERALLY, KNOWINGLY, IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY AND ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT OR COUNTERCLAIM BROUGHT BY ANY PARTY TO THIS AGREEMENT ARISING IN CONNECTION WITH, OUT OF OR OTHERWISE RELATING TO THIS AGREEMENT. No delay or failure on the part of Pledgee in the exercise of any right or remedy against Pledgor or any other party against whom Pledgee may have any rights, shall operate as a waiver of any agreement or obligation contained herein, and no single or partial exercise by Pledgee of any rights or remedies hereunder shall preclude other or further exercise thereof or other exercise of any other right or remedy whether contained in this Agreement or in any of the other documents regarding the Obligations, including without limitation the Operating Agreement. No waiver of the rights of Pledgee hereunder or in connection herewith and no release of Pledgor shall be effective unless executed in writing by Pledgee. No actions of Pledgee permitted under this Agreement shall in any way impair or affect the enforceability of any agreement or obligation contained herein. 13. Independent Obligations. The obligations of Pledgor are independent of the obligations of any other party which may be initially or otherwise responsible for performance or payment of the Obligations, and a separate action or actions for payment, damages or performance may be brought and prosecuted by Pledgee against Pledgor, individually, for the full amount of the Obligations then due and payable, whether or not an action is brought against any other party, whether or not Pledgee is involved in any proceedings and whether or not Pledgee or Pledgor or any other person is joined in any action or proceedings. 14. No Offset Rights of Pledgor. No lawful act of commission or omission of any kind or at any time upon the part of Pledgee shall in any way affect or impair the rights of Pledgee to enforce any right, power or benefit under this Agreement, and no set-off, recoupment, reduction or diminution of any obligation which Pledgor has or may have against Pledgee or against any other party shall be available against Pledgee in any suit or action brought by Pledgee to enforce any right, power or benefit under this Agreement. 15. Power of Attorney. Pledgor hereby appoints Pledgee as his attorney- in-fact to execute and file, effective upon the occurrence of an Event of Default, on his behalf any financing statements, continuation statements or other documentation required to perfect or continue the security interest created hereby. This power, being coupled with an interest, shall be irrevocable until all amounts secured hereby have been paid, satisfied and discharged in full. Pledgor acknowledges and agrees that the exercise by Pledgee of its rights under this Section 15 will not be deemed a satisfaction of the amounts owed Pledgee unless Pledgee so elects in writing. 16. GOVERNING LAW. THE PARTIES HERETO AGREE THAT THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF COLORADO WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. SUCH PARTIES FURTHER AGREE THAT IN THE EVENT OF DEFAULT, THIS AGREEMENT MAY BE ENFORCED IN THE DISTRICT COURT IN AND FOR THE CITY AND COUNTY OF DENVER, STATE OF COLORADO AND THEY DO HEREBY SUBMIT TO THE JURISDICTION OF SUCH COURT REGARDLESS OF THEIR RESIDENCE OR WHERE THIS AGREEMENT MAY BE EXECUTED. 17. Successors and Assigns. All agreements, covenants, conditions and provisions of this Agreement shall inure to the benefit of and be binding upon the respective heirs, personal representatives, successors and assigns of the parties hereto. 18. Notices. Whenever any party hereto shall desire to, or be required to, give or serve any notice, demand, request or other communication with respect to this Agreement, each such notice, demand, request or communication shall be in writing and shall be effective only if the same is delivered by personal service (including, without limitation, courier or express service) or mailed certified or registered mail, postage prepaid, return receipt requested, or sent by telegram to the parties at the addresses shown throughout this Agreement or such other addresses which the parties may provide to one another in accordance herewith. If notice is sent to Pledgee, a copy of such notice shall also be given to Wayne H. Hykan, Esq., Brownstein Hyatt Farber & Strickland, P.C., 410 17th Street, Suite 2222, Denver, Colorado 80202. If notice is sent to Pledgor, a copy of such notice shall also be given to Alan B. Lottner, Esq., Haligman & Lottner, First Interstate Tower North, 633 Seventeenth Street, Suite 2700, Denver, Colorado 80202-3635. Notices delivered personally will be effective upon delivery to an authorized representative of the party at the designated address; notices sent by mail in accordance with the above paragraph will be effective upon execution of the Return Receipt Requested. 19. Consent of Pledgor. Pledgor consents to the exercise by Pledgee of any rights of Pledgor in accordance with the provisions of this Agreement. 20. Severability. Every provision of this Agreement is intended to be severable. In the event any term or provision hereof is declared by a court of competent jurisdiction to be illegal or invalid for any reason whatsoever, such illegality or invalidity shall not affect the legality or validity of the balance of the terms and provisions hereof, which terms and provisions shall remain binding and enforceable. 21. Amendment. This Agreement may be modified or rescinded only by a writing expressly relating to this Agreement and signed by all of the parties. 22. Termination. This Agreement shall terminate, and shall be of no further force or effect, upon the earlier to occur of the following: (i) full payment and performance of the Obligations of the Pledgor, (ii) acquisition by Pledgor or an affiliate of Pledgor of 100% ownership interest in the Limited Liability Company, or (iii) upon the mutual consent of Pledgor and Pledgee. 23. Certain Matters With Respect to Pledgee. This Agreement and all documents, agreements, understandings and arrangements relating to this transaction have been executed by the undersigned on behalf of Pledgee in his/her capacity as an officer or director of Pledgee, and not individually, and neither the directors, officers or shareholders of Pledgee shall be bound by or have any personal liability hereunder or thereunder. The parties to this Agreement shall look solely to the assets of Pledgee for satisfaction of any liability of Pledgee in respect of this Agreement and all documents, agreements, understandings and arrangements relating to this transaction and will not seek recourse or commence any action against any of the directors, officers or shareholders of Pledgee or any of their personal assets for the performance or payment of any obligation hereunder or thereunder. The foregoing shall also apply to all and any future documents, agreements, understandings, arrangements and transactions between the parties hereto with respect to the Collateral or this Agreement. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. PLEDGOR: __________________________________________ Al Feld PLEDGEE: WELLSFORD PARK HIGHLANDS CORP., a Colorado corporation By:_______________________________________ Name:________________________________ Title:_______________________________ STATE OF ____________ ) ) ss. COUNTY OF ___________ ) The foregoing instrument was acknowledged before me this __ day of __________________, 1997, by Al Feld. WITNESS my hand and official seal. My commission expires: ______________________________________. Address: ________________________________ (SEAL) Notary Public STATE OF ____________ ) ) ss. COUNTY OF ___________ ) The foregoing instrument was acknowledged before me this _____ day of __________, 1997, by _________________________ as _______________ of Wellsford Park Highlands Corp., a Colorado corporation. WITNESS my hand and official seal. My commission expires: _____________________________________. Address: _____________________________________ (SEAL) Notary Public SCHEDULE A CONSENT TO SECURITY INTEREST AND AGREEMENT OF THE MEMBERS OF RED CANYON AT PALOMINO PARK LLC, a Colorado Limited Liability Company The undersigned, being all the members of RED CANYON AT PALOMINO PARK LLC, a Colorado limited liability company (the "Limited Liability Company") hereby represent and certify to Wellsford Park Highlands Corp., a Colorado corporation (the "Secured Party") as follows: 1. The Limited Liability Company has received notice from the Secured Party that the Secured Party has a security interest in the following collateral ("Collateral") registered to Al Feld (the "Debtor"): (i) All of the right, title and interest of the Debtor in the Limited Liability Company, whether now owned or hereafter acquired, including, without limitation, the Debtor's Interest (as defined in the Operating Agreement) in the Limited Liability Company and its right to receive payments, fees, distributions and allocations under or in connection with the Operating Agreement (whether as Member or as Manager), as such Operating Agreement may be modified or extended from time to time with the consent of the Secured Party; and (ii) All proceeds, whether cash proceeds or noncash proceeds, and products of any and all of the foregoing. 2. Other than the notice from the Secured Party referred to above, the Limited Liability Company has not received any notice from any entity or person claiming an adverse claim against, lien on or security interest in the Collateral. 3. The security interest of the Secured Party referred to above was duly registered in the books and records of the Limited Liability Company effective April 17, 1996. 4. Interests in the Limited Liability Company, whether as Member or as Manager, are not represented in any certificate, instrument or document, and such interest may be assigned, transferred or pledged without the party receiving such assignment, transfer or pledge taking physical possession of any certificate, instrument or document. The Members hereby consent to the execution and delivery of the Pledge and Security Agreement by the Debtor and agree hereby to be bound by Section 4 thereof to assign, set over, transfer, distribute, pay and deliver the Collateral and any and all payments, proceeds or products due to Debtor under the Collateral to the Secured Party. The Members hereby consent to the admission of the Secured Party (or its nominee, designee or any person acquiring its interest under the Pledge and Security Agreement), as a Manager of the Limited Liability Company upon receipt of notice by the Secured Party of an Event of Default by the Debtor thereunder, and (ii) that the Secured Party or such nominees, designees or persons acquiring the Secured Party's interest thereunder shall not be deemed to have assumed any of Debtor's liability by virtue of such admission as the Manager of the Limited Liability Company. This Agreement and all documents, agreements, understandings and arrangements relating to this transaction have been executed by the undersigned on behalf of the Secured Party in his/her capacity as an officer or trustee of the Secured Party, and not individually, and neither the directors, officers or shareholders of the Secured Party shall be bound by or have any personal liability hereunder or thereunder. The parties to this Agreement shall look solely to the assets of the Secured Party for satisfaction of any liability of the Secured Party in respect of this Agreement and all documents, agreements, understandings and arrangements relating to this transaction and will not seek recourse or commence any action against any of the directors, officers or shareholders of the Secured Party or any of their personal assets for the performance or payment of any obligation hereunder or thereunder. The foregoing shall also apply to all and any future documents, agreements, understandings, arrangements and transactions between the parties hereto with respect to the Collateral or this Agreement. EXECUTED as of the date set forth above. MEMBERS: WELLSFORD PARK HIGHLANDS CORP., a Colorado corporation By:_______________________________________ Name:________________________________ Title:_______________________________ __________________________________________ AL FELD, an individual AGREED TO AND CONCURRED: SOLE MANAGER _______________________________ AL FELD EXHIBIT M PLEDGE AND SECURITY AGREEMENT BY WPHC (See attached) PLEDGE AND SECURITY AGREEMENT THIS PLEDGE AND SECURITY AGREEMENT (this "Agreement") is made as of the 17th day of April, 1996, by WELLSFORD PARK HIGHLANDS CORP., a Colorado corporation, having an office at 370 Seventeenth Street, Suite 3100, Denver, Colorado 80202 ("Pledgor"), for the benefit of AL FELD, an individual, having an address of 4600 South Ulster Street, Suite 350, Denver, Colorado 80237 ("Pledgee"). RECITALS A. Pledgor is a Member of Red Canyon at Palomino Park LLC, a Colorado limited liability company (the "Limited Liability Company"), which Limited Liability Company is governed by its Operating Agreement dated as of April 17, 1996 (the "Operating Agreement"), by and between Pledgor and Pledgee. B. Pledgee also is a Member, as well as the Manager, in the Limited Liability Company. C. In order to secure the full payment and performance by Pledgor of all of Pledgor's obligations under the Operating Agreement, as such Operating Agreement may be now or hereafter amended, modified or restated (said obligations under the Operating Agreement are hereinafter referred to as the "Obligations"), Pledgor is entering into this Agreement for the benefit of Pledgee. AGREEMENT NOW, THEREFORE, in consideration of the recitals, covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows: 1. Definitions. a. "Collateral" shall mean: (i) All of Pledgor's right, title and interest in the ownership interests of Pledgor in the Limited Liability Company, whether now owned or hereafter acquired, including, without limitation, its Interest (as defined in the Operating Agreement) in the Limited Liability Company, the right of Pledgor, if any, to any benefits to which Pledgor may be entitled pursuant to the Operating Agreement or the Colorado Limited Liability Company Act, Colo. Rev. Stat. Sections 7-80-101 to 7-80-913, as amended from time to time (the "Act"), and Pledgor's right to receive payments, fees, distributions and allocations under or in connection with the Operating Agreement (whether as Member or as Manager), as such Operating Agreement may be modified or extended from time to time with the consent of Pledgee; and (ii) All proceeds, whether cash proceeds or noncash proceeds, and products of any and all of the foregoing. b. "Event of Default" shall mean an event of default described in Section 8 herein. 2. Pledge of Collateral and Grant of Security Interest. Pledgor does hereby unconditionally and irrevocably assign, pledge, convey, transfer, deliver, set over and grant unto Pledgee, its successors and assigns, as security for Pledgor's complete and timely payment and performance of the Obligations, a continuing first lien security interest under the Uniform Commercial Code of the State of Colorado in the Collateral. Pledgor hereby further grants to Pledgee all rights in the Collateral as are available to a secured party of such Collateral under the Uniform Commercial Code of the State of Colorado (being the principal place of business of Pledgor) and, concurrently herewith, shall deliver to Pledgee duly executed UCC-1 financing statements suitable for filing in the State of Colorado with respect to the Collateral. 3. Delivery to Pledgee. a. Pledgor agrees to execute and to use its best efforts to cause all other necessary parties, and any successors and assigns thereof, to execute and deliver to Pledgee such other agreements, instruments and documentation as Pledgee may reasonably request from time to time to effect the conveyance, transfer, and grant to Pledgee of Pledgor's right, title and interest in and to the Collateral as security for the Obligations. b. Concurrently with the execution of this Agreement, Pledgor has caused each of the Members of the Limited Liability Company, other than Pledgee, to execute the Consent to Security Interest and Agreement in the form attached hereto as Schedule A (the "Consent") evidencing the consent of the Members to the assignment of Pledgor's Limited Liability Company interests and their agreement to be bound by Section 4 of this Agreement. Pledgor further agrees to execute and to cause the other Members of the Limited Liability Company to execute and deliver to Pledgee such other agreements, instruments and documentation as Pledgee may reasonably request from time to time to effectuate the conveyance, transfer, assignment and grant to Pledgee of all of Pledgor's right, title and interest in and to the Collateral. 4. Proceeds and Products of the Collateral. a. Notwithstanding any of the foregoing, unless and until there occurs an Event of Default, Pledgee agrees to forbear from exercising his right to receive all benefits pertaining to the Collateral (except as otherwise permitted under the Operating Agreement), and Pledgor shall be permitted to exercise all rights and to receive all benefits of the Collateral, including, without limitation, the right to exercise all voting, approval, consent and similar rights of Pledgor pertaining to the Collateral, payments due under, proceeds, whether cash proceeds or noncash proceeds, and products of the Collateral and to retain and enjoy the same. b. Pledgor acknowledges and agrees with Pledgee, that unless Pledgee otherwise consents, in Pledgee's sole discretion, Pledgor shall not exercise any voting, approval, consent or other rights with respect to the Collateral at any time after (i) the occurrence of an Event of Default and (ii) receipt of notice from Pledgee instructing Pledgor not to exercise any such voting, approval, consent or other rights with respect to the Collateral, provided, however, that Pledgor shall exercise any such right it may have under the agreements comprising the Collateral with respect to the business affairs of the Limited Liability Company as is reasonably necessary to protect and preserve the Collateral. c. Upon or at any time after the occurrence of an Event of Default, Pledgee, at his option to be exercised in his sole discretion by written notice to Pledgor, may exercise all rights and remedies granted under this Agreement, including, without limitation, the right to require the obligors under the Collateral to make all payments due under and to pay all proceeds, whether cash proceeds or noncash proceeds, and products of the Collateral to Pledgee. Upon the giving of any such notice, the security constituted by this Agreement shall become immediately enforceable by Pledgee, without any presentment, further demand, protest or other notice of any kind, all of which are hereby expressly and irrevocably waived by Pledgor. Pledgor hereby authorizes and directs each respective obligor under the agreements constituting the Collateral, that upon receipt of written notice from Pledgee of an Event of Default by Pledgor hereunder, to assign, set over, transfer, distribute, pay and deliver any and all Collateral or said payments, proceeds or products of the Collateral to Pledgee, at such address as Pledgee may direct, at such time and in such manner as the Collateral and such payments, proceeds and products of the Collateral would otherwise be distributed, transferred, paid or delivered to Pledgor. The respective obligors under the agreements constituting the Collateral shall be entitled to conclusively rely on such notice and make all such assignments and transfers of the Collateral and all such payments with respect to the Collateral and pay all such proceeds and products of the Collateral to Pledgee and shall have no liability to Pledgor for any loss or damage Pledgor may incur by reason of said reliance. 5. No Assumption. Notwithstanding any of the foregoing, whether or not an Event of Default shall have occurred, and whether or not Pledgee elects to foreclose on his security interest in the Collateral as set forth herein, neither the execution of this Agreement, receipt by Pledgee of any of Pledgor's right, title and interest in and to the Collateral and the payments, proceeds and products of the Collateral, now or hereafter due to Pledgor from any obligor of the Collateral, nor Pledgee's foreclosure of his security interest in the Collateral, shall in any way be deemed to obligate Pledgee to assume any of Pledgor's obligations, duties or liabilities under the Collateral or any agreements constituting the Collateral, as presently existing or as hereafter amended, or under any and all other agreements now existing or hereafter drafted or executed (collectively, the "Pledgor's Liabilities"), unless Pledgee otherwise agrees to assume any or all of the Pledgor's Liabilities in writing. In the event of foreclosure by Pledgee of his security interest in the Collateral, Pledgor shall remain bound and obligated to perform the Pledgor's Liabilities to the extent required under the Operating Agreement and Pledgee shall not be deemed to have assumed any of the Pledgor's Liabilities, except as provided in the preceding sentence. In the event the entity or person acquiring the Collateral at a foreclosure sale elects to assume the Pledgor's Liabilities, such assignee shall agree to be bound by the terms and provisions of the applicable agreement. 6. Indemnification. Pledgor hereby agrees to indemnify, defend and hold Pledgee, his successors and assigns harmless from and against any and all damages, losses, claims, costs or expenses (including without limitation, reasonable attorneys' fees) and any other liabilities whatsoever that Pledgee or his successors or assigns may incur by reason of Pledgor's failure to comply with the terms and conditions of this Agreement or by reason of any unpermitted assignment of Pledgor's right, title and interest in and to any or all of the Collateral. 7. Representations, Warranties and Covenants. In addition to the representations made by Pledgor in the Operating Agreement, if any, Pledgor makes the following representations and warranties, which shall be deemed to be continuing representations and warranties, and Pledgor covenants and agrees to provide written notice to Pledgee within ten (10) days after Pledgor becomes aware that any of the following is no longer true and correct and to perform diligently all acts reasonably necessary to maintain or restore the truth and correctness, in all material respects, of the following: a. Pledgor acknowledges that the Operating Agreement and any other agreements constituting the Collateral, currently are in full force and effect and have not been amended or modified, except by Pledgor and Pledgee in writing. b. Pledgor has the full right and title to its interest in the Collateral and has the full power, legal right and authority to pledge, convey, transfer and assign such interest. None of the Collateral is subject to any existing assignment, claim, lien, pledge, transfer or other security interest of any character, or to any attachment, levy, garnishment or other judicial process or to any claim for set-off, counterclaim, deduction or discount. Pledgor shall not, without the prior written consent of Pledgee, which consent may be granted or denied in Pledgee's sole discretion, further convey, transfer, set over or pledge to any party any of its interests in the Collateral. Pledgor agrees to (i) warrant and defend its title to the Collateral and the security interest created by this Agreement against all claims of all persons, and (ii) maintain and preserve the Collateral and such security interests. c. The pledge of the Collateral pursuant to this Agreement creates a valid first priority security interest in the Collateral, securing the performance of the Obligations, which security interest shall be perfected upon the filing of the UCC-1 Financing Statements referred to in Paragraph 2 of this Agreement. d. Pledgor's Employer Identification number is: 84-1305872. Pledgor's principal place of business is located at: 370 Seventeenth Street, Suite 3100, Denver, Colorado 80202. e. Pledgor agrees that it shall not, without at least thirty (30) days' prior written notification to Pledgee, move or otherwise change its principal place of business. f. To the best knowledge of Pledgor, neither the execution and delivery of this Agreement by Pledgor nor the consummation of the transactions herein contemplated nor the fulfillment of the terms hereof (i) violate the terms of any agreement, indenture, mortgage, deed of trust, equipment lease, instrument or other document to which Pledgor is a party, or (ii) conflict with any law, order, rule or regulation applicable to Pledgor or any court or any government, regulatory body or administrative agency or other governmental body having jurisdiction over Pledgor or its properties, or (iii) result in or require the creation or imposition of any lien (other than the first priority lien of Pledgee in the Collateral contemplated hereby). g. No consent or approval which has not been obtained prior to the date hereof of any other person or entity and no authorization, approval or other action by, and no notice to or filing with any governmental body, regulatory authority or securities exchange, was or is necessary as a condition to the validity of the pledge hereunder of the Collateral and such pledge is effective to vest in the Pledgee the rights of the Pledgee in the Collateral as set forth herein. h. Pledgor shall comply in all material respects with all requirements of law applicable to the Collateral or any part thereof. i. Pledgor shall pay and discharge all taxes, assessments and governmental charges or levies against any Collateral prior to delinquency thereof and shall keep all Collateral free of all unpaid charges whatsoever. 8. Event of Default. Each of the following shall constitute an Event of Default hereunder: a. A failure of Pledgor to make a Capital Contribution pursuant to the Operating Agreement within thirty (30) days of receipt by Pledgor of written demand from Pledgee, provided that the fact that such amount is due and payable is not in dispute, or that any dispute has been finally determined by a court having jurisdiction or through another means that is mutually acceptable to Pledgor and Pledgee; or b. Any warranty, representation or statement of Pledgor in this Agreement proves to have been false in any material respect when made or furnished; or c. There occurs the issuance of a writ, order of attachment or garnishment with respect to any of the Collateral and such writ, order of attachment or garnishment is not dismissed and removed within thirty (30) days thereafter. d. A material breach or violation of any covenant or agreement contained herein shall have occurred, which is not cured within thirty (30) days after notice has been given to Pledgor by Pledgee. Any Event of Default under this Agreement shall be an event of default by Pledgor under the Operating Agreement. 9. Remedies. a. Upon the occurrence of an Event of Default, Pledgee may, by giving notice of such Event of Default, at his option, do any one or more of the following: (i) Take control of the Collateral, collect, and thereafter exercise all rights and powers of Pledgor with respect to the Collateral; and (ii) Without notice to or demand upon Pledgor, make such payments and do such acts as Pledgee may deem necessary to protect his security interest in the Collateral, including, without limitation, paying, purchasing, contesting or compromising any encumbrance, charge or lien which is prior to or superior to the security interest granted hereunder, and in exercising any such powers or authority to pay all expenses incurred in connection therewith; and (iii) Require Pledgor to take all actions necessary to deliver such Collateral to Pledgee, or an agent or representative designated by Pledgee; and (iv) Foreclose upon this Agreement as herein provided or in any commercially reasonable manner permitted by law, and exercise any and all of the rights and remedies conferred upon Pledgee by the Operating Agreement, or in any other document executed by Pledgor in connection with the Obligations secured hereby; and sell or cause to be sold the Collateral, without affecting in any way the rights or remedies to which Pledgee may be entitled under the other such instruments; and (v) Sell or otherwise dispose of the Collateral at public sale, without having the Collateral at the place of sale, and upon terms and in such manner as is commercially reasonable; Pledgee may be a purchaser at any sale; and (vi) Exercise any remedies of a secured party under the Uniform Commercial Code of the State of Colorado or any other applicable law; and (vii) Exercise any remedies available to Pledgee under the Operating Agreement; and (viii) Notwithstanding anything to the contrary contained in this Agreement, at any time after an Event of Default Pledgee may, by delivering written notice to the Limited Liability Company and to Pledgor, succeed, or designate its nominee or designee to succeed, to all right, title and interest of Pledgor (including, without limitation, the right, if any, to vote on or take any action with respect to the matters of the Limited Liability Company) as a Member of the Limited Liability Company in respect of the Collateral. Pledgor hereby irrevocably authorizes and directs the Limited Liability Company on receipt of any such notice (a) to deem and treat Pledgee or such nominee or designee in all respects as a Member (and not merely an assignee of a Member) of such Limited Liability Company, entitled to exercise all the rights, powers and privileges (including the right to vote on or take any action with respect to Limited Liability Company matters pursuant to the Operating Agreement, to receive all distributions, to be credited with the capital account and to have all other rights, powers and privileges appertaining to the Collateral to which Pledgor would have been entitled had the Collateral not been transferred to Pledgee or such nominee or designee), and (b) to file amended Articles of Organization for such Limited Liability Company, if required, admitting Pledgee or such nominee or designee as a Member of the Limited Liability Company in place of Pledgor; and (ix) The rights granted to Pledgee under this Agreement are of a special, unique, unusual and extraordinary character. The loss of any of such rights cannot be reasonably or adequately compensated by way of damages in any action at law, and any material breach by Pledgor of any of Pledgor's covenants, agreements, obligations, representations or warranties under this Agreement will cause Pledgee irreparable injury and damage. In the event of any such breach, Pledgee shall be entitled, as a matter of right, to injunctive relief or other equitable relief in any court of competent jurisdiction to prevent the violation or contravention of any of the provisions of this Agreement or to compel compliance with the terms of this Agreement by Pledgor. Pledgee is absolutely and irrevocably authorized and empowered by Pledgor to demand specific performance of each of the covenants, agreements, representations and warranties of Pledgor in this Agreement. Pledgor hereby irrevocably waives any defense based on the adequacy of any remedy at law which might otherwise be asserted by Pledgor as a bar to the remedy of specific performance in any action brought by Pledgee against Pledgor to enforce any of the covenants or agreements of Pledgor in this Agreement. b. Unless the Collateral is perishable or threatens to decline speedily in value or is of a type customarily sold on a recognized market, Pledgee shall give Pledgor at least ten (10) days' prior written notice of the time and place of any public sale of the Collateral subject to this Agreement or other intended disposition thereof to be made. Such notice shall be conclusively deemed to have been delivered to Pledgor at the address set forth in subsection 7(d) of this Agreement, unless Pledgor shall notify Pledgee in writing of any change of its principal place of business and provide Pledgee with the address of its new place of business. c. The proceeds of any sale under subsections 9(a)(iv) and (v) above shall be applied as follows: (i) To the repayment of all reasonable costs and expenses of retaking, holding and preparing for the sale and the selling of the Collateral (including actual reasonable legal expenses and attorneys' fees) and the discharge of all assessments, encumbrances, charges or liens, if any, on the Collateral prior to the lien hereof (except any taxes, assessments, encumbrances, charges or liens subject to which such sale shall have been made); (ii) To the payment of the whole amount, if any, of the Obligations, as and when the same become due; and (iii) The aggregate surplus, if any, shall be paid to Pledgor in a lump sum, without recourse to Pledgee, or as a court of competent jurisdiction may direct. d. Pledgee shall have the right to enforce one or more remedies under this Agreement and under the Operating Agreement, successively or concurrently, and such action shall not operate to estop or prevent Pledgee from pursuing any further remedy which he may have, and any repossession or retaking or sale of the Collateral pursuant to the terms hereof shall not operate to release Pledgor until full payment of any deficiency has been made in cash. e. PLEDGOR ACKNOWLEDGES THAT PLEDGEE MAY BE UNABLE TO EFFECT A PUBLIC SALE OF ALL OR ANY PART OF THE COLLATERAL AND MAY BE COMPELLED TO RESORT TO ONE OR MORE PRIVATE SALES TO A RESTRICTED GROUP OF PURCHASERS WHO WILL BE OBLIGATED TO AGREE, AMONG OTHER THINGS, TO ACQUIRE THE COLLATERAL FOR THEIR OWN ACCOUNT, FOR INVESTMENT AND NOT WITH A VIEW TO THE DISTRIBUTION OR RESALE THEREOF. PLEDGOR FURTHER ACKNOWLEDGES THAT ANY SUCH PRIVATE SALES MAY BE AT PRICES AND ON TERMS LESS FAVORABLE THAN THOSE OF PUBLIC SALES, AND AGREES THAT PROVIDED SUCH PRIVATE SALES ARE MADE IN A COMMERCIALLY REASONABLE MANNER, PLEDGEE SHALL HAVE NO OBLIGATION TO DELAY SALE OF ANY COLLATERAL TO PERMIT THE ISSUER THEREOF TO REGISTER IT FOR PUBLIC SALE UNDER THE SECURITIES ACT OF 1933. PLEDGOR AGREES THAT PLEDGEE SHALL BE PERMITTED TO TAKE SUCH ACTIONS AS PLEDGEE DEEMS REASONABLY NECESSARY IN DISPOSING OF THE COLLATERAL TO AVOID CONDUCTING A PUBLIC DISTRIBUTION OF SECURITIES IN VIOLATION OF THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE, AS NOW ENACTED OR AS THE SAME MAY IN THE FUTURE BE AMENDED, PROVIDED THAT ANY SUCH ACTIONS SHALL BE COMMERCIALLY REASONABLE. IN ADDITION, PLEDGOR AGREES TO EXECUTE, FROM TIME TO TIME, ANY AMENDMENT TO THIS AGREEMENT OR OTHER DOCUMENT AS PLEDGEE MAY REASONABLY REQUIRE TO EVIDENCE THE ACKNOWLEDGEMENTS AND CONSENTS OF PLEDGOR SET FORTH IN THIS SECTION. 10. Attorneys Fees. Pledgor agrees to pay to Pledgee, without demand, reasonable attorneys' fees and all reasonable costs and other reasonable expenses which Pledgee expends or incurs in collecting any amounts payable by Pledgor with respect to an Event of Default hereunder or in enforcing this Agreement against Pledgor, whether or not suit is filed. 11. Further Documentation. Pledgor hereby agrees to execute, from time to time, one or more financing statements and such other instruments as may be required to perfect the security interest created hereby, including any continuation or amendments of such financing statements, and pay the cost of filing or recording the same in the public records specified by Pledgee. 12. Waiver and Estoppel. Pledgor represents and acknowledges that it knowingly waives each and every one of the following rights, and agrees that it will be estopped from asserting any argument to the contrary: (a) any promptness in making any claim or demand hereunder; (b) any defense that may arise by reason of the incapacity or lack of authority of Pledgor; (c) any defense based upon an election of remedies by Pledgee which destroys or otherwise impairs any or all of the Collateral; (d) the right of Pledgor to proceed against Pledgee or any other person for reimbursement; and (e) all duty or obligation of Pledgee to perfect, protect, retain or enforce any security for the payment of amounts payable by Pledgor hereunder. TO THE FULLEST EXTENT PERMITTED BY LAW, EACH PARTY TO THIS AGREEMENT SEVERALLY, KNOWINGLY, IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY AND ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT OR COUNTERCLAIM BROUGHT BY ANY PARTY TO THIS AGREEMENT ARISING IN CONNECTION WITH, OUT OF OR OTHERWISE RELATING TO THIS AGREEMENT. No delay or failure on the part of Pledgee in the exercise of any right or remedy against Pledgor or any other party against whom Pledgee may have any rights, shall operate as a waiver of any agreement or obligation contained herein, and no single or partial exercise by Pledgee of any rights or remedies hereunder shall preclude other or further exercise thereof or other exercise of any other right or remedy whether contained in this Agreement or in any of the other documents regarding the Obligations, including without limitation the Operating Agreement. No waiver of the rights of Pledgee hereunder or in connection herewith and no release of Pledgor shall be effective unless in writing executed by Pledgee. No actions of Pledgee permitted under this Agreement shall in any way impair or affect the enforceability of any agreement or obligation contained herein. 13. Independent Obligations. The obligations of Pledgor are independent of the obligations of any other party which may be initially or otherwise responsible for performance or payment of the Obligations, and a separate action or actions for payment, damages or performance may be brought and prosecuted by Pledgee against Pledgor, individually, for the full amount of the Obligations then due and payable, whether or not an action is brought against any other party, whether or not Pledgee is involved in any proceedings and whether or not Pledgee or Pledgor or any other person is joined in any action or proceedings. 14. Lawful Acts of Pledgee. No lawful act of commission or omission of any kind or at any time upon the part of Pledgee shall in any way affect or impair the rights of Pledgee to enforce any right, power or benefit under this Agreement. 15. Power of Attorney. Pledgor hereby appoints Pledgee as its attorney- in-fact to execute and file, effective upon the occurrence of an Event of Default, on its behalf any financing statements, continuation statements or other documentation required to perfect or continue the security interest created hereby. This power, being coupled with an interest, shall be irrevocable until all amounts secured hereby have been paid, satisfied and discharged in full. Pledgor acknowledges and agrees that the exercise by Pledgee of his rights under this Section 15 will not be deemed a satisfaction of the amounts owed Pledgee unless Pledgee so elects in writing. 16. GOVERNING LAW. THE PARTIES HERETO AGREE THAT THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF COLORADO WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. SUCH PARTIES FURTHER AGREE THAT IN THE EVENT OF DEFAULT, THIS AGREEMENT MAY BE ENFORCED IN THE DISTRICT COURT IN AND FOR THE CITY AND COUNTY OF DENVER, STATE OF COLORADO AND THEY DO HEREBY SUBMIT TO THE JURISDICTION OF SUCH COURT REGARDLESS OF THEIR RESIDENCE OR WHERE THIS AGREEMENT MAY BE EXECUTED. 17. Successors and Assigns. All agreements, covenants, conditions and provisions of this Agreement shall inure to the benefit of and be binding upon the respective heirs, personal representatives, successors and assigns of the parties hereto. 18. Notices. Whenever any party hereto shall desire to, or be required to, give or serve any notice, demand, request or other communication with respect to this Agreement, each such notice, demand, request or communication shall be in writing and shall be effective only if the same is delivered by personal service (including, without limitation, courier or express service) or mailed certified or registered mail, postage prepaid, return receipt requested, or sent by telegram to the parties at the addresses shown throughout this Agreement or such other addresses which the parties may provide to one another in accordance herewith. If notice is sent to Pledgor, a copy of such notice shall also be given to Wayne H. Hykan, Esq., Brownstein Hyatt Farber & Strickland, P.C., 410 17th Street, Suite 2222, Denver, Colorado 80202. If notice is sent to Pledgee, a copy of such notice shall also be given to Alan B. Lottner, Esq., Haligman & Lottner, PC, 633 17th Street, Suite 2700, Denver, Colorado 80202. Notices delivered personally will be effective upon delivery to an authorized representative of the party at the designated address; notices sent by mail in accordance with the above paragraph will be effective upon execution of the Return Receipt Requested. 19. Consent of Pledgor. Pledgor consents to the exercise by Pledgee of any rights of Pledgor in accordance with the provisions of this Agreement. 20. Severability. Every provision of this Agreement is intended to be severable. In the event any term or provision hereof is declared by a court of competent jurisdiction to be illegal or invalid for any reason whatsoever, such illegality or invalidity shall not affect the legality or validity of the balance of the terms and provisions hereof, which terms and provisions shall remain binding and enforceable. 21. Amendment. This Agreement may be modified or rescinded only by a writing expressly relating to this Agreement and signed by all of the parties. 22. Limitation of Liability. No officer, director or shareholder of Pledgor shall be bound by or have any personal liability hereunder or under any documents, agreements, understandings or arrangements relating to this transaction. The parties to this Agreement shall look solely to the assets of Pledgor for satisfaction of any liability of Pledgor in respect of this Agreement and all documents, agreements, understandings and arrangements relating to this transaction and will not seek recourse or commence action against any of the directors, officers or shareholders of Pledgor or any of their personal assets for the performance or payment of any obligation hereunder or thereunder. The foregoing shall also apply to all and any future documents, agreements, understandings, arrangements and transactions between the parties hereto with respect to the Obligations, the Collateral or this Agreement. 23. Termination. This Agreement shall terminate, and shall be of no further force or effect, upon the earlier to occur of the following: (i) full payment and performance of the Obligations of the Pledgor, (ii) acquisition by Pledgor or an affiliate of Pledgor of 100% ownership interest in the Limited Liability Company, or (iii) upon the mutual consent of Pledgor and Pledgee. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. PLEDGOR: WELLSFORD PARK HIGHLANDS CORP., a Colorado corporation By:__________________________________ Name: ____________________________ Title: ___________________________ PLEDGEE: _____________________________________ Al Feld STATE OF ____________ ) ) ss. COUNTY OF __________ ) The foregoing instrument was acknowledged before me this ____ day of _______________, 1997, by _________________________ as _______________ of Wellsford Park Highlands Corp., a Colorado corporation. WITNESS my hand and official seal. My commission expires: ___________________________________. Address: ________________________________ (SEAL) Notary Public STATE OF COLORADO ) ) ss. COUNTY OF ________ ) The foregoing instrument was acknowledged before me this __ day of __________, 1997, by Al Feld. WITNESS my hand and official seal. My commission expires: _____________________________________. Address: ________________________________ (SEAL) Notary Public SCHEDULE A CONSENT TO SECURITY INTEREST AND AGREEMENT OF THE MEMBERS OF RED CANYON AT PALOMINO PARK LLC, a Colorado Limited Liability Company The undersigned, being all the members of RED CANYON AT PALOMINO PARK LLC, a Colorado limited liability company (the "Limited Liability Company") hereby represent and certify to Al Feld, an individual having an address at 4600 South Ulster Street, Suite 350, Denver, Colorado 80237 (the "Secured Party") as follows: 1. The Limited Liability Company has received notice from the Secured Party that the Secured Party has a security interest in the following collateral (the "Collateral") registered to Wellsford Park Highlands Corp., a Colorado corporation (the "Debtor"): GAR All of the right, title and interest of the Debtor in the Limited Liability Company, whether now owned or hereafter acquired, including, without limitation, the Debtor's Interest (as defined in the Operating Agreement) in the Limited Liability Company and its right to receive payments and distributions from the Limited Liability Company and allocations under or in connection with the Operating Agreement, as such Operating Agreement may be modified or extended from time to time with the written consent of the Secured Party; and (ii) All proceeds, whether cash proceeds or noncash proceeds, and products of any and all of the foregoing. 2. Other than the notice from the Secured Party referred to above, the Limited Liability Company has not received any notice from any entity or person claiming an adverse claim against, lien on or security interest in the Collateral. 3. The security interest of the Secured Party referred to above was duly registered in the books and records of the Limited Liability Company effective April 17, 1996. 4. Interests in the Limited Liability Company are not represented in any certificate, instrument or document, and such Interests may be assigned, transferred or pledged without the party receiving such assignment, transfer or pledge taking physical possession of any certificate, instrument or document. 5. The Members hereby consent to the execution and delivery of that certain the Pledge and Security Agreement by the Debtor and agree hereby to be bound by Section 4 thereof to assign, set over, transfer, distribute, pay and deliver the Collateral and any and all payments, proceeds or products due to the Debtor under the Collateral to the Secured Party. This agreement and all documents, agreements, understandings and arrangements relating to this transaction have been executed by the undersigned on behalf of Wellsford Park Highlands Corp., a Colorado corporation ("WPHC") in his/her capacity as an officer or director of WPHC, and not individually, and neither the directors, officers or shareholders of WPHC shall be bound by or have any personal liability hereunder or thereunder. The parties to this agreement shall look solely to the assets of WPHC for satisfaction of any liability of WPHC in respect of this agreement and all documents, agreements, understandings and arrangements relating to this transaction and will not seek recourse or commence any action against any of the directors, officers or shareholders of WPHC or any of their personal assets for the performance or payment of any obligation hereunder or thereunder. The foregoing shall also apply to all and any future documents, agreements, understandings, arrangements and transactions between the parties hereto with respect to the Collateral or this Agreement. EXECUTED as of the date set forth above. MEMBERS: WELLSFORD PARK HIGHLANDS CORP., a Colorado corporation By:_______________________________________ Name: _________________________________ Title: ________________________________ __________________________________________ AL FELD, an individual AGREED TO AND CONCURRED: SOLE MANAGER __________________________________________ Al Feld EXHIBIT N PLANS AND SPECIFICATIONS EXHIBIT O FINAL PROJECT BUDGET EXHIBIT T INFRASTRUCTURE BUDGET EXHIBIT U SUBSTITUTION AGREEMENT (See attached) SUBSTITUTION AGREEMENT THIS SUBSTITUTION AGREEMENT (this "Agreement") is made and entered into as of the 17th day of April, 1996, by and among AL FELD, an individual ("Feld"), WELLSFORD PARK HIGHLANDS CORP., a Colorado corporation ("WPHC"), and THE FELD COMPANY, a Colorado corporation (the "Company"). RECITALS A. WPHC is a Member of Red Canyon at Palomino Park LLC, a Colorado limited liability company (the "LLC"), which LLC is governed by its Operating Agreement dated as of April 17, 1996 (the "Operating Agreement") by and between WPHC and Feld. B. Feld is also a Member, as well as the Manager, in the LLC and is the principal officer and shareholder of the Company. C. In order to facilitate WPHC's appointment of the Company as a substitute Member and the Manager of the LLC upon the death or disability of Feld in accordance with Section 12.13 of the Operating Agreement and to bind the Company to the agreements set forth in said Section 12.13, the parties hereto now desire to enter into this Agreement. AGREEMENT NOW, THEREFORE, in consideration of the execution of the Operating Agreement and of the recitals, covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Request for Substitute Manager. In the event that Feld should die or WPHC shall elect to remove Feld as manager due to disability (such an event is hereinafter referred to as a "Triggering Event"), WPHC shall have the right, at its sole option, to request in writing that: (a) the Company shall acquire from Feld (or from his estate, if Feld is deceased) the entire interest of Feld in the LLC; (b) the Company shall be admitted as a Member of the LLC and substituted for Feld as Member and Manager under the Operating Agreement; and (c) the Company shall assume, in writing, all of the obligations of the Manager and of a Member under the Operating Agreement, as the same may be amended from time to time. The foregoing actions under items (a), (b) and (c) shall be effective upon the next business day after WPHC delivers its written request to the Company and Feld. Notwithstanding anything to the contrary contained herein or in the Operating Agreement, if the Company is substituted for Feld as a Member and Manager, then Feld (or his estate if Feld is deceased) shall remain liable for the performance of the obligations of the Manager under the Operating Agreement, in accordance with Section 12.12.3.2 thereof. 2. Failure to Request a Substitute Manager. If WPHC fails to exercise its option under Section 12.13 of the Operating Agreement and this Agreement to cause the Company to be substituted for Feld as the Manager within ninety (90) days after the date of a Triggering Event, then such right shall automatically terminate and Feld (and his estate) shall be released from all responsibilities and obligations as Manager under the Operating Agreement arising after the effective date of Feld's withdrawal or Removal (as said term is defined in the Operating Agreement) from the LLC in connection with the Triggering Event. 3. Attorneys Fees. In the event any litigation or other legal proceedings or alternative dispute resolution proceedings are brought for the enforcement of or arise out of this Agreement, the prevailing party shall be entitled to recover from the non-prevailing party all reasonable attorneys' fees and costs and all other reasonable expenses, in addition to any other relief or damages obtained. 4. Further Documentation. The parties hereby agree to execute, from time to time, such other documents as may be reasonably necessary to effectuate the intent of this Agreement and Section 12.13 of the Operating Agreement. 5. GOVERNING LAW. THE PARTIES HERETO AGREE THAT THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF COLORADO WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. SUCH PARTIES FURTHER AGREE THAT THIS AGREEMENT MAY BE ENFORCED IN THE DISTRICT COURT IN AND FOR THE CITY AND COUNTY OF DENVER, STATE OF COLORADO AND THEY DO HEREBY SUBMIT TO THE JURISDICTION OF SUCH COURT REGARDLESS OF THEIR RESIDENCE OR WHERE THIS AGREEMENT MAY BE EXECUTED. 6. Successors and Assigns. All agreements, covenants, conditions and provisions of this Agreement shall inure to the benefit of and be binding upon the respective heirs, personal representatives, successors and assigns of the parties hereto. 7. Notices. Whenever any party hereto shall desire to, or be required to, give or serve any notice, demand, request or other communication with respect to this Agreement, each such notice, demand, request or communication shall be in writing and shall be effective only if the same is delivered by personal service (including, without limitation, courier or express service) or mailed certified or registered mail, postage prepaid, return receipt requested, or sent by telegram to the parties at the addresses shown in the Operating Agreement or such other addresses which the parties may provide to one another in accordance therewith. The notice address for the Company shall be the same as the notice address for Feld. If notice is sent to WPHC, a copy of such notice shall also be given to Wayne H. Hykan, Esq., Brownstein Hyatt Farber & Strickland, P.C., 410 17th Street, Suite 2222, Denver, Colorado 80202. If notice is sent to Feld or the Company, a copy of such notice shall also be given to Alan Lottner, Esq., Haligman and Lottner, First Interstate Tower North, 633 Seventeenth Street, Suite 2700, Denver, Colorado 80202-3635. Notices delivered personally will be effective upon delivery to an authorized representative of the party at the designated address; notices sent by mail in accordance with the above paragraph will be effective upon execution of the Return Receipt Requested. 8. Severability. Every provision of this Agreement is intended to be severable. In the event any term or provision hereof is declared by a court of competent jurisdiction to be illegal or invalid for any reason whatsoever, such illegality or invalidity shall not affect the legality or validity of the balance of the terms and provisions hereof, which terms and provisions shall remain binding and enforceable. 9. Capitalized Terms. All capitalized terms not otherwise defined herein shall have the meanings set forth in the Operating Agreement. 10. Amendment. This Agreement may be modified or rescinded only by a writing expressly relating to this Agreement and signed by all of the parties. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. ________________________________________ AL FELD, individually WELLSFORD PARK HIGHLANDS CORP., a Colorado corporation By:_____________________________________ Its:____________________________________ THE FELD COMPANY, a Colorado corporation By:_____________________________________ Its:____________________________________ EX-10.12 14 TRI-PARTY AGREEMENT THIS TRI-PARTY AGREEMENT ("Agreement") is executed this 29th day of May, 1997, by and among NATIONSBANK OF TEXAS, N.A., a national banking association ("Construction Lender" or "NationsBank"), RED CANYON AT PALOMINO PARK LLC, a Colorado limited liability company ("Borrower"), WELLSFORD PARK HIGHLANDS CORP., a Colorado corporation ("WPHC"), WELLSFORD RESIDENTIAL PROPERTY TRUST, a Maryland real estate investment trust ("WRPT"), AL FELD, an individual resident of Denver, Colorado ("Feld"), and THE FELD COMPANY, a Colorado corporation. R E C I T A L S: A. Feld and WPHC, as members, are parties to that certain Operating Agreement of Red Canyon at Palomino Park LLC, a Colorado limited liability company, dated as of April 17, 1996, as amended by First Amendment to Operating Agreement of Red Canyon at Palomino Park LLC dated as of May 19, 1997 (the "Operating Agreement") evidencing the organization and formation of Borrower. The Operating Agreement contemplates the development of a 304-unit apartment complex and related facilities and amenities (the "Improvements") by Borrower on certain real property located in Highlands Ranch, Douglas County, Colorado, as more particularly described on Exhibit A attached hereto and made a part hereof (the "Land") (the Land and the Improvements being referred to herein collectively as the "Property"). All terms used herein with their initial letters capitalized, unless otherwise defined herein, shall have the same meaning as ascribed thereto in the Operating Agreement. B. NationsBank has agreed, subject to compliance by Borrower with all of the terms and conditions of the Construction Loan Agreement of even date herewith (the "Loan Agreement") between NationsBank and Borrower, to make a construction loan to Borrower (the "Loan") to provide funds for the acquisition of the Land and the construction of the Improvements on the Land. In connection with the Loan, Borrower has executed, among other instruments, a Promissory Note of even date herewith (the "Note"), payable to the order of NationsBank in the stated principal amount of $29,379,819.00 and a first lien Construction Loan Deed of Trust, Assignment, Security Agreement and Financing Statement of even date herewith (the "Mortgage"), encumbering the Property. The Loan has been guaranteed by Feld and The Feld Company (collectively, the "Guarantors") by separate Guaranty Agreements of even date herewith (collectively, the "Guaranty Agreements") in favor of NationsBank. The Loan Agreement, the Note, the Mortgage, and all other documents evidencing, securing or otherwise pertaining to the Loan are referred to herein collectively as the "Loan Documents." C. The Operating Agreement contains a requirement that at the Construction Loan Closing, Borrower, the Construction Lender and WRPT will enter into an agreement providing, among other things, if the Loan has not been paid in full by its maturity date, the Construction Lender shall have the right to require that WRPT either purchase the Loan from the Construction Lender, or at WRPT's option, cause the Loan to be repaid. The Loan Agreement also contains a requirement that NationsBank, Borrower, WPHC and WRPT enter into an agreement coordinating the payoff of the Loan by WRPT. This Agreement is being entered into in compliance with the aforesaid requirements in the Operating Agreement and the Loan Agreement. AGREEMENTS NOW, THEREFORE, in consideration of the mutual covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Subject to the satisfaction or waiver (by WRPT) of the conditions and requirements listed in Exhibit B attached hereto and made a part hereof, WRPT agrees to pay to NationsBank, on or before the maturity date of the Note, the lesser of (i) the outstanding balance of all principal, interest and other amounts owing to NationsBank in connection with the Loan (the "Outstanding Loan Balance"), or (ii) the total of the Final Project Budget (the lesser of the Outstanding Loan Balance and the total of the Final Project Budget is referred to herein as the "Loan Payoff"). The Final Project Budget is defined in paragraph 3 below and is subject to possible adjustment as provided in paragraph 3. Upon its receipt of the Loan Payoff, NationsBank shall, at the option of WRPT, either (a) assign to WRPT the Note, the Mortgage and all other Loan Documents, without recourse or representation, except as to title/ownership of the Loan Documents being transferred, or (b) cause the Mortgage and all other liens and security interests on and against the Property and securing the Loan to be released; provided, however, in connection with its receipt of the Loan Payoff and such assignment of the Loan Documents or release of the Mortgage, NationsBank shall retain its right to recover the difference, if any, between the Outstanding Loan Balance and the Loan Payoff from Guarantors under the Guaranty Agreements and shall also retain all of it rights and remedies against Guarantors under the Environmental Indemnity Agreement and all other indemnifications contained in the Loan Documents. When the Loan Payoff is made, Borrower and WPHC shall execute and deliver such documents and instruments as may be necessary to conform to the terms of the Operating Agreement, and shall perform and observe all of the requirements of the Operating Agreement to be performed and observed by Borrower and WPHC, respectively, in connection with the Final Closing. Notwithstanding anything contained in the Operating Agreement to the contrary, but subject to the satisfaction or waiver (by WRPT) of the conditions and requirements listed in Exhibit B hereto, WRPT shall be obligated to make the Loan Payoff to NationsBank regardless of whether or not there is any uncured default on the part of Feld, any Affiliate of Feld, or Borrower under the Operating Agreement or under any other contracts or agreements relating to the Project. 2. WPHC and WRPT advise NationsBank that they have approved and accepted, or have waived, the following items and conditions: (a) The Initial Closing was completed in a timely manner, all of the requirements and conditions set forth in Section 5.1 of the Operating Agreement have been satisfied or waived, and WPHC has no right to remove Feld as a Member or Manager of Borrower for any reason related to the Initial Closing. (b) The Construction Loan Closing has been completed in a timely manner, all of the requirements and conditions listed in Section 5.2 of the Operating Agreement have been satisfied or waived, WPHC has approved all of the documents and other items it is required to approve under Section 5.2 of the Operating Agreement, and WPHC has no right to remove Feld as a Member or Manager of Borrower for any reason related to the Construction Loan Closing. Without limiting the foregoing, it is specifically acknowledged and agreed that WPHC has approved all terms and conditions applicable to the Loan and all of the Loan Documents as listed in Exhibit D attached hereto and made a part hereof. (c) The Infrastructure Land Closing was completed in a timely manner and all of the requirements and conditions set forth in Section 5.3.1 of the Operating Agreement have been satisfied. WPHC has also approved the Infrastructure Improvements Agreement as described in Section 5.3.3 of the Operating Agreement. 3. It is understood and agreed that WRPT has approved the budget for the Loan, a copy of which is attached hereto and made a part hereof as Exhibit C, and that said budget constitutes the Final Project Budget for purposes of the Operating Agreement and this Agreement. The Final Project Budget is subject to possible adjustment in accordance with the following provisions: (a) In the event WPHC determines at any time that it is necessary or appropriate to make any cash contribution ("Cash Contribution") to Borrower, WPHC shall deliver written notice thereof to NationsBank prior to making the Cash Contribution. As used herein, the term "Cash Contribution" also includes amounts funded to Borrower from the proceeds of the "Bonds" (as defined in the Loan Agreement) and used for the construction of the Improvements. To the extent any such Cash Contribution (including Bond proceeds) is approved in writing by NationsBank, in its sole and absolute discretion, and is actually made to Borrower, the amount thereof shall be deducted from the total of the Final Project Budget for purposes of calculating the Loan Payoff. In no event shall any Cash Contribution (including Bond proceeds) made to Borrower which is not approved in advance in writing by NationsBank be deducted from the Final Project Budget. (b) NationsBank shall have the right to make reallocations and other adjustments to the line items in the Final Project Budget from time to time without the necessity of obtaining any consent or approval from WRPT, provided that WRPT's prior written approval shall be required for (i) any increases to the total amount of the Final Project Budget and (ii) any decreases to the interest reserve line item in the Final Project Budget. As between NationsBank and Borrower, any such reallocations or adjustments shall be subject to the terms and conditions of the Loan Agreement. 4. NationsBank shall not have the right to seek recovery against WRPT or WPHC for any amount in excess of the Loan Payoff and, after its receipt of the Loan Payoff, NationsBank shall not have the right to seek recovery against Borrower if the Loan Payoff is less than the Outstanding Loan Balance; provided that the foregoing shall not (i) limit the rights of NationsBank (as described in paragraph 1 hereof) against Guarantors under the Guaranty Agreements, the other Loan Documents, or otherwise or (ii) preclude NationsBank from naming Borrower as a party in any suit against Guarantors (although NationsBank may not obtain any recovery from Borrower after its receipt of the Loan Payoff). The provisions of this paragraph 4 shall survive the delivery of the Loan Payoff to NationsBank and the closing of the transaction described in paragraph 1. 5. WPHC and WRPT are aware that (i) the Property is subject to, among other assessment agreements and liens related thereto, an Indemnification Assessment and Lien (the "Indemnification Assessment Lien"), dated as of May 2, 1996, recorded in Book 1338 at Page 2006 in the Office of the Clerk and Recorder of Douglas County, Colorado and relating to certain indemnification obligations of Palomino Park Public Improvements Corporation (the "Corporation") in favor of Highlands Ranch Metropolitan District No. 2 in connection with the Bonds; and (ii) the Indemnification Assessment Lien is prior to the lien of the Mortgage. Notwithstanding anything contained herein to the contrary, it is agreed that upon the occurrence of any default under the Indemnification Assessment Lien WRPT shall be obligated to either, at its option, (i) pay all amounts necessary to cure the default under the Indemnification Assessment Lien to the Corporation or to NationsBank (if NationsBank has made the payment necessary to cure such default, although NationsBank shall not be required to do so), or (ii) pay the Loan Payoff to NationsBank in accordance with the provisions of paragraph 1 hereof, even if not all of the conditions and requirements listed in Exhibit B hereto are satisfied at such time (and if WRPT exercises the option under this clause (ii) the Loan Payoff shall include all amounts paid by NationsBank, if any, to cure such default). WRPT shall make its election under either clause (i) or clause (ii) of the preceding sentence, and shall make the appropriate payment to the Corporation or to NationsBank, no later than ten (10) days after the commencement of any foreclosure or other enforcement proceeding by the Corporation with respect to the Indemnification Assessment Lien. 6. Borrower, WPHC and WRPT agree that the Operating Agreement will not be modified or amended in any manner which could affect the security or interests of NationsBank without the prior written consent of NationsBank. The provisions of this paragraph 6 shall no longer apply after the Loan Payoff has been made to NationsBank. 7. WPHC represents and warrants to NationsBank that, as of the date hereof, to the best of WPHC's knowledge, there is no uncured default by Feld or any Affiliate of Feld under the Operating Agreement or any of the Approved Affiliate Agreements, and WPHC is not aware of any occurrence or condition which, with the giving of notice or passage of time, or both, could constitute a default by Feld or any Affiliate of Feld under the Operating Agreement or any of the Approved Affiliate Agreements. As used herein, the phrase "to the best of WPHC's knowledge" shall mean the current actual knowledge of WPHC and shall not imply any inquiry or investigation other than a review of all relevant files in the possession of WPHC. 8. All of the parties hereto acknowledge and agree that this Agreement satisfies the requirements and conditions for a tri-party agreement under both the Operating Agreement and the Loan Agreement. 9. In the event any default occurs under the Loan Documents, NationsBank agrees to deliver to WRPT a copy of any notice of default sent by NationsBank to Borrower (the "Default Notice") and further agrees not to accelerate the maturity of the Note if WRPT, within thirty (30) days after the date of the Default Notice (the "Cure Period"), either (a) cures or causes to be cured such default (it being agreed that WRPT shall have no obligation to cure any such default), or (b) notifies NationsBank of its willingness to pay and satisfy or purchase the Loan from NationsBank by payment of the outstanding balance of principal and interest owing thereon (but not in excess of the amount of the Loan Payoff), as well as any costs that have been incurred by NationsBank as a result of such default, within ten (10) days after expiration of the Cure Period and WRPT does so pay and satisfy or purchase the Loan within ten (10) days after expiration of the Cure Period. Any Default Notice delivered by NationsBank to WRPT pursuant to this paragraph 9 shall include a written statement of the amount necessary to pay and satisfy or purchase the Loan from NationsBank. Since the final amount of accrued interest and actual costs incurred by NationsBank as a result of the default may not be known at the time NationsBank delivers the Default Notice, it is agreed that such payoff statement may include a per diem amount for accrued interest and may include an estimate of costs, with NationsBank reserving the right to collect all costs actually incurred by NationsBank in connection with the default (if the actual costs exceed the estimated costs). If WRPT elects to purchase the Loan from NationsBank as aforesaid, then the closing shall be held through the office of the same title company in Denver, Colorado which handled the closing of the Loan on the date specified by WRPT in its notice of election to purchase, which date shall not be later than ten (10) days after expiration of the Cure Period. Notwithstanding anything contained herein to the contrary, in no event shall NationsBank be obligated to give a Default Notice to WRPT with respect to any default that NationsBank is not required to give notice of to Borrower under the Loan Documents. 10. Any notice or communication required or permitted to be given hereunder shall be in writing and shall be deemed to be delivered when actually received or, regardless of whether actually received or not, (a) one (1) business day after deposited with Federal Express, Emery, DHL, UPS, or other overnight air courier service, (b) twenty-four (24) hours after transmitted by facsimile, with evidence of transmission attached and hard copy sent by United States mail, or (c) three (3) days after deposited in the United States mail, postage prepaid, registered or certified mail, return receipt requested, addressed to the addressee as follows or to such other address or facsimile number as shall hereafter be designated by written notice from the addressee actually received by the other parties at least twenty (20) days prior to the effective date of the change: NationsBank: NationsBank of Texas, N.A. Real Estate Banking Group 901 Main Street, 51st Floor Dallas, Texas 75202 Attn: Real Estate Loan Administration Facsimile No. 214/508-1571 with copy to: Michael A. Deahl Powell & Coleman, L.L.P. One NorthPark East, Suite 130 8950 North Central Expressway Dallas, Texas 75231 Facsimile No. 214/373-8768 Borrower: c/o Mr. Al Feld The Feld Company 4600 South Ulster Street, Suite 350 Denver, Colorado 80237 Facsimile No. 303/721-9418 with copy to: Alan B. Lottner Haligman & Lottner, P.C. 633 17th Street, Suite 2700, North Tower Denver, Colorado 80202 Facsimile No. 303/292-1300 WPHC and WPRT: c/o Wellsford Residential Property Trust 370 Seventeenth Street, Suite 3100 Denver, Colorado 80202 Attn: David M. Strong Facsimile No. 303/595-7799 with copies to: Wellsford Residential Property Trust 610 Fifth Avenue, 7th Floor New York, New York 10020 Attn: Jeffrey Lynford Facsimile No. 212/333-2323 and to: Wayne H. Hykan Brownstein Hyatt Farber & Strickland, P.C. 410 Seventeenth Street, 22nd Floor Denver, Colorado 80202 Facsimile No. 303/623-1956 11. With respect to the relationship among NationsBank, Borrower, Guarantors, WPHC and WRPT, in the event of any conflict or inconsistency between the terms, provisions or conditions of this Agreement, on the one hand, and the terms, provisions or conditions of the Operating Agreement or the Loan Agreement, on the other hand, this Agreement will govern. However, the terms of the Operating Agreement will govern the relationship among the members of Borrower and the relationship between Borrower and WRPT. 12. If any party shall be required to employ an attorney to enforce or defend the rights of such party hereunder, the prevailing party or parties shall be entitled to recover reasonable attorneys fees and costs. 13. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which taken together shall constitute one and the same instrument. 14. This Agreement may be changed, terminated or modified only by agreement in writing signed by all of the parties hereto. 15. The covenants, agreements and rights contained in this Agreement shall be binding upon and shall inure to the benefit of the respective successors and assigns of the parties hereto and all persons claiming by, through or under any of them. Without limiting the foregoing, it is agreed that any transfer or assignment of the Loan by NationsBank shall be expressly made subject to this Agreement and that the transferee or assignee will also be entitled to the rights and benefits of NationsBank under this Agreement. In addition, NationsBank agrees to deliver written notice to WRPT within a reasonable period of time after any such transfer or assignment of the Loan. 16. This Agreement has been executed by the undersigned signatory on behalf of WRPT in his/her capacity as an officer or trustee of WRPT which has been formed as a Maryland real estate investment trust pursuant to a Declaration of Trust of WRPT dated as of July 10, 1992, and not individually, and neither the trustees, officers or shareholders of WRPT shall be bound by or have any personal liability hereunder or thereunder. The other parties hereto shall look solely to the assets of WRPT for satisfaction of any liability of WRPT in respect of this Agreement and will not seek recourse or commence any action against any of the trustees, officers or shareholders of WRPT individually or against any of their personal assets for the performance or payment of any obligation hereunder or thereunder. The foregoing shall also apply to any and all future documents, agreements, understandings, arrangements and transactions between the parties hereto with respect to the subject matter of this Agreement. 17. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND SHALL BE PERFORMABLE IN DALLAS COUNTY, TEXAS. 18. THIS AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES REGARDING THE SUBJECT HEREOF AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. [Signature pages follow] IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the day and year first above written. CONSTRUCTION LENDER: NATIONSBANK OF TEXAS, N.A., a national banking association By: /s/ Sondra E. Teilborg ---------------------------- Name: Sondra E. Teilborg --------------------- Title: Vice President --------------------- BORROWER: RED CANYON AT PALOMINO PARK LLC, a Colorado limited liability company By: /s/ Al Feld ---------------------------- Al Feld, Manager WPHC: WELLSFORD PARK HIGHLANDS CORP., a Colorado corporation By: /s/ David M. Strong ---------------------------- David M. Strong Vice President WRPT: WELLSFORD RESIDENTIAL PROPERTY TRUST, a Maryland real estate investment trust By: /s/ David M. Strong ---------------------------- David M. Strong Vice President GUARANTORS: /s/ Al Feld --------------------------------- Al Feld THE FELD COMPANY, a Colorado corporation By: /s/ Al Feld ---------------------------- Al Feld President EXHIBIT A LEGAL DESCRIPTION EXHIBIT B 1. Delivery to WPHC of a payoff letter from NationsBank setting forth the total of all principal, interest and other amounts owing to NationsBank in connection with the Loan. 2. The Title Insurance Company shall be irrevocably committed to issue the following endorsements to the Owner's Title Policy issued to Borrower in connection with the Construction Loan Closing (said endorsements to be issued at the time of the Loan Payoff): (a) A "date down" endorsement to the Title Policy extending the effective date of the Title Policy to the date of funding and showing no exceptions to title other than the exceptions reflected on the existing Title Policy and any other exceptions which are reasonably acceptable to or have been previously approved in writing by WPHC. (b) An endorsement increasing the amount of insurance by an amount equal to the Final Closing Capital Contribution. (c) Such other endorsements as WPHC may reasonably require and the Title Insurance Company is willing to issue. Such additional endorsements shall be at WPHC's sole cost and expense. 3. Delivery to WPHC of unconditional lien releases from all subcontractors, materialmen and providers of labor, equipment, material and/or services to the Property, as to all work performed and materials purchased in connection with the construction of the Project (which by definition, does not include the Infrastructure), in form reasonably satisfactory to WPHC or, with respect to any liens not so released, Feld shall have provided surety bonds to which any contested liens are transferred (and released from the Property) and title insurance over any such liens. 4. Delivery to WPHC of a physical inspection report prepared by the Construction Consultant under the Operating Agreement or, alternatively, a copy of a physical inspection report prepared by the construction inspector under the Loan Agreement and addressed to WPHC. 5. Delivery to WPHC of an as-built survey reasonably satisfactory to WPHC dated no more than thirty (30) days prior to the date of funding, showing no encroachments or other adverse matters affecting title to the Property, except as shall be reasonably acceptable to or have been previously approved in writing by WPHC. WPHC acknowledges that it has approved the ALTA/ACSM Land Survey of the Property prepared by P. R. Fletcher & Associates, Inc. dated May 23, 1997, Job No. 788.01. 6. Delivery to WPHC of a written document executed by Feld, the architect and the general contractor certifying no material change to the approved "for- construction" plans and specifications for the Project except any changes stated therein that have previously been approved by WPHC. 7. Delivery to WPHC of a copy of the final and unconditional certificate or certificates of occupancy issued by the appropriate governmental authorities for the Project in its entirety and a copy of any permits and licenses which are required for the operation and use of the Project. ED Delivery to WPHC of an Architect's Certificate substantially in the form attached hereto as Exhibit B-1. [Note: This will be the same form as attached to the Operating Agreement as Exhibit S-1.] 9. Delivery to WPHC of an Engineer's Certificate substantially in the form attached hereto as Exhibit B-2. [Note: This will be the same form as attached to the Operating Agreement as Exhibit S-2.] 10. Delivery to WPHC of satisfactory evidence (which may be in the form of an endorsement to the Title Policy described in item 2 above) that all real property taxes and assessments for the Property which are due and payable through the date of funding have been fully paid. 11. Delivery to WPHC of a Release and Waiver, substantially in the form attached hereto as Exhibit B-3, from Feld and each Affiliate of Feld that is a party to an Approved Affiliate Agreement [Note: This will be the same form as attached to the Operating Agreement as Exhibit B-3]. EXHIBIT B-1 ------------------ Form of Architect's Certificate (Letterhead of Architect) CERTIFICATE OF ARCHITECT ______________, 1997 Red Canyon at Palomino Park LLC Wellsford Residential Property Trust 370 17th Street, Suite 3100 Denver, CO 80202 Reference: ___________________________ _________________, Colorado Ladies and Gentlemen: Please refer to the final architectural plans and specifications reflecting all field notes and field changes as built described in the attached Exhibit A (the "Plans"). The undersigned understands that ___________________________ or its designee ("Wellsford") is acquiring an interest in or is causing the repayment of the construction loan for a residential complex owned by Red Canyon at Palomino Park LLC, a Colorado limited liability company ("Owner"), located on that certain parcel of real property having an address of ___________________ in the City of ___________________________, County of _________________, State of Colorado and described on Exhibit B attached hereto (the "Site"), on which Owner has constructed a complex of apartment units known as ___________________ (the "Project"). This Certificate is a condition precedent to Wellsford's acquiring the Project or repaying such loan, and the undersigned acknowledges that Wellsford will be relying upon this Certificate in consummating such transaction. With such understanding, the undersigned has reviewed the Plans, the construction of the Project in relationship to the Plans, and its conformity and compliance with applicable laws and regulations (i.e., applicable federal, state, county and municipal laws and regulations and ordinances, including without limitation, governing building and fire codes, zoning, subdivision and land use laws and regulations, environmental and safety statutes and regulations, and the rules and regulations of other governmental agencies having jurisdiction over the Site or the Project ("Applicable Laws"). Based upon these reviews and upon due professional investigation, the undersigned declares and certifies to and for the benefit of Owner and Wellsford that: 1. The undersigned is the architect who prepared the Plans and coordinated and supervised the construction of the Project. 2. The Project commonly known as ___________________________ contains 456 apartment units in ______ buildings, and _____________ parking spaces, with related amenities and facilities. The Site is zoned ___________________________ under the applicable ordinances of the City of ___________________________, Colorado. 3. We have examined all applicable materials relative to those types of restrictions and requirements sometimes referred to as use, dimensional, bulk and parking restrictions, jurisdictional wetlands requirements, setback and buffering requirements, density restraints, landscaping and vegetation preservation ordinances, laws, rules and regulations and environmental restraints, which relate to the Site (hereinafter referred to as "Development Constraints") and have determined that the Project is permitted as a matter of right except for the following variances: ___________________________, and that the following restrictions and requirements (the "Restrictions and Requirements") are applicable to the Project: Minimum Lot Area: Height Limitation: Maximum Floor Area Ratio (or other type of bulk -bulk restriction): Limitation on Number of Dwelling Units (if any): Front Yard Requirements: Side and Rear Yard Requirements: Parking Requirements: 4. The Project and the Site are in compliance with the Development Constraints and the Restrictions and Requirements. 5. The improvements contemplated by the Plans have been completed in substantial compliance with the Plans, except for the items in the attached Exhibit C which are incomplete to the extent indicated and for which the estimated cost to complete is indicated on said Exhibit C. 6. We are of the opinion that the Project has been designed in accordance with the applicable provisions of Colorado law, the Americans with Disabilities Act of 1990, 42 U.S.C. Section 12101, et seq., as amended, and any other applicable law, rule or regulation of any kind or description relating to the elimination of architectural barriers for the handicapped. 7. We certify that any and all amounts due and payable to us under or in connection with the Standard Form of Agreement between Owner and Architect for Housing Services (AIA-Document B181) dated ___________________________ with regard to the Project have been paid in full. 8. The Project, the Plans and all improvements comply with Applicable Laws, including without limitation, the applicable PUD, and with all necessary and required notices, permits or license agreements in connection with the Plans, and all permits, licenses and approvals required for the construction of the improvements contemplated by the Plans and for the use and occupancy of the Project (including, without limitation, all final certificates of occupancy) have been obtained from the applicable governmental or quasi-governmental agency having jurisdiction or any private party from whom any license is required. 9. The improvements are ready for occupancy. 10. The improvements on the Property, contain a minimum of ________________ square feet of net rentable living area (as measured from inside face of exterior wall to apartment side of corridor wall to centerline of tenant separation wall) for the apartments. 11. The undersigned is a licensed architect and has the power and authority to render this Certificate and to execute and deliver it on behalf of Feld Design, Inc. This Certificate may be relied upon only by Wellsford and the Owner. Very truly yours, By: Pamela J.L. English Supervising Architect Dated:____________________________ EXHIBIT B-2 ------------------ Form of Engineer's Certificate (Letterhead of Project Engineer) ENGINEER'S CERTIFICATE _________________, 1997 Red Canyon at Palomino Park LLC Wellsford Residential Property Trust 370 17th Street, Suite 3100 Denver, Colorado 80202 Reference: ___________________ _______________, Colorado Ladies and Gentlemen: The undersigned understands that ___________________________ or its designee ("Wellsford") is acquiring an interest in or is causing the repayment of the construction loan for a residential complex owned by Red Canyon at Palomino Park LLC, a Colorado limited liability company ("Owner"), located on that certain parcel of real property having an address of ________________ in the City of __________________________, County of __________________, State of Colorado and described on Exhibit A attached hereto (then "Site"), on which Owner has constructed a complex of ________ apartment units known as (the "Project"). This Certificate is a condition precedent to Wellsford's acquiring the Project or repaying such loan, and the undersigned acknowledges that Wellsford will be relying upon this Certificate in consummating such transaction. With such understanding, the undersigned has reviewed those portions of the plans and specifications for the Project that are listed on Exhibit B attached hereto (the "Engineering Plans"), the construction of the Project in relationship to the Engineering Plans, and its conformity and compliance with certain applicable laws and regulations. Based upon these reviews and upon due professional investigation, the undersigned declares and certifies to and for the benefit of Owner and Wellsford that: 1. Satisfactory methods of access to and egress from the Site and the Project and adjoining or nearby public ways are available and are sufficient to meet the reasonable needs of the Project and all applicable requirements of public authorities. Sanitary water supply and storm sewer and sanitary sewer facilities and other required utilities (gas, electricity, telephone, etc.) are likewise available and are sufficient to meet the reasonable needs of the Project and all applicable requirements of public authorities. 2. We are of the opinion that the Property is not located in a 100-Year Floor plain or in an identified "flood prone area," as descried by the U.S. Department of Housing and Urban Development, pursuant to the Flood Disaster Protection Act of 1973, as amended, and is not subject to any federal, state or local "wetlands" rules, regulations, ordinances or requirements. 3. We have reviewed and are familiar with all tests and analyses performed and professional recommendations made by soil engineers and other consultants regarding the condition of the soil of the Site. In our professional opinion, the condition of the soil of the Site is adequate to support the Project as completed. 4. We have reviewed the locations of all easements, rights-of-way, subsurface rights of jurisdictional wetlands, and all rules and regulations pertaining to the same in force relating to the Site, and the Plans are prepared so that the Project does not encroach over, across or upon any such easements, rights-of-way, subsurface rights or jurisdictional wetlands and the like, and all necessary permits and approvals required for the Project have been obtained. 5. We have reviewed all deeds, easements, covenants, restrictions and other matters set forth in Schedule B of Title Commitment No. __________ issued by Land Title Guaranty Company, and the Project satisfies and/or does not violate any provisions concerning construction of improvements on the Site set forth in such deeds, easements, covenants, restrictions and other matters. This Certificate may be relied upon only by Owner and Wellsford. Very Truly yours, [ENGINEER] By:__________________________ Title:______________________ Dated:_____________________ EXHIBIT C APPROVED BUDGET Land Costs - ---------- Land $2,123,119 Site Improvements 5,127,247 Hard Costs - ---------- Construction Contract 16,518,058 Amenities 845,782 General Conditions/Permits 1,133,204 Soft Costs - ---------- Architectural 148,000 Engineering 317,800 Title Insurance 21,280 Legal 40,000 Appraisal and Environmental Audit 7,500 Construction Management Fee 608,000 Reproduction Costs 16,000 Landscape Architect 42,000 Interior Design 20,000 Accounting/Tax Returns 10,000 Developer's Fee 304,000 Real Estate Taxes 30,000 Systems Development Fee 505,500 Lender/Owner Inspections 15,200 NationsBank Loan Fee 146,899 Guaranty Fee 293,748 NationsBank Loan Interest 1,634,789 Contingency 674,643 ___________ TOTAL $30,579,819 Less Borrower's Upfront Equity 1,200,000 ___________ TOTAL LOAN AMOUNT $29,379,819 EXHIBIT D SCHEDULE OF LOAN DOCUMENTS [Unless indicated otherwise, all of the following Loan Documents are dated as of May 29, 1997.] 1. Construction Loan Agreement. 2. Promissory Note. 3. Guaranty Agreement of Al Feld. 4. Guaranty Agreement of The Feld Company. 5. Construction Loan Deed of Trust, Assignment, Security Agreement and Financing Statement. 6. UCC-1 Financing Statements. 7. Assignment of Rents and Leases. 8. Environmental Indemnity Agreement. 9. Collateral Assignment of Management Agreement. 10. Manager's Agreement, Subordination and Consent to Assignment. 11. Assignment of Construction Contract. 12. Contractor's Subordination, Agreement and Consent to Assignment of Construction Contract. 13. Assignment of Construction Documents. 14. Architect's Consent to Assignment, Agreement and Subordination of Lien. 15. Certification of Non-Foreign Status. 16. Notice by Disburser. EX-10.13 15 ASSIGNMENT AND ASSUMPTION OF TRI-PARTY AGREEMENT THIS ASSIGNMENT AND ASSUMPTION OF TRI-PARTY AGREEMENT (this "Assignment"), is made and entered into as of the _____ day of May, 1997, by and between WELLSFORD RESIDENTIAL PROPERTY TRUST, a Maryland real estate investment trust (hereinafter called "Assignor"), ERP OPERATING LIMITED PARTNERSHIP, an Illinois limited partnership (hereinafter called "Assignee"), RED CANYON AT PALOMINO PARK LLC, a Colorado limited liability company2 ("Red Canyon"), WELLSFORD PARK HIGHLANDS CORP., a Colorado corporation ("WPHC"), THE FELD COMPANY, a Colorado corporation ("Feld Company"), AL FELD, an individual and NATIONSBANK OF TEXAS, N.A., a national banking association ("Nationsbank"). RECITALS (a) Reference is hereby made to that certain Tri-Party Agreement dated _______________ ____, 1997, by and among Nationsbank, Assignor, Red Canyon, WPHC, Al Feld, and Feld Company (the "Phase II Tri-Party Agreement"). The Phase II Tri-Party Agreement was executed in connection with that certain construction loan in the original principal amount of $29,502,119.00 from Nationsbank to Red Canyon for the development of a 304-unit apartment complex and related facilities in Highlands Ranch, Douglas County, Colorado (the "Project"). (b) Assignor has entered into that certain Agreement and Plan of Merger (the "Merger Agreement") dated as of January 16, 1997, by and between Equity Residential Properties Trust, a Maryland real estate investment trust ("ERPT"), and Assignor in connection with the merger of ERPT with and into Assignor. (c) ERPT is the general partner of Assignee. (d) Pursuant to the Merger Agreement, Assignor is obligated to assign to Assignee, and Assignee has agreed to assume, all of Assignor's rights, interests and obligations under the Phase II Tri-Party Agreement. (e) The parties hereto now desire to enter into this Assignment in order to effectuate the above-referenced assignment and assumption of Assignor's rights, interests and obligations under the Phase II Tri-Party Agreement and to evidence the consent to such assignment and assumption by the parties hereto. NOW, THEREFORE, in consideration of the above recitals and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby covenant and agree as follows: LLS Assignment. Assignor does hereby transfer, assign, grant, delegate and convey to Assignee, its successors and assigns, and Assignee, for itself and its successors and assigns, does hereby assume, all of Assignor's rights, interests and obligations in, to and under the Phase II Tri-Party Agreement from and after the date hereof. (ii) Consent To Assignment. Nationsbank and each other party hereto does hereby consent to and acknowledge the above assignment and agrees to look solely to Assignee from and after the date hereof for the performance of all duties and obligations that were previously the responsibility of Assignor under the Phase II Tri-Party Agreement. Any further assignment of the Phase II Tri-Party Assignment shall require the prior written consent of Nationsbank. (iii) Original Documents. Concurrently with the execution and delivery of this Assignment, Assignor shall deliver to Assignee any original copies of the Phase II Tri-Party Agreement, together with all exhibits, addenda and amendments thereto, in Assignor's possession. (iv) Notice to Assignee. The parties hereto agree that from and after the date hereof, a copy of any notice or communication required or permitted to be given to Assignor pursuant to the Phase II Tri-Party Agreement, shall now be sent to ERP Operating Limited Partnership, 2 North Riverside Plaza, Suite 400, Chicago, Illinois 60606, attention: President, with a copy to (i) Equity Residential Properties Trust, Two North Riverside Plaza, Suite 400, Chicago, Illinois 60606, Attention: President and Bruce C. Strohm, Esq. and (ii) Rudnick & Wolfe, 203 N. LaSalle St., Suite 1800, Chicago, Illinois 60601, Attention: Errol R. Halperin, Esq. (v) Governing Law. This Assignment shall be governed by and construed in accordance with the laws of the State of Colorado. (vi) Successors and Assigns. This Assignment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. (vii) Headings. The headings of the paragraphs of this Assignment have been included only for convenience, and shall not be deemed in any manner to modify or limit any of the provisions of this Assignment or be used in any manner in the interpretation of this Assignment. (viii) Interpretation. Whenever the context so requires in this Assignment, all words used in the singular shall be construed to have been used in the plural (and vice versa), each gender shall be construed to include any other genders, and the word "person" shall be construed to include a natural person, a corporation, a firm, a partnership, a joint venture, a trust, an estate or any other entity. (ix) Partial Invalidity. Each provision of this Assignment shall be valid and enforceable to the fullest extent permitted by law. If any provision of this Assignment or the application of such provision to any person or circumstance shall, to any extent, be invalid or unenforceable, then the remainder of this Assignment, or the application of such provision to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected by such invalidity or unenforceability. (x) Further Agreements. Assignor agrees to execute and deliver to Assignee such additional documents, instruments or agreements as may be necessary or appropriate to effectuate the purposes of this Assignment. (xi) Limitation of Liability. This Assignment and all documents, agreements, understandings and arrangements relating to this Assignment have been executed by the undersigned on behalf of Assignor in his/her capacity as an officer or trustee of Assignor which has been formed as a Maryland real estate investment trust pursuant to a Declaration of Trust of Assignor dated as of July 10, 1992, and not individually, and neither the trustees, officers or shareholders of Assignor shall be bound by or have any personal liability hereunder or thereunder. The beneficiary of this Assignment shall look solely to the assets of Assignor for satisfaction of any liability of Assignor in respect of this Assignment and all documents, agreements, understandings and arrangements relating to this transaction and will not seek recourse or commence any action against any of the trustees, officers or shareholders of Assignor or any of their personal assets for the performance or payment of any obligation hereunder or thereunder. The foregoing shall also apply to all and any future documents, agreements, understandings, arrangements and transactions between the parties hereto with respect to the this Assignment or any matter related thereto. (xii) Counterparts. This Assignment may be executed in one or more counterparts, all of which when taken together shall constitute the entire agreement of the parties. [SIGNATURE PAGE FOLLOWS] IN WITNESS WHEREOF, the parties hereto have executed this Assignment as of the date above first written. WELLSFORD RESIDENTIAL PROPERTY TRUST, a Maryland real estate investment trust By:/s/ David M. Strong --------------------------------------- Name: David M. Strong Title: Vice President ERP OPERATING LIMITED PARTNERSHIP, an Illinois limited partnership By: EQUITY RESIDENTIAL PROPERTIES TRUST, its general partner By:/s/ Bruce C. Strohm ------------------------------------------- Name: Bruce C. Strohm Title: Executive Vice President NATIONSBANK OF TEXAS, N.A., a national banking association By:/s/ Sondra E. Teilborg ---------------------------------------------- Name: Sondra E. Teilborg Title: Vice President RED CANYON LLC, a Colorado limited liability company By:/s/ Al Feld ---------------------------------------------- Al Feld, Manager WELLSFORD PARK HIGHLANDS CORP., a Colorado corporation By:/s/ David M. Strong --------------------------------------------- David M. Strong, Vice President THE FELD COMPANY, a Colorado corporation By:/s/ Al Feld -------------------------------------------- Al Feld, President -------------------------------------------- Al Feld EX-10.14 16 AGREEMENT AND ACKNOWLEDGEMENT REGARDING TRI-PARTY AGREEMENT This Agreement (this "Agreement") is made and entered into as of this 30th day of May, 1997, by and between Nationsbank of Texas, N.A., a national banking association ("Nationsbank"), Red Canyon at Palomino Park LLC, a Colorado limited liability company ("Borrower"), Wellsford Park Highlands Corp., a Colorado corporation ("WPHC"), and ERP Operating Limited Partnership, an Illinois limited partnership ("ERP Operating Partnership"). RECITALS (f) Reference is hereby made to that certain Tri-Party Agreement dated May 30, 1997, by and among Nationsbank, Borrower, Wellsford Park Highlands Corp., a Colorado corporation, Wellsford Residential Property Trust, a Maryland real estate investment trust ("WRPT"), Al Feld, an individual and the Feld Company, a Colorado corporation (the "Phase II Tri-Party Agreement"), executed in connection with that certain construction loan in the original principal amount of $29,379,819.00 from Nationsbank to Borrower for the development of a 304-unit apartment complex and related facilities in Highlands Ranch, Douglas County, Colorado (the "Project"). (g) WRPT has entered into that certain Agreement and Plan of Merger dated as of January 16, 1997, by and between Equity Residential Properties Trust, a Maryland real estate investment trust ("ERPT"), and WRPT in connection with the merger of ERPT with and into WRPT. (h) ERPT is the general partner of ERP Operating Partnership. (i) The obligations of WRPT pursuant to the Phase II Tri-Party Agreement have been or will be assigned to and assumed by ERP Operating Partnership pursuant to that certain Assignment and Assumption of Tri-Party Agreement (the "Tri-Party Assignment"). (j) The parties hereto now desire to enter into this Agreement in order to confirm the status of certain items contained in the Phase II Tri-Party Agreement. NOW, THEREFORE, for and in consideration of the above recitals and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree to and confirm the following: (i) The Phase II Tri-Party Agreement (including all Exhibits thereto) is in full force and effect and has not been assigned, modified, supplemented or amended in any way, except as described in Paragraph 4 below. (ii) Nationsbank has not delivered to WRPT any Default Notice (as defined in the Phase II Tri-Party Agreement) pursuant to Paragraph 9(a) of the Phase II Tri-Party Agreement with respect to WRPT that has not been cured. (iii) Subject to Nationsbank's rights under Paragraph 3(b) of the Phase II Tri-Party Agreement, the total amount of the Final Project Budget (as defined in the Phase II Tri-Party Agreement) as it relates to the Project has not been modified, supplemented or amended in any way. (iv) Nationsbank acknowledges that obligations of WRPT pursuant to the Phase II Tri-Party Agreement have been assigned to and assumed by ERP Operating Partnership pursuant to the Tri-Party Assignment. (v) The parties hereto shall look solely to ERP Operating Partnership for the performance of all obligations of WRPT pursuant to the Phase II Tri-Party Agreement. (vi) All obligations of ERP Operating Partnership, as assignee of WRPT, to Nationsbank with respect to the Project are as set forth in the Phase II Tri- Party Agreement and have not been amended or modified in any way. (vii) From and after the date hereof, a copy of any notice or communication required or permitted to be given to WRPT pursuant to the Phase II Tri-Party Agreement, shall now be sent to ERP Operating Limited Partnership, 2 North Riverside Plaza, Suite 400, Chicago, Illinois 60606, attention: President, with a copy to (i) Equity Residential Properties Trust, Two North Riverside Plaza, Suite 400, Chicago, Illinois 60606, Attention: President and Bruce C. Strohm, Esq. and (ii) Rudnick & Wolfe, 203 N. LaSalle St., Suite 1800, Chicago, Illinois 60601, Attention: Errol R. Halperin, Esq. (viii) This Agreement shall be governed by and construed in accordance with the laws of the State of Colorado. (ix) Except as set forth herein and in the Tri-Party Assignment, the Phase II Tri-Party Agreement is hereby ratified and confirmed and shall not be otherwise amended or modified by this or any other instrument. (x) This Agreement may be executed in one or more counterparts, all of which when taken together shall constitute the entire Agreement of the parties. [SIGNATURE PAGE FOLLOWS] IN WITNESS WHEREOF, the parties hereto have duly executed this agreement as of the day and year first above written. NATIONSBANK OF TEXAS, N.A., a national banking association By:/s/ Sondra E. Teilborg -------------------------------- Name: Sondra E. Teilborg Title: Vice President RED CANYON AT PALOMINO PARK LLC, a Colorado limited liability company By:/s/ Al Feld --------------------------------- Al Feld, Manager WELLSFORD PARK HIGHLANDS CORP., a Colorado corporation By:/s/ David M. Strong ---------------------------------- David M. Strong Vice President ERP OPERATING LIMITED PARTNERSHIP, an Illinois limited partnership By: EQUITY RESIDENTIAL PROPERTIES TRUST, its general partner By:/s/ Bruce C. Strohm ------------------------------- Name: Bruce C. Strohm Title: Executive Vice President EX-10.18 17 FIRST AMENDMENT TO LETTER OF CREDIT REIMBURSEMENT AGREEMENT This First Amendment to Letter of Credit Reimbursement Agreement (the "First Amendment"), dated as of May 30, 1997, among PALOMINO PARK PUBLIC IMPROVEMENTS CORPORATION, a Colorado nonprofit corporation (the "Bond Issuer"); WELLSFORD RESIDENTIAL PROPERTY TRUST, a Maryland real estate investment trust ("Wellsford REIT") (immediately upon consummation of the Merger described herein, Wellsford REIT's name shall be changed to Equity Residential Properties Trust); DRESDNER BANK AG, a banking corporation organized and existing under the laws of The Federal Republic of Germany, acting by and through its New York Branch (the "Bank"); and WELLSFORD REAL PROPERTIES, INC., a Maryland corporation ("WRP"), relates to that certain Letter of Credit Reimbursement Agreement, dated as of December 1, 1995, by and among the Bond Issuer, Wellsford REIT and the Bank (the "Reimbursement Agreement"). Except as otherwise provided herein, capitalized terms used in this First Amendment shall have the meanings set forth in the Reimbursement Agreement, as amended by this First Amendment (the "Amended Reimbursement Agreement"), and the rules of interpretation contained in Sections 1.2 and 1.3 of the Reimbursement Agreement shall apply equally to this First Amendment. WHEREAS, the Bond Issuer has issued its Assessment Lien Revenue Bonds, Series 1995 (the "Bonds") pursuant to the terms of a Trust Indenture, dated as of September 1, 1995 (the "Bond Indenture"), between the Bond Issuer and United States Trust Company of New York, as Trustee (the "Bond Trustee"); and WHEREAS, in order to secure the payment of principal of and interest on the Bonds, the Bank has issued an irrevocable Letter of Credit (together with any extensions, renewals or replacements thereof, the "Letter of Credit"), in accordance with the terms of the Reimbursement Agreement; and WHEREAS, Wellsford REIT intends to spin-off WRP and merge with Equity Residential Properties Trust, a Maryland real estate investment trust ("ERP REIT"), with Wellsford REIT being the surviving entity and being renamed Equity Residential Properties Trust; and WHEREAS, Wellsford REIT and WRP intend to enter into that certain Assignment Agreement dated as of May 30, 1997 (the "Assignment Agreement") pursuant to which Wellsford REIT assigns all of its right, title and interest in the Reimbursement Agreement to WRP and WRP assumes all obligations of Wellsford REIT arising out of or in connection with the Reimbursement Agreement and covenants and agrees that it shall perform the obligations of Wellsford REIT thereunder; and WHEREAS, the Bank and the Bond Issuer have been asked to consent to the Assignment Agreement and to the Merger; and WHEREAS, the Bank and the Bond Issuer have been asked to consent to the replacement of Wellsford REIT with WRP as an Account Party to the Reimbursement Agreement; and WHEREAS, in order to induce the Bank to consent to the Assignment Agreement and to enter into this First Amendment, ERP Operating Limited Partnership, an Illinois limited partnership (the "Guarantor"), which is a majority owned subsidiary of ERP REIT and after the Merger will be a majority owned subsidiary of Wellsford REIT (with Wellsford REIT being renamed "Equity Residential Properties Trust"), intends to enter into that certain Guaranty dated as of May 30, 1997 (the "Guaranty;") on behalf of the Bank; and WHEREAS, the parties desire to amend the Reimbursement Agreement as hereinafter provided. NOW THEREFORE for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 11. From and after the effectiveness of this First Amendment, the Bank hereby consents to the Spin Off, the Merger and the Assignment Agreement. From and after the effectiveness of this First Amendment, WRP is hereby constituted as successor account party to Wellsford REIT under the Reimbursement Agreement, and Wellsford REIT is released from all future liability to the Bank and the Bond Issuer under the Reimbursement Agreement, the Letter of Credit, the Bond Indenture, the Remarketing Agreement, the Promissory Notes, the Pledge Agreement and the Bonds except as set forth below. From and after the effectiveness of this First Amendment, all references in the Reimbursement Agreement to Wellsford REIT shall be deemed references to WRP (except for the references contained in Article 3, to the extent such references relate to conditions precedent satisfied prior to the effectiveness of this First Amendment.) 12. Section 1.1 of the Reimbursement Agreement shall be amended as follows: a. The following definitions contained in Section 1.1 shall be deleted in their entirety: "Agent," "Base Rate Loans," "Lenders," "Loans," "Net Capital Expenditures," "Pro Forma Debt Service Charges," "REIT Status," "Unencumbered Operating Properties," and "Wellsford REIT Loan Obligations"; b. The definition of "Balance Sheet Date" shall be amended by deleting the words "September 30, 1995" and inserting the words "May 30, 1997 (after the consummation of the Spin Off and the Merger)" in lieu thereof; c. The definition of "Base Rate" shall be amended by deleting the words "Bank of Boston at its head office in Boston, Massachusetts" and inserting the words "Dresdner Bank AG, New York Branch at its office in New York, New York"; d. The definition of "Consolidated Operating Cash Flow" shall be amended and restated in its entirety as follows: (a) "Consolidated Operating Cash Flow" means, with respect to any period, an amount equal to the Operating Cash Flow of the Borrower and its Subsidiaries for such period consolidated in accordance with generally accepted accounting principles. e. The definition of "Debt Service" shall be amended and restated in its entirety as follows: (a) "Debt Service" means, for any period, the sum of actual interest expense and mandatory or scheduled principal payments due and payable during such period with respect to all Indebtedness, excluding any balloon payments due upon maturity of any Indebtedness, amortized loan fees and the capitalized interest expense and principal payments due with respect to the construction loans on the Development permitted by Section 6.3(a) hereof. f. The definition of "Deed of Trust" shall be amended by adding the words "including such amendments, modifications or supplements permitted pursuant to its terms and Section 6.1" after the words "dated December 1, 1995". g. The definition of "Development" shall be amended by adding the words "comprising approximately 182 acres planned for development in five phases" before the period at the end thereof. h. The definition of "Distribution" shall be amended by (i) deleting the words "beneficial interest" and adding the words "common stock or other equity interests" in lieu thereof each time such words appear therein and (ii) deleting the words "or partners as such." i. The definition of "Expiration Date" shall be amended by replacing the words ""the Maturity Date of the Wellsford REIT Loan Agreement" with the words "May 30, 2005." AR The definition of "Federal Funds Effective Rate" shall be amended by (i) replacing the word "Agent" with the words "the Bank" each time such word appears therein and (ii) deleting the words "as provided for in the Wellsford REIT Loan Agreements"; k. The definition of "Operating Cash Flow" shall be amended and restated in its entirety as follows: (a) "Operating Cash Flow" means, with respect to any Person (or any asset of any Person) for any period, an amount equal to the sum of (a) the Net Income (or Deficit) of such Person (or attributable to such asset) for such period plus (b) depreciation and amortization, interest expense, and any extraordinary or non-recurring losses deducted in calculating such Net Income (or Deficit) minus (c) any extraordinary or non-recurring gains included in calculating such Net Income (or Deficit). l. The definition of "Participant(s)" shall be amended by deleting the parenthetical "(including without limitation the Intercreditor Agreement)"; m. The definition of "Pledge Agreement" shall be amended by adding the words "including, without limitation, the Bond Pledge Amendment" before the period at the end thereof. n. The definition of "Promissory Note" shall be amended by adding the words ", including, without limitation, the Note Amendments" before the period at the end thereof. o. The definition of "Reimbursement Agreement" shall be amended by adding the words ", including, without limitation, the First Amendment" before the period at the end thereof. p. The definition of "Related Documents" shall be amended by deleting the words "the Wellsford REIT Loan Agreement, the Intercreditor Agreement and the Loan Documents" and inserting the words "the First Amendment, the Assignment Agreement, the Note Amendments, the Guaranty, the Bond Pledge Amendment, the Indenture Supplement, the Assessment Agreement Amendment, the Assessment and Lien Amendment and the Deed of Trust Amendment"; q. The definition of "Wellsford Reimbursement Agreement" shall be amended by adding the words "and all exhibits, instruments or agreements relating thereto or contemplated thereby, including without limitation that certain Wellsford Bond Pledge and Security Agreement dated as of December 20, 1995, that certain First Amendment to Wellsford Bond Pledge and Security Agreement dated as of May 30, 1997, that certain Palomino Park Promissory Note from the Bond Issuer to Wellsford REIT dated as of December 20, 1995, and that certain Endorsement of Palomino Park Promissory Note by Wellsford REIT to WRP dated May 30, 1997, in each case including such amendments, modifications or supplements permitted pursuant to this respective terms and Section 6.1. r. The following definitions shall be added to Section 1.1 in the proper alphabetical order: (a) "Adjustment Date" means the earlier to occur of (i) May 30, 1998, (ii) the date on which an Equity Offering is completed having raised an amount of not less than $50,000,000; and (iii) the date on which the Point View Office Complex is 90% leased pursuant to bona-fide arms-length leases requiring the payment of current rent with tenants in actual occupancy. (b) "Assessment and Lien Amendment" means that certain First Amendment to Public Improvements Assessment and Lien, dated as of May [30], 1997, by and between the Bond Issuer and Highlands. (c) "Assessment Agreement Amendment" means that certain First Amendment to Assessment Agreement, dated as of May [30], 1997, by and between the Bond Issuer and Highlands. (d) "Assignment Agreement" means that certain Assignment and Assumption Agreement, dated as of May [30], 1997, by and between Wellsford REIT and WRP. (e) "Bond Pledge Amendment" means that certain First Amendment to Bond Pledge and Security Agreement, dated as of May [30], 1997, among WRP, Wellsford REIT, the Bond Issuer, the Bank and the Bond Trustee. (f) "Capital Improvement Reserve" means, for any period, an amount equal to thirty cents ($0.30) multiplied by the weighted average of rentable square footage of Real Estate owned by the Borrower and its Subsidiaries during such period. (g) "Deed of Trust Amendment" means that certain First Amendment to Deed of Trust, Security Agreement, Financing Statement and Assignment of Rents and Leases dated as of May [30], 1997, by and among the Bond Issuer, the Bond Trustee and the Bank. (h) "Drawing Date" has the meaning set forth in Section 2.1(1). (i) "Equity Offering" means the issuance and sale by WRP of any of its equity securities. (j) "Final LC Loan Payment Date" has the meaning set forth in Section 2.2(1). (k) "First Amendment" means that certain First Amendment to Letter of Credit Reimbursement Agreement, dated as of May [30], 1997, among the Bond Issuer, Wellsford REIT, the Bank and WRP. (l) "First Amendment Effective Date" means that date when all of the conditions to the effectiveness of the First Amendment have been satisfied or waived by the Bank and the First Amendment has become effective. The First Amendment Effective Date is May 30, 1997. (m) "Guarantor" means ERP Operating Limited Partnership, an Illinois limited partnership. (n) "Guarantor's Loan Agreement" means that certain Amended and Restated Revolving Credit Agreement dated as of December 9, 1996 among Guarantor, the banks listed therein, Morgan Guaranty Trust Company of New York, as Lead Agent, Bank of America Illinois, as Co- Lead Agent, The First National Bank of Chicago, as Co-Lead Agent, First Bank National Association, as Co-Lead Agent, and Nationsbank of Texas, N.A., as Co-Agent. (o) "Guaranty" means that certain Guaranty dated as of May 30, 1997 made by the Guarantor on behalf of the Bank. (p) "Interest Payment Date" means the 1st day of every month. (q) "Indenture Supplement" means that certain First Amendment to Trust Indenture, dated as of May 30, 1997, between the Bond Issuer and the Bond Trustee. (r) "Merger" means the transactions contemplated by that certain Agreement and Plan of Merger dated as of January 16, 1997, pursuant to which Wellsford REIT and Equity Residential Properties Trust will merge, with Wellsford REIT being the surviving entity and being renamed "Equity Residential Properties Trust." (s) "Net Cash Proceeds" means, with respect to the sale or issuance of any capital stock or other equity securities, notes, bonds, debentures, debt securities or other similar instruments, any securities convertible into or exchangeable for capital stock or any warrants, rights or options to acquire capital stock by any Person, the aggregate amount of cash in connection with such transaction after deducting therefrom only (a) actual costs of such sale or issuance, including brokerage commissions, underwriting fees and discounts, legal fees, finder's fees and other similar fees and commissions and (b) the amount of taxes payable in connection with or as a result of such transaction, in each case to the extent, but only to the extent, that the amounts so deducted are, at the time of receipt of such cash, actually paid or earmarked for payment to a Person that is not an Affiliate and are properly attributable to such transaction or to the asset that is the subject hereof in accordance with generally accepted accounting principles consistently applied." (t) "Note Amendments" means that certain Amended and Restated Promissory Note dated as of May 30, 1997 made by WRP and that certain Allonge to Promissory Note dated as of May 30, 1997 made by the Bond Issuer. (u) "Point View Office Complex" means certain real property and improvements located in Wayne, New Jersey consisting of the following: (i) a main campus of two office buildings and (ii) two smaller office buildings located at 1700 and 1800 Valley Road. (v) "Proxy Statement" means that certain Equity Residential Properties Trust and Wellsford Residential Property Trust Joint Proxy Statement, Equity Residential Properties Trust Prospectus and Wellsford Real Properties, Inc. Information Statement dated April 25, 1997. :\E "Red Canyon" means Red Canyon at Palomino Park LLC, a Colorado limited liability company, the members of which are Wellsford Park Highlands Corp. (99%) and Al Feld (1%). (x) "Shareholder's Equity" means, at any date, the total consolidated shareholder's equity of WRP and its Subsidiaries, determined in conformity with generally accepted accounting principles consistently applied. (y) "Spin Off" means the transactions contemplated by that certain Contribution and Distribution Agreement dated as of May 30, 1997 by and between Wellsford REIT and WRP, pursuant to which, among other things, certain assets are contributed and certain obligations are assumed by WRP, including, among others, 80% of the shares of WPHC (which represents an approximately 80% interest in the Development) and WRP's common stock is distributed to Wellsford REIT's shareholders. (z) "Spin Off Agreements" means the Contribution and Distribution Agreement dated as of May 30, 1997 by and between Wellsford REIT and WRP, the Credit Enhancement Agreement dated as of May 30, 1997 by and between Guarantor and WRP, the Agreement Regarding Palomino Park by and between Guarantor and WRP, those certain Right of First/Last Offer Agreements contemplated by the Agreement Regarding Palomino Park, those certain Restrictive Covenant Agreements contemplated by the Agreement Regarding Palomino Park, the Tri-Party Agreement (the "Highlands Tri-Party Agreement"), dated as of December 29, 1995 by and among Nationsbank of Texas, N.A., Highlands, WPHC, Wellsford REIT, Al Feld and the Feld Company, the Assignment and Assumption of Tri-Party Agreement dated as of May 30, 1997 by and among Wellsford REIT, Guarantor, and the other Persons party to the Highlands Tri-Party Agreement, the Tri-Party Agreement (the "Red Canyon Tri-Party Agreement") dated as of May 29, 1997 by and among Nationsbank of Texas, N.A., Red Canyon, WPHC, Wellsford REIT, Al Feld and the Feld Company, the Assignment and Assumption of Tri-Party Agreement dated as of May 30, 1997, by and among Wellsford REIT, Guarantor and the other Persons party to the Red Canyon Tri- Party Agreement, the Standby Option Agreement dated as of May 30, 1997 by and between WPHC and Guarantor, the Reimbursement and Indemnification Agreement dated as of May 30, 1997 by and between WRP and Guarantor, the Pledge of Promissory Note and Collateral Assignment of Reimbursement Agreement dated as of May 30, 1997 by WRP in favor of Guarantor, the Shareholder's Agreement dated as of May 30, 1997 by and between WRP, Guarantor, and WPHC, the Affirmative Covenant Agreement dated as of May 30, 1997 by the Bond Issuer in favor of Guarantor and, in each case, all exhibits, instruments or agreements relating to each. (aa) "Tangible Net Worth" means the excess of total assets over total liabilities, total assets and total liabilities to be determined in accordance with generally accepted accounting principles consistently applied, minus intangible assets (including, without limitation, franchises, patents, patent applications, trademarks, brand names, goodwill and capitalized research and development cost), determined in conformity with generally accepted accounting principles consistently applied. (ab) "WPHC" means Wellsford Park Highlands Corp., a Colorado corporation. (ac) "WRP" means Wellsford Real Properties, Inc., a Maryland corporation. (ad) "WRP Loan Agreement" means that certain Revolving Credit Agreement dated as of May 30, 1997 among WRP and Bank Boston and Morgan Guaranty Trust Company of New York pursuant to which a revolving line of credit in the amount of up to $50 million will be made available to WRP, as described in the Proxy Statement. 13. Section 2.1 of the Reimbursement Agreement shall be amended as follows: a. Subsection (2) shall be deleted in its entirety and the following subsection (2) shall be inserted in lieu thereof: (a) "(2) To the extent permitted by law all amounts required to be reimbursed to the Bank pursuant to the foregoing clause (1) of this Section 2.1 shall bear interest at the Base Rate for three days from the date such amounts are required to be reimbursed, and thereafter at the Default Rate until paid in full. Such amounts shall be due and payable on demand." b. The last sentence of Section 2.1 shall be deleted in its entirety. 14. Section 2.2 of the Reimbursement Agreement shall be deleted in its entirety and the following Section 2.2 shall be inserted in lieu thereof: (a) "Section 2.2 Reimbursement of Liquidity Drawing Amounts and LC Loans. The Account Parties agree that they shall reimburse the Bank for amounts drawn under Liquidity Drawings (the "Liquidity Drawing Amounts") in accordance with the following provision of this Section 2.2: (b) (1) At the written request of both Account Parties received by the Bank no later than 8:00 a.m. New York time on the Business Day next succeeding the Drawing Date (the "LC Loan Eligibility Date") stating that no Default exists and is continuing or would result from the conversion of a Liquidity Drawing into an LC Loan as set forth herein and that the representations and warranties contained in Article IV of this Reimbursement Agreement are true and correct on and as of the date of such conversion as if made on and as of such date, and requesting a conversion to an LC Loan as set forth herein, to the extent not repaid in full, including interest thereon in accordance with clause (2) of Section 2.1, Liquidity Drawings may be converted into a short-term loan under this Reimbursement Agreement (an "LC Loan"). From and after the LC Loan Eligibility Date and until the LC Loans have been repaid in full, the LC Loans shall bear interest at the Base Rate plus one and three-quarters percent (1.75%) for the period commencing on the LC Loan Eligibility Date and ended fourteen days following the Drawing Date for the Liquidity Drawing that became such LC Loan, at the Base Rate plus two and one-half percent (2.5%) for the next fourteen days thereafter, and at the Base Rate plus three and one-half percent (3.5%) for the next fourteen days thereafter (the "Final LC Loan Payment Date"). Interest on such LC Loans shall be payable in arrears on the earlier of each Interest Payment Date or the applicable Final LC Loan Payment Date. On the Final LC Loan Payment Date for any LC Loan, such LC Loan shall be immediately due and payable in full, including all accrued and unpaid interest. LC Loans may be prepaid in accordance with Section 2.4. Any Liquidity Drawing that is not converted into a LC Loan in accordance with this Section 2.2(1) shall be due and payable at the time, and bear interest at the rates set forth in Section 2.1. (c) (2) Notwithstanding the foregoing, all unreimbursed Liquidity Drawings and LC Loans shall be accelerated and become immediately due and payable on the first to occur of the end of the Final LC Loan Interest Period (for LC Loans only) and the Expiration Date. To the extent permitted by law, any unreimbursed Liquidity Drawings or LC Loan, and any interest accruing thereon, that are not paid when due thereafter shall bear interest at the Default Rate. While held by or for the benefit of the Bank, the Pledged Bonds shall bear interest at the Base Rate plus one and three-quarters percent (1.75%)." 15. Section 2.4 of the Reimbursement Agreement shall be amended as follows: a. The first sentence thereof shall be amended by deleting the words "and the Lenders"; b. The third sentence thereof shall be amended by deleting the parenthetical; c. Subsection (2) shall be amended by deleting the parenthetical which immediately follows the words "the Bank shall receive a payment." 16. Section 2.8 of the Reimbursement Agreement shall be amended by (i) replacing the word "arrears" with the word "advance" each time such word appears therein, (ii) replacing the phrase "each Wellsford REIT Loan Agreement Interest Payment Date" with the phrase "January 1, April 1, July 1 and October 1 of each year until the Expiration Date" each time such phrase appears therein, and (iii) replacing the percentage "0.50%" with the percentage "0.95%" each time such percentage appears therein. 17. Section 2.10 of the Reimbursement Agreement shall be amended by deleting the parenthetical contained in the first sentence thereof. 18. Section 2.15 shall be deleted in its entirety. 19. Section 4.1 of the Reimbursement Agreement shall be amended by amending subsection (1) by deleting subsection (a) in its entirety and inserting the following subsection (a) in lieu thereof: (1) "(a) WRP: (i) is a Maryland corporation duly organized, incorporated, validly existing and in good standing under the laws of Maryland, (ii) has all requisite power to own its property, to conduct its business as now conducted and as presently contemplated and to enter into and satisfy its obligations under this Reimbursement Agreement and the other Related Documents to which it is a party, and (iii) is in good standing as a foreign entity and is duly authorized to do business in Denver, Colorado and in each other jurisdiction where failure to be so qualified in such other jurisdiction could have a materially adverse effect on the business, assets or financial condition of WRP.". 20. Section 4.4 of the Reimbursement Agreement shall be deleted in its entirety and the following Section 4.4 shall be inserted in lieu thereof: (a) "Section 4.4 Financial Statements. WRP and Highlands have furnished to the Bank: pro forma income projections and pro forma summary balance sheets of WRP as of the Balance Sheet Date satisfactory in form and substance to the Bank and certified by WRP's chief financial officer as fairly presenting reasonable estimates of the matters set forth therein. Such balance sheet and statements of income and stockholder's equity and all other financial statements delivered to the Bank by WRP or Wellsford REIT in connection with the Spin Off, the Merger and the First Amendment, and all other financial statements delivered to the Bank by WRP on or after the Balance Sheet Date pursuant to Section 5.4 hereof, have been prepared in accordance with generally accepted accounting principles, are complete, true and correct and fairly present the financial condition of WRP and its Subsidiaries and Highlands and its Subsidiaries, respectively, as of such dates and the results of the operations of each of them. There are no liabilities, contingent or otherwise, of WRP or Highlands or any of their respective Subsidiaries involving material amounts not disclosed in said financial statements and the related notes thereto, or financial statements and the related notes thereto delivered to the Bank in accordance with Section 5.4 hereof." 21. Section 4.7 of the Reimbursement Agreement shall be amended by deleting the phrase ", or of Wellsford REIT to pay and perform the Wellsford REIT Loan Obligations in the manner contemplated by the Wellsford REIT Loan Agreement and the Loan Documents" in its entirety. 22. Section 4.14 of the Reimbursement Agreement shall be amended by (i) adding the words ", or assumption, as the case may be," after the words "execution and delivery" and (ii) adding the words ", limited liability operating agreements or" after the words "articles of incorporation." 23. Section 4.15 of the Reimbursement Agreement shall be deleted in its entirety and the following Section 4.15 shall be inserted in lieu thereof: (a) "Section 4.15. [Reserved]" 24. Section 4.17 of the Reimbursement Agreement shall be amended by (i) adding the word "or" immediately after the words "Liquidity Drawing Amount" and immediately after the words "this Reimbursement Agreement," (ii) deleting the phrase "or any Loan (as that term is defined in the Wellsford REIT Loan Agreement)" and (iii) deleting the phrase "or the Wellsford REIT Loan Agreement." 25. Section 4.23 of the Reimbursement Agreement shall be amended by deleting the words "of the Wellsford REIT Loan Obligations." 26. Section 4.25 of the Reimbursement Agreement shall be amended by (i) adding the word "or" immediately before the words "any other Related Document" and (ii) deleting the words "the Wellsford REIT Loan Agreement or the Loan Documents related thereto." 27. Section 5.4 of the Reimbursement Agreement shall be amended by deleting subsection (h) thereof and replacing it with the following: (a) "(i) concurrently with the delivery thereof pursuant to the WRP Loan Agreement, copies of all certificates, reports, financials and other documents delivered to the Lenders pursuant to the WRP Loan Agreement; and" 28. Section 5.5 of the Reimbursement Agreement shall be amended by deleting subsection (4) in its entirety and replacing it with the following subsection (4): (a) "(4) [Reserved.]". 29. Section 5.6 of the Reimbursement Agreement shall be amended by replacing the words "real estate investment trust" with the word "corporation" in the first sentence thereof. 30. Section 5.8 of the Reimbursement Agreement shall be amended by deleting the last sentence thereof in its entirety. 31. Sections 5.12, 5.13 and 5.14 shall be deleted in their entirety. 32. Section 6.1 of the Reimbursement Agreement shall be deleted in its entirety and the following Section 6.1 shall be inserted in lieu thereof: (a) "Section 6.1 Amendments. Each Account Party shall not, and WRP shall not permit Highlands, Red Canyon, or any other Subsidiary of WRP to, amend, modify, or supplement, or agree to any amendment or modification of, or supplement to, any of the Related Documents or the Wellsford Reimbursement Agreement to which it is a party. Each Account Party shall not, and WRP shall not permit Highlands, Red Canyon, or any other Subsidiary of WRP, to amend, modify or supplement, or agree to any amendment or modification of, or supplement to, that certain Operating Agreement of Red Canyon, dated as of April 17, 1996, that certain Operating Agreement of Highlands, dated as of April 27, 1995 (as amended by that certain First Amendment to Operating Agreement of Highlands, dated December 29, 1995), and that certain Deposit and Contract Administration Agreement, made as of May 2, 1995, by and between the Feld Company and Wellsford Park Highlands Corp. if such amendment, modification or supplement would have an adverse effect on the Bank or on any Account Party's ability to satisfy its obligations under this Reimbursement Agreement or any Related Document or on Guarantor's ability to satisfy its obligations under the Guaranty. The Account Parties shall not amend, and shall not permit WPHC, Highlands, Red Canyon or any of their other respective Subsidiaries to amend, modify or supplement any Spin Off Agreement if such amendment, modification or supplement would have an adverse effect on the Bank or on any Account Party's ability to satisfy its obligations under this Reimbursement Agreement or any Related Document or on Guarantor's ability to satisfy its obligations under the Guaranty." 33. Section 6.3 of the Reimbursement Agreement shall be amended as follows: a. Subsection (a) shall be amended by deleting the words "Indebtedness to the bank group under the Wellsford REIT Loan Agreement and the Loan Documents related thereto" and adding the words "Indebtedness under the WRP Loan Agreement and the documents related thereto, Indebtedness of Red Canyon in a principal amount not to exceed $29,500,000, on terms similar to those applicable to the construction financing for Phase I of the Development provided by Nationsbank, the proceeds of which will be used to construct Phase II of the Development," in lieu thereof; b. Subsection (f) shall be deleted in its entirety and the following subsection (f) shall be inserted in lieu thereof: (a) "(f) [reserved]" c. Subsection (g) shall be deleted in its entirety and the following subsection (g) shall be inserted in lieu thereof: (a) "(g) [reserved]" d. Subsection (h) shall be deleted in its entirety and the following Subsection (h) shall be inserted in lieu thereof: (a) "(h) [reserved]" e. Subsection (i) shall be deleted in its entirety and the following subsection (i) shall be inserted in lieu thereof: (a) "(i) [reserved]" f. Subsection (j) shall be deleted in its entirety and the following subsection (j) shall be inserted in lieu thereof: (a) "(j) [reserved]" 34. Section 6.4, subsection (f) shall be amended by deleting the words ",liens in favor of the Lenders under the Wellsford REIT Loan Agreement and Loan Documents." 35. Section 6.5 shall be amended by (i) adding the word "and" after the semi-colon in Subsection (i); and (ii) deleting Subsections (j) and (k) in their entirety and inserting the following Subsection (j) in lieu thereof: (a) "(j) with respect to WRP and its Subsidiaries, investments consistent with the certain Section entitled "Lines of Business" in the Form S-11 Registration Statement for WRP delivered to the Bank in connection with the First Amendment." 36. Section 6.9 of the Reimbursement Agreement shall be deleted in its entirety and the following Section 6.9 shall be inserted in lieu thereof: (a) "Section 6.9 Distributions. WRP will not make any Distributions which would cause it to violate the provisions of Section 6.17." 37. Section 6.10 of the Reimbursement Agreement shall be amended as follows: a. Subsection (1) shall be deleted in its entirety and the following subsection (1) shall be inserted in lieu thereof: (a) "(1) WRP shall not sell, transfer or otherwise dispose of any interest in WPHC unless after giving effect to such disposition, WRP shall hold at least fifty-one percent (51%) of the Voting Interests of WPHC, and WPHC shall not sell, transfer, or otherwise dispose of any interest in Highlands, Red Canyon or any other limited liability company formed to develop any phase of the Development that is or will be subject to the Assessment and Lien, unless, after giving effect to such disposition, WPHC shall hold at least fifty-one percent (51%) of the Voting Interests of Highlands, Red Canyon and such other limited liability company (as applicable), in any case, unless consented to in writing by the Bank."; b. Subsection (2) shall be amended by (i) adding the words ", whether direct or indirect," immediately before the words "in Highlands," and (ii) adding the words ", WPHC and/or Red Canyon" after the words "in Highlands". 38. Section 6.11 of the Reimbursement Agreement shall be deleted in its entirety and the following Section 6.11 shall be inserted in lieu thereof: (a) "Section 6.11. [Reserved]" 39. Section 6.12 of the Reimbursement Agreement shall be deleted in its entirety and the following Section 6.12 shall be inserted in lieu thereof: (a) "Section 6.12. [Reserved]" 40. Section 6.13 of the Reimbursement Agreement shall be amended by (i) deleting the "(i)" immediately following the words "of any Indebtedness other than the obligations" and (ii) deleting the words "and (ii) to the Agent and the Lenders under the Wellsford REIT Loan Agreement and the other Loan Documents." 41. Section 6.14 of the Reimbursement Agreement shall be deleted in its entirety and the following Section 6.14 shall be inserted in lieu thereof: (a) "Section 6.14. [Reserved]" 42. Section 6.17 of the Reimbursement Agreement shall be amended as follows: a. Subsection (1) shall be deleted in its entirety and the following subsection (1) shall be inserted in lieu thereof: (a) "(1) Minimum Shareholder's Equity. (a) From May 30, 1997 through June 4, 1997, WRP will not permit its Shareholder's Equity to be less than $45,000,000; and (b) from and after June 4, 1997, WRP will not, at the end of any fiscal quarter, permit its Shareholder's Equity to be less than the sum of (x) $35,000,000 plus (y) eight percent (80%) of the Net Cash Proceeds of all Equity Offerings funding on or after May 30, 1997. b. Subsection (2) shall be deleted in its entirety and the following subsection (2) shall be inserted in lieu thereof: (a) "(2) Consolidated Operating Cash Flow Coverage. WRP will not, at the end of any fiscal quarter, (a) until the occurrence of the Adjustment Date, permit its Consolidated Operating Cash Flow for any period of four consecutive fiscal quarters (treated as a single accounting period) (the "Test Period"), minus the Capital Improvement Reserve for the Test Period to be less than 1.3 times the Debt Service for the Test Period; and (b) after the occurrence of the Adjustment Date, permit Consolidated Operating Cash Flow for the Test Period minus the Capital Improvement Reserve for the Test Period to be less than 1.5 times the Debt Service for the Test Period. Until four consecutive fiscal quarters have been completed after July 1, 1997, the Consolidated Operating Cash Flow Coverage calculation shall be based on those consecutive fiscal quarters ending after July 1, 1997, even if there are less than four such quarters. 43. Section 7.1 of the Reimbursement Agreement shall be amended as follows: a. Subsection (c) shall be amended by deleting the references to Sections 5.13 and 5.14, by replacing the words "45 days" with the words "15 Business Days," and by deleting the words "provided that such cure period shall apply only if not more than two such cure periods, or portions thereof, have occurred in the prior 12 months." b. Subsection (d) shall be amended by replacing the words "45 days" with the words "15 Business Days." c. Subsection (f) shall be amended by replacing the words "(except the Loan Documents); or the occurrence and continuation of an event of default under any of the Loan Document" with "or the occurrence and continuation of any default under, or the failure to observe or perform any term, covenant or agreement contained in any of the Spin Off Agreements if such default or failure could have an adverse effect on the Bank or on any Account Party's ability to satisfy its obligations under this Reimbursement Agreement or any Related Document or on Guarantor's ability to satisfy its obligations under the Guaranty, and the passage of the applicable cure period, if any, set forth therein." d. Subsection (h) shall be amended by replacing the words "(i) the amount available to the Account Parties in connection with such litigation under any insurance policies held by the Account Parties or their Subsidiaries plus (ii) in the case of Wellsford REIT and its Subsidiaries" with the words "$250,000" and by adding the words "or any judgment creditor shall levy upon assets or properties of either Account Party or any of their respective Subsidiaries" immediately before the semi-colon. e. Subsection (m) shall be amended by replacing the word "60" with the word "30" and by replacing the word "$1,000,000" with the word "$250,000." f. Subsection (t) shall be amended by deleting the "and" immediately after the semi-colon. g. Subsection (u) shall be deleted in its entirety and the following subsection (u) shall be inserted in lieu thereof: (a) "(u) default under the Guaranty by the Guarantor; and" h. The following Subsection (v) shall be added immediately after subsection (u): (a) "(v) default by WRP in the payment of the principal of or interest on any obligation or Indebtedness under the WRP Loan Agreement; or the occurrence and continuation of a default under, or the failure to observe or perform any material term, covenant or agreement contained in, the WRP Loan Agreement, and the passage of the applicable cure period, if any, set forth therein." 44. Section 8.1 of the Reimbursement Agreement shall be amended by (i) deleting the words ", any Lender" in the first sentence thereof and (ii) adding the words "the Guarantor," after the words "the Remarketing Agent," in clause (d) thereof. 45. Section 9.3 shall be deleted in its entirety and the following Section 9.3 shall be inserted in lieu thereof: (a) "Section 9.3 Extension. On or after June 20, 1999 (and annually thereafter through June 20, 2004), WRP may request that the then-existing Expiration Date of the Letter of Credit be extended for a period of one- year, provided however that in no event shall the date stated in paragraph 1(a) of the Letter of Credit be extended beyond May 30, 2005. Such request shall be made in writing at least 120 days prior to then-existing Expiration Date. Within sixty (60) days of receipt of a request for extension, the Bank shall, at its sole option, either notify WRP, the Bond Issuer and the Bond Trustee that it will consent to such extension or notify WRP, the Bond Issuer and the Bond Trustee that the Letter of Credit will not be so extended. Failure of the Bank to respond to any requested extension shall constitute the Bank's denial of such request. If the Bank consents to an extension request, such extension will become effective only upon payment by the Account Parties of an extension fee in the amount of $16,667. Failure to pay the extension fee within thirty (30) days after the Bank has provided its consent to an extension shall nullify such consent and the Expiration Date of the Letter of Credit will not be so extended." RDO Section 10.7 shall be deleted in its entirety and the following Section 10.7 shall be inserted in lieu thereof: (a) "Section 10.7 Consent to Jurisdiction and Venue, Etc. Each of the Bond Issuer and WRP irrevocably (a) agrees that any suit, action or other legal proceeding arising out of or relating to this Reimbursement Agreement or any of the other Related Documents may be brought in a court of record in the State of New York or in the Courts of the United States located in such state, (b) consents to the jurisdiction of each such court in any such suit, action or proceeding and (c) waives any objection which it may have to the laying of venue of any such suit, action or proceedings in any of such courts and any claim that any such suit, action or proceeding has been bought in an inconvenient forum. Each of the Bond Issuer and WRP agrees that a final judgment in any such suit, action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. All mailings under this Section 10.7 shall be by certified mail, return receipt requested. (b) Nothing in this Section 10.7 shall affect the right of the Bank to serve legal process in any other manner permitted by law or affect that right of the Bank to bring any suit, action or proceeding against either the Bond Issuer or WRP or their respective property or any property encumbered by the Assignment and Lien in the courts of any other jurisdiction." 47. Section 10.13 shall be deleted in its entirety and the following Section 10.13 shall be inserted in lieu thereof: (a) "Section 10.13 WAIVER OF JURY TRIAL. WRP AND THE BOND ISSUER EACH HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO TRIAL BY JURY FOR ANY TRIAL RESULTING EITHER DIRECTLY OR INDIRECTLY OUT OF, UNDER OR IN CONNECTION WITH THIS REIMBURSEMENT AGREEMENT OR ANY OF THE OTHER RELATED DOCUMENTS. WRP AND THE BOND ISSUER EACH FURTHER AGREES THAT, IN THE EVENT OF LITIGATION, IT WILL NOT PERSONALLY OR THROUGH ITS AGENTS OR ATTORNEYS SEEK TO REPUDIATE THE VALIDITY OF THIS SECTION 10.13, AND IT ACKNOWLEDGES THAT IT FREELY AND VOLUNTARILY ENTERED INTO THIS AGREEMENT TO WAIVE TRIAL BY JURY IN ORDER TO INDUCE THE BANK TO ISSUE THE LETTER OF CREDIT, AND TO ENTER INTO THE FIRST AMENDMENT." 48. The following Section 10.15 is hereby added to the Reimbursement Agreement: (a) "Section 10.15. Subrogation and Subordination. Notwithstanding anything to the contrary set forth in this Reimbursement Agreement, the Related Documents, the Wellsford Reimbursement Agreement or the Spin Off Agreements: (b) (1) Subrogation. Except as set forth in Subsection 10.15(2) below with respect to the Wellsford Reimbursement Agreement, until all obligations to the Bank under this Reimbursement Agreement and the Related Documents shall have been paid in full and the Letter of Credit shall have expired or been canceled, each Account Party shall withhold exercise of (a) any claim, right or remedy, direct or indirect, that such Account Party now has or may hereafter have against the other Account Party or any of its assets in connection with this Reimbursement Agreement or the Related Documents or the performance by any Account Party of its obligations thereunder, in each case, whether such claim, right or remedy arises in equity, under contract, by statute, under common law or otherwise and including without limitation (i) any right of subrogation, reimbursement or indemnification that any Account Party now has or may hereafter have against the other Account Party, (ii) any right to enforce, or to participate in, any claim, right or remedy that the Bank now or may hereafter have against any Account Party, and (iii) any benefit of, and any right to participate in, any collateral or security now or hereafter held by the Bond Trustee or the Bank, and (b) any right of contribution any Account Party may have against any other Person regarding any of the obligations under this Reimbursement Agreement and the Related Documents. Each Account Party agrees that, to the extent the agreement to withhold the exercise of its rights of subrogation, reimbursement, indemnification and contribution as set forth herein is found by a court of competent jurisdiction to be void or voidable for any reason, any rights of contribution such Account Party may have against the other Account Party or any such other Person shall be junior to and subordinate to any rights the Bank or the Bond Trustee may have in any such collateral or security, and to any right the Bank may have against such other Account Party or such other Person. The Bank may use, sell or dispose of any item of collateral or security as it sees fit without regard to any subrogation rights any Account Party may have, and upon any such disposition or sale any rights of subrogation any Account Party may have shall terminate. If any amounts shall be paid to any Account Party on account of such subrogation, reimbursement or indemnification rights at any time when all obligations to the Bank then due and owing under this Reimbursement Agreement and the Related Documents shall not have been paid in full, such amount shall be held in trust for the Bank and shall forthwith be paid over to the Bank to be credited and applied against the obligations to the Bank under this Reimbursement Agreement and the Related Documents whether matured or unmatured, in accordance with the terms hereof and thereof. (c) (2) Subordination. Any Indebtedness of an Account Party now or hereafter held by any other Account Party, including without limitation all obligations under the Wellsford Reimbursement Agreement, is hereby subordinated in right of payment to the prior payment in full of all obligations of such Person to the Bank now or hereafter existing under this Reimbursement Agreement and the other Related Documents (all such obligations by any Account Party to the other Account Party being the "Subordinated Obligations"). Each Account Party agrees not to ask, demand, sue for, take or receive from the other Account Party, directly or indirectly, in cash or other property or by set-off or in any other manner (including without limitation from or by way of collateral), payment of all or any of the Subordinated Obligations of such other Account Party unless and until all obligations then due and owing under this Reimbursement Agreement and the other Related Documents shall have been paid and satisfied in full. Any payment on any Subordinated Obligation collected or received by any Account Party after an Event of Default has occurred and is continuing shall be held in trust for the Bank and shall forthwith be paid over to the Bank to be credited and applied against the obligations to the Bank under this Reimbursement Agreement and the Related Documents, but without affecting, impairing or limiting in any manner the liability of any Account Party under any other provision of this Reimbursement Agreement and the other Related Documents." 49. Exhibit D to the Reimbursement Agreement is replaced with Attachment A (Compliance Certificate of WRP) attached hereto. 50. In connection with this First Amendment and the transactions contemplated hereby, Account Parties agree to pay the Bank, pursuant to Section 2.5 of the Reimbursement Agreement, the sum of $50,000 as an amendment fee, plus the Bank's actual costs and expenses (including, without limitation, attorneys fees) associated with this First Amendment and the Related Documents. All such amounts shall be payable on the Effective Date. 51. This First Amendment shall be effective upon the date (the "Effective Date") that each of the following conditions is, except as specifically provided below, (x) satisfied or (y) waived by the Bank: a. The Account Parties shall deliver or cause to be delivered to the Bank a fully executed copy of this First Amendment, the Assignment Agreement, the Guaranty, the Note Amendments, and the Bond Pledge Amendment; b. The Account Parties shall deliver or cause to be delivered to the Bank a fully executed copy of the Indenture Supplement, the Assessment Agreement Amendment, the Assessment and Lien Amendment, the Deed of Trust Amendment and all documents amending, modifying or supplementing the Wellsford Reimbursement Agreement entered into prior to, concurrently with, or immediately after the Spin Off and the Merger; c. The Account Parties shall deliver or cause to be delivered to the Bank the following for each of WRP, the Guarantor and the Bond Issuer, unless otherwise noted, dated the Effective Date: (1) Certified copies of the Articles of Incorporation or Limited Partnership Agreement, as the case may be, of each of WRP, the Guarantor and the Bond Issuer, together with a good standing certificate from the Secretary of State (or comparable official) of their respective jurisdictions of incorporation or organization, each dated a recent date prior to the Effective Date; (2) Good standing certificates regarding each of WRP, the Guarantor and the Bond Issuer from the Secretary of State of Colorado; (3) Copies of the Bylaws, if applicable, for each of WRP, the Guarantor and the Bond Issuer certified as of the Effective Date by their respective corporate secretary or an assistance secretary; (4) Resolutions of the Boards of Directors of each of WRP, the Guarantor and the Bond Issuer or a written consent of its general partner or partners, as applicable, approving and authorizing the execution, delivery and performance of this First Amendment and the other Related Documents to be entered into concurrently with the First Amendment to which it is a party and the other matters contemplated hereby and copies of all other documents evidencing any other necessary organizational action, certified as of the Effective Date by their respective secretary or assistant secretary as being in full force and effect without modification or amendment; (5) Signature and incumbency certificates of the officers of each of WRP, the Guarantor and the Bond Issuer executing this First Amendment and the other Related Documents to be entered into concurrently with the First Amendment to which it is a party; d. The Account Parties shall deliver or cause to be delivered to the Bank originally executed copies of favorable opinions of (i) Ballard, Spahr, Andrews & Ingersoll, Bond Counsel, (ii) Brownstein Hyatt Farber & Strickland, Colorado counsel to the Bond Issuer, (iii) Robinson Silverman Pearce Aronsohn & Berman LLP, New York counsel to the Bond Issuer, (iv) Ballard Spahr Andrews & Ingersoll, Maryland counsel to WRP, (v) Robinson Silverman Pearce Aronsohn & Berman, New York counsel to WRP, (vi) Rudnick & Wolfe, counsel to the Guarantor, (vii) Robinson Silverman Pearce Aronsohn & Berman, New York special counsel to the Guarantor, (viii) Ballard Spahr Andrews & Ingersoll, Maryland counsel to Wellsford REIT, and (ix) Robinson Silverman Pearce Aronsohn & Berman, LLP, New York counsel to Wellsford REIT, each in form and substance satisfactory to the Bank and its counsel, dated as of the Effective Date; e. The Account Parties shall deliver or cause to be delivered to the Bank certified copies of all approvals or authorizations by, or consents of, or notices to or registrations with, any governmental body or agency required for the Bond Issuer, WRP or the Guarantor, as the case may be, to enter into this First Amendment and the other Related Documents to be entered into concurrently with the First Amendment to which each of them is a party or to have WRP assume Wellsford REIT's position with respect to the Development or the Bonds, and copies of all such approvals, authorizations, consents, notices or registrations required to be obtained or made prior to the Effective Date in connection with the transactions contemplated by the Related Documents; f. WRP shall deliver or cause to be delivered (i) a completed, executed Compliance Certificate in the form of Attachment A hereto dated as of the Effective Date demonstrating compliance with each of the covenants calculated therein after consummation of the Merger and (ii) a completed, executed Compliance Certificate for the Guarantor in the form of Attachment B hereto dated as of the Effective Date demonstrating compliance with each of the covenants calculated therein as of the most recent fiscal quarter end of the Guarantor and after the consummation of the Spin Off and the Merger; g. WRP shall deliver or cause to be delivered (i) a Solvency Certificate of WRP in the form of Attachment C hereto dated as of the Effective Date demonstrating WRP's solvency after the consummation of the Spin Off, the Merger and the related transactions described in the Proxy Statement, including without limitation, the transactions contemplated by this First Amendment and the Related Documents, and (ii) a Solvency Certificate of the Guarantor in the form of Exhibit D hereto dated as of the Effective Date demonstrating the Guarantor's solvency after the consummation of the Spin Off, the Merger and the related transactions described in the Proxy Statement, including without limitation, the transactions contemplated by this First Amendment, the Guaranty and the Related Documents, h. Each Account Party and the Guarantor shall deliver a certificate executed by one of its officers and dated as of the Effective Date stating that: (i) its representations and warranties, contained in Article 4 of the Reimbursement Agreement, as amended by this First Amendment, and the Related Documents or Article III of the Guaranty, as applicable, are true and correct on and as of the Effective Date as though made on and as of such date; (ii) it is in compliance with all of the covenants set forth in Articles 5 and 6 of the Reimbursement Agreement as amended by this First Amendment or Article IV and V of the Guaranty, as applicable, (iii) no petition by or against it has at any time been filed under the United States Bankruptcy Code or under any similar act; (iv) no Event of Default or Default has occurred and is continuing, or would result from the execution, delivery or performance of this First Amendment, the Guaranty, or the Related Documents; and (v) such other matters as the Bank or its counsel may request; i. WRP shall pay or caused to be paid all of the amounts (including attorney's fees and expenses) payable at the Effective Date pursuant to Section 2.5 of the Reimbursement Agreement and paragraph 40 hereof; j. WRP shall deliver or cause to be delivered for each of WRP and the Guarantor its most recent annual audited financial statements and its unaudited financial statements as of March 31, 1997. All of such statements shall be accompanied with a certificate from an officer of WRP or the Guarantor, as applicable, stating that no material adverse change in the consolidated assets, liabilities, operations or financial condition of WRP or the Guarantor, as applicable, has occurred since the date of the most recent financial statements; k. The Account Parties shall deliver or cause to be delivered to the Bank evidence that any amendments to the Related Documents necessary or desirable to perfect the security interests granted in the Reimbursement Agreement, as amended, and the Related Agreements have been executed and delivered and, if necessary, recorded or filed in the appropriate county recorder's office; that any other appropriate financing statements, including any amendments to the UCC-1 financing statement previously filed, have been filed in the appropriate filing office(s); and that commitments for endorsements to the Loan Policies regarding the Deed of Trust and the Assessment and Lien have been issued by a title company acceptable to the Bank in form and substance acceptable to the Bank; l. Wellsford REIT shall deliver or cause to be delivered to the Bank fully executed or conformed copies of any agreements or documents relating to the Spin Off or the Merger, including without limitation the Spin Off Agreements, that the Bank or its counsel may request, accompanied by certificates of officers of the parties to such agreements or documents, in form and substance satisfactory to the Bank and dated as of the Effective Date, certifying that the Spin Off has been consummated prior to the effectiveness of this First Amendment in accordance with the Spin Off Documents and the Merger will be consummated on the Effective Date immediately following the effectiveness of the First Amendment in accordance with the Agreement and Plan of Merger dated as of January 16, 1997 and the documents contemplated thereby. m. The Account Parties shall deliver such other documents, instruments, approvals and, if requested by the Bank, certified duplicates of executed copies thereof, and opinions as the Bank may reasonably request; n. The Bank shall give notice, as provided in Paragraph 1(a) of the Letter of Credit, extending the Letter of Credit to June 20, 2000, and the Bank shall give notice in accordance with Section 2.10 of the Reimbursement Agreement providing new wire transfer instructions for payment to the Bank. 52. Nothing in this Agreement shall be construed to modify the obligations of the Bank to the Bond Trustee arising under or in connection with the Letter of Credit. 53. On and after the Effective Date, each reference in the Reimbursement Agreement and the Related Documents to the Reimbursement Agreement or any schedule or exhibit thereto shall mean the Amended Reimbursement Agreement or such schedule or exhibit thereto as amended by this First Amendment. Except as specifically amended or modified hereby, the Reimbursement Agreement shall remain in full force and effect and is hereby ratified and confirmed. The execution, delivery and effectiveness of this First Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of the Bank nor constitute a waiver of any provision of the Amended Reimbursement Agreement. 54. This First Amendment shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to the principles of conflicts of laws. 55. This First Amendment may be executed in any number of counterparts, any set of which signed by the parties hereto shall be deemed to be and shall constitute a completed executed original for all purposes. The parties agree that this First Amendment, agreements ancillary to this First Amendment, and Related Documents to be entered into in connection with this First Amendment will be considered executed and delivered by a party upon delivery of such party's signature to the other parties by facsimile transmission. Such facsimile signature shall be treated in all respects as having the same effect as an original signature. [Remainder of page intentionally left blank] IN WITNESS WHEREOF, the undersigned have executed this First Amendment to Letter of Credit Reimbursement Agreement as of the day and year first above written. PALOMINO PARK PUBLIC IMPROVEMENTS CORPORATION By: /s/ Edward Lowenthal -------------------------- Title: -------------------------- WELLSFORD RESIDENTIAL PROPERTY TRUST By: /s/ Edward Lowenthal -------------------------- Title: -------------------------- WELLSFORD REAL PROPERTIES, INC. By: /s/ Edward Lowenthal -------------------------- Title: -------------------------- DRESDNER BANK AG, NEW YORK BRANCH By: /s/ Johannes Boeckman -------------------------- Title: Vice President -------------------------- By: /s/ Michael A. Seton -------------------------- Title: Assistant Vice President -------------------------- List of Attachment Attachment A - Form of Compliance Certificate for WRP. Attachment B - Form of Compliance Certificate for the Guarantor. Attachment C - Form of Solvency Certificate for WRP. Attachment D - Form of Solvency Certificate for the Guarantor. EX-10.19 18 AMENDMENT TO WELLSFORD REIMBURSEMENT AGREEMENT This Amendment to Wellsford Reimbursement Agreement (the "Amendment"), is made as of the 30th day of May, 1997, by and between PALOMINO PARK PUBLIC IMPROVEMENTS CORPORATION, a Colorado nonprofit corporation (the "Company"); WELLSFORD RESIDENTIAL PROPERTY TRUST, a Maryland real estate investment trust ("Wellsford REIT"); and WELLSFORD REAL PROPERTIES, INC., a Maryland corporation ("WRP"). WHEREAS, the Company has issued its Assessment Lien Revenue Bonds, Series 1995 (the "Bonds") pursuant to the terms of an Indenture of Trust, dated as of December 1, 1995, as amended and supplemented (the "Indenture"), between the Company and United States Trust Company of New York, as Trustee (the "Trustee"); and WHEREAS, in order to further secure the payment of principal of and interest on the Bonds, Dresdner Bank AG, New York, a banking corporation organized and existing under the laws of The Federal Republic of Germany, acting by and through its New York Branch (the "Bank"), has issued an irrevocable Letter of Credit (together with any extensions, renewals or replacements thereof, the "Letter of Credit"), in accordance with the terms of a Letter of Credit Reimbursement Agreement, dated as of December 1, 1995 (the "Bank Reimbursement Agreement"), between the Bank, and the Company and Wellsford REIT, as account parties; and WHEREAS, WRP shall succeed to the interest of Wellsford REIT pursuant to the terms of a First Amendment to the Bank Reimbursement Agreement, by and between the Bank, the Company, Wellsford REIT and WRP, in accordance with the provisions of an Assignment and Assumption Agreement between WRP and Wellsford REIT; and WHEREAS, the Company and Wellsford REIT executed and delivered a Reimbursement Agreement, dated as of the 1st day of December, 1995 (the "Reimbursement Agreement"), pursuant to which the Company agreed, among other things, to pay, indemnify, reimburse, exonerate and hold Wellsford REIT harmless against any loss, liability, demand or cost incurred by Wellsford REIT in connection with the Bank Reimbursement Agreement; and WHEREAS, the parties desire to amend the Reimbursement Agreement as hereinafter provided. NOW THEREFORE for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: a. Wellsford REIT hereby assigns all its right, titles and interest in the Reimbursement Agreement to WRP. WRP hereby assumes all obligations of Wellsford REIT arising out of or in connection with the Reimbursement Agreement, and covenants and agrees that it shall perform the obligations of Wellsford REIT thereunder. WRP is hereby constituted as successor to Wellsford REIT, and Wellsford REIT is released from all liability under the Reimbursement Agreement and documents executed in connection therewith. The Company hereby consent to such assignment and assumption, and to the merger of Wellsford REIT and Equity Residential Properties Trust, a Maryland real estate investment trust. The Company hereby covenants and agrees that it shall be obligated to WRP in like manner and to the same extend as provided in the Reimbursement Agreement with respect to the obligations of the Company to Wellsford REIT. Unless the context clearly requires, all references in the Reimbursement Agreement to Wellsford Residential Property Trust shall be deemed references to Wellsford Real Properties, Inc. b. The Company represents and warrants to WRP as follows: (a) The Company has all requisite power to enter into and satisfy its obligations under this Amendment. (b) The execution, delivery and performance of this Amendment and the transactions contemplated hereby are (i) within the authority of the Company, (ii) have been duly authorized by all necessary proceedings on the part of the Company, (iii) do not and will not conflict with a result and a breach or contravention of any provision of law, statute, rule or regulation to which the Company is subject to any judgment, order, writ, injunction, license or permit applicable to the Company, or its properties, (iv) do not and will not conflict with or constitute a default (whether with a passage of time or the giving of notice or both) under any provision of the charter documents, partnership agreement, declaration of trust, articles of Incorporation or other documents or bylaws of or any other agreement or other instrument binding upon, the Company or any of its properties, and (v) do not and will not result in or require the imposition of any lien or encumbrances on any of the properties, assets or rights of the Company or any of its properties. (c) This Amendment is a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms and provisions hereof, except as enforceability is limited by bankruptcy, insolvency, reorganization, moratorium or other laws relating to or affecting generally the enforcement of creditors' rights and except to the extent the availability of the remedies of specific performance or injunctive relief is subject to the discretion of the court before which any proceedings thereof may be brought. (d) There are no actions, suits, proceedings or investigations of any kind pending or threatening against the Company, or any of the subsidiaries of the Company before any court, tribunal or administrative agency or board that, if adversely determined, might either in any case or in the aggregate, materially adversely effect the properties, assets, financial conditions, or business of such person or materially impair the right of such person to carry on business substantially as now conducted by it, or result in any liability not adequately covered by insurance, or for which adequate reserves are not maintained on the balance sheets of such person. c. The Company hereby agrees to pay to WRP, upon demand, any and all reasonable expenses of the WRP, including reasonable attorney fees and expenses, incurred or paid by WRP, in connection with the preparation and negotiation of this Amendment, the request for release and other documents and agreements referred to herein or contemplated hereby. d. Except as modified herein, the Reimbursement Agreement is hereby ratified and confirmed in its original form. IN WITNESS WHEREOF, the undersigned have executed this Amendment to Letter of Credit Reimbursement Agreement as of the day and year first above written. PALOMINO PARK PUBLIC IMPROVEMENTS CORPORATION By:/s/ David M. Strong -------------------------------- Title: Vice President WELLSFORD RESIDENTIAL PROPERTY TRUST By:/s/ David M. Strong -------------------------------- Title: Vice President WELLSFORD REAL PROPERTY, INC. By:/s/ David M. Strong -------------------------------- Title: Vice President EX-10.20 19 ASSIGNMENT AND ASSUMPTION AGREEMENT THIS ASSIGNMENT AND ASSUMPTION AGREEMENT (this "Assignment") is made as of May 30, 1997, by and between WELLSFORD RESIDENTIAL PROPERTY TRUST, a Maryland real estate investment trust ("Assignor"), and WELLSFORD REAL PROPERTIES, INC., a Maryland corporation ("Assignee"). W I T N E S S E T H: For valuable consideration, the receipt of which is hereby acknowledged, Assignor and Assignee agree as follows: 1. Assignment and Assumption. a. Assignor hereby assigns and transfers to Assignee all right, title and interest of Assignor in, to and under (i) that certain Bond Pledge and Security Agreement, dated as of December 1, 1995, by and between Assignor, Palomino Park Public Improvements Corporation, a Colorado nonprofit corporation (the "Bond Issuer"), Dresdner Bank AG, New York Branch, a banking corporation organized under the laws of The Federal Republic of German, operating through its New York Branch (the "Bank"), and United States Trust Company of New York, a trust company organized under the laws of the State of New York, as Trustee (the "Trustee") (the "Pledge Agreement"), (ii) that certain Letter of Credit Reimbursement Agreement, dated as of December 1, 1995, between Assignor, the Bank and the Bond Issuer, together with all amendments, modifications and supplements thereto (the Reimbursement Agreement"), (iii) that certain Promissory Note, dated as of December 1, 1995, from the Assignor to the Bank (the "Wellsford Note") (iv) that certain Promissory Note, dated as of December 1, 1995, from the Bond Issuer to the Assignor (the "Issuer Note"), (v) that certain Wellsford Bond Pledge and Security Agreement, dated as of December 1, 1995, by and between Assignor, the Bond Issuer and the Trustee (the "Wellsford Pledge Agreement"), (vi) that certain Reimbursement Agreement, dated as of December 1, 1995, between Assignor and the Bond Issuer, together with all amendments, modifications and supplements thereto (the "Wellsford Reimbursement Agreement"), (vii) that certain Public Improvements Assessment and Lien, dated as of December 1, 1995, including all amendments and modifications thereto (the "Assessment and Lien"), by and between the Bond Issuer and Park at Highlands LLC, a limited liability company organized under the laws of the State of Colorado (the "Developer"), (viii) the Assessment Agreement, dated as of December 1, 1995, together with all amendments, modifications and supplements thereto (the "Assessment Agreement"), by and between the Developer and the Bond Issuer, and (ix) that certain Trust Indenture, dated as of December 1, 1995, by and between the Bond Issuer and United States Trust Company of New York, as Trustee, ((i), (ii), (iii), (iv), (v), (vi), (vii), (viii) and (ix), collectively, the "Conveyed Property"). b. Assignee hereby accepts the foregoing assignment, and (i) confirms that it shall be deemed to be a party to the Reimbursement Agreement, the Pledge Agreement, the Wellsford Pledge Agreement, the Wellsford Reimbursement Agreement and the Wellsford Note, and (ii) agrees to be bound by all of the terms of, and to undertake all of the obligations of the Assignor contained in the Reimbursement Agreement, the Pledge Agreement, the Wellsford Note, the Wellsford Reimbursement Agreement and the Wellsford Pledge Agreement. The execution and delivery of this Assignment shall constitute an acknowledgment and agreement by each of the parties hereto (i) that each intends that the transfer, assignment and conveyance herein contemplated constitute an absolute assignment by the Assignor of its interest in the Conveyed Property, conveying good title in such Conveyed Property free and clear of any liens, and that such interest shall not be a part of the Assignor's estate in the event of the bankruptcy or the occurrence of another similar event of, or with respect to, the Assignor, (ii) that each consents to such assignment by the Assignor of its rights under the Conveyed Property and the assumption by the Assignee of the obligations of Assignor thereunder, and (iii) that Assignor is and shall be relieved of all liabilities arising pursuant to and in accordance with the Reimbursement Agreement, the Pledge Agreement, the Wellsford Note, the Wellsford Reimbursement Agreement and the Wellsford Pledge Agreement. 2. Further Assurances. The parties shall promptly execute and deliver any additional instruments or documents which may be reasonably necessary to evidence or better effect the assignment contemplated hereby. Notwithstanding the foregoing, nothing in this Assignment shall be construed as requiring any party to the Assignment to incur liabilities or obligations other than with respect to liabilities and obligations arising specifically described in the Conveyed Property. 3. Counterparts. This Assignment may be executed in any number of counterparts and by each party on a separate counterpart or counterparts, each of which when so executed and delivered shall be deemed an original and all of which taken together shall constitute but one and the same instrument. 4. Governing Law. This Assignment shall be deemed to be an agreement made under the laws of the State of New York and for all purposes shall be governed by and construed in accordance with such laws. 5. Binding Effect. This Assignment shall be binding upon and inure to the benefit of each of the parties and its successors and assigns. IN WITNESS WHEREOF, Assignor and Assignee have executed this Assignment as of the date first hereinabove written. ASSIGNOR: WELLSFORD REAL ESTATE INVESTMENT TRUST By:/s/ David M. Strong ----------------------------- Name: David M. Strong Title: Vice President ASSIGNEE: WELLSFORD REAL PROPERTY, INC. By: /s/ David M. Strong ------------------------------ Name: David M. Strong Title: Vice President EX-10.21 20 ============================================================================== Credit Enhancement Agreement between ERP OPERATING LIMITED PARTNERSHIP and WELLSFORD REAL PROPERTIES, INC. Dated as of May 30, 1997 ============================================================================== CREDIT ENHANCEMENT AGREEMENT THIS CREDIT ENHANCEMENT AGREEMENT (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, INC., a Maryland corporation ("Newco"). A. Pursuant to a certain Trust Indenture dated as of December 1, 1995 (the "Indenture"), between Palomino Park Public Improvements Corporation, a Colorado nonprofit corporation ("PPPIC"), and United States Trust Company of New York, as trustee (the "Trustee"), PPPIC has issued, sold and delivered its Assessment Lien Revenue Bonds, Series 1995 (the "Bonds"), in the aggregate principal amount of Fourteen Million Seven Hundred Fifty-Five Thousand and 00/100 Dollars ($14,755,000.00). The Bonds are payable as to principal and interest in the manner provided in the Indenture. Proceeds of the Bonds are intended to be applied for the purpose of financing certain public facilities located within Highlands Ranch Metropolitan District No. 2, Douglas County, Colorado, a quasi-municipal corporation organized under the laws of the State of Colorado. The Indenture, and the other documents and instruments to which PPPIC is a party, evidencing or securing PPPIC's obligations in connection with the Bonds (with the exception of the "Letter of Credit Documents" described below) are referred to herein collectively as the "Bond Documents." All capitalized terms not otherwise defined herein shall have the meanings set forth in the Indenture. B. Pursuant to the Indenture, PPPIC is required to furnish a Letter of Credit or Alternate Credit Facility satisfying the conditions set forth in the Indenture, to secure the payment of Bonds that are in the Weekly Mode or the Term Mode, but not Bonds that are in the Fixed Mode. Pursuant to the terms of a Letter of Credit Reimbursement Agreement dated as of December 1, 1995 (said agreement, as the same may be modified pursuant to Section 3.1(h) hereof, the "Bank Reimbursement Agreement") by and among PPPIC, Wellsford Residential Property Trust, a Maryland real estate investment trust ("Wellsford Parent"), and Dresdner Bank, AG, New York Branch (the "Bank"), the Bank has issued to the Trustee, acting on behalf of the holders of the Bonds, a certain letter of credit (the "Dresdner L.C.") in the face principal amount of $15,773,702, for the purpose of securing the payment of the Bonds. All documents entered into by PPPIC or Wellsford Parent pursuant to the Bank Reimbursement Agreement are referred to herein collectively as the "Letter of Credit Documents." C. PPPIC and Wellsford Parent have entered into a Reimbursement Agreement dated as of December 1, 1995 (the "Wellsford Parent Reimbursement Agreement") pursuant to which PPPIC has undertaken certain obligations and provided certain security for the benefit of Wellsford Parent in consideration of Wellsford Parent's obligations under the Bank Reimbursement Agreement. Among other things, pursuant to the Wellsford Parent Reimbursement Agreement, PPPIC agreed that PPPIC would not convert the Rate Mode of the Bonds without the express written consent of Wellsford Parent and would, at the request of Wellsford Parent, convert the Rate Mode of the Bonds. PPPIC has executed and delivered to Wellsford Parent a certain Palomino Park Promissory Note dated December 20, 1995 (the "PPPIC Note to Wellsford Parent"), evidencing PPPIC's payment obligations to Wellsford Parent pursuant to the Wellsford Parent Reimbursement Agreement. D. Newco has been formed as a wholly-owned subsidiary of 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 Contribution Agreement, Wellsford Parent has assigned to Newco and Newco has assumed, or is assuming concurrently herewith, Wellsford Parent's rights and obligations under the Bank Reimbursement Agreement, the Letter of Credit Documents, the Wellsford Parent Reimbursement Agreement and the PPPIC Note to Wellsford Parent. E. 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 CREDIT ENHANCEMENT 1.1 (a) Upon and subject to the satisfaction of the conditions precedent set forth in Article 3 hereof, ERP Operating Partnership shall execute and deliver to the Bank a guaranty (the "Initial ERP Operating Partnership Guaranty") pursuant to which ERP Operating Partnership shall guarantee to the Bank the payment by Newco of any and all "Overdue Reimbursement Amounts" (as such term is hereinafter defined). As employed herein, the term "Overdue Reimbursement Amounts" shall mean any and all sums due and owing from time to time by Newco to the Bank pursuant to the Bank Reimbursement Agreement that are not paid to the Bank by Newco when due (after the expiration of any cure periods under the Bank Reimbursement Agreement) pursuant to the Bank Reimbursement Agreement. The Initial ERP Operating Partnership Guaranty: (i) shall not require security for ERP Operating Partnership's obligations pursuant to the Initial ERP Operating Partnership Guaranty; (ii) shall obligate ERP Operating Partnership to pay all Overdue Reimbursement Amounts to the Bank upon demand or, if the Bank shall agree, in its sole and absolute discretion, then within a period of up to three (3) business days following the making of a written demand upon ERP Operating Partnership by the Bank and shall provide that the payment by ERP Operating Partnership to the Bank within said period of time shall, at ERP Operating Partnership's election, constitute a cure with respect to Newco's obligations to the Bank under the Bank Reimbursement Agreement; (iii) shall not impose upon ERP Operating Partnership any financial covenants (collectively, "financial covenants") consisting of net worth requirements, financial tests, financial reporting requirements (other than customary quarterly and annual statements) or covenants generally recognized as financial covenants with respect to ERP Operating Partnership, or any other covenants regarding the nature or manner of operation of ERP Operating Partnership's businesses; provided, however, that the Initial ERP Operating Partnership Guaranty may be cross- defaulted to such corporate-level financial covenants, if any, as ERP Operating Partnership may be subject to from time to time under any of ERP Operating Partnership's corporate-level unsecured debt instruments, to the extent that the enforcement of said covenants is not waived or released by the financial institutions in whose favor said covenants primarily run (upon request from the Bank, ERP Operating Partnership shall furnish the Bank with evidence satisfactory to the Bank of such financial covenants to which ERP Operating Partnership may from time to time be subject); (iv) shall not contain a waiver of any rights of subrogation that ERP Operating Partnership may otherwise have by reason of making payment to the Bank under the Initial ERP Operating Partnership Guaranty, shall grant ERP Operating Partnership full rights of subrogation with respect thereto upon the payment in full to the Bank by ERP Operating Partnership of Newco's obligations under the Letter of Credit Documents, and shall contain the Bank's agreement to assign to ERP Operating Partnership (without warranty, representation or recourse, and without releasing Newco from any obligations or defaults thereunder) the Bank's rights and remedies under the Letter of Credit Documents following the payment in full by ERP Operating Partnership of Newco's obligations under the Letter of Credit Documents; (v) shall provide for an absolute and unconditional guaranty of payment by ERP Operating Partnership containing such terms and conditions as are usual and customary for the Bank to impose in transactions of the type herein contemplated with third party guarantors of comparable net worth which are unaffiliated with the party whose obligations they are guaranteeing, which guaranty may include an express statement to the effect of any one or more of the following: ERP Operating Partnership shall not be released by any bankruptcy (voluntary or involuntary) of any obligor with respect to the Letter of Credit Documents, any fact, matter or circumstance, whether or not denominated in the Letter of Credit Documents; and that ERP Operating Partnership shall expressly waive or be deemed to have waived any suretyship defenses; and may permit the Bank to seek sole and immediate enforcement of the Initial ERP Operating Partnership Guaranty without first proceeding against Newco, PPPIC or any obligor or collateral; provided, however, that the Initial ERP Operating Partnership Guaranty shall provide that ERP Operating Partnership shall be released fully and absolutely from liability under the Initial ERP Operating Partnership Guaranty in the event that the Bank Reimbursement Agreement or the other Letter of Credit Documents or any of Newco's obligations in connection therewith shall be modified without the prior written consent of ERP Operating Partnership, which shall not be unreasonably withheld, provided that such modification shall not increase the amount of the Letter of Credit or otherwise increase ERP Operating Partnership's obligations under the Initial ERP Operating Partnership Guaranty, increase the likelihood that ERP Operating Partnership will be required to make a payment pursuant to the Initial ERP Operating Partnership Guaranty, or diminish the remedies or collateral to which ERP Operating Partnership will become subrogated upon payment as contemplated under Section 1.1(a)(iv) hereinabove; and (vi) shall provide that the term of the Initial ERP Operating Partnership Guaranty or any Alternate Credit Facility shall not extend beyond the eighth (8th) anniversary of the date of this Agreement (the "Expiration Date") or, if the term of the Initial ERP Operating Partnership Guaranty or any Alternate Credit Facility shall extend beyond the Expiration Date, then such guaranty document shall make it clear that the guaranty afforded under this Agreement shall expire on the Expiration Date. (b) The form of the Initial ERP Operating Partnership Guaranty shall be subject to ERP Operating Partnership's review and approval, which shall not be unreasonably withheld or delayed if the terms and conditions thereof conform to the parameters set forth in Section 1.1(a) hereof. 1.2 For so long as a Letter of Credit or Alternate Credit Facility is required to be furnished to the Trustee pursuant to the terms of the Indenture, Newco shall cause PPPIC to do so and, in particular, shall cause PPPIC to furnish to the Trustee a Letter of Credit or Alternate Credit Facility in accordance with Section 5.15(b) of the Indenture prior to the expiration of any then-existing Letter of Credit so as to cause the Trustee to surrender for cancellation the previously held Letter of Credit to the issuer thereof, not less than thirty (30) days prior to the expiry of said existing Letter of Credit. 1.3 In connection with any Alternate Letter of Credit or Alternate Credit Facility that may be furnished to the Trustee from time to time pursuant to the Indenture, ERP Operating Partnership acknowledges that PPPIC or Newco may desire or be required to undertake certain obligations or provide certain financial accommodations (collectively the "Alternate Reimbursement Obligations") to the issuer of said Alternate Letter of Credit or Alternate Credit Facility. The documents evidencing or securing Newco's Alternate Reimbursement Obligations are referred to herein collectively as the "Alternate Reimbursement Documents". The parties acknowledge that the issuer of the Alternate Letter of Credit or the Alternate Credit Facility may be one or more institutions, selected by Newco, meeting the requirements of the Indenture. If Newco undertakes any Alternate Reimbursement Obligations, then ERP Operating Partnership shall enter into a guaranty of the payment of Newco's Alternate Reimbursement Obligations by executing and delivering to the issuer of said Alternate Letter of Credit or Alternate Credit Facility a guaranty in favor of said issuer (the "Alternate ERP Operating Partnership Guaranty"), upon and subject to the satisfaction of the conditions precedent set forth in Sections 3.1(d), 3.1(f), 3.1(i), 3.1(k) and 3.2 hereof, and subject also to the satisfaction of the following additional conditions precedent: (a) The terms and conditions of said Alternate Letter of Credit or Alternate Credit Facility shall be subject to ERP Operating Partnership's review and approval in ERP Operating Partnership's sole and absolute discretion; provided, however, that ERP Operating Partnership shall not unreasonably withhold or delay its approval with respect thereto if the terms and conditions thereof shall not be materially less favorable to Newco than the terms and conditions of the Letter of Credit Documents, as the same have been modified pursuant to this Agreement, and are otherwise commercially reasonable in the circumstances; (b) The terms and conditions of the Alternate ERP Operating Partnership Guaranty shall be subject to ERP Operating Partnership's review and approval in ERP Operating Partnership's sole and absolute discretion; provided, however, that ERP Operating Partnership shall not unreasonably withhold or delay its approval with respect thereto if the scope and nature thereof is limited in substantially the same manner as the Initial ERP Operating Partnership Guaranty and if the Alternate ERP Operating Partnership Guaranty is not otherwise on terms materially less favorable than the Initial ERP Operating Partnership Guaranty; (c) The Initial ERP Operating Partnership Guaranty (or, as the case may be, any pre-existing Alternate ERP Operating Partnership Guaranty) shall be returned to ERP Operating Partnership, and ERP Operating Partnership shall be released fully and absolutely from all liability thereunder, prior to or concurrently with the execution and delivery of the Alternate ERP Operating Partnership Guaranty; (d) The Alternate Letter of Credit or Alternate Credit Facility shall satisfy the requirements of the Indenture; and (e) Newco and PPPIC shall have executed and delivered documents relating to the Alternate Credit Facility or Alternate Letter of Credit, as the case may be, which are in substantially the same form as the Wellsford Parent Reimbursement Agreement and the PPPIC Note to Wellsford Parent, respectively, and PPPIC and Newco shall have executed and delivered to ERP Operating Partnership an instrument or agreement with respect thereto in substantially the same form as the Collateral Assignment and Consent described in Section 4.6 hereof. 1.4 Newco shall furnish drafts of all Alternate Reimbursement Documents to ERP Operating Partnership not less than sixty (60) days prior to the date on which any Alternate Letter of Credit or Alternate Credit Facility is required or proposed to be furnished to the Trustee. If ERP Operating Partnership is not satisfied with the terms of the proposed Alternate Reimbursement Documents for any reason whatsoever, or if ERP Operating Partnership, in its sole discretion, shall otherwise prefer to do so, ERP Operating Partnership may itself arrange for an Alternate Letter of Credit or Alternate Credit Facility in lieu of the one proposed by Newco or PPPIC; provided, however, that if the terms of the proposed documents are such that ERP Operating Partnership would otherwise be obligated to execute and deliver an Alternate ERP Operating Partnership Guaranty pursuant to Section 1.3 of this Agreement in connection with an Alternate Letter of Credit or Alternate Credit Facility proposed by Newco or PPPIC, and ERP Operating Partnership nevertheless desires not to do so, then (i) ERP Operating Partnership shall be obligated to arrange for an Alternate Letter of Credit or Alternate Credit Facility in lieu of the one proposed by Newco or PPPIC, and (ii) under such circumstances, ERP Operating Partnership shall bear all costs and expenses arising in connection with such Alternate Letter of Credit or Alternate Credit Facility including, without limitation, any fees, costs, attorneys' fees or charges imposed or incurred by the Bank, the Trustee, or the rating service rating the Bonds. If ERP Operating Partnership arranges for such an Alternate Letter of Credit or Alternate Credit Facility, then Newco covenants and agrees that PPPIC and Newco shall be the parties primarily liable on a joint and several basis with respect to the Alternate Reimbursement Documents arranged by ERP Operating Partnership, and ERP Operating Partnership agrees, subject to the satisfaction of the conditions set forth in this Agreement, to execute and deliver an Alternate ERP Operating Partnership Guaranty with respect to Newco's payment obligations under said Alternate Reimbursement Documents. Any Alternate Reimbursement Documents proposed by ERP Operating Partnership shall be on terms that are not materially less favorable to Newco or PPPIC than the Alternate Reimbursement Documents proposed by Newco or PPPIC. 1.5 ERP Operating Partnership shall have no liability to Newco or any other party to maintain any given rating with respect to the Bonds, it being acknowledged and agreed that (i) ERP Operating Partnership has no obligation whatsoever to PPPIC, the Trustee, the holders of the Bonds or any party paying assessments to PPPIC, and (ii) ERP Operating Partnership's sole obligation in connection with the Bonds is to provide certain financial accommodations to the issuer of a Letter of Credit or Alternate Credit Facility, as the case may be, solely in accordance with the terms of this Agreement. 1.6 For informational purposes, from time to time upon reasonable prior notice, ERP Operating Partnership shall cooperate reasonably in furnishing information concerning itself to the Bank or the issuer of any Alternate Letter of Credit or Alternate Credit Facility whether prior or subsequent to entering into the Initial ERP Operating Partnership Guaranty or any Alternate ERP Operating Partnership Guaranty, as the case may be. 1.7 Newco shall have the right at any time prior to the Expiration Date to obtain a full release of the Initial ERP Operating Partnership Guaranty or the Alternate ERP Operating Partnership Guaranty, as the case may be, and terminate this Agreement. ARTICLE 2 FEES AND EXPENSES 2.1 With respect to each period (each, an "Annual Period") commencing on the date hereof or on any anniversary of the date hereof and ending on the immediately preceding day of the same month in the next calendar year, Newco shall pay to ERP Operating Partnership a fee (the "Credit Enhancement Fee"), in an amount equal to one-half of one percent (0.5%) of the face amount of any Letter of Credit (or the maximum principal amount of any Alternate Credit Facility) in existence on the first day of said Annual Period. The Credit Enhancement Fee for any given Annual Period shall be payable quarterly in advance (in equal fourths of the Credit Enhancement 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 occurrence of any of the following prior to the end of the said quarter: (i) the repayment in full of the Bonds; (ii) the termination or expiration of this Agreement; (iii) the release of the Initial ERP Operating Partnership Guaranty or any Alternate ERP Operating Partnership Guaranty; or (iv) the conversion of the Bonds to the Fixed Mode. 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. 2.2 Newco shall be solely responsible for paying (i) all costs, fees, charges, penalties and other expenses charged by the Bank or the issuer of any Alternate Letter of Credit or Alternate Credit Facility, and (ii) to the extent the same are reasonable in the circumstances, all costs, fees and expenses, including without limitation attorneys' fees and expenses, incurred by ERP Operating Partnership in connection with the Letter of Credit, any Alternate Letter of Credit or Alternate Credit Facility, the Initial ERP Operating Partnership Guaranty or any Alternate ERP Operating Partnership Guaranty. ARTICLE 3 CONDITIONS PRECEDENT 3.1 As conditions precedent to ERP Operating Partnership's obligations pursuant to Article 1 of this Agreement, Newco shall furnish to ERP Operating Partnership: (a) evidence, satisfactory to ERP Operating Partnership in the exercise of ERP Operating Partnership's commercially reasonable judgment, of the consent of PPPIC, the Bank, the Trustee and all other parties having a right of consent in connection with the Bonds or the Letter of Credit with respect to the assumption by Newco of Wellsford Parent's obligations pursuant to the Bank Reimbursement Agreement and the Letter of Credit Documents, and the release of Wellsford Parent therefrom. (b) an instrument in form and substance satisfactory to ERP Operating Partnership in the exercise of ERP Operating Partnership's commercially reasonable judgment, executed by the Bank, releasing ERP Operating Partnership and Wellsford Parent from any and all obligations in connection with the Bank Reimbursement Agreement and the Letter of Credit Documents, other than those obligations expressly undertaken by ERP Operating Partnership pursuant to the Initial ERP Operating Partnership Guaranty. (c) an instrument, in form and substance satisfactory to ERP Operating Partnership in the exercise of ERP Operating Partnership's commercially reasonable judgment, releasing ERP Operating Partnership and Wellsford Parent from any and all obligations under (i) that certain Second Amended and Restated Revolving Credit Agreement date as of June 30, 1995, as amended, with the First National Bank of Boston and the other parties listed therein, and (ii) that certain Intercreditor Agreement dated as of June 30, 1995, as amended, by and among said parties (collectively, the documents described in this Section 3.1(c) are referred to herein as the "Bank of Boston Documents"); (d) a current certificate from the Trustee that, to the knowledge of Trustee, there has not occurred and shall not be continuing any default or event of default beyond any applicable grace period under the Indenture or the Bond Documents; (e) a current certificate, in form and substance satisfactory to ERP Operating Partnership in the exercise of ERP Operating Partnership's commercially reasonable judgment, executed by an officer of the Bank, to the effect that, to the knowledge of the Bank, there is no continuing default or event of default beyond any applicable grace period under the Bank Reimbursement Agreement or the Letter of Credit Documents; (f) a certificate, in form and substance satisfactory to ERP Operating Partnership, executed by an officer or director of PPPIC, to the effect that the Bond Documents shall not have been modified in any respect, from the forms submitted to ERP Operating Partnership prior to the execution of the Merger Agreement, without ERP Operating Partnership's written consent, which shall not be unreasonably withheld; (g) a certificate, in form and substance satisfactory to ERP Operating Partnership, executed by an officer or director of PPPIC, to the effect that the Letter of Credit Documents have not been modified in any respect from the forms submitted to ERP Operating Partnership prior to the execution of the Merger Agreement, without ERP Operating Partnership's written consent (which shall not be unreasonably withheld), except as provided in Section 3.1(h) hereinbelow; (h) the Bank Reimbursement Agreement and the Letter of Credit Documents shall have been amended so that (x) all covenants relating to the financial status and operations and personnel of Wellsford Parent have either been deleted or have been modified so as to reflect the status and business operations of Newco, as Wellsford Parent's assignee thereunder, (y) all references to the Bank of Boston Documents (including cross-defaults thereto and all references to any line or lines of credit available to Wellsford Parent pursuant thereto) shall have been deleted, and (z) such other provisions as Newco and the Bank may agree upon shall have been modified without the prior written consent of ERP Operating Partnership, which shall not be unreasonably withheld; provided that no such modification shall alter the basic business terms and procedures set forth in Articles 1, 2, 6.15, 6.19, 6.20, 6.21, 7.2, 8 and 9 of the Bank Reimbursement Agreement, relieve Newco and PPPIC of their obligations as the sole "Account Parties" (as such term is defined in the Bank Reimbursement Agreement) or increase the amount of the Letter of Credit or otherwise increase ERP Operating Partnership's obligations under the Initial ERP Operating Partnership Guaranty, increase the likelihood that ERP Operating Partnership will be required to make a payment pursuant to the Initial ERP Operating Partnership Guaranty, or diminish the remedies or collateral to which ERP Operating Partnership will become subrogated upon payment as contemplated under Section 1.1(a)(iv) hereinabove; (i) a Reimbursement and Indemnification Agreement, executed by Newco, described in Section 4.3 hereof; (j) the acknowledgement and agreement of PPPIC described in Section 5.1(b) hereof, the irrevocable power of attorney from PPPIC described in Section 5.1(c) hereof, and the Trustee's consent and acknowledgement described in Section 5.1(c) hereof; (k) the covenant and agreement of PPPIC described in Section 4.5 hereof; (l) evidence, satisfactory to ERP Operating Partnership in the exercise of ERP Operating Partnership's commercially reasonable judgment, of the consent of PPPIC with respect to the assumption by Newco of Wellsford Parent's rights and obligations under the Wellsford Parent Reimbursement Agreement and the release of Wellsford Parent therefrom and the assignment to Newco of the PPPIC Note to Wellsford Parent; (m) the Collateral Assignment and Consent described in Section 4.6 hereof; and (n) evidence, satisfactory to ERP Operating Partnership in the exercise of ERP Operating Partnership's commercially reasonable judgment, that Newco was formed, established and capitalized in accordance with the terms of the Contribution Agreement. 3.2 It shall be a condition precedent to ERP Operating Partnership's obligations pursuant to Article 1 of this Agreement that no Event of Default beyond all applicable cure periods shall have occurred under this Agreement. 3.3 The consummation of the transactions contemplated under the Merger Agreement shall be a condition precedent to ERP Operating Partnership's obligations pursuant to Article 1 of this Agreement. 3.4 Newco shall use its best efforts to ensure that all conditions precedent to ERP Operating Partnership's obligations pursuant to Article 1 of this Agreement 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 to ERP Operating Partnership's obligations pursuant to Article 1 of this Agreement 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 4 OTHER OBLIGATIONS OF NEWCO 4.1 On the same day, if any, as ERP Operating Partnership is required to make any payment from time to time under the Initial ERP Operating Partnership Guaranty or any Alternate ERP Operating Partnership Guaranty, Newco shall repay said amounts to ERP Operating Partnership in full. All amounts required to be reimbursed to ERP Operating Partnership pursuant to the foregoing sentence shall be interest at the rate of the "Prime Rate" (as such term is hereinafter defined) plus three percent (3%) per annum until paid in full, which interest shall be due and payable to ERP Operating Partnership on demand. Said interest shall be in the nature of default rate interest and the payment of said interest shall not excuse Newco from the obligation of repaying the amounts due and payable to ERP Operating Partnership pursuant to the first sentence of this Section 4.1 when said amounts are due pursuant to said sentence. As employed herein, the term "Prime Rate" shall mean, from time to time, the rate of interest per annum then most recently announced by The First National Bank of Chicago in Chicago, Illinois as its corporate base rate. If The First National Bank of Chicago shall not announce such a rate, then the term "Prime Rate" shall mean the prime rate or base rate from time to time announced by an American money center bank designated by ERP Operating Partnership. 4.2 (a) Newco shall indemnify and hold harmless ERP Operating Partnership, its general and limited partners, and the officers, directors, trustees, agents and employees of any of the foregoing (each, a "ERP Operating Partnership Indemnified Party") from and against any and all claims, demands, damages, losses, liabilities, and costs or expenses whatsoever (including reasonable attorneys' fees) which the ERP Operating Partnership Indemnified Party may incur (or which may be claimed against the ERP Operating Partnership Indemnified Party by any person or entity whatsoever) by reason of or in connection with the execution, delivery and performance of this Agreement, the Initial ERP Operating Partnership Guaranty or any Alternate ERP Operating Partnership Guaranty, except to the extent of claims, demands, damages, losses, liabilities and costs and expenses arising by reason of ERP Operating Partnership's breach of its obligations under this Agreement or by reason of the gross negligence or willful misconduct of the Indemnified Party. (b) ERP Operating Partnership shall indemnify and hold harmless Newco and its officers, directors, agents and employees (each, a "Newco Indemnified Party") from and against any and all claims, demands, damages, losses, liabilities, and costs or expenses whatsoever (including reasonable attorneys' fees) to the extent they arise from ERP Operating Partnership's breach of its obligations under this Agreement or by reason of the gross negligence or willful misconduct of ERP Operating Partnership. 4.3 The rights and obligations of ERP Operating Partnership and Newco with respect to the matters set forth in Sections 4.1 and 4.2 shall be set forth in a Reimbursement and Indemnification Agreement to be prepared by ERP Operating Partnership and to be entered into concurrently with the execution and delivery of the Initial ERP Operating Partnership Guaranty and any Alternate ERP Operating Partnership Guaranty, which shall be in form and substance satisfactory to ERP Operating Partnership in the exercise of its commercially reasonable judgment. 4.4 Newco covenants and agrees to comply in all material respects, and to cause PPPIC to comply in all material respects, with all terms and conditions of (i) the Indenture and the other Bond Documents, (ii) the Bank Reimbursement Agreement and the other Letter of Credit Documents, and (iii) any Alternate Reimbursement Documents. 4.5 Newco shall cause PPPIC to covenant and agree (i) to furnish ERP Operating Partnership concurrently with copies of all documentation furnished to the Trustee or its agents by PPPIC in connection with the draw-down of any Bond proceeds to fund the construction of the Public Improvements or other expenses and (ii) except as may be required by or in order to comply with existing law, that the Public Improvements that are constructed from time to time shall be only those Public Improvements reasonably required from time to time to service the improvements existing or under development on the Property. 4.6 As security for Newco's obligations under this Agreement, Newco shall collaterally assign to ERP Operating Partnership all of Newco's rights, title and interest under the Wellsford Parent Reimbursement Agreement, and shall pledge to ERP Operating Partnership the PPPIC Note to Wellsford Parent. Said collateral assignment and pledge shall be evidenced by an instrument (the "Collateral Assignment") in form and substance satisfactory to ERP Operating Partnership in the exercise of its commercially reasonable judgment. The Collateral Assignment shall include a provision pursuant to which Newco agrees: (i) not to consent to any modification of the Bank Reimbursement Agreement, the Indenture, or any documents executed by PPPIC in connection therewith which would have the effect of increasing the amount of the Letter of Credit or otherwise increasing ERP Operating Partnership's obligations under the Initial ERP Operating Partnership Guaranty, increasing the likelihood that ERP Operating Partnership will be required to make a payment pursuant to the Initial ERP Operating Partnership Guaranty, or diminishing the remedies or collateral to which ERP Operating Partnership will become subrogated upon payment as contemplated under Section 1.1(a)(iv) hereinabove; (ii) not to consent to the exercise by PPPIC of any rights of optional redemption under the Indenture without the prior written consent of ERP Operating Partnership, which consent shall not be unreasonably withheld; (iii) not to direct or consent to any conversion of the Rate Mode of the Bonds that is inconsistent with ERP Operating Partnership's rights under Section 5.1 of this Agreement; and (iv) that all rights of consent, and all rights to direct the actions of PPPIC which Newco has pursuant to the Wellsford Parent Reimbursement Agreement, shall be exercisable solely by ERP Operating Partnership solely upon the occurrence of an Event of Default described in Section 7.1. Newco shall cause PPPIC to execute a consent and acknowledgment (the "Consent"), pursuant to which PPPIC consents to the Collateral Assignment and agrees that all rights of consent, and all rights to direct the actions of PPPIC, which Newco has pursuant to the Wellsford Parent Reimbursement Agreement, shall be exercisable solely by ERP Operating Partnership solely upon the occurrence of an Event of Default described in Section 7.1 unless and until written notice of the release of said right is received from ERP Operating Partnership. ARTICLE 5 RATE MODE OF BONDS; EXPIRATION OF ERP OPERATING PARTNERSHIP'S OBLIGATIONS 5.1 Newco acknowledges that, pursuant to the Collateral Assignment and the Consent, ERP Operating Partnership shall have the exclusive right, subject to the rights of the Bank under the Bank Reimbursement Agreement, upon and following the occurrence of an Event of Default beyond all applicable cure periods or at any time after the Expiration Date (provided that ERP Operating Partnership shall not have previously been released from all of its obligations under the Initial ERP Operating Partnership Guaranty by the Alternate ERP Operating Partnership Guaranty, as the case may be), to direct PPPIC with respect to establishing the Rate Modes from time to time of the Bonds. ERP Operating Partnership hereby agrees to permit the Bonds to remain in the Weekly Mode; provided that, at any time on or after the Expiration Date (provided that ERP Operating Partnership shall not have previously been released from all of its obligations under the Initial ERP Operating Partnership Guaranty or the Alternate ERP Operating Partnership Guaranty, as the case may be) or at any time after the occurrence of an Event of Default under this Agreement beyond all applicable cure periods, ERP Operating Partnership shall have the right to direct PPPIC to exercise its option (the "Rate Conversion Option"), at the earliest possible time thereafter pursuant to the Indenture, to convert all the Bonds to the Fixed Mode. ERP Operating Partnership shall not cause the Bonds to be converted to the Term Mode without the approval of Newco and ERP Operating Partnership shall have no obligation at any time to cause or permit a conversion of the Bonds to a Term Mode with a duration of longer than two hundred and ten (210) days or which ends after the Expiration Date or the expiration date or maturity date of the Letter of Credit, any Alternate Letter of Credit or any Alternate Credit Facility. 5.2 On and as of the Expiration Date, Newco shall cause ERP Operating Partnership to be released from the Initial ERP Operating Partnership Guaranty and any Alternate ERP Operating Partnership Guaranty then in effect as of the Expiration Date, and ERP Operating Partnership shall have no further obligations pursuant to this Agreement from and after the Expiration Date. ARTICLE 6 REPRESENTATIONS AND WARRANTIES 6.1 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. (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 7.2) 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) All of the Bonds are in the Weekly Mode. 6.2 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 7.2) 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 7 EVENTS OF DEFAULT 7.1 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 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 or PPPIC of any covenant, condition or agreement contained in this Agreement, the Bond Documents, the Letter of Credit Documents, any Alternate Reimbursement Documents and any Reimbursement and Indemnification Agreement entered into pursuant to Section 4.3 hereof, 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 PPPIC, or of a substantial part of the property or assets of Newco or PPPIC 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 PPPIC or for a substantial part of the property or assets of Newco or PPPIC, or (iii) the winding-up or liquidation of Newco or PPPIC; 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 PPPIC 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 (d) above, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for Newco or PPPIC or for a substantial part of the property or assets of Newco or PPPIC, (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, or (vi) become unable, admit in writing its inability or fail generally to pay its debts as they become due; (f) one or more judgments for the payment of money in an aggregate amount in excess of $250,000 shall be rendered against Newco or PPPIC and the same shall remain unbonded or undischarged for a period of 30 consecutive days during which execution shall not be effectively stayed, or any judgment creditor shall levy upon assets or properties of Newco or PPPIC to enforce any such judgment; or (g) there shall have occurred a Change in Control with respect to Newco or PPPIC. 7.2 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, 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 other than ERP Operating Partnership or ERP Operating Partnership's Affiliate) 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. With respect to PPPIC, a "Change in Control" shall mean that the members of the Board of Directors of PPPIC are no longer the nominees of Newco. "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. 7.3 Remedies. Upon the occurrence of an Event of Default described in Section 7.1 hereof, ERP Operating Partnership shall have any and all remedies available to it at law, in equity or pursuant to statute. Without limitation of the foregoing,the occurrence of an Event of Default shall have the consequences set forth in Sections 3.2 and 5.1 of this Agreement. ARTICLE 8 AGREEMENT REGARDING PALOMINO PARK Notwithstanding anything to the contrary contained herein, if at any time Newco shall breach the terms of Article 7 of that certain Agreement Regarding Palomino Park of even date herewith by and between ERP Operating Partnership and Newco, then ERP Operating Partnership shall have no further obligations under this Agreement. 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. 610 Fifth Avenue, 7th Floor New York, New York 10020 Attn: Edward Lowenthal Telecopy No.: (212) 333-2323 with a copy to: Brownstein, Hyatt, Farber & Strichland P.C. 410 Seventeenth St., Suite 2200 Denver, Colorado 80202 Attn: Wayne Hykan, Esq. Telecopy No.: (303) 623-1956 (b) if to ERP Operating Partnership: ERP Operating Limited Partnership c/o Equity Residential Properties Trust Two North Riverside Plaza, Suite 400 Chicago, Illinois 60606 Attn: President Telecopy No.: (312) 207-5243 with a copy to: Equity Residential Properties Trust Two North Riverside Plaza, Suite 400 Chicago, Illinois 60606 Attn: Bruce C. Strohm, Esq., General Counsel Telecopy No.: (312) 454-0039 and: Rudnick & Wolfe 203 N. LaSalle Street, Suite 1800 Chicago, Illinois 60601 Attn: Errol R. Halperin, Esq. Telecopy No.: (312) 236-7516 Such notice will be deemed given when received. 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, the Initial ERP Operating Partnership Guaranty or any Alternate ERP Operating Partnership Guaranty. 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 neither Newco nor ERP Operating Partnership shall have the right to assign its rights hereunder or any interest herein without the prior consent of the other. 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 ERP Operating Partnership or Newco 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 ERP Operating Partnership and Newco 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 either party in any case shall entitle such 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 OR NEW YORK 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 COURT OR FEDERAL COURT SITTING IN THE CITY OF NEW YORK. 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/ Bruce C. Strohm -------------------------------- Name: Bruce C. Strohm Title: Executive Vice President and General Counsel WELLSFORD REAL PROPERTIES, INC. By:/s/ Edward Lowenthal ------------------------------ Name: Edward Lowenthal Title: President EX-10.22 21 REIMBURSEMENT AND INDEMNIFICATION AGREEMENT THIS REIMBURSEMENT AND INDEMNIFICATION AGREEMENT (this "Agreement") made as of the 30th day of May, 1997 by and between WELLSFORD REAL PROPERTIES, INC., a Maryland corporation ("Newco") and ERP OPERATING LIMITED PARTNERSHIP, an Illinois limited partnership ("ERP"). R E C I T A L S: A. Reference is hereby made to that certain Letter of Credit in the face principal amount of $15,773,702.00 issued by Dresdner Bank, AG, New York Branch (the "Bank") for the purpose of securing the payment of certain bonds which were issued by the Palomino Park Public Improvements Corporation, a Colorado nonprofit corporation ("PPPIC") for the purpose of financing certain public facilities located within Highlands Ranch Metropolitan District No. 2, Douglas County, Colorado, a quasi-municipal corporation organized pursuant to the laws of the State of Colorado (the "Dresdner L.C."). In connection with the Dresdner L.C., the Bank, PPPIC and Wellsford Residential Properties Trust, a Maryland real estate investment trust ("Wellsford Parent") entered into that certain Letter of Credit Reimbursement Agreement dated as of December 1, 1995 (the "Bank Reimbursement Agreement"). B. All of Wellsford Parent's rights and obligations under the Bank Reimbursement Agreement have been assigned to and assumed by Newco, a wholly-owned subsidiary of Wellsford Parent, pursuant to that certain Contribution Agreement dated as of May 30, 1997 by and between Wellsford Parent and Newco (the "Contribution Agreement"). C. ERP and Newco have entered into that certain Credit Enhancement Agreement dated as of May 30, 1997 (the "Credit Enhancement Agreement") whereby, among other things, ERP has agreed to guarantee certain obligations of Newco (as the assignee of Wellsford Parent pursuant to the Contribution Agreement) under the Bank Reimbursement Agreement. All capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Credit Enhancement Agreement. Concurrently herewith and pursuant to the terms of the Credit Enhancement Agreement, ERP has agreed to execute and deliver to the Bank the Initial ERP Operating Partnership Guaranty and, if required pursuant to Article 1.3 of the Credit Enhancement Agreement, an Alternate ERP Operating Partnership Guaranty. D. In consideration of ERP's obligations under the Initial ERP Operating Partnership Guaranty, and if required, the Alternate ERP Operating Partnership Guaranty, Newco has agreed to enter into this Agreement under the terms and conditions as set forth herein. A G R E E M E N T: NOW, THEREFORE, in consideration of the recitals, and the mutual representations, warranties, covenants and agreements contained herein, Newco and ERP hereby agree as follows: 1. Reimbursement. Newco hereby promises, without notice or demand, to pay to ERP in full the amount of any payment ERP is required to make under the Initial ERP Operating Partnership Guaranty or any Alternate ERP Operating Partnership Guaranty. All such amounts shall be due and payable in full by Newco to ERP on the day on which payment is made by ERP under the Initial ERP Operating Partnership Guaranty or any Alternate ERP Operating Partnership Guaranty. Newco shall pay ERP interest at the rate of the "Prime Rate" (as such term is hereinafter defined) plus three percent (3%) on all amounts due and owing from Newco to ERP under this Agreement, from the date said amounts are due until said amounts are actually paid in full by Newco to ERP. The payment of said interest by Newco shall not, however, authorize Newco to defer payment when due of any amounts required to be paid by Newco pursuant to this Agreement. As employed herein, the term "Prime Rate" shall mean, from time to time, the rate of interest per annum then most recently announced by The First National Bank of Chicago in Chicago, Illinois as its corporate base rate. If The First National Bank of Chicago shall not announce such a rate, then the term "Prime Rate" shall mean the prime rate or base rate from time to time announced by an American money center bank designated by ERP. 2. Indemnification of ERP. Newco shall indemnify, exonerate and hold harmless ERP and any "ERP Indemnified Party" (as such term is hereinafter defined) against any and all claims, demands, damages, losses, liabilities and any costs and expenses whatsoever, including without limitation reasonable attorneys' fees, which ERP or any ERP Indemnified Party may incur (or which may be claimed against ERP or any ERP Indemnified Party by any person or entity whatsoever) in connection with the following: a. The execution and delivery of, or the performance of any obligations under the Credit Enhancement Agreement. b. The execution and delivery of, or the performance of any obligations under the Initial ERP Operating Partnership Guaranty. c. The execution and delivery of, or the performance of any obligations under any Alternate ERP Operating Partnership Guaranty. Notwithstanding the foregoing, Newco shall not indemnify or hold harmless ERP to the extent that claims, demands, damages, losses, liabilities, costs and expenses have arisen by reason of ERP's breach of its obligations under the Credit Enhancement Agreement or the negligence or willful misconduct of ERP or any ERP Indemnified Party in connection with the Credit Enhancement Agreement, the Initial ERP Operating Partnership Guaranty or any Alternate ERP Operating Partnership Guaranty. As employed herein, the term "ERP Indemnified Party" shall mean any and all general and limited partners, officers, directors, trustees and agents of ERP and any and all employees of the foregoing. DG Indemnification of Newco. ERP shall indemnify, exonerate and hold harmless Newco and any "Newco Indemnified Party" (as such term is hereinafter defined) against any and all claims, demands, damages, losses, liabilities and any costs and expenses whatsoever, including without limitation, reasonable attorneys' fees which Newco or any Newco Indemnified Party may incur (or which may be claimed against Newco or any Newco Indemnified Party) in connection with ERP's breach of its obligations under the Credit Enhancement Agreement or by reason of the negligence or willful misconduct of ERP in connection with the Credit Enhancement Agreement, the Initial ERP Operating Partnership Guaranty or any Alternate ERP Operating Partnership Guaranty. As employed herein, the term "Newco Indemnified Party" shall mean any and all officers, directors and agents of Newco and any and all employees of the foregoing. 4. Covenant of Newco. If Newco receives any notices with respect to a default under the Bank Reimbursement Agreement or if Newco receives notice that Newco has taken action that with the passage of time would constitute an event of default under the Bank Reimbursement Agreement, then Newco shall immediately deliver copies of all such notices to ERP. 5. Waiver and Estoppel. Newco knowingly waives and agrees that it will be estopped from asserting any argument to the contrary: (a) any and all notice of acceptance of this Agreement or of the creation, renewal or accrual of any of the obligations or liabilities hereunder indemnified against, either now or in the future; (b) protest, presentment, demand for payment, notice of default or nonpayment, notice of protest or default; (c) any and all notices or formalities to which Newco may otherwise be entitled, including without limitation notice of the granting of any indulgences or extensions of time of payment of any of the liabilities and obligations hereunder and hereby indemnified against; (d) any promptness in making any claim or demand hereunder; (e) the defense of the statute of limitations in any action hereunder or in any action for the collection of amounts payable hereunder; (f) any defense that may arise by reason of the incapacity, lack of authority, death or disability of any other person or persons or the failure to file or enforce a claim against the estate (in administration, bankruptcy or any other proceeding) of any other person or persons; (g) any defense based upon an election of remedies which destroys or otherwise impairs any or all of the subrogation rights of Newco or the right of Newco to proceed against any other person for reimbursement, or both; (h) all duty or obligation of ERP to proceed against any one or more person as a condition to proceeding against Newco; (i) any principle or provision of law, statutory or otherwise, which is or might be in conflict with the terms and provisions of this Agreement. No delay or failure on the part of ERP in the exercise of any right or remedy against Newco or any other party against whom ERP may have any rights, shall operate as a waiver of any agreement or obligation contained herein, and no single or partial exercise by ERP of any rights or remedies as hereunder shall preclude other or further exercise thereof or other exercise of any other right or remedy. No waiver of the rights of ERP or in connection herewith and no release of Newco shall be effective unless in writing executed by a duly authorized officer of ERP. 6. Restriction on Modification of Guaranties. ERP agrees that following the execution of the Initial ERP Operating Partnership Guaranty and the Alternate ERP Operating Partnership Guaranty, ERP will not consent to a modification of the terms and conditions of the Initial ERP Operating Partnership Guaranty or the terms and conditions of the Alternate ERP Operating Partnership Guaranty which would increase Newco's obligations under this Agreement, without Newco's prior written consent, unless (in the case of the Alternate ERP Operating Partnership Guaranty) ERP is required to enter into an Alternate ERP Operating Partnership Guaranty in such form pursuant to the Credit Enhancement Agreement. 7. Remedies; Attorneys' Fees and Enforcement Costs. If either party shall fail to perform its obligations under this Agreement, the other party shall be entitled to pursue any and all remedies, singly, successively or in combination (including, without limitation, direct and consequential damages, the remedy of specific performance and injunctive relief) available to it at law, in equity or pursuant to statute. In the event of any action or proceeding at law or in equity between ERP and Newco to enforce any provision of this Agreement or to protect or establish any right or remedy of either party hereunder, the unsuccessful party to such litigation (after exhaustion of all appeals) shall pay to the prevailing party all costs and expenses, including reasonable attorneys' fees incurred therein by such prevailing party, and if such prevailing party shall recover judgment in any such action or proceeding, such costs and expenses (including such attorneys' fees) as are related to said action or proceeding, or as were incurred by the prevailing party in any lower court proceedings which have been overturned, shall be included in and as a part of such judgment. 8. Notices. All notices herein required shall be in writing and shall be served on the parties at the addresses or telecopy numbers as set forth herein. The mailing of a notice by registered or certified mail, return receipt requested, the "faxing" of a notice by telecopy or notice sent by overnight courier or messenger shall be deemed sufficient service hereunder. Notices shall be deemed given as of (i) the second (2nd) business day after the date of mailing if mailed by registered or certified mail as aforesaid, (ii) the new business day after the date of sending, if sent by overnight courier, (iii) the time received if delivered by messenger, or (iv) the date received if given by telecopy as aforesaid, if received during normal business hours, otherwise, on the next business day. Notices shall be sent as follows: If to ERP: ERP Operating Limited Partnership c/o Equity Residential Properties Trust Two North Riverside Plaza, Suite 400 Chicago, Illinois 60606 Attention: President Fax No. (312) 207-5243 with a copy to: Equity Residential Properties Trust Two North Riverside Plaza, Suite 400 Chicago, Illinois 60606 Attention: Bruce C. Strohm, Esq. Fax No. (312) 454-0039 and to: Rudnick & Wolfe 203 N. LaSalle Street, Suite 1800 Chicago, Illinois 60601 Attention: Errol R. Halperin, Esq. Fax No. (312) 236-7516 If to Newco: Wellsford Real Properties, Inc. 610 Fifth Avenue, 7th Floor New York, New York 10020 Attention: Edward Lowenthal Fax No. (212) 333-2323 with a copy to: Brownstein Hyatt Farber & Strickland, P.C. 410 17th Street, 22nd Floor Denver, Colorado 80202 Attention: Wayne H. Hykan, Esq. Fax No. (303) 623-1956 9. State Law. This Agreement shall be construed and interpreted in accordance with the substantive laws of the State of Illinois without regard to principles of conflicts of laws. 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 OR NEW YORK 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 COURT OR FEDERAL COURT SITTING IN THE CITY OF NEW YORK. 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. 11. Headings. The headings used herein are for convenience only and do not limit or alter the terms of this Agreement or in any way affect the meaning or interpretation of this Agreement. 12. Successors and Assigns. All rights of ERP and Newco shall inure to the benefit of their successors and assigns, and all obligations, liabilities, and duties of Newco hereunder shall bind their successors and assigns, provided that Newco shall not be permitted to assign its rights and obligations under this Agreement without the prior written consent of ERP, which may be withheld in ERP's sole and absolute discretion. 13. Entire Agreement; Amendment and Modification. This Agreement constitutes the entire agreement and understanding of the parties hereto in respect of the subject matter contained herein, supersedes all prior agreements and understandings, both written and oral, between the parties in respect of the subject matter hereof or thereof and no changes, amendments, or alterations hereto shall be effective unless pursuant to written instrument executed by Newco and ERP. 14. Waiver of Strict Compliance. No waiver or failure of ERP to exercise any right, power or remedy or to insist upon strict compliance with any obligation, covenant, agreement, representation, warranty, or condition shall operate as a waiver of, or estoppel with respect to, any subsequent or other failure to comply with such obligation, covenant, agreement, representation, warranty, or condition. 15. Severability. In the event that any provision of this Agreement, or the application thereof to any particular party or circumstance, is found by a court of competent jurisdiction to be invalid or unenforceable (in whole or in its application to a particular party or circumstance), the remaining provisions of this Agreement or the application thereof to different parties or circumstances, as the case may be, shall not be affected thereby and this Agreement shall remain in full force and effect in all other respects. 16. Time of the Essence. The parties hereby acknowledge and agree that time is and shall be of the essence hereof. [Signature page follows] SIGNATURE PAGE TO REIMBURSEMENT AND INDEMNIFICATION AGREEMENT IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. WELLSFORD REAL PROPERTIES, INC., a Maryland corporation By:/s/Edward Lowenthal ------------------------------- Name: Edward Lowenthal Title: President ERP OPERATING LIMITED PARTNERSHIP, an Illinois limited partnership By: Equity Residential Properties Trust, a Maryland real estate investment trust, its general partner By:/s/ Bruce C. Strohm --------------------------- Name: Bruce C. Strohm Title: Executive Vice President EX-10.23 22 GUARANTY This GUARANTY ("Guaranty") is executed as of May 30, 1997, by ERP Operating Limited Partnership, an Illinois limited partnership ("Guarantor"), in favor of and for the benefit of Dresdner Bank AG, New York Branch, a banking corporation organized and existing under the laws of The Federal Republic of Germany, acting by and through its New York Branch (the "Bank"). W I T N E S S E T H: WHEREAS, Palomino Park Public Improvements Corporation, a Colorado nonprofit corporation (the "Bond Issuer"), has issued its Assessment Lien Revenue Bonds, Series 1995 (the "Bonds") pursuant to the terms of a Trust Indenture, dated as of September 1, 1995 (the "Bond Indenture"), between the Bond Issuer and United States Trust Company of New York, as Trustee (the "Bond Trustee"), the proceeds of which have been or will be used primarily to finance certain water, sewer, street and park facilities for The Park at Highlands Ranch, a master-planned community in Douglas, Colorado, comprising approximately 182 acres planned for development in five phases (the "Development"); and WHEREAS, in order to secure the payment of principal of and interest on the Bonds, the Bank has issued an irrevocable Letter of Credit (together with any extensions, renewals or replacements thereof, the "Letter of Credit"), in accordance with the terms of a Letter of Credit Reimbursement Agreement, dated as of December 1, 1995 (the "Original Reimbursement Agreement"), between the Bank, and the Bond Issuer and Wellsford Real Estate Investment Trust ("Wellsford REIT"), as account parties; and WHEREAS, Wellsford REIT intends to spin-off Wellsford Real Properties, Inc. ("WRP," and together with the Bond Issuer, the "Account Parties") and merge with Equity Residential Properties Trust, a Maryland real estate investment trust ("ERP REIT"), with Wellsford REIT being the surviving entity and being renamed Equity Residential Properties Trust; and WHEREAS, Wellsford REIT has requested that WRP succeed to the interest of Wellsford REIT under the Reimbursement Agreement, in accordance with the provisions of that certain First Amendment to Letter of Credit Reimbursement Agreement, dated as of the date hereof, between the Bank, the Bond Issuer, Wellsford REIT and WRP (the "First Amendment" and together with the Original Reimbursement Agreement, the "Reimbursement Agreement"), and that certain Assignment and Assumption Agreement, dated as of the date hereof, by and between Wellsford REIT and WRP (the "Assignment Agreement") (capitalized terms used herein without definition have the meanings given such terms in the Reimbursement Agreement unless otherwise expressly indicated, provided, however, that capitalized terms used in section 4.4 and not otherwise defined in this Guaranty have the meanings given such terms in Annex A attached hereto); and WHEREAS, the Bank and the Bond Issuer have been asked to consent to the Spin Off and the Merger; and WHEREAS, in order to induce the Bank to consent to the Assignment Agreement, the Spin Off and the Merger and to enter into the First Amendment, Guarantor, which is a majority-owned subsidiary of ERP REIT and after the Merger will be a majority-owned subsidiary of Wellsford REIT (with Wellsford REIT being renamed "Equity Residential Properties Trust"), has offered to enter into this Guaranty for the benefit and in favor of the Bank; and WHEREAS, both through the Merger and accompanying transactions and through its direct and indirect ownership interests in both WRP and the Development pursuant to the Spin Off and the Merger, Guarantor will directly benefit from the transactions contemplated hereby. NOW, THEREFORE, as an inducement to the Bank to execute the First Amendment and the Assignment Agreement and for other good and valuable consideration, the receipt and legal sufficiency of which are hereby acknowledged, Guarantor hereby agrees as follows: ARTICLE V NATURE AND SCOPE OF GUARANTY 5.1 Guaranty of Obligation. Guarantor hereby irrevocably and unconditionally guarantees to the Bank and its successors and assigns the due and punctual payment and performance in full of all Guaranteed Obligations (as herein defined) as and when the same shall become due and payable, whether by lapse of time, by acceleration of maturity or otherwise (including amounts that would become due but for the operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. Section 362(a)). 5.2 Definition of Guaranteed Obligations. The term "Guaranteed Obligations" is used herein to mean the punctual payment when due, whether at stated maturity, by acceleration or otherwise, of all obligations of each Account Party, and both of them, now or hereinafter existing under the Reimbursement Agreement and the Related Documents, including, subject to the provisions of Section 2.1, (if applicable), any extensions, modifications, amendments, substitutions and renewals thereof, whether for principal (including reimbursement of amounts drawn under the Letter of Credit), interest, fees, expenses, indemnification, or otherwise. Notwithstanding anything to the contrary in the Reimbursement Agreement or the Related Documents, (i) the Bank shall not be deemed to have waived any right which the Bank may have under Section 506(a), 506(b), 1111(b) or any other provisions of the U.S. Bankruptcy Code to file a claim for the full amount of the debt secured by the Deed of Trust or to require that all collateral shall continue to secure all of the debt owing to the Bank in accordance with the Reimbursement Agreement and the Related Documents, provided, however, that the exercise of such rights shall not be a condition to or a prerequisite for the exercise of any rights or remedies of the Bank hereunder or under the Reimbursement Agreement or any other Related Document, and (ii) Guarantor shall be liable for the full amount of the Guaranteed Obligations as and when due hereunder. 5.3 Nature of Guaranty. This Guaranty is an irrevocable, absolute, continuing guaranty of payment and not a guaranty of collection. This Guaranty may not be revoked by Guarantor and shall continue to be effective with respect to any Guaranteed Obligations arising or created after any attempted revocation by Guarantor. Subject to the provisions of Section 2.1 hereof, the fact that at any time or from time to time the Guaranteed Obligations may be increased or reduced shall not release or discharge the obligation of Guarantor to the Bank with respect to the Guaranteed Obligations. This Guaranty may be enforced by the Bank and any subsequent holder of the Promissory Notes and shall not be discharged by the assignment or negotiation of all or part of any of the Promissory Notes. 5.4 Guaranteed Obligations Not Reduced by Offset. The Guaranteed Obligations and the liabilities and obligations of Guarantor to the Bank hereunder, shall not be reduced, discharged or released because or by reason of any existing or future offset, claim or defense of any Account Party, or any other party, against the Bank or against payment of the Guaranteed Obligations, whether such offset, claim or defense arises in connection with the Guaranteed Obligations (or the transactions creating the Guaranteed Obligations) or otherwise. 5.5 Payment By Guarantor. Guarantor hereby agrees, in furtherance of the foregoing and not in limitation of any other right which the Bank or any other Person may have at law or in equity against Guarantor by virtue hereof, that upon the failure of any Account Party to pay any of the Guaranteed Obligations when and as the same shall become due, whether at stated maturity, by required prepayment, declaration, acceleration, demand or otherwise, Guarantor will upon demand, without presentment, protest, notice of protest, notice of non-payment, notice of intention to accelerate the maturity, notice of acceleration of the maturity, or any other notice whatsoever, pay, or cause to be paid, in cash, to the Bank, an amount equal to the sum of the unpaid principal amount of all Guaranteed Obligations then due as aforesaid, accrued and unpaid interest on such Guaranteed Obligations at the relevant rate set forth in the Reimbursement Agreement and the Related Documents (including, without limitation, interest which, but for the filing of a petition in bankruptcy with respect to WRP or the Bond Issuer, would have accrued on such Guaranteed Obligations, whether or not a claim is allowed against WRP or the Bond Issuer for such interest in any such bankruptcy proceeding) and all other Guaranteed Obligations then owed to the Bank. 5.6 Payment of Expenses. Guarantor agrees to pay, or cause to be paid, on demand, and to save the Bank harmless against liability for, any and all costs and expenses (including fees and disbursements of counsel and reasonable allocated costs of internal counsel) incurred or expended by the Bank in connection with the enforcement of or preservation of any rights under this Guaranty. The covenant contained in this Section shall survive the payment and performance of the Guaranteed Obligations and the termination of this Guaranty. 5.7 Effect of Bankruptcy. (a) So long as any Guaranteed Obligations remain outstanding, Guarantor shall not, without the prior written consent of the Bank, commence or join with any other Person in commencing any bankruptcy, reorganization or insolvency proceedings of or against either or both of the Account Parties. The obligations of Guarantor under this Guaranty shall not be reduced, limited, impaired, discharge, deferred, suspended or terminated by any proceeding, voluntary or involuntary, involving the bankruptcy, insolvency, receivership, reorganization, liquidation, or arrangement of either or both of the Account Parties or by any defense which either or both of the Account Parties may have by reason of the order, decree or decision of any court or administrative body resulting from any such proceeding. (b) Guarantor acknowledges and agrees that any interest on any portion of the Guaranteed Obligations which accrues after the commencement of any proceeding referred to in clause (a) above (or, if interest on any portion of the Guaranteed Obligations ceases to accrue by operation of law by reason of the commencement of said proceedings, such interest as would have accrued on such portion of the Guaranteed Obligations if said proceedings had not been commenced) shall be included in the Guaranteed Obligations, whether or not a claim is allowed for such interest in any such bankruptcy proceeding, because it is the intention of Guarantor and the Bank that the Guaranteed Obligations which are guaranteed by Guarantor pursuant to this Guaranty should be determined without regard to any rule of law or order which may relieve either or both of the Account Parties of any portion of such Guaranteed Obligations. Guarantor will permit any trustee in bankruptcy, receiver, debtor in possession, assignee for the benefit of creditors or similar person to pay the Bank, or allow the claim of the Bank in respect of, any such interest accruing after the date on which such proceeding is commenced. (c) In the event that all or any portion of the Guaranteed Obligations are paid by either or both of the Account Parties, the obligation of Guarantor hereunder shall continue and remain in full force and effect or be reinstated, as the case may be, in the event that all or any part of such payment(s) are rescinded or recovered directly or indirectly from the Bank as a preference, fraudulent transfer or otherwise, and any such payments which are so rescinded or recovered shall constitute Guaranteed Obligations for all purposes under this Guaranty. It is the intention of Guarantor that Guarantor's obligations hereunder shall not be discharged except by Guarantor's performance of such obligations and then only to the extent of such performance. 5.8 Rights Cumulative. The rights, powers and remedies given to the Bank by this Guaranty are cumulative and shall be in addition to and independent of all rights, powers and remedies given to the Bank by virtue of any statue or rule of law or in any of the Reimbursement Agreement, the Related Documents or any agreement between Guarantor and the Bank or between an Account Party and the Bank. Any forbearance or failure to exercise, and any delay by the Bank in exercising, any right, power or remedy hereunder shall not impair any such right, power or remedy or be construed to be a waiver thereof, nor shall it preclude the further exercise of any such right, power or remedy. 5.9 Notice of Events. As soon as Guarantor obtains knowledge thereof, Guarantor shall give the Bank written notice of any condition or event which has resulted in (a) a material adverse change in the financial condition of Guarantor, or (b) a breach of or noncompliance with any term, condition or covenant contained herein or in any other documents delivered pursuant hereto. 5.10 Successor. The term "WRP" or "Bond Issuer," as applicable, as used herein shall include any new or successor corporation, association, partnership (general or limited), joint venture, trust or other individual or organization formed as a result of any merger, reorganization, sale, transfer, devise, gift or bequest of WRP or Bond Issuer, as applicable, or any interest in WRP or Bond Issuer, as applicable. ARTICLE VI EVENTS AND CIRCUMSTANCES NOT REDUCING OR DISCHARGING GUARANTOR'S OBLIGATIONS Except as otherwise expressly set forth herein, Guarantor agrees that its obligations hereunder are irrevocable, absolute, independent and unconditional and shall not be affected by any circumstance which releases, diminishes, impairs, reduces or adversely affects its obligations hereunder or constitutes a legal or equitable discharge of a guarantor or surety other than payment in full of the Guaranteed Obligations. In furtherance of the foregoing and without limiting the generality thereof, Guarantor agrees as follows: 6.1 Modification. Bank, upon such terms as it deems appropriate, without notice or demand and without affecting the validity or enforceability of this Guaranty or giving rise to any reduction, limitation, impairment, discharge or termination of Guarantor's liability hereunder, from time to time may (i) renew, extend, increase, modify, alter, rearrange, accelerate, or otherwise change the time, place, manner or terms of payment (including without limitation the rate of interest) of the Guaranteed Obligations and (ii) renew, extend, amend, modify, rescind, waive, increase, alter, supplement, rearrange or otherwise change the Reimbursement Agreement, any Related Document or any other document, instrument, contract or understanding between WRP, the Bond Issuer and the Bank, or any other parties, pertaining to the Guaranteed Obligations, whether or not in accordance with the Reimbursement Agreement, such Related Document or such other document; provided, however, that, notwithstanding the foregoing and anything to the contrary contained in this Section 2.1, so long as no Event of Default has occurred and is continuing under this Guaranty, if at any time the Bank and the Account Parties desire to amend, modify, alter or supplement the Reimbursement Agreement or any Related Document (by a written instrument or otherwise) in any way, other than extensions of the Letter of Credit through May 30, 2005 in accordance with Section 9.3 of the Reimbursement Agreement and Exhibit H of the Letter of Credit, the Bank shall first obtain Guarantor's consent to the amendment, modification, alteration, or supplement if the effect thereof is to increase the obligations or impose new obligations upon Guarantor under this Guaranty. If Guarantor's consent was required by the preceding sentence and the Bank fails to obtain Guarantor's consent to such amendment, modification, alteration or supplement, the Bank shall have no obligation or liability to Guarantor and the only consequence of the Bank's failure to obtain Guarantor's consent to such amendment, modification, alteration or supplement shall be that Guarantor shall have no obligation hereunder with respect to the new, additional or increased obligation, as applicable. 6.2 Adjustments. The Bank may enforce this Guaranty notwithstanding any adjustment, indulgence, forbearance or compromise that might be granted or given by the Bank to any Account Party or the Guarantor. 6.3 Disputes with Account Party. Bank may enforce this Guaranty upon the occurrence of an Event of Default under the Reimbursement Agreement or any Related Document notwithstanding the existence of any dispute between the Bank and an Account Party with respect to the existence of such Event of Default. 6.4 Independence of Obligations. The obligations of Guarantor hereunder are independent of the obligations of each of the Account Parties under the Reimbursement Agreement and the Related Documents and the obligations of any other guarantor of the obligations of an Account Party under the Reimbursement Agreement and the Related Documents, and a separate action or actions may be brought and prosecuted against Guarantor whether or not any action is brought against an Account Party or any of such other guarantors and whether or not an Account Party is joined in any such action or actions. The obligations of Guarantor hereunder are independent of any full or partial release of the liability of any Account Party on the Guaranteed Obligations, or any part thereof, or of any co-guarantors, or any other person or entity now or hereafter liable, whether directly or indirectly, jointly, severally, or jointly and severally, to pay, perform, guarantee or assure the payment of the Guaranteed Obligations, or any part thereof, it being recognized, acknowledged and agreed by Guarantor that Guarantor may be required to pay the Guaranteed Obligations in full without assistance or support of any other party, and Guarantor has not been induced to enter into this Guaranty on the basis of a contemplation, belief, understanding or agreement that other parties will be liable to pay or perform the Guaranteed Obligations, or that the Bank will look to other parties to pay or perform the Guaranteed Obligations. Accordingly, it shall not be necessary for the Bank (and Guarantor hereby waives any rights which Guarantor may have to require the Bank), in order to enforce the obligations of Guarantor hereunder, first to (i) institute suit or exhaust its remedies against any Account Party or others liable on any Guaranteed Obligations or any other person, (ii) enforce the Bank's rights against any collateral which shall ever have been given to secure any indebtedness under the Reimbursement Agreement or the Related Documents, (iii) enforce the Bank's rights against any other guarantors of the Guaranteed Obligations, (iv) join any Account Party or any others liable on the Guaranteed Obligations in any action seeking to enforce this Guaranty, (v) exhaust any remedies available to the Bank against any collateral which shall ever have been given to secure any indebtedness under the Reimbursement Agreement or the Related Documents, or (vi) resort to any other means of obtaining payment of the Guaranteed Obligations. The Bank shall not be required to mitigate damages or take any other action to reduce, collect or enforce the Guaranteed Obligations. 6.5 Partial Payment. Guarantor's payment of a portion, but not all, of the Guaranteed Obligations shall in no way limit, affect, modify or abridge Guarantor's liability for any portion of the Guaranteed Obligations which has not been paid. Without limiting the generality of the foregoing, if the Bank is awarded a judgement in any suit brought to enforce Guarantor's covenant to pay a portion of the Guaranteed Obligations, such judgment shall not be deemed to release Guarantor from its covenant to pay the portion of the Guaranteed Obligations that is not the subject of such suit. 6.6 Collateral. Bank, upon such terms as it deems appropriate, without notice or demand and without affecting the validity or enforceability of this Guaranty or giving rise to any reduction, limitation, impairment, discharge or termination of Guarantor's liability hereunder, from time to time may (i) request and accept other guaranties of the Guaranteed Obligations and take, hold and accept security, collateral or guaranty, or other assurances of payment, for the payment of all or any part of this Guaranty or the Guaranteed Obligations; (ii) release, surrender, exchange, substitute, compromise, settle, rescind, waive, alter, subordinate or modify, with or without consideration, any security, property or collateral at any time existing in connection with, or assuring or securing the payment of, all or any part of the Guaranteed Obligations, any other guaranties of the Guaranteed Obligations, or any other obligation of any Person with respect to the Guaranteed Obligations; (iii) allow the waste, deterioration, waste, loss or impairment (including without limitation negligent, willful, unreasonable or unjustifiable impairment) of any collateral, property or security at any time existing in connection with, or assuring or securing payment of, all or any part of the Guaranteed Obligations; or (iv) enforce and apply any security, collateral or property now or hereafter held by or for the benefit of the Bank in respect of this Guaranty or the Guaranteed Obligations and direct the order or manner of sale thereof, or exercise any other right or remedy that the Bank may have against any such security, collateral or property, as the Bank in its discretion may determine consistent with the Reimbursement Agreement and the Related Documents, including foreclosure on any such security, collateral or property pursuant to one or more judicial or nonjudicial sales, whether or not every aspect of any such sale is commercially reasonable, and even though such action operates to impair or extinguish any right to reimbursement or subrogation or other right or remedy of Guarantor against either or both of the Account Parties or any security, collateral or property for the Guaranteed Obligations. 6.7 Invalidity of Guaranteed Obligations. This Guaranty and the obligations of Guarantor hereunder shall be valid and enforceable and shall not be subject to any reduction, limitation, impairment, discharge or termination as a result of the invalidity, illegality or unenforceability of all or any part of the Guaranteed Obligations, or any document or agreement executed in connection with the Guaranteed Obligations, for any reason whatsoever, including without limitation the fact that (i) the Guaranteed Obligations, or any part thereof, exceeds the amount permitted by law, (ii) the obligations of the Guarantor hereunder are, in any respect, more burdensome than permitted by law, (iii) the act of creating the Guaranteed Obligations or any part thereof is ultra vires, (iv) the officers or representatives executing the Promissory Notes, the Reimbursement Agreement or the other Related Documents or otherwise creating the Guaranteed Obligations acted in excess of their authority, (v) the Guaranteed Obligations violate applicable usury laws, (vi) WRP or the Bond Issuer has valid defenses, claims or offsets (whether at law, in equity or by agreement) which render the Guaranteed Obligations wholly or partially uncollectible from any Account Party, including, without limitation, any defense arising by reason of the incapacity or any disability of an Account Party, (vii) the creation, performance or repayment of the Guaranteed Obligations (or the execution, delivery and performance of any document or instrument representing part of the Guaranteed Obligations or executed in connection with the Guaranteed Obligations, or given to secure the repayment of the Guaranteed Obligations) is illegal, uncollectible or unenforceable, (viii) any term of this Guaranty which is or may be in conflict with any principles or provisions of law, statutory or otherwise, (ix) the Guarantor's obligations hereunder qualify or may qualify, for any reason, for any legal or equitable discharge, or (ix) the Promissory Notes, the Reimbursement Agreement or any of the other Related Documents have been forged or otherwise are irregular or not genuine or authentic, it being agreed that Guarantor shall remain liable hereon regardless of whether any Account Party or any other person be found not liable on the Guaranteed Obligations or any part thereof for any reason, whether or not Guarantor shall have had notice of any of the foregoing. 6.8 Notice. Guarantor waives any and all right to notice, demand, presentment, protest, notice of protest, notice of dishonor or notice of action or inaction in connection with this Guaranty, the Reimbursement Agreement, the Related Documents, and any documents or agreements evidencing, securing or relating to any of the Guaranteed Obligations and the obligations hereby guaranteed. 6.9 Other Actions Taken or Omitted. Except as expressly provided in Section 2.1 hereof, this Guaranty and the obligations of Guarantor hereunder shall be valid and enforceable and shall not be subject to any reduction, limitation, impairment, discharge or termination for any other action taken or omitted to be taken with respect to the Reimbursement Agreement and the Related Documents, the Guaranteed Obligations, or the security and collateral therefor, whether or not such action or omission prejudices Guarantor or increases the likelihood that Guarantor will be required to pay the Guaranteed Obligations pursuant to the terms hereof, it is the unambiguous and unequivocal intention of Guarantor that Guarantor shall be obligated to pay the Guaranteed Obligations when due, notwithstanding any occurrence, circumstance, event, action, or omission whatsoever, whether contemplated or uncontemplated, and whether or not otherwise or particularly described herein, which obligation shall be deemed satisfied only upon the full and final payment and satisfaction of the Guaranteed Obligations. ARTICLE VII REPRESENTATIONS AND WARRANTIES In order to induce the Bank to consent to the Spin Off, the Merger and the accompanying transactions, to accept this Guaranty and to enter into the First Amendment and to extend credit thereunder, Guarantor represents and warrants to the Bank that the following statements are true and correct: 7.1 Existence and Power. Guarantor is a limited partnership, duly formed and validly existing as a limited partnership under the laws of the State of Illinois and has all powers and all material governmental licenses, authorizations, consents and approvals required to own its property and assets and carry on its business as now conducted or as it presently proposes to conduct and has been duly qualified and is in good standing in every jurisdiction in which the failure to be so qualified or in good standing is likely to have a material adverse effect on this Guaranty. DGA Power and Authority. Guarantor has the partnership power and authority to execute, deliver and carry out the terms and provisions of this Guaranty to which it is a party, and has taken all necessary partnership action, if any, to authorize the execution and delivery on behalf of Guarantor and the performance by Guarantor of this Guaranty. Guarantor has executed this Guaranty and each of the documents related thereto to which it is a party in accordance with the terms of this Guaranty, and this Guaranty and each such related document constitutes the legal, valid and binding obligation of Guarantor, enforceable in accordance with its terms, except as enforceability may be limited by applicable insolvency, bankruptcy or other laws affecting creditors rights generally, or general principles of equity, whether such enforceability is considered in a proceeding in equity or at law. 7.3 No Violation. Neither the execution, delivery or performance by or on behalf of Guarantor of this Guaranty, nor compliance by Guarantor with the terms and provisions hereof nor the consummation of the transactions contemplated by this Guaranty, (i) will materially contravene any applicable provision of any law, statute, rule, regulation, order, writ, injunction or decree of any court or governmental instrumentality, (ii) will materially conflict with or result in any breach of, any of the terms, covenants, conditions or provisions of, or constitute a default under, or result in the creation or imposition of (or the obligation to create or impose) any lien upon any of the property or assets of Guarantor or any of its Subsidiaries pursuant to the terms of any indenture, mortgage, deed of trust, or other agreement or other instrument to which Guarantor (or of any partnership of which Guarantor is a partner) or any of its Subsidiaries is a party or by which it or any of its property or assets is bound or to which it is subject, or (iii) will cause a material default by Guarantor under any organization document of any Person in which Guarantor has an interest, or cause a material default under Guarantor's agreement or certificate of limited partnership, the consequences of which conflict, breach or default would have a material adverse effect on this Guaranty or Guarantor's ability to perform its obligations hereunder or result in or require the creation or imposition of any lien whatsoever upon any property of the Guaranty or any of its Affiliates. 7.4 Financial Information. The consolidated balance sheet of Guarantor and its Subsidiaries, dated as of December 31, 1996, the related consolidated statements of Guarantor's financial position for the fiscal year then ended, reported on by Ernst & Young LLP, the consolidated balance sheet of Guarantor and its Subsidiaries, dated as of March 31, 1997, and the related consolidated statements of Guarantor's financial position for the fiscal quarter then ended, copies of which have been delivered to the Bank, fairly present, in conformity with generally accepted accounting principles, the consolidated financial position of Guarantor and its Subsidiaries as of such dates and their consolidated results of operations and cash flows for such fiscal year and fiscal quarter, respectively. 7.5 Solvency. As of the date hereof, and after giving effect to the Merger and the transactions related thereto and to this Guaranty and the contingent obligations evidenced hereby, Guarantor is, and will be, solvent, and has and will have assets which, fairly valued, exceed its obligations, liabilities (including contingent liabilities) and debts, and has and will have property and assets sufficient to satisfy and repay its obligations and liabilities. 7.6 Governmental Approvals. No order, consent, approval, license, authorization, or validation of, or filing, recording or registration with, or exemption by, any governmental or public body or authority, or any subdivision thereof, is required to authorize, or is required in connection with the execution, delivery and performance of this Guaranty or the consummation of any of the transactions contemplated hereby other than those that have already been duly made or obtained and remain in full force and effect or those which, if not made or obtained, would not have a material adverse effect on this Guaranty or Guarantor's ability to perform its obligations hereunder. 7.7 Benefit. As of the date hereof, (a) Guarantor owns shares of stock in WRP for which Guarantor has paid consideration in the amount of $3,500,000 and (b) Guarantor owns a twenty percent (20%) interest in Wellsford Park Highlands Corp., which holds a ninety-nine percent (99%) interest in the entities owning the real property in the Development. Moreover, Guarantor will benefit from the Spin Off and the Merger, the consummation of which requires the Bank's consent under the Reimbursement Agreement. Accordingly, Guarantor has received direct benefit from the making of this Guaranty with respect to the Guaranteed Obligations. 7.8 Familiarity and Reliance. Guarantor is familiar with, and has independently reviewed books and records regarding, the financial condition of each of the Account Parties and is familiar with the value of any and all collateral intended to be created as security for the payment of the Bonds, the Promissory Notes and the other Guaranteed Obligations; however, Guarantor is not relying on such financial condition or the collateral as an inducement to enter into this Guaranty. 7.9 No Representation By the Bank. Neither the Bank nor any other party has made any representation, warranty or statement to Guarantor in order to induce Guarantor to execute this Guaranty. 7.10 Legality. The execution, delivery and performance by Guarantor of this Guaranty and the consummation of the transactions contemplated hereunder do not, and will not, contravene or conflict with any law, statute or regulation whatsoever to which Guarantor is subject or constitute a default (or an event which with notice or lapse of time or both would constitute a default) under, or result in the breach of, any indenture, mortgage, deed of trust, charge, lien, or any contract, agreement or other instrument to which Guarantor is a party or which may be applicable to Guarantor. This Guaranty is a legal and binding obligation of Guarantor and is enforceable in accordance with its terms, except as limited by bankruptcy, insolvency or other laws of general application relating to the enforcement of creditors' rights. 7.11 Survival. All representations and warranties made by Guarantor herein shall survive the execution hereof. ARTICLE IV AFFIRMATIVE AND NEGATIVE COVENANTS Guarantor covenants and agrees that, until this Guaranty terminates pursuant to Section 7.1 below: 4.1 Information. Guarantor will deliver to the Bank copies of all certificates, reports, financials and other documents to be delivered to the lenders pursuant to Section 5.1 of that certain Amended and Restated Revolving Credit Agreement, dated as of December 9, 1996, among Guarantor, the banks listed therein, Morgan Guaranty Trust Company of New York, as Lead Manager, Bank of America Illinois, as Co-Lead Manager, The First National Bank of Chicago, as Co-Agent, First Bank National Association, as Co-Agent, and Nationsbank of Texas, N.A., as Co-Agent (the "Guarantor Credit Agreement") within 85 days of the close of the Fiscal Quarter (as defined in Annex A) of Guarantor for each of the first three Fiscal Quarters of the Fiscal Year (as defined in Annex A) and within 125 days of the close of the final Fiscal Quarter of the Fiscal Year. Within 85 days of the close of the Fiscal Quarter of Guarantor for each of the first three Fiscal Quarters of the Fiscal Year and within 125 days of the close of the final Fiscal Quarter of the Fiscal Year, Guarantor shall deliver to the Bank a statement (a "Compliance Certificate") certified by the principal financial officer of Guarantor in the form of Exhibit A hereto setting forth in reasonable detail computations evidencing compliance with the covenants contained in this Article IV. 4.2 Conduct of Business and Maintenance of Existence. Guarantor will continue to engage in business of the same general type as now conducted, and will preserve, renew and keep in full force and effect, its partnership existence and its rights, privileges and franchises necessary for the normal conduct of business unless the failure to maintain such rights and franchises does not have a material adverse effect on this Guaranty or Guarantor's ability to perform its obligations hereunder. 4.3 Existence. Guarantor shall do or cause to be done, all things necessary to preserve and keep in full force and effect its existence and its patents, trademarks, servicemarks, tradenames, copyrights, franchises, licenses, permits, certificates, authorizations, qualifications, accreditation, easements, rights of way and other rights, consents and approvals the nonexistence of which is likely to have a material adverse effect on this Guaranty or Guarantor's ability to perform its obligations hereunder. 4.4 Financial Covenants. (a) Definitions. All capitalized terms contained in this Section 4.4 not otherwise defined in this Guaranty shall have the definitions assigned to such terms in Annex A hereto. (b) Total Liabilities to Gross Asset Value. Guarantor shall not permit the ratio of Total Liabilities to Gross Asset Value of Guarantor and its Subsidiaries to exceed 0.50:1 at any time. (c) Unencumbered Pool. Guarantor shall not permit the ratio of the Unencumbered Asset Value to outstanding Unsecured Debt to be less than 2.5:1 at any time. (d) EBITDA to Fixed Charges Ratio. Guarantor shall not permit the ratio of EBITDA for the then most recently completed Fiscal Quarter to Fixed Charges for the then most recently completed Fiscal Quarter to be less than 1.8:1. (e) Unencumbered Net Operating Income to Unsecured Interest Expense. Guarantor shall not permit the ratio of Unencumbered Net Operating Income for the then most recently completed Fiscal Quarter to Unsecured Interest Expense for the then most recently completed Fiscal Quarter to be less than 2.25:1. (f) Minimum Consolidated Tangible Net Worth. The Consolidated Tangible Net Worth of the Guarantor and its Consolidated Subsidiaries will at no time be less than $1,000,000,000 plus ninety percent (90%) of all Net Offering Proceeds received by ERP REIT, the surviving trust under the Merger (i.e., Wellsford REIT as the surviving entity in the Merger, which will be renamed Equity Residential Properties Trust), or Guarantor on or after December 9, 1996. (g) Calculation. Each of the foregoing ratios and financial requirements shall be calculated as of the last day of each Fiscal Quarter. (h) Accounting Terms and Determinations. Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared in accordance with GAAP applied on a basis consistent (except for changes concurred in by Guarantor's independent public accountants) with the most recent audited consolidated financial statements of Guarantor and its Consolidated Subsidiaries delivered to the Bank; provided that for purposes of references to the financial results and information of "ERP REIT, on a consolidated basis," ERP REIT shall mean the surviving entity from the Merger and shall be deemed to own one hundred percent (100%) of the partnership interests in Guarantor; and provided further that, if Guarantor notifies the Bank that Guarantor wishes to amend any covenant in this Article IV to eliminate the effect of any change in GAAP on the operation of such covenant (or if the Bank notifies Guarantor that it wishes to amend this Article IV for such purpose), then Guarantor's compliance with such covenant shall be determined on the basis of GAAP in effect immediately before the relevant change in GAAP became effective, until either such notice is withdrawn or such covenant is amended in a manner reasonably satisfactory to Guarantor and the Bank. 4.5 Restriction on Fundamental Changes. (a) Guarantor shall not enter into any merger or consolidation, unless (i) Guarantor is the surviving entity, (ii) the entity which is merged into Guarantor is predominantly in the commercial real estate business, (iii) the credit ratings assigned by Standard & Poor's Ratings Services and Moody's Investors Services Inc. (the "Rating Agencies") to the surviving entity's long term unsecured debt or implied senior debt, as applicable, are not lower than the credit ratings assigned by the Rating Agencies to Guarantor's long term unsecured debtor or implied senior debt, as applicable, two months immediately preceding such merger, and (iv) in the case of any merger where the then fair market value of the assets of the entity which is merged into Guarantor is twenty-five percent (25%) or more of the Gross Asset Value (as defined in Annex A) of the surviving entity of such Merger and its Consolidated Subsidiaries (as defined in Annex A), the Bank shall consent thereto in writing, which consent shall not be unreasonably withheld, conditioned or delayed. Guarantor shall not liquidate, wind-up or dissolve (or suffer any liquidation or dissolution), discontinue its business or convey, lease, sell, transfer or otherwise dispose of, in one transaction or series of transactions, all or substantially all of its business or property, whether now or hereafter acquired. Nothing in this Section shall be deemed to prohibit the sale or leasing of portions of the Guarantor's real property assets in the ordinary course of business. (b) Guarantor shall not amend its agreement of limited partnership or other organizational documents in any manner that would have a material adverse effect on this Guaranty or Guarantor's ability to perform its obligations hereunder without the Bank's consent, which shall not be unreasonably withheld. 4.6 Amendments. Guarantor shall not amend, modify, or supplement, or agree to any amendment or modification of, or supplement to, any of the Related Documents to which it is a party. Guarantor shall not amend, modify, or supplement, or agree to any amendment or modification of, or supplement to any of the Spin Off Agreements which would adversely affect any Account Party's ability to satisfy its obligations under the Reimbursement Agreement or any Related Documents, or which would adversely affect Guarantor's ability to satisfy its obligations under this Guaranty, or which would detract from Guarantor's obligations hereunder. ARTICLE V SUBORDINATION OF CERTAIN INDEBTEDNESS 5.1 Guarantor's Rights of Subrogation, Contribution, Etc. Until the Guaranteed Obligations shall have been paid in full and the Letter of Credit shall have expired or been cancelled, Guarantor shall withhold exercise of (a) any claim, right or remedy, direct or indirect, that Guarantor now has or may hereafter have against any Account Party or any of its assets in connection with this Guaranty or the performance by Guarantor of its obligations hereunder, in each case, whether such claim, right or remedy arises in equity, under contract, by statute, under common law or otherwise and including without limitation (i) any right of subrogation, reimbursement or indemnification that Guarantor now has or may hereafter have against an Account Party, (ii) any right to enforce, or to participate in, any claim, right or remedy that the Bank now or may hereafter have against any Account Party, and (iii) any benefit of, and any right to participate in, any collateral or security now or hereafter held by the Bank, and (b) any right of contribution Guarantor may have against any other guarantor of any of the Guaranteed Obligations. Guarantor further agrees that, to the extent the agreement to withhold the exercise of its rights of subrogation, reimbursement, indemnification and contribution as set forth herein is found by a court of competent jurisdiction to be void or voidable for any reason, any rights of contribution Guarantor may have against any such other guarantor, shall be junior to and subordinate to any rights the Bank may have in any such collateral or security, and to any right the Bank may have against such other guarantor. The Bank may use, sell or dispose of any item of collateral or security as it sees fit without regard to any subrogation rights Guarantor may have, and upon any such disposition or sale any rights of subrogation Guarantor may have shall terminate. If any amounts shall be paid to Guarantor on account of any such subrogation, reimbursement or indemnification rights at any time when all Guaranteed Obligations shall not have been paid in full, such amount shall be held in trust for the Bank and shall forthwith be paid over to the Bank to be credited and applied against the Guaranteed Obligations, whether matured or unmatured, in accordance with the terms hereof. 5.2 Subordination of Other Obligations. (a) Any Indebtedness (as defined in Annex A) of an Account Party or any other Palomino Party (as defined in Annex A) now or hereafter held by Guarantor is hereby subordinated in right of payment to the prior payment in full of all obligations then due and owing of such Person now or hereafter existing under the Reimbursement Agreement and the other Related Documents, including, subject to the provisions of Section 2.1 hereof (if applicable), any extensions, modifications, substitutions, amendments and renewals thereof, whether for principal (including reimbursement of amounts drawn under any letter of credit), interest, fees, expenses, indemnification or otherwise (all such obligations by any Palomino Party to the Guarantor being the "Subordinated Obligations"). Guarantor agrees not to ask, demand, sue for, take or receive from any Palomino Party, directly or indirectly, in cash or other property or by set-off or in any other manner (including without limitation from or by way of collateral), payment of all or any of the Subordinated Obligations of such Palomino Party unless and until all obligations of such Palomino Party then due and owing under the Reimbursement Agreement and the other Related Documents have been paid and satisfied in full. Any payment on any Subordinated Obligation collected or received by Guarantor after an Event of Default has occurred and is continuing shall be held in trust for the Bank and shall forthwith be paid over to the Bank to be credited and applied against the Guaranteed Obligations but without affecting, impairing or limiting in any manner the liability of Guarantor under any other provision of this Guaranty. (b) In furtherance and not in limitation of Section 5.2(a): (i) until the Guaranteed Obligations have been paid in full, the Letter of Credit has expired, and this Guaranty has terminated in accordance with Section 7.1, upon any distribution of all or any of the assets of any Palomino Party indebted to Guarantor to creditors of such Palomino Party upon the dissolution, winding up, liquidation, arrangement, reorganization, adjustment, protection, relief, or composition of such Palomino Party or its debts, whether in any bankruptcy, insolvency, arrangement, reorganization, receivership, relief or similar proceedings or upon an assignment for the benefit of creditors or any other marshalling of the assets and liabilities of such Palomino Party or otherwise, any payment or distribution of any kind (whether in cash, property or securities) which otherwise would be payable or deliverable upon or with respect to the Subordinated Obligations of such Palomino Party to Guarantor, shall be paid or delivered directly to the Bank to be credited and applied against the Guaranteed Obligations; and (ii) Guarantor agrees that, until the Guaranteed Obligations have been paid in full, the Letter of Credit has expired, and this Guaranty has terminated in accordance with Section 7.1, it shall not commence, or join with any creditor other than the Bank in commencing, any proceeding against any Palomino Party referred to in Section 5.2(b)(i). 5.3 Claims in Bankruptcy. In the event of receivership, bankruptcy, reorganization, arrangement, debtor's relief, or other insolvency proceedings involving Guarantor as debtor, the Bank shall have the right to prove its claim in any such proceeding so as to establish its rights hereunder and receive directly from the receiver, trustee or other court custodian dividends and payments which would otherwise be payable on account of any debt or liability of an Account Party or any other Palomino Party to Guarantor. Guarantor hereby assigns such dividends and payments to the Bank. Should the Bank receive, for application upon the Guaranteed Obligations, any such dividend or payment which is otherwise payable to Guarantor, and which, as between an Account Party or any other Palomino Party and Guarantor, shall constitute a credit on account of a claim or liability of such Account Party or such other Palomino Party to Guarantor, then upon payment to the Bank in full of all Guaranteed Obligations and the termination of this Guaranty pursuant to Section 7.1 hereof, Guarantor shall become subrogated to the rights of the Bank to the extent that such payments to the Bank on account of such claim or liability have contributed toward the liquidation of the Guaranteed Obligations, and such subrogation shall be with respect to that proportion of the Guaranteed Obligations which would have been unpaid if the Bank had not received dividends or payments on account of such claim or liability. ARTICLE VI EVENTS OF DEFAULT 6.1 Events of Default. The occurrence of any of the following events (including expiration of any specified time) shall constitute an "Event of Default," unless waived by the Bank in writing: (a) failure of Guarantor to pay when due any amount due under this Guaranty within 3 business days following the making of a demand upon Guarantor by the Bank pursuant to Section 1.5 hereof; (b) failure of Guarantor to observe of perform any of the covenants, conditions or provisions of this Guaranty (other than as specified in Sections 6.1(a), 6.1(c), 6.1(d), 6.1(e), 6.1(f), 6.1(g), 6.1(h) or 6.1(i) hereof) and to remedy such failure within 45 days of such failure; (c) any representation or warranty made by Guarantor herein or in any certificate, financial or other statement furnished in connection with this Guaranty or the Amendment shall prove to have been untrue or incomplete in any material respect when made; (d) admission by Guarantor of insolvency or bankruptcy or its inability or failure generally to pay its debts as they become due, or Guarantor makes an assignment for the benefit of creditors or applies for or consents to the appointment of a trustee, custodian or receiver for such Person, or for a major part of its property; (e) filing of a petition or application for the appointment of a trustee or other custodian, liquidator or receiver in bankruptcy, custodian or receiver for Guarantor or all or part of its assets and property or any thereof or a case or other proceeding shall be commenced against Guarantor under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution of liquidation or similar law of any jurisdiction, now or hereafter in effect, and Guarantor shall indicate its approval thereof, consent thereto or acquiescence therein or such petition, application, case or proceeding shall not have been dismissed within 60 days following the commencement thereof; (f) institution of bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings, or other proceedings for relief under any bankruptcy law or similar law for the relief of debtors, by or against Guarantor (other than bankruptcy proceedings instituted by Guarantor against third parties), and, if instituted against Guarantor, allowance or consent by Guarantor to such proceedings or failure to obtain dismissal, stay or other nullification within thirty (30) days after such institution; (g) entrance of a decree or order appointing any such trustee, custodian, liquidator or receiver or adjudicating Guarantor bankrupt or insolvent, or approving a petition in any such case or other proceeding, or a decree or order for relief is entered in respect of Guarantor, in each case of the foregoing in an involuntary case under federal bankruptcy laws as now or hereafter constituted; (h) cancellation, termination, revocation or rescission of this Guaranty otherwise than in accordance with the terms thereof or with the express prior written agreement, consent or approval of the Bank, or any action at law, suit in equity or other legal proceeding to cancel, revoke or rescind this Guaranty shall be commenced by or on behalf of Guarantor or any court or any other governmental or regulatory authority or agency of competent jurisdiction shall make a determination that, or issue a judgment, order, decree or ruling to the effect that, this Guaranty is illegal, invalid or unenforceable in accordance with the terms thereof in any material respect as determined by the Bank; and (i) (a) default by Guarantor in the payment of the principal or the interest on any obligation or Indebtedness under the Guarantor Credit Agreement (as defined in Section 4.1) or any other Recourse Debt (as defined in Annex A) of Guarantor in excess of $10 million; or (b) the occurrence or continuation of any event of default (as defined in the Guarantor Credit Agreement) under the Guarantor Credit Agreement; or (c) any default under any document governing any of Guarantor's other Recourse Debt in excess of $10 million which, in the case of this subsection (c) only, is not cured within the time periods set forth therein. 6.2 Rights and Remedies. Upon the occurrence and continuation of an Event of Default, the Bank, in its sole discretion, (a) may, by notice to Guarantor, declare the obligations of Guarantor hereunder to be immediately due and payable, and the same shall thereupon become immediately due and payable, (b) may deliver concurrently to the Account Parties and the Bond Trustee written notice that an Event of Default has been declared under this Guaranty (and accordingly under the Reimbursement Agreement) and that the Letter of Credit will terminate ten (10) days after receipt of such notice together with a written request that the Bonds be accelerated, (c) may cure any default, event of default or event of nonperformance under this Guaranty or (d) may exercise any other rights or remedies available under this Guaranty, any Related Document, any other agreement or at law or in equity. The rights and remedies of the Bank specified herein are for the sole and exclusive benefit, use and protection of the Bank, and the Bank is entitled, but shall have no duty or obligation to Guarantor, either Account Party, the Bond Trustee, the Bondholders or otherwise, (i) to exercise or refrain from exercising any right or remedy reserved to the Bank hereunder, or (ii) to cause the Account Parties or any other party to exercise or to refrain from exercising any rights or remedy available to it under any of the Related Documents. ARTICLE VII MISCELLANEOUS 7.1 Term. Except for those provisions which by their terms survive the termination of this Guaranty, this Guaranty shall terminate after the occurrence of both (i) the expiration of the Letter of Credit (which under the terms of the Reimbursement Agreement shall not extend beyond May 30, 2005) and (ii) payment in full of all obligations owed to the Bank under this Guaranty, the Reimbursement Agreement and all Related Documents. 7.2 Waiver. No failure to exercise, and no delay in exercising, on the part of Bank, any right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right. The rights of the Bank hereunder shall be in addition to all other rights provided by law. No modification or waiver of any provision of this Guaranty, nor consent to departure therefrom, shall be effective unless in writing and no such consent or waiver shall extend beyond the particular case and purpose involved. No notice or demand given in any case shall constitute a waiver of the right to take other action in the same, similar or other instances without such notice or demand. 7.3 Notices. Any notice, demand, statement, request or consent made hereunder shall be in writing and shall be deemed to be received by the addressee on the third day following the day such notice is deposited with the United States Postal Service first class certified mail, return receipt requested, addressed to the address, as set forth below, of the party to whom such notice is to be given, or to such other address as either party shall in like manner designate in writing. The addresses of the parties hereto are as follows: Guarantor: ERP Operating Limited Partnership c/o Equity Residential Properties Trust Two North Riverside Plaza Chicago, Illinois 60606-2639 Attn: Chief Financial Officer with a copy to Attn: General Counsel Telephone: (312) 474-1300 Facsimile: (312) 454-0434 Bank: Dresdner Bank AG New York Branch 75 Wall Street New York, NY 10005-2889 Attn:Johannes Boeckmann Telephone: (212) 429-2000 Facsimile: (212) 429-2127 7.4 Governing Law. This Guaranty shall be governed by and construed in accordance with the laws of the State of New York and the applicable laws of the United States of America. 7.5 Invalid Provisions. If any provision of this Guaranty is held to be illegal, invalid, or unenforceable under present or future laws effective during the term of this Guaranty, such provision shall be fully severable and this Guaranty shall be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part of this Guaranty, and the remaining provisions of this Guaranty shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance from this Guaranty' unless such continued effectiveness of this Guaranty, as modified, would be contrary to the basic understandings and intentions of the parties as expressed herein. 7.6 Amendments. This Guaranty may be amended only by an instrument in writing executed by Guarantor and the Bank. 7.7 Parties Bound; Assignment. This Guaranty shall be binding upon and inure to the benefit of the parties hereto and their respective successors, assigns and legal representatives; provided, however, that Guarantor may not, without the prior written consent of the Bank, assign any of its rights, powers, duties or obligations hereunder. 7.8 Headings. Section headings are for convenience of reference only and shall in no way affect the interpretation of this Guaranty. 7.9 Recitals. The recital and introductory paragraphs hereof are a part hereof, form a basis for this Guaranty and shall be considered prima facie evidence of the facts and documents referred to therein. 7.10 Rights and Remedies. If Guarantor becomes liable for any indebtedness owing by an Account Party to the Bank, by endorsement or otherwise, other than under this Guaranty, such liability to the Bank shall not be in any manner impaired or affected hereby and the rights of the Bank hereunder shall be cumulative of any and all other rights that the Bank may ever have against Guarantor. The exercise by the Bank of any right or remedy hereunder or under any other instrument or at law or in equity, shall not preclude the concurrent or subsequent exercise of any other right or remedy. 7.11 Entirety. THIS GUARANTY EMBODIES THE FINAL, ENTIRE AGREEMENT OF GUARANTOR AND THE BANK WITH RESPECT TO GUARANTOR'S GUARANTY OF THE GUARANTEED OBLIGATIONS AND SUPERSEDES ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF. THIS GUARANTY IS INTENDED BY GUARANTOR AND THE BANK AS A FINAL AND COMPLETE EXPRESSION OF THE TERMS OF THE GUARANTY, AND NO COURSE OF DEALING BETWEEN GUARANTOR AND THE BANK, NO COURSE OF PERFORMANCE, NO TRADE PRACTICES, AND NO EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OR OTHER EXTRINSIC EVIDENCE OF ANY NATURE SHALL BE USED TO CONTRADICT, VARY, SUPPLEMENT OR MODIFY ANY TERM OF THIS GUARANTY AGREEMENT. THERE ARE NO ORAL AGREEMENTS BETWEEN GUARANTOR AND THE BANK. 7.12 Waiver of Right To Trial By Jury. GUARANTOR HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO TRIAL BY JURY FOR ANY TRIAL RESULTING EITHER DIRECTLY OR INDIRECTLY OUT OF, UNDER OR IN CONNECTION WITH THIS GUARANTY. GUARANTOR FURTHER AGREES THAT, IN THE EVENT OF LITIGATION, IT WILL NOT PERSONALLY OR THROUGH ITS AGENTS OR ATTORNEYS SEEKS TO REPUDIATE THE VALIDITY OF THIS SECTION 7.12, AND IT ACKNOWLEDGES THAT IT FREELY AND VOLUNTARILY ENTERED INTO THIS AGREEMENT TO WAIVE TRIAL BY JURY IN ORDER TO INDUCE THE BANK TO CONSENT TO THE MERGER AND THE ASSIGNMENT AGREEMENT AND TO ENTER INTO THE FIRST AMENDMENT. 7.13 Consent to Jurisdiction and Venue, Etc. Guarantor irrevocably (a) agrees that any suit, action or other legal proceeding arising out of or relating to this Guaranty may be brought in a court of record in the State of New York or in the Courts of the United States located in such state, (b) consents to the jurisdiction of each such court in any such suit, action or proceeding and (c) waives any objection which it may have to the laying of venue of any such suit, action or proceeding in any of such courts and any claim that any such suit, action or proceeding has been brought in an inconvenient forum. Guarantor agrees that a final judgment in any such suit, action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. All mailings under this Section 7.13 shall be by certified mail, return receipt requested. Nothing in this section 7.13 shall affect the right of the Bank to serve legal process in any other manner permitted by law or affect that right of the Bank to bring any suit, actions or proceeding against Guarantor or its property in the courts of any other jurisdiction. 7.14 Cooperation. Guarantor acknowledges that the Bank and its successors and assigns may (i) sell this Guaranty, the Promissory Notes, the Reimbursement Agreement and the Related Documents to one or more investors as a whole loan, (ii) participate the indebtedness under the Reimbursement Agreement or Related Documents secured by this Guaranty to one or more investors, (iii) deposit this Guaranty, the Promissory Notes, the Reimbursement Agreement and the Related Documents with a trust, which trust may sell certificates to investors evidencing an ownership interest in the trust assets, or (iv) otherwise sell any indebtedness under the Reimbursement Agreement or the Related Documents or interest therein to investors (the transactions referred to in clauses (i) through (iv) are hereinafter each referred to as "Secondary Market Transaction"). Guarantor shall cooperate with the Bank in effecting any such Secondary Market Transaction and shall cooperate to implement all requirements imposed by any rating agency involved in any Secondary Market Transaction. Guarantor shall provide such information and documents relating to Guarantor, any Account Party or the Trust Property as the Bank may reasonably request in connection with such Secondary Market Transaction. In addition, Guarantor shall make available to the Bank all information concerning its business and operations that the Bank may reasonably request. The Bank shall be permitted to share all such information with the investment banking firms, rating agencies, accounting firms, law firms and other third-party advisory firms involved with any indebtedness incurred under the Reimbursement Agreement or the Related Documents or the applicable Secondary Market Transaction. It is understood that the information provided by Guarantor to the Bank may ultimately be incorporated into the offering documents for the Secondary Market Transaction and thus various investors may also see some or all of the information. The Bank and all of the aforesaid third-party advisors and professional firms shall be entitled to rely on the information supplied by, or on behalf of, Guarantor in the form as provided by Guarantor. The Bank may publicize the existence of indebtedness incurred under the Reimbursement Agreement and the Related Documents in connection with its marketing for a Secondary Market Transaction or otherwise as part of its business development. 7.15 Assignability to Federal Reserve. The Bank may assign and pledge all or any portion of the obligations owing to it hereunder to any Federal Reserve Bank or the United States Treasury as collateral security pursuant to Regulation A of the Board of Governors of the Federal Reserve System and any Operating Circular issued by such Federal Reserve Bank, provided that any payment in respect of such assigned obligations made by Guarantor to the Bank in accordance with the terms of this Guaranty shall satisfy Guarantor's obligations hereunder in respect of such assigned obligation to the extent of such payment. No such assignment shall release the Bank from its obligations under the Reimbursement Agreement or any other Related Document. 7.16 Facsimile Execution. This Guaranty shall be considered executed and delivered by the Guarantor upon delivery of Guarantor's signature to the Bank by facsimile transmission. Such facsimile signature shall be treated in all respects as having the same effect as an original signature. 7.17 Reinstatement in Certain Circumstances. If at any time any payment of the principal of or interest under the Promissory Notes or any other amount payable by the any Account Party under the Reimbursement Agreement or the Related Documents is rescinded or must be otherwise restored or returned upon the insolvency, bankruptcy or reorganization of any Account Party or otherwise, Guarantor's obligations hereunder with respect to such payment shall be reinstated as though such payment has been due but not made at such time. EXECUTED as of the day and year first above written. GUARANTOR: ERP OPERATING LIMITED PARTNERSHIP By: EQUITY RESIDENTIAL PROPERTIES TRUST, its general partner By: /s/ Bruce C. Strohm ----------------------------------- Print Name: Bruce C. Strohm Print Title: Executive Vice President and General Counsel ANNEX A FINANCIAL COVENANTS DEFINITIONS The following terms, as used in Section 4.4 of the Guaranty and elsewhere in the Guaranty as expressly provided therein, have the following meanings: "Adjusted Asset Value" means, with respect to any Person or Property, (i) for any Property for which an acquisition or disposition has not occurred in the Fiscal Quarter most recently ended by Guarantor or a Financing Partnership, the product of four (4) and a fraction, the numerator of which is EBITDA for such Fiscal Quarter attributable to such Property in a manner reasonably acceptable to the Bank for the Fiscal Quarter most recently ended, and the denominator of which is the FMV Cap Rate, plus (ii) for any Property which has been acquired by Guarantor or a Financing Partnership in the Fiscal Quarter most recently ended, the Net Price of the Property paid by Guarantor or a Financing Partnership for such Property. "Applicable Interest Rate" means (i) with respect to any Fixed Rate Indebtedness, the fixed interest rate applicable to such Fixed Rate Indebtedness at the time in question, and (ii) with respect to any Floating Rate Indebtedness, either (x) the rate at which the interest rate applicable to such Floating Rate Indebtedness is actually capped (or fixed pursuant to an interest rate hedging device), at the time of calculation, if Guarantor has entered into an interest rate cap agreement or other interest rate hedging device with respect thereto or (y) if Guarantor has not entered into an interest rate cap agreement or other interest rate hedging device with respect to such Floating Rate Indebtedness, the greater of (A) the rate at which the interest rate applicable to such Floating Rate Indebtedness could be fixed for the remaining term of such Floating Rate Indebtedness, at the time of calculation, by Guarantor's entering into any unsecured interest rate hedging device either not requiring an upfront payment or if requiring an upfront payment, such upfront payment shall be amortized over the term of such device and included in the calculation of the interest rate (or, if such rate is incapable of being fixed by entering into an unsecured interest rate hedging device at the time of calculation, a fixed rate equivalent reasonably determined by the Bank) or (B) the floating rate applicable to such Floating Rate Indebtedness at the time in question. "Approved Bank" shall mean banks which have (i)(a) a minimum net worth of $500,000,000 and/or (b) total assets of $10,000,000,000, and (ii) a minimum long term debt rating of (a) BBB+ or higher by S&P, and (b) Baa1 or higher by Moody's. "Capital Leases" as applied to any Person, means any lease of any property (whether real, personal or mixed) by that Person as lessee which, in conformity with GAAP, is or should be accounted for as a capital lease on the balance sheet of that Person. "Capital Reserve" shall mean, for any period, $62.50 for each Fiscal Quarter to occur during such period. "Cash and Cash Equivalents" shall mean (i) cash, (ii) direct obligations of the United States Government, including without limitation, treasury bills, notes and bonds, (iii) interest bearing or discounted obligations of Federal agencies and Government sponsored entities or pools of such instruments offered by Approved Banks and dealers, including without limitation, Federal Home Loan Mortgage Corporation participation sale certificates, Government National Mortgage Association modified pass through certificates, Federal National Mortgage Association bonds and notes, and Federal Farm Credit System securities, (iv) time deposits, Domestic and Eurodollar certificates of deposit, bankers acceptances, commercial paper rated at least A-1 by S&P and P-1 by Moody's and/or guaranteed by an Aa rating by Moody's, a AA rating by S&P or better rated credit, floating rate notes, other money market instruments and letters of credit each issued by Approved Banks (provided that the same shall cease to be a "Cash or Cash Equivalent" if at any time any such bank shall cease to be an Approved Bank), (v) obligations of domestic corporations, including, without limitation, commercial paper, bonds, debentures and loan participations, each of which is rated at least AA by S&P and/or Aa2 by Moody's and/or guaranteed by an Aa rating by Moody's, a AA rating by S&P or better rated credit, (vi) obligations issued by states and local governments or their agencies, rated at least MIG-1 by Moody's and/or SP-1 by S&P and/or guaranteed by an irrevocable letter of credit of an Approved Bank (provided that the same shall cease to be a "Cash or Cash Equivalent" if at any time any such bank shall cease to be an Approved Bank), (vii) repurchase agreements with major banks and primary government security dealers fully secured by the U.S. Government or agency collateral equal to or exceeding the principal amount on a daily basis and held in safekeeping, and (viii) real estate loan pool participations, guaranteed by an AA rating given by S&P or Aa2 rating given by Moody's or better rated credit. "Consolidated Subsidiary" means at any date any Subsidiary or other entity which is consolidated with Guarantor in accordance with GAAP. "Consolidated Tangible Net Worth" means at any date the consolidated partner's capital plus the value of preference units of Guarantor and its Consolidated Subsidiaries (determined on a book basis), less their consolidated Intangible Assets, all determined as of such date. For purposes of this definition "Intangible Assets" means with respect to any such intangible assets, the amount (to the extent reflected in determining such consolidated stockholders" equity) of (i) all write-ups (other than write-ups resulting from foreign currency translations and write-ups of assets of a going concern business made within twelve months after the acquisition of such business) subsequent to June 30, 1996 in the book value of any asset (other than Real Property Assets) owned by Guarantor or a Consolidated Subsidiary and (ii) goodwill, patents, trademarks, service marks, trade names, anticipated future benefit of tax loss carry forwards, copyrights, organization or developmental expenses and other intangible assets. "Contingent Obligation" as to any Person means, without duplication, (i) any contingent obligation of such Person required to be shown on such Person's balance sheet in accordance with GAAP, and (ii) any obligation required to be disclosed in the footnotes to such Person's financial statements, guaranteeing partially or in whole any Non-Recourse Indebtedness, lease, dividend or other obligation, exclusive of contractual indemnities (including, without limitation, any indemnity or price-adjustment provision relating to the purchase or sale of securities or other assets) and guarantees of non-monetary obligations (other than guarantees of completion) which have not yet been called on or quantified, of such Person or of any other Person. The amount of any Contingent Obligation described in clause (ii) shall be deemed to be (a) with respect to a guaranty of interest or interest and principal, or operating income guaranty, the Net Present Value of the sum of all payments required to be made thereunder (which in the case of an operating income guaranty shall be deemed to be equal to the debt service for the note secured thereby), calculated at the Applicable Interest Rate, through (i) in the case of an interest or interest and principal guaranty, the stated date of maturity of the obligation (and commencing on the date interest could first be payable thereunder), or (ii) in the case of an operating income guaranty, the date through which such guaranty will remain in effect, and (b) with respect to all guarantees not covered by the preceding clause (a), an amount equal to the stated or determinable amount of the primary obligation in respect of which such guaranty is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof (assuming such Person is required to perform thereunder) as recorded on the balance sheet and on the footnotes to the most recent financial statements of Guarantor required to be delivered pursuant to Section 4.4 of the Guaranty. Notwithstanding anything contained herein to the contrary, guarantees of completion shall not be deemed to be Contingent Obligations unless and until a claim for payment or performance has been made thereunder, at which time any such guaranty of completion shall be deemed to be a Contingent Obligation in an amount equal to any such claim. Subject to the preceding sentence, (i) in the case of a joint and several guaranty given by such Person and another Person (but only to the extent such guaranty is recourse, directly or indirectly to Guarantor), the amount of the guaranty shall be deemed to be 100% thereof unless and only to the extent that such other Person has delivered Cash or Cash Equivalents to secure all or any part of such Person's guaranteed obligations and (ii) in the case of a guaranty (whether or not joint and several) of an obligation otherwise constituting Indebtedness of such Person, the amount of such guaranty shall be deemed to be only that amount in excess of the amount of the obligation constituting Indebtedness of such Person. Notwithstanding anything contained herein to the contrary, "Contingent Obligations" shall be deemed not to include guarantees of Unused Commitments or of construction loans to the extent the same have not been drawn. All matters constituting "Contingent Obligations" shall be calculated without duplication. "Convertible Securities" means evidences of shares of stock, limited or general partnership interests or other ownership interests, warrants, options, or other rights or securities which are convertible into or exchangeable for, with or without payment of additional consideration, shares of common stock of ERP REIT or partnership interests of Guarantor, as the case may be, either immediately or upon the arrival of a specified date or the happening of a specified event. "Debt Service" means, for any period, Interest Expense for such period plus scheduled principal amortization (excluding any individual scheduled principal payment which exceeds 25% of the original principal amount of an issuance of Indebtedness) for such period on all Indebtedness of ERP REIT (calculated as provided in Section 4.4(g) of the Guaranty), on a consolidated basis, plus Guarantor's Share of scheduled principal amortization for such period on all Indebtedness of Investment Affiliates for which there is no recourse to ERP REIT or Guarantor (or any Property thereof), plus, without duplication, ERP REIT's and Guarantor's actual or potential liability for principal amortization for such period on all Indebtedness of Investment Affiliates that is recourse to ERP REIT or Guarantor (or any Property thereof). "EBITDA" means, for any period (i) Net Income for such period, plus (ii) depreciation and amortization expense and other non-cash items deducted in the calculation of Net Income for such period, plus (iii) Interest Expense deducted in the calculation of Net Income for such period, plus, (iv) Taxes deducted in the calculation of Net Income for such period, plus (v) Guarantor's Share of distributed earnings of Investment Affiliates for such period, minus (vi) the gains (and plus the losses) from extraordinary items or asset sales or write-ups or forgiveness of indebtedness included in the calculation of Net Income, for such period, minus (vii) Guarantor's Share of accrued income and losses of Investment Affiliates for such period minus (viii) earnings of Subsidiaries for such period distributed to third parties, all of the foregoing without duplication. "ERP REIT" means the surviving trust under the Merger (as defined in the Reimbursement Agreement) (i.e., Wellsford REIT as the surviving entity in the Merger, which will be renamed Equity Residential Properties Trust). "Financing Partnerships" means (i) those subsidiary limited partnerships for which Guarantor is a limited partner with a 1% limited partnership interest, Guarantor is a general partner with a 98% general partner interest and a QRS Corporation is a general partner with a 1% general partner interest, (ii) those limited liability companies for which Guarantor is a member with a 99% member interest and a QRS Corporation is a member with a 1% member interest, (iii) those general partnerships in which Guarantor is a general partner with a 99% partnership interest and a QRS Corporation is a general partner with a 1% partnership interest, and (iv) those corporations which are wholly-owned and controlled by Guarantor or an entity described in clause (i), (ii) or (iii) of this definition. "Fiscal Quarter" means a fiscal quarter of a Fiscal Year. "Fiscal Year" means the fiscal year of Guarantor and ERP REIT which shall be the twelve (12) month period ending on the last day of December in each year. "Fixed Charges" for any Fiscal Quarter period means the sum of (i) Debt Service for such period, (ii) the product of the average number of apartment units owned (directly or beneficially) by Guarantor or a Financing Partnership during such period and the Capital Reserve for such period, (iii) Guarantor's Share of the aggregate sum of the product of the average number of apartment units owned (directly or beneficially) by each Investment Affiliate during such period and the Capital Reserve for such period, and (iv) dividends on preferred units payable by Guarantor for such period. "Fixed Rate Indebtedness" means all Indebtedness which accrues interest at a fixed rate. "Floating Rate Indebtedness" means all Indebtedness which is not Fixed Rate Indebtedness and which is not a Contingent Obligation or an Unused Commitment. "FMV Cap Rate" means 9%. "GAAP" means generally accepted accounting principles recognized as such in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and the Financial Accounting Standards Board or in such other statements by such other entity as may be approved by a significant segment of the accounting profession, which are applicable to the circumstances as of the date of determination. "Gross Asset Value" means, with respect to any Person or Property, Adjusted Asset Value plus, in the case of any Person, the value of any Cash or Cash Equivalent owned by such Person and not subject to any Lien. "Guarantor Credit Agreement" means that certain Amended and Restated Revolving Credit Agreement, dated as of December 9, 1996, among Guarantor, the Lenders, Morgan Guaranty Trust Company of New York, as lead agent, Bank of America Illinois, as co-lead agent, and The First National Bank of Chicago, First Bank National Association and Nationsbank of Texas, N.A., as co-agents, or any credit or loan agreement replacing or superseding the same. "Guarantor's Share" means Guarantor's or ERP REIT's share of the liabilities of an Investment Affiliate based upon Guarantor's or ERP REIT's percentage ownership of such Investment Affiliate, as the case may be. "Indebtedness" as applied to any Person (and with out duplication), means (a) all indebtedness, obligations or other liabilities of such Person for borrowed money, (b) all indebtedness, obligations or other liabilities of such Person evidenced by Securities or other similar instruments, (c) all Contingent Obligations of such Person, (d) all reimbursement obligations and other liabilities of such Person with respect to letters of credit or banker's acceptances issued for such Person's account or other similar instruments for which a contingent liability exists, (e) all obligations of such Person to pay the deferred purchase price of Property or services, (f) all obligations in respect of Capital Leases (including ground leases) of such Person, (g) all indebtedness obligations or other liabilities of such Person or others secured by a Lien on any asset of such Person, whether or not such indebtedness, obligations or liabilities are assumed by, or are a personal liability of such Person, (h) all indebtedness, obligations or other liabilities (other than interest expense liability) in respect of Interest Rate Contracts and foreign currency exchange agreements (other than Interest Rate Contracts purchased to hedge Indebtedness), (i) ERISA obligations currently due and payable and (j) all other items which, in accordance with GAAP, would be included as liabilities on the liability side of the balance sheet of such Person. "Interest Expense" means, for any period and without duplication, total interest expense, whether paid, accrued or capitalized (including the interest component of Capital Leases but excluding interest expense covered by an interest reserve established under a loan facility) of ERP REIT, on a consolidated basis, including without limitation all commissions, discounts and other fees and charges owed with respect to drawn letters of credit, amortized costs of Interest Rate Contracts incurred on or after December 9, 1996 and the facility fees payable to the lenders under the Guarantor Credit Agreement in accordance with the Guarantor Credit Agreement, Plus Guarantor's Share of accrued, paid or capitalized interest with respect to any Indebtedness of Investment Affiliates for which there is no recourse to ERP REIT or Guarantor, plus, without duplication, ERP REIT's and Guarantor's actual or potential liability for accrued, paid or capitalized interest with respect to Indebtedness of Investment Affiliates that is recourse to ERP REIT or Guarantor calculated for all Fixed Rate Indebtedness, at the actual interest rate in effect with respect to all Indebtedness outstanding as of the last day of such Fiscal Quarter and in the case of all Floating Rate Indebtedness, the greater of (i) (A) the Treasury Rate plus 1.75% for taxable Indebtedness and (B) 7.0% for tax-exempt Indebtedness, (ii) the actual rate of interest in effect with respect to such Floating Rate Indebtedness outstanding for which no Interest Rate Contract is in effect as of the last day of such quarter and (iii) if an Interest Rate Contract is in effect with respect to such Floating Rate Indebtedness, the strike rate payable under such Interest Rate Contract, all determined on an annualized basis. "Interest Rate Contracts" means, collectively, interest rate swap, collar, cap or similar agreements providing interest rate protection. "Investment Affiliate" means any Person in whom ERP REIT or Guarantor holds an equity interest, directly or indirectly, whose financial results are not consolidated under GAAP with the financial results of ERP REIT or Guarantor on the consolidated financial statements of ERP REIT and Guarantor. "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind, or any other type of preferential arrangement, in each case that has the effect of creating a security interest, in respect of such asset. For the purposes of these definitions, Guarantor or any Consolidated Subsidiary shall be deemed to own subject to a Lien any asset which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such asset. "Moody's" means Moody's Investors Services, Inc. or any successor thereto. "Net Income" means, for any period, the net earnings (or loss) after Taxes of Guarantor, on a consolidated basis, for such period calculated in conformity with GAAP. "Net Offering Proceeds" means all cash or other assets received by ERP REIT or Guarantor as a result of the sale of common shares of beneficial interest, preferred shares of beneficial interest, partnership interests, limited liability company interests, Convertible Securities or other ownership or equity interests in ERP REIT or Guarantor less customary costs and discounts of issuance paid by ERP REIT or Guarantor, as the case may be. "Net Operating Income" means, for any period with respect to any Property owned (directly or beneficially) by Guarantor or a Financing Partnership, the net operating income of such Property (attributed to such Property in a manner reasonably acceptable to the Bank) for such period (i) determined in accordance with GAAP, (ii) determined in a manner which is consistent with the past practices of ERP REIT and Guarantor, and (iii) inclusive of an allocation of reasonable management fees and administrative costs to each Property consistent with the past practices of ERP REIT and Guarantor, except that, for purposes of determining Net Operating Income, income shall not (a) include security or other deposits, lease termination or other similar charges, delinquent rent recoveries, unless previously reflected in reserves, or any other items deemed by the Bank to be of a non-recurring nature or (b) be reduced by depreciation or amortization. "Net Price" means, with respect to the purchase and sale of any Property, without duplication, (i) Cash and Cash Equivalents paid as consideration for such purchase or sale, plus (ii) the principal amount of any note received or other deferred payment to be made in connection with such purchase or sale (except as described in clause (iv) below), plus (iii) the value of any other considerations delivered in connection with such purchase or sale (including, without limitation, shares of beneficial interest in ERP REIT and OP Units or Preferred OP Units (as defined in Guarantor's partnership agreement)) (as reasonably determined by the Bank), minus (only in the case of a sale) (iv) the value of any consideration deposited into escrow or subject to disbursement or claim upon the occurrence of any event, minus (only in the case of a sale) (v) the value of any consideration required to be paid to any Person other than Guarantor and its Subsidiaries owning a beneficial interest in such Property, minus (vi) reasonable costs of sale and taxes paid or payable in connection with such purchase or sale. "Net Present Value" shall mean, as to a specified or ascertainable dollar amount, the present value, as of the date of calculation of any such amount using a discount rate equal to the base interest rate in effect under the Guarantor Credit Agreement as of the date of such calculation. "Non-Recourse Indebtedness" means Indebtedness with respect to which recourse for payment is limited to (i) specific assets related to a particular Property or group of Properties encumbered by a Lien securing such Indebtedness or (ii) any Subsidiary (provided that if a Subsidiary is a partnership, there is no recourse of Guarantor or ERP REIT as a general partner of such partnership); provided, however, that personal recourse of Guarantor or ERP REIT for any such Indebtedness for fraud, misrepresentation, misapplication of cash, waste, environmental claims and liabilities and other circumstances customarily excluded by institutional lenders from exculpation provisions and/or included in separate indemnification agreements in non-recourse financing of real estate shall not, by itself, prevent such Indebtedness from being characterized as Non-Recourse Indebtedness. "Palomino Company" means any limited liability company formed by, or with the consent of, WRP, Guarantor, WPHC, Highlands and/or Red Canyon (as such terms are defined in the Reimbursement Agreement) to develop any phase of the Development that is or will be encumbered by the Assessment and Lien (as such term is defined in the Reimbursement Agreement). "Palomino Parties" means, collectively, the Bond Issuer, WRP, WPHC, Highlands, Red Canyon (as defined in the Reimbursement Agreement), and each Palomino Company. "Person" means an individual, a corporation, a partnership, an association, a trust or any other entity or organization, including a government or political subdivision or an agency or instrumentality thereof. "Property" means, with respect to any Person, any real or personal property, building, facility, structure, equipment or unit, or other asset owned by such Person. "Qualifying Unencumbered Property" means any Property from time to time which (i) is an operating multifamily residential property wholly-owned (directly or beneficially) by Guarantor or a Financing Partnership, (ii) is not subject (nor are any equity interests in such Property subject) to a Lien which secures Indebtedness of any Person other than Liens permitted under the Guarantor Credit Agreement, (iii) is not subject (nor are any equity interests in such Property subject) to any covenant, condition, or other restriction which prohibits or limits the creation or assumption of any Lien upon such Property. "QRS Corporation" means those qualified ERP REIT subsidiaries wholly owned by ERP REIT. "Real Property Assets" means as of any time, the real property assets (including interests in participating mortgages in which Guarantor's interest therein is characterized as equity according to GAAP) owned directly or indirectly by Guarantor and the Consolidated Subsidiaries at such time. "Recourse Debt" means Indebtedness that is not Non-Recourse Indebtedness. "S&P" means Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc., or any successor thereto. "Secured Debt" means Indebtedness, the payment of which is secured by a Lien on any Property owned or leased by ERP REIT, Guarantor, or any Subsidiary. "Securities" means any stock, partnership interests, shares, shares of beneficial interest, voting trust certificates, bonds, debentures, notes or other evidences of indebtedness, secured or unsecured, convertible, subordinated or otherwise, or in general any instruments commonly known as "securities," or any certificates of interest, shares, or participations in temporary or interim certificates for the purchase or acquisition of, or any right to subscribe to, purchase or acquire any of the foregoing, but shall not include any evidence of the obligations. "Subsidiary" means any corporation or other entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by Guarantor. "Taxes" means all federal, state, local and foreign income and gross receipts taxes. "Total Liabilities" means, as of the date of determination and without duplication, all Indebtedness of ERP REIT (calculated as provided in Section 4.4(g) of the Guaranty), on a consolidated basis, Plus Guarantor's Share of all Indebtedness of Investment Affiliates for which there is no recourse to ERP REIT or Guarantor (or any Property thereof) plus the actual or potential liability of ERP REIT, Guarantor or any Subsidiary for any Indebtedness of Investment Affiliates that is recourse to ERP REIT or Guarantor (or Property thereof) plus accounts payable incurred in the ordinary course of business. "Treasury Rate" means, as of any date, a rate equal to the annual yield to maturity on the U.S. Treasury Constant Maturity Series with a ten year maturity, as such yield is reported in Federal Reserve Statistical Release H.15 -- Selected Interest Rates, published most recently prior to the date the applicable Treasury Rate is being determined. Such yield shall be determined by straight line linear interpolation between the yields reported in Release H.15, if necessary. In the event Release H.15 is no longer published, the Bank shall select, in its reasonable discretion, an alternate basis for the determination of Treasury yield for U.S. Treasury Constant Maturity Series with ten year maturities. "Unencumbered Asset Value" means (i) a fraction, the numerator of which is the product of four (4) and the aggregate Unencumbered Net Operating Income for the most recently ended Fiscal Quarter which is attributable (in a manner reasonably acceptable to the Bank) to Qualifying Unencumbered Properties owned (directly or beneficially) by Guarantor or any Financing Partnership (exclusive of Unimproved Assets) for the entire Fiscal Quarter and the denominator of which is the FMV Cap Rate Plus (ii) for all Qualifying Unencumbered Properties wholly-owned (directly or beneficially) by Guarantor or any Financing Partnership which have been acquired (directly or indirectly) by Guarantor or any Financing Partnership in the Fiscal Quarter most recently ended, the aggregate Net Price of the Qualifying Unencumbered Properties paid by Guarantor or its Affiliates for such Qualifying Unencumbered Properties. "Unencumbered Net Operating Income" means for any period for all Qualifying Unencumbered Properties owned (directly or beneficially) by Guarantor or any Financing Partnership during the applicable period, Net Operating Income from each such Qualifying Unencumbered Property minus an amount equal to the product of the average number of apartment units in such Qualifying Unencumbered Property during such period and the Capital Reserve for such period. "Unimproved Assets" means Real Property Assets upon which no material improvements have been completed which completion is evidenced by a certificate of occupancy or its equivalent. "Unsecured Debt" means Indebtedness of Guarantor and any Financing Partnership which is not Secured Debt. "Unsecured Interest Expense" means Interest Expense other than Interest Expense payable in respect of Secured Debt. "Unused Commitments" shall mean an amount equal to all unadvanced funds (other than unadvanced funds in connection with any construction loan) which any third party is obligated to advance to Guarantor or another Person or otherwise pursuant to any loan document, written instrument or otherwise. EXHIBIT A FORM OF GUARANTOR COMPLIANCE CERTIFICATE EX-10.24 23 AMENDED AND RESTATED PROMISSORY NOTE Dated: May 30, 1997 FOR VALUE RECEIVED, the undersigned, Wellsford Real Properties, Inc., a Maryland corporation ("WRP"), HEREBY PROMISES TO PAY on the Expiration Date to the order of Dresdner Bank AG, New York Branch, a banking corporation organized and existing under the laws of The Federal Republic of Germany acting through its New York Branch (the "Bank"), the unpaid amount of all obligations of WRP to the Bank pursuant to that certain Letter of Credit Reimbursement Agreement among WRP, Palomino Park Public Improvements Corporation and the Bank dated as of December 1, 1995 (as amended by that certain First Amendment to Letter of Credit Reimbursement Agreement dated as of May 30, 1997, and as further amended from time to time in accordance with its terms, the "Reimbursement Agreement") and the other Related Documents. WRP promises to pay interest on the unpaid principal amount of this Promissory Note from the date hereof until such principal amount is paid in full, at such interest rates, and payable at such times, as are specified in the Reimbursement Agreement. (Capitalized terms used in this Promissory Note which are not otherwise defined herein have the same meaning as provided in the Reimbursement Agreement.) Both principal and interest are payable in lawful money of the United States of America in immediately available funds at the office of the Bank set forth in the Reimbursement Agreement. This Promissory Note is one the Promissory Notes referred to in, and is entitled to the benefits of, the Reimbursement Agreement and the other Related Documents. The Reimbursement Agreement, among other things, contains provisions for acceleration of the maturity hereof upon the happening of certain stated events and also for optional and mandatory prepayments on account of principal hereof prior to the maturity hereof upon the terms and conditions therein specified. WRP waives presentment, demand, protest or notice of any kind in connection with this Promissory Note. WRP agrees to pay to the holder hereof, on demand, all costs and expenses (including legal fees and disbursements) incurred in connection with the enforcement and collection of this Promissory Note. This Promissory Note shall be governed by, and construed in accordance with, the laws of the State of New York. WELLSFORD REAL PROPERTIES, INC. By: /s/ David M. Strong ------------------------------------- Name: David M. Strong Title: Vice President EX-10.25 24 CONTRIBUTION AND DISTRIBUTION AGREEMENT CONTRIBUTION AND DISTRIBUTION AGREEMENT, dated as of May 30, 1997, by and between WELLSFORD RESIDENTIAL PROPERTY TRUST, a Maryland real estate investment trust ("Wellsford Parent"), and WELLSFORD REAL PROPERTIES, INC., a Maryland corporation ("Newco"). RECITALS: WHEREAS, Wellsford Parent and Equity Residential Properties Trust, a Maryland real estate investment trust ("EQR"), have entered into an Agreement and Plan of Merger dated as of January 16, 1997 (the "Merger Agreement"), providing for the merger of EQR with Wellsford Parent (the "Merger"), with Wellsford Parent continuing as the surviving entity of the Merger, upon the terms and subject to the conditions set forth in the Merger Agreement; WHEREAS, the Board of Trustees of Wellsford Parent has determined that Wellsford Parent can maximize the value of certain of its assets by not conveying them in the Merger, and EQR has indicated that it has no interest in acquiring such assets; WHEREAS, the Board of Trustees of Wellsford Parent has deemed it appropriate and advisable, in order to enhance value for the shareholders of Wellsford Parent, prior to the Merger and as contemplated by the Merger Agreement, to (i) contribute to Newco certain of the assets and liabilities of Wellsford Parent and (ii) distribute, immediately prior to the Merger, as a taxable distribution to the holders of Common Shares of Beneficial Interest, $.01 par value of Wellsford Parent (the "Wellsford Parent Common Shares"), all of the outstanding shares of common stock, $.01 par value, of Newco owned by Wellsford Parent (the "Newco Common Stock"); WHEREAS, following such contribution and distribution, EQR shall acquire the remaining businesses, operations, assets and liabilities of Wellsford Parent and its remaining direct and indirect subsidiaries pursuant to the Merger; and WHEREAS, Wellsford Parent and Newco have determined that it is necessary and desirable to set forth the transactions required to effect such contribution and distribution and to set forth other agreements that will govern certain other matters following such distribution. NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained in this Agreement, the parties hereby agree as follows: ARTICLE 1 DEFINITIONS As used in this Agreement, the following terms have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): "Action" means any action, suit, arbitration, inquiry, proceeding or investigation by or before any court, any governmental or other regulatory or administrative agency or commission or any arbitration tribunal. "Affiliate" means, when used with respect to a specified person, another person that, directly or indirectly, controls, is controlled by, or is under common control with, the person specified. "Agent" means the distribution agent to be appointed by Wellsford Parent to distribute to the Holders the shares of Newco Common Stock pursuant to the Distribution. "Assumed Liabilities" has the meaning set forth in Section 2.2. "Code" means the Internal Revenue Code of 1986, as amended, and the Treasury Regulations promulgated thereunder, including any successor legislation. "Commission" means the Securities and Exchange Commission. "Confidential Information" has the meaning set forth in Section 4.3. "Contributed Asset" and "Contributed Assets" have the meaning set forth in Section 2.1. "Contribution" has the meaning set forth in Section 2.4. "Credit Enhancement Agreement" means the Credit Enhancement Agreement of even date herewith between ERP Operating Partnership and Newco. "Distribution" means the distribution prior to the effective time of the Merger by Wellsford Parent to the Holders of all the outstanding shares of Newco Common Stock owned by Wellsford Parent on the Distribution Date on the basis of 0.25 of a share of Newco Common Stock for each outstanding Wellsford Parent Common Share. "Distribution Date" means the date determined pursuant to Section 3.1 on which the Distribution will be effected. "Distribution Record Date" means the close of business on the date to be determined by the Board of Trustees of Wellsford Parent as the record date for determining the shareholders of Wellsford Parent entitled to receive Newco Common Stock in the Distribution, which will be the date on which the Merger is effected. "Effective Time" means the time on the Distribution Date when Wellsford Parent delivers to the Agent instructions directing the Agent to effect the Distribution. "ERP Operating Partnership" means ERP Operating Limited Partnership, an Illinois limited partnership, of which EQR is the general partner. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Governmental Authority" means any government or any agency, bureau, board, commission, court, department, official, political subdivision, tribunal or other instrumentality of any government, whether federal, state or local, domestic or foreign. "Holder" means a holder of record of Wellsford Parent Common Shares on the Distribution Record Date. "Indemnifying Party" has the meaning set forth in Section 5.3. "Indemnitee" has the meaning set forth in Section 5.3. "Indemnitee Notice" has the meaning set forth in Section 5.4. "Intellectual Property Rights" has the meaning set forth in Section 2.1. "IRS" means the Internal Revenue Service. "Liabilities" means any and all debts, liabilities and obligations, absolute or contingent, matured or unmatured, liquidated or unliquidated, accrued or unaccrued, known or unknown, whenever arising, including, without limitation, Taxes and those debts, liabilities and obligations arising under any law, rule, regulation, Action, threatened Action, order or consent decree of any court, any governmental or other regulatory or administrative agency or commission or any award of any arbitration tribunal, and those arising under any contract, commitment or undertaking. "Losses" and "Loss" mean any and all losses, charges, Liabilities, claims, damages, penalties and costs or expenses (including, without limitation, reasonable attorney's fees and any and all expenses whatsoever reasonably incurred in investigating, preparing or defending against any Actions or threatened Actions). "Merger" has the meaning set forth in the recitals. "Newco Common Stock" has the meaning set forth in the recitals. "Newco Indemnitees" has the meaning set forth in Section 5.1. "Newco Liabilities" means, collectively, (i) all the Liabilities of Newco under this Agreement, (ii) all the Liabilities arising out of or in connection with or otherwise relating to (A) the Assumed Liabilities, (B) the Liabilities of Newco and the Newco Subsidiaries, whether incurred before or after the Effective Time, and (C) the assets and conduct of the business of Newco and the Newco Subsidiaries, whether incurred before or after the Effective Time, but shall exclude the liabilities and benefits of Wellsford Parent under the Tri-Party Agreement. "Newco Subsidiaries" mean all Subsidiaries of Newco after giving effect to the transactions contemplated hereby. "Note" means the Promissory Note dated June 28, 1996 by Specified Properties VIII, L.P., a Texas limited partnership. "Palomino Agreement" means the Agreement regarding Palomino Park of even date herewith between Newco and ERP Operating Partnership. "Palomino Bonds" mean the Assessment Lien Revenue Bonds, Series 1995, issued by PPPIC in the original aggregate principal amount of $14,755,000, pursuant to a Trust Indenture dated as of December 1, 1995. "Palomino Park" means the Overall Property, as defined in the Palomino Agreement. "PPPIC" means Palomino Park Public Improvement Corporation, a Colorado nonprofit corporation. "Registration Statement" means the registration statement on Form 10 (or other applicable form) filed with the Commission by Newco pursuant to the requirements of Section 12 of the Exchange Act, and the rules and regulations thereunder, in order to register the Newco Common Stock under Section 12(b) of the Exchange Act. "Representatives" has the meaning set forth in Section 4.3. "Retained Subsidiaries" means all Subsidiaries of Wellsford Parent other than the Newco Subsidiaries. "S-4" means the registration statement on Form S-4 filed with the Commission relating to shares issued in connection with the Merger. "Securities Act" means the Securities Act of 1933, as amended. "Sonterra Documents" has the meaning set forth in Section 2.1. "Subsidiary" means any entity at least 51% of the total outstanding voting interests of which are owned, directly or indirectly, by another entity. "Taxes" means all taxes, charges and fees imposed by the United States or any state, county, local or foreign government or subdivision or agency thereof. "Third-Party Claim" has the meaning set forth in Section 5.4. "Transaction Costs Agreement" means the Transaction and Termination Costs Agreement of even date herewith among Wellsford Parent, EQR and Newco. "Transition Period" means the period from the Effective Time until three months following the Effective Time. "Tri-Party Agreement" means, collectively, the Tri-Party Agreements executed by Wellsford Parent in favor of NationsBank, N.A., as lender under the construction loan financing for Phase I and Phase II of Palomino Park. "Wellsford Parent Common Shares" has the meaning set forth in the recitals. "Wellsford Parent Indemnitees" has the meaning set forth in Section 5.2. "Wellsford Parent Liabilities" means, collectively, (i) all the Liabilities of Wellsford Parent under this Agreement, (ii) all the Liabilities of Wellsford Parent and the Retained Subsidiaries (other than the Newco Liabilities), whether arising before or after the Effective Time, and (iii) the liabilities and benefits of Wellsford Parent under the Tri-Party Agreement. "WPHC" means Wellsford Park Highlands Corp., a Colorado corporation. References to a "Schedule" are, unless otherwise specified, to one of the Schedules attached to this Agreement, and references to a "Section" are, unless otherwise specified, to one of the Sections of this Agreement. ARTICLE 2 CONTRIBUTION OF PROPERTIES AND ASSETS TO NEWCO 2.1 Contribution. Subject to the terms and conditions of this Agreement, immediately prior to the Distribution Date, Wellsford Parent shall, without any representations or warranties, express or implied, assign, transfer, convey and deliver to Newco all of Wellsford Parent's right, title and interest in and to the following properties and assets (each a "Contributed Asset", and collectively, the "Contributed Assets"): (a) all agreements and other documents in connection with a 344-unit apartment project located in Tucson, Arizona, and commonly known as Sonterra at Williams Centre, including, without limitation, those agreements and documents (the "Sonterra Documents") which are listed on Schedule 2.1(a) attached hereto; (b) any and all funds (other than payments of principal and interest under the Note received prior to the Distribution Date), held by Wellsford Parent or its designees under the Sonterra Documents, including, without limitation, any and all tax deposits held pursuant to the Deed of Trust; (c) eighty (80) shares of Class A Common Stock of WPHC, constituting 80% of the outstanding shares of WPHC and 100% of the outstanding voting shares of WPHC; (d) cash in the amount (determined pursuant to Section 1.10 of the Merger Agreement (the "Contribution Funds")) of $12,965,995; (e) the split dollar life insurance agreements listed on Schedule 2.1(e) hereto; (f) the Merrill Lynch Non-Qualified Deferred Compensation Plan Trust Agreement, dated June 20, 1994, by and between Wellsford Parent and Merrill Lynch Trust Company; (g) the Merrill Lynch Non-Qualified Deferred Compensation Plan Revocable Trust Agreement dated May 28, 1997 by and between Wellsford Parent and Merrill Lynch Trust Company; (h) the Merrill Lynch Special Non-Qualified Deferred Compensation Plan adopted by Wellsford Parent; (i) any rights of Wellsford Parent under the Operating Agreement of Park at Highlands LLC dated as of April 27, 1995, as amended, and the Operating Agreement of Red Canyon at Palomino Park LLC, as amended; (j) any rights of Wellsford Parent under the Reimbursement Agreement dated December 1, 1995 between PPPIC and Wellsford Parent; (k) Wellsford Bond Pledge and Security Agreement, dated December 1, 1995, among PPPIC, Wellsford Parent and United States Trust Company of New York (the "Bond Trustee"); (l) the Palomino Park Promissory Note dated December 20, 1995 from PPPIC to Wellsford Parent, delivered pursuant to the Reimbursement Agreement described in clause (i) of this definition; (m) the opinion of Ballard Spahr Andrews & Ingersoll dated December 20, 1995, addressed, inter alia, to Wellsford Parent, with respect to the Bonds; (n) any other agreements between PPPIC and Wellsford Parent, and any other agreements of third parties which run to the benefit of Wellsford Parent with respect to the Palomino Bonds; (o) the Letter of Credit Reimbursement Agreement dated December 1, 1995 among PPPIC, Wellsford Parent and Dresdner Bank AG, New York Branch; (p) any agreements executed by Dresdner Bank AG, New York Branch in favor of Wellsford Parent; (q) any rights of Wellsford Parent under the Bond Pledge and Security Agreement dated December 1, 1995 among PPPIC, Wellsford Parent, Dresdner Bank AG, New York Branch and the Bond Trustee; (r) any other rights or interest of Wellsford Parent and any of the Retained Subsidiaries in any of the documents and agreements regarding Palomino Park (other than the rights of ERP Operating Partnership under the Credit Enhancement Agreement and the Palomino Agreement); (s) furniture, fixtures, equipment and personalty located in the office premises demised pursuant to the Headquarter Lease; and (t) the name "Wellsford", the ticker symbol "WRP", and the plate used in connection with the engraving and printing of the Wellsford Parent share certificates (the "Intellectual Property Rights"). Such contribution shall be effected in such a manner so that Wellsford Parent and the Retained Subsidiaries have no continuing obligation with respect to the Contributed Assets after the Effective Time, except as otherwise provided in the Credit Enhancement Agreement and the Palomino Agreement. 2.2 Assumption. (a) Subject to the terms and conditions of this Agreement, simultaneously with the contribution contemplated by Section 2.1, Newco shall assume and undertake to pay and discharge the following (the "Assumed Liabilities"): (i) All Liabilities of Wellsford Parent with respect to the Contributed Assets, including, without limitation, all liabilities and obligations of Wellsford Parent under each of the agreements giving rise to any of the Contributed Assets; (ii) the obligations arising under the option certificates listed on Schedule 2.2(a) attached hereto (the "Option Agreements"), which will be satisfied by (A) issuing Newco Common Stock pursuant to the Amended Newco Options (defined below) and (B) amending the Option Agreements, as described in Schedule 2.2(a) (as amended, the "Amended Newco Options"); (iii) the obligation to pay William Cockrum 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 Donald D. MacKenzie; and (vi) any other obligation of Wellsford Parent and the Retained Subsidiaries under any other agreement relating to the Sonterra Documents, the Palomino Bonds, PPPIC or Palomino Park, except the obligations of ERP Operating Partnership under the Credit Enhancement Agreement and the Palomino Agreement. (b) Notwithstanding anything contained in Section 2.2(a), Wellsford Parent hereby retains, and Newco does not assume and will have no liability with respect to, Wellsford Parent Liabilities, except as otherwise provided in the Transaction Costs Agreement. 2.3 Agreements and Documents to be Delivered in Connection with Contribution. Wellsford Parent and Newco shall execute and deliver, or cause to be executed and delivered, all agreements, documents and instruments necessary or appropriate to effect the contribution contemplated by Section 2.1 and the assumption contemplated by Section 2.2, including, without limitation, those agreements, documents and instruments described in this Section 2.3: (a) Wellsford Parent and Newco shall execute and deliver, or cause to be executed and delivered, an Assignment and Assumption Agreement for the Contributed Assets and the Assumed Liabilities. (b) Wellsford Parent shall execute and deliver or cause to be executed and delivered the following documents: RDO Assignment of Note and Security Agreements, including an assignment of (a) the Note without recourse, (b) the Deed of Trust (as defined on Schedule 2.1(a) hereto), (c) the Loan Agreement (as defined on Schedule 2.1(a) hereto), (d) the Assignment of Leases and Rents (as defined on Schedule 2.1(a) hereto), (e) the Security Agreement (as defined on Schedule 2.1(a) hereto), and (f) those certain financing statements perfecting Wellsford Parent's security interests granted by the Deed of Trust and the Security Agreement (collectively, the "Security Documents"); (ii) Assignment of Deed of Trust and Security Documents, in form suitable for recording; (iii) Assignment of Option Agreement (as defined on Schedule 2.1(a) hereto), in form suitable for recording; (iv) UCC-2 Assignments, in form suitable for filing or recording, as the case may be; (v) Omnibus Assignment of Mortgage Documents relating to the Sonterra Documents not otherwise covered by the documents listed in this Section 2.3(b); (vi) Assignment of Seller's Waiver (as defined in Schedule 2.1(a) hereto); (vii) Certificate(s) representing eighty (80) shares of Class A Common Stock of WPHC, with valid stock powers attached; and (xii) Bill of Sale granting to Newco all right, title and interest of Wellsford Parent to the Intellectual Property Rights. 2.4 Contributions Not Effected Prior to the Distribution; Transfer Deemed Effective as of the Distribution Date. To the extent that any assignment, transfer, conveyance or delivery (each, a "Contribution") of any Contributed Asset contemplated by this Article II shall not have been consummated on or prior to the Distribution Date, the parties shall cooperate to effect such Contribution as promptly following the Distribution Date as shall be practicable. Nothing herein shall be deemed to require the Contribution of any Contributed Assets which by their terms or operation of law cannot be assigned, transferred, conveyed or delivered; provided, however, that Wellsford Parent and Newco shall use their reasonable best efforts to seek to obtain any necessary consents or approvals for the Contribution of all Contributed Asset contemplated to be contributed pursuant to this Article II. In the event that any Contribution of a Contributed Asset has not been consummated, from and after the Distribution Date Wellsford Parent shall hold such Contributed Asset in trust for the use and benefit of Newco, and shall take such other action as may be reasonably requested by Newco in order to place Newco, insofar as is reasonably possible, in the same position as would have existed had such Contributed Asset been contributed as contemplated by this Article II. As and when any such Contributed Asset is able to be assigned, transferred, conveyed or delivered, as the case may be, such Contribution shall be effected forthwith. The parties agree that, as of the Distribution Date, Newco shall be deemed to have acquired complete and sole beneficial ownership over all of the Contributed Assets, together with all rights, powers and privileges incident thereto and all duties, obligations and responsibilities incident thereto including, without limitation, to the Assumed Liabilities. 2.5 In contemplation of the Contribution and Distribution, Wellsford Parent and Newco have entered into a Sublease whereby Wellsford Parent has subleased to Newco the premises covered by the Lease between Rockefeller Center Properties ("Prime Landlord") and Wellsford Parent, dated June 29, 1994. Newco has agreed to indemnify Wellsford Parent against certain claims of the Prime Landlord pursuant to an Indemnity Agreement executed and delivered by Newco. ARTICLE 3 DISTRIBUTION AND RELATED TRANSACTIONS 3.1 Actions Prior to Distribution. (a) The Board of Trustees of Wellsford Parent (or a duly authorized committee thereof) shall, in its discretion, establish the Distribution Record Date and the Distribution Date and any procedures necessary or appropriate in connection with the Distribution, but in no event shall the Distribution occur prior to such time as the conditions set forth in this Agreement have been satisfied or waived. Such action shall not create any obligation on the part of Wellsford Parent to effect the Distribution or in any way limit Wellsford Parent's power of termination set forth in Section 6.1 of this Agreement. (b) Wellsford Parent and Newco shall prepare and mail, prior to the Distribution Date, to the holders of Wellsford Parent Common Shares, such information concerning Newco, its business, operations and management, the Distribution and such other matters as Wellsford Parent shall reasonably determine to be necessary and as may be required by law. Wellsford Parent and Newco will prepare, and Newco will, to the extent required under applicable law, file with the Commission any such documentation which Wellsford Parent determines are necessary or desirable to effectuate the Distribution, and Wellsford Parent and Newco shall each use its reasonable best efforts to obtain all necessary approvals from the Commission with respect thereto as soon as practicable. (c) Wellsford Parent and Newco shall take all such action as may be necessary or appropriate under the securities or blue sky laws of the United States (and any comparable laws under any foreign jurisdiction) in connection with the Distribution. (d) Wellsford Parent and Newco shall take all reasonable steps necessary and appropriate to cause the conditions set forth in Section 6.1 to be satisfied and to effect the Distribution on the Distribution Date. (e) Newco shall prepare and file, and shall use its reasonable best efforts to have approved on or prior to the Distribution Date, an application for the listing of the Newco Common Stock to be distributed in the Distribution on the New York Stock Exchange, the American Stock Exchange or NASDAQ National Market System, subject to official notice of issuance. 3.2 Distribution. On or prior to the Distribution Date, subject to the conditions and rights of termination set forth in this Agreement, Wellsford Parent shall (i) deliver to the Agent for the benefit of the Holders a single stock certificate representing all the Newco Common Stock owned by Wellsford Parent, endorsed by Wellsford Parent in blank, and (ii) deliver to the Agent written instructions to distribute on the Distribution Date to each Holder or designated transferee or transferees of such Holder 0.25 of a share of Newco Common Stock for each Wellsford Parent Common Share held by such Holder (and, if applicable, cash in lieu of fractional shares). 3.3 Fractional Shares. (a) No Fractional Shares. Notwithstanding anything herein to the contrary, no certificate or scrip evidencing a fractional share of Newco Common Stock shall be issued in connection with the Distribution, and any such fractional share interests to which a Holder would otherwise be entitled will not entitle such Holder to vote or to any rights of a stockholder of Newco. In lieu of any such fractional shares, each Holder who, but for the provisions of this Section 3.3(a), would be entitled to receive a fractional share interest of Newco Common Stock pursuant to the Distribution shall be paid cash, without any interest thereon, as hereinafter provided. Wellsford Parent shall instruct the Agent to determine the number of whole shares and fractional shares of Newco Common Stock allocable to each Holder, to aggregate all such fractional shares into whole shares, to sell the whole shares obtained thereby in the open market at the then prevailing prices on behalf of Holders who otherwise would be entitled to receive fractional share interests and to distribute to each such Holder his, her or its ratable share of the total proceeds of such sale, after making appropriate deductions of the amount required to be withheld for federal income tax purposes and after deducting any applicable transfer taxes. All brokers' fees and commissions incurred in connection with such sales shall be paid by Newco. (b) Unclaimed Stock or Cash. Any Newco Common Stock or cash in lieu of fractional shares and dividends or distributions with respect to Newco Common Stock that remain unclaimed by any Holder 180 days after the Distribution Date shall be returned to Wellsford Parent, and any such Holder shall look only to Wellsford Parent for the Newco Common Stock, cash, if any, in lieu of fractional share interests and any such dividends or distributions to which they are entitled, subject in each case to applicable escheat or other abandoned property laws. 3.4 No Representations or Warranties. Each of the parties hereto understands and agrees that no party hereto is, in this Agreement or in any other agreement or document contemplated by this Agreement or otherwise, making any representation or warranty whatsoever, including, without limitation, as to title, value or legal sufficiency. ARTICLE 4 COVENANTS 4.1 Undertaking by Wellsford Parent. Wellsford Parent hereby undertakes to change its name from "Wellsford Residential Property Trust" to a new name bearing no resemblance to its present name, immediately upon consummation of the Merger. Promptly, and in any event prior to the completion of the Transition Period, Wellsford Parent shall remove all references to the name "Wellsford" from the names of the Retained Subsidiaries and all of its stationery. 4.2 Corporate Records. Wellsford Parent shall use its best efforts to arrange, as soon as practicable following the Distribution Date, for the transportation and delivery to Newco of all original agreements, documents, books, records and files relating to or affecting Newco, the Contributed Assets or the Assumed Liabilities, to the extent such items are not already in the possession of Newco, provided that Wellsford Parent may retain any tax returns, reports, forms or work papers, and Newco will be provided with copies of such returns, reports, forms or work papers. 4.3 Confidentiality. Each of Wellsford Parent and Newco shall hold, and shall cause its respective trustees, directors, officers, Affiliates, employees, agents, accountants, consultants and advisors (collectively, "Representatives") to hold, in strict confidence all information concerning the other relating to the Contributed Assets and the Assumed Liabilities in its possession (except to the extent that such information has been (a) in the public domain through no fault of such party or any of its Representatives, including information contained in the Registration Statement and the S-4 and other statements and reports filed with the Commission, or (b) later lawfully acquired from other sources by such party) to the extent such information (i) relates to the period up to the Effective Time, (ii) relates to this Agreement or (iii) is obtained from the other party pursuant to this Agreement ("Confidential Information"). Each party shall not release or disclose, or permit to be released or disclosed by any of its Representatives or otherwise, any Confidential Information to any other person, except its auditors, attorneys, financial advisors, bankers and other consultants and advisors who need to know such information, unless compelled to disclose by judicial or administrative process or, as advised by its counsel, by other requirements of law. In the event that either party or its Representatives (a "Disclosing Party") is compelled to release or disclose, or permit to be released or disclosed, any Confidential Information as provided in the immediately preceding sentence, such Disclosing Party shall (i) immediately notify the other party (the "Providing Party") of the existence, terms and circumstances surrounding such a requirement, (ii) consult with the Providing Party on the advisability of taking legally available steps to resist or narrow such requirement and (iii) if disclosure of such information is nevertheless required, furnish only that portion of the Confidential Information which, in the opinion of such Disclosing Party's counsel, such Disclosing Party is legally compelled to disclose and to cooperate with any action by the Providing Party to obtain an appropriate protective order or other reliable assurance that confidential treatment will be accorded the Confidential Information (it being agreed that the Providing Party shall reimburse the Disclosing Party for all reasonable out-of-pocket expenses incurred by the Disclosing Party in connection with such cooperation). 4.4 Further Assurances. Each of the parties hereto shall use their reasonable best efforts, prior to, on and after the Distribution Date, to take or cause to be taken, all actions, and to do, or cause to be done, all things, necessary, proper or desirable under applicable laws and regulations to carry out the purposes of this Agreement and to vest Newco with full title to all Contributed Assets. Without limiting the foregoing, Wellsford Parent and Newco shall use their best efforts to obtain all consents and approvals, to enter into all amendatory agreements and to make all filings and applications and take all other actions which may be required for the consummation of the transactions contemplated by this Agreement, including, without limitation, all applicable regulatory filings. ARTICLE 5 INDEMNIFICATION 5.1 Indemnification by Wellsford Parent. Except as otherwise set forth herein, Wellsford Parent, for itself and its Affiliates, and their respective successors and assigns, shall indemnify, defend and hold harmless Newco, each of its directors, officers, employees and agents, and each Affiliate of Newco, and each of the heirs, executors, successors and assigns of any of the foregoing (the "Newco Indemnitees") from and against any and all Losses of the Newco Indemnitees arising out of, by reason of or otherwise in connection with the Wellsford Parent Liabilities, except as otherwise provided in the Transaction Costs Agreement. 5.2 Indemnification by Newco. Except as otherwise set forth herein, Newco, for itself and its Affiliates and their respective successors and assigns, shall indemnify, defend and hold harmless Wellsford Parent, each of its trustees, officers, employees and agents, and each Affiliate of Wellsford Parent, and each of the heirs, executors, successors and assigns of any of the foregoing (the "Wellsford Parent Indemnitees") from and against any and all Losses of the Wellsford Parent Indemnitees arising out of, by reason of or otherwise in connection with the Newco Liabilities, except as otherwise provided in the Credit Enhancement Agreement and the Palomino Agreement. 5.3 Limitations on Indemnification Obligations. The amount which any party (an "Indemnifying Party") is or may be required to pay to any other party (an "Indemnitee") pursuant to Section 5.1 or Section 5.2 shall be reduced (retroactively or prospectively) by any insurance proceeds or other amounts actually recovered by or on behalf of such Indemnitee, in reduction of the related Loss. If an Indemnitee shall have received the payment required by this Agreement from an Indemnifying Party in respect of a Loss and shall subsequently actually receive insurance proceeds or other amounts in respect of such Loss, then such Indemnitee shall pay to such Indemnifying Party a sum equal to the amount of such insurance proceeds or other amounts actually received, up to the aggregate amount of any payments received from such Indemnifying Party pursuant to this Agreement in respect of such Loss. 5.4 Procedure for Indemnification. (a) If an Indemnitee shall receive notice or otherwise learn of the assertion by a person (including, without limitation, any Governmental Authority) who is not a party to this Agreement or the Merger Agreement of any claim or of the commencement by any such person of any Action (a "Third-Party Claim") with respect to which an Indemnifying Party may be obligated to provide indemnification pursuant to this Agreement, such Indemnitee shall give such Indemnifying Party written notice (the "Indemnitee Notice") thereof promptly after becoming aware of such Third-Party Claim; provided, however, that the failure of any Indemnitee to give notice as provided in this Section 5.4 shall not relieve the applicable Indemnifying Party of its obligations under this Article V, except to the extent that such Indemnifying Party is prejudiced by such failure to give notice. Such Indemnitee Notice shall describe the Third-Party Claim in reasonable detail and shall indicate the amount (estimated if necessary) of the Loss that has been or may be sustained by such Indemnitee. (b) The Indemnitee shall provide to the Indemnifying Party on request all information and documentation reasonably necessary to support and verify any Losses which the Indemnitee believes give rise to a claim for indemnification hereunder and shall give the Indemnifying Party reasonable access to all books, records and personnel in the possession or under the control of the Indemnitee which would have bearing on such claim. (c) Upon receipt of the Indemnitee Notice required by Section 5.4(a), the Indemnifying Party shall be entitled, if it so elects, to take control of the defense and investigation with respect to such claim and to employ and engage attorneys of its own choice to handle and defend the same, at the Indemnifying Party's cost, risk and expense, upon written notice to the Indemnitee of such election within 30 days of receipt of Indemnitee's notice. The Indemnifying Party shall not settle any third-party claim that is the subject of indemnification without the written consent of the Indemnitee, which consent shall not be unreasonably withheld; provided, however, that the Indemnifying Party may settle a claim without the Indemnitee's consent if such settlement (i) includes a complete release of the Indemnitee and (ii) does not require the Indemnitee to make any payment or take any action or otherwise materially adversely affect the Indemnitee. After notice from an Indemnifying Party to an Indemnitee of its election to assume the defense of a Third-Party Claim, such Indemnifying Party will not be liable to such Indemnitee under this Article V for any legal or other expenses subsequently incurred by such Indemnitee in connection with the defense thereof; provided, that, if the defendants in any such claim include both the Indemnifying Party and one or more Indemnitees and a conflict of interest between such Indemnitees and such Indemnifying Party exists in respect of such claim, such Indemnitees will have the right to employ separate counsel reasonably satisfactory to the Indemnifying Party to represent such Indemnitees, and in that event the reasonable fees and expenses of such separate counsel (but not more than one separate counsel) will be paid by such Indemnifying Party. (d) If an Indemnifying Party elects to defend or to seek to compromise any Third-Party Claim, the appropriate Indemnitee shall (x) cooperate in all reasonable respects with the Indemnifying Party in connection with such defense and (y) not admit any liability with respect to, or settle, compromise or discharge, such Third-Party Claim without the Indemnifying Party's prior written consent. (e) If the Indemnifying Party shall decline to assume the defense of any such Third-Party Claim, or shall fail to notify the Indemnitee that it will defend such claim within 30 days after receipt of the Indemnitee Notice, the Indemnitee shall defend against such claim (provided that the Indemnitee shall not settle such claim without the consent of the Indemnifying Party). The expenses of all proceedings, contests or lawsuits in respect of such claims shall be borne by the Indemnifying Party but only if the Indemnifying Party is responsible pursuant to this Article V to indemnify the Indemnitee in respect of the Third-Party Claim. (f) In the event of payment by an Indemnifying Party to any Indemnitee in connection with any Third-Party Claim, such Indemnifying Party shall be subrogated to and shall stand in the place of such Indemnitee as to any events or circumstances with respect to which such Indemnitee may have any right or claim relating to such Third-Party Claim against any claimant or plaintiff asserting such Third-Party Claim. Such Indemnitee shall cooperate with such Indemnifying Party in a reasonable manner, and at the cost and expense of such Indemnifying Party, in prosecuting any subrogated right or claim. (g) With respect to any Third-Party Claim for which the Indemnifying Party assumes responsibility for defense, the Indemnifying Party shall inform the Indemnitee, upon the reasonable written request of the Indemnitee, of the status of efforts to resolve such Third-Party Claim. With respect to any Third-Party Claim for which the Indemnifying Party does not assume such responsibility, the Indemnitee shall inform the Indemnifying Party, upon the reasonable written request of the Indemnifying Party, of the status of efforts to resolve such Third-Party Claim. 5.5 Survival of Indemnities. The obligations of Wellsford Parent and Newco under this Article V shall survive the sale or other transfer by it of any assets or businesses or the assignment by it of any Liabilities, with respect to any Loss of the other related to such assets, businesses or Liabilities. ARTICLE 6 CONDITIONS TO THE CONTRIBUTION AND THE DISTRIBUTIONS 6.1 Conditions Precedent to the Distributions. The obligation of Wellsford Parent to cause the Contribution of the Contributed Assets pursuant to Article II and to cause the consummation of the Distributions pursuant to Article III shall be subject, at the option of Wellsford Parent, to the fulfillment or waiver, of each of the following conditions: (a) Effective Date of Registration Statement. Each of the Registration Statement and the S-4 shall have been declared effective by order of the Commission and shall not be the subject of any stop order or proceeding by the Commission seeking a stop order. (b) No Prohibitions. Consummation of the transactions contemplated hereby shall not be prohibited by applicable law and no Governmental Authority of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any statute, rule, regulation, executive order, decree, injunction or other order (whether temporary, preliminary or permanent) which is in effect and which materially restricts, prevents or prohibits consummation of the Distribution, the Merger or any transaction contemplated by this Agreement or the Merger Agreement, it being understood that the parties hereto hereby agree to use their reasonable best efforts to cause any such decree, judgment, injunction or other order to be vacated or lifted as promptly as possible. (c) Conditions Precedent to Merger Satisfied. Each condition to the closing of the Merger set forth in Sections 6.1 and 6.3 of the Merger Agreement shall have been satisfied or waived. ARTICLE 7 MISCELLANEOUS 7.1 Termination. This Agreement may be terminated and the Distribution abandoned for any or no reason at any time prior to the Distribution by and in the sole discretion of the Board of Trustees of Wellsford Parent without the approval of Newco or the shareholders of Wellsford Parent. In the event of such termination, no party will have any liability of any kind to any other party. 7.2 Complete Agreement; Construction. This Agreement, including the Schedules, constitutes the entire agreement between the parties with respect to the subject matter hereof, and supersedes all previous negotiations, commitments and writings with respect to such subject matter. 7.3 Survival of Agreements. Except as otherwise contemplated by this Agreement, all covenants and agreements of the parties contained in this Agreement will survive the Distribution Date. 7.4 Governing Law. This Agreement will be governed by and construed in accordance with the laws of the State of Maryland, without regard to the principles of conflicts of laws thereof. 7.5 Notices. All notices and other communications hereunder must be in writing and must be delivered by hand, mailed by registered or certified mail (return receipt requested) or sent by facsimile transmission to the parties at the following addresses (or at such other addresses for a party as may be specified by like notice) and will be deemed given on the date on which such notice is received: To Wellsford Parent: Before the Distribution Date, to: Wellsford Residential Property Trust 610 Fifth Avenue, 7th Floor New York, NY 10020 Attn: President Fax: (212) 333-2323 After the Distribution Date, to: Equity Residential Properties Trust Two North Riverside Plaza Suite 400 Chicago, IL 60606 Attn: President Fax: (312) 207-5243 To Newco: Wellsford Real Properties, Inc. 610 Fifth Avenue, 7th Floor New York, NY 10020 Attn: President Fax: (212) 333-2323 7.6 Amendments. This Agreement may not be modified or amended except by an agreement in writing signed by the parties. 7.7 Successors and Assigns. Except in connection with the Merger, this Agreement shall not be assignable, in whole or in part, directly or indirectly, by either party hereto without the prior written consent of the other, and any attempt to assign any rights or obligations arising under this Agreement without such consent shall be void; provided, however, that the provisions of this Agreement shall be binding upon, inure to the benefit of and be enforceable by the parties and their respective successors and permitted assigns; provided, further, that the rights and obligations of Wellsford Parent under this Agreement may be assigned after the Merger to ERP Operating Partnership. 7.8 No Third-Party Beneficiaries. Except for the provisions of Article V relating to Indemnitees and as otherwise expressly provided herein, the provisions of this Agreement are solely for the benefit of the parties hereto and their respective successors and permitted assigns and should not be deemed to confer upon third parties any remedy, claim, liability, reimbursement, claim of action or other right in excess of those existing without reference to this Agreement. 7.9 Title and Headings. Titles and headings to sections herein are inserted for the convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement. 7.10 Legal Enforceability. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof. Any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Without prejudice to any rights or remedies otherwise available to any party hereto, each party hereto acknowledges that damages would be an inadequate remedy for any breach of the provisions of this Agreement and agrees that the obligations of the parties hereunder are specifically enforceable. 7.11 Counterparts. This Agreement may be executed in one or more counterparts, each of which when executed shall be deemed an original, but all of which together shall constitute one and the same instrument. 7.12 Non-Recourse. This Agreement and all documents, agreements, understandings and arrangements relating hereto have been entered into or executed on behalf of Wellsford Parent by the undersigned in his capacity as a trustee or officer of Wellsford Parent, which has been formed as a Maryland real estate investment trust pursuant to an Amended and Restated Declaration of Trust of Wellsford Parent dated as of November 2, 1992, as amended and restated, and not individually, and neither the trustees, officers or shareholders of Wellsford Parent shall be personally bound or have any personal liability hereunder. Newco shall look solely to the assets of Wellsford Parent for satisfaction of any liability of Wellsford Parent with respect of this Agreement and all documents, agreements, understandings and arrangements relating to this Agreement and will not seek recourse or commence any action against any of the trustees or officers of Wellsford Parent or any of their personal assets for the performance or payment of any obligation of Wellsford Parent hereunder or thereunder. IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the day and year first above written. WELLSFORD RESIDENTIAL PROPERTY TRUST By: /s/ Jeffrey Lynford ------------------------------------- Name: Jeffrey Lynford Title: Chairman WELLSFORD REAL PROPERTIES, INC. By: /s/ Edward Lowenthal ------------------------------------ Name: Edward Lowenthal Title: President SCHEDULE 2.1(a) SONTERRA DOCUMENTS 1. Loan Agreement ("Loan Agreement"), dated as of June 28, 1996, by and between Wellsford Residential Property Trust and Specified Properties VIII, L.P., a Texas Limited Partnership ("Specified"). 2. Waiver of Borrower's Condition, dated as of July 11, 1996, by Specified. 3. Promissory Note, dated June 28, 1996, by Specified in favor of Wellsford Residential Property Trust in the amount of $17,800,000.00 (the "Note"). 4. Deed of Trust, Security Agreement and Fixture Filing, made as of June 28, 1996, by Specified, as Trustor, Chicago Title Insurance Company, as Trustee, and Wellsford Residential Property Trust, as Beneficiary ("Deed of Trust"). 5. Guaranty Agreement, dated as of June 28, 1996, by John R. Carmichael in favor of Wellsford Residential Property Trust. 6. Assignment of Leases and Rents, dated as of June 28, 1996, by and from Specified to and for the benefit of Wellsford Residential Property Trust ("Assignment of Leases and Rents"). 7. Assignment of Agreements, made as of June 28, 1996, by Specified to Wellsford Residential Property Trust. 8. Consent and Agreement of Manager, by Lexford Properties, Inc., dated as of July 15, 1996. 9. Hazardous Substances Remediation and Indemnification Agreement, dated as of June 28, 1996, by Specified, Westwood Residential No. 9 Limited Partnership, a Texas limited partnership, and Westwood Residential General Partner No. 9, Inc., a Texas corporation, in favor of Wellsford Residential Property Trust. 10. Security Agreement, dated as of June 28, 1996, between Specified and Wellsford Residential Property Trust ("Security Agreement"). 11. Letter Agreement, dated July 9, 1996, between Specified, Wellsford Residential Property Trust and Chicago Title Insurance Company. 12. Lender's Title Policy No. 512169 issued by Chicago Title Insurance Company, dated July 12, 1996 ("Lender's Title Policy"). 13. Option Agreement, made as of June 28, 1996, by and between Specified and Wellsford Residential Property Trust ("Option Agreement"). 14. Memorandum of Option to Purchase, made as of June 28, 1996, by Specified and Wellsford Residential Property Trust. 15. Waiver of Seller's Condition, dated as of July 11, 1996, by Specified ("Seller's Waiver"). 16. Owner's Title Policy No. 512169 issued by Chicago Title Insurance Company, dated September 20, 1996. SCHEDULE 2.1(e) SPLIT DOLLAR LIFE INSURANCE 1. Modification Agreement, dated as of December 11, 1995, by and between Wellsford Residential Property Trust and Edward Lowenthal. 2. Modification Agreement, dated as of December 11, 1995, by and between Wellsford Residential Property Trust and Jeffrey H. Lynford. 3. Modification Assignment, dated as of December 11, 1995, by and between Wellsford Residential Property Trust and Edward Lowenthal. 4. Modification Assignment, dated as of December 11, 1995, by and between Wellsford Residential Property Trust and Jeffrey H. Lynford. SCHEDULE 2.2(a) OPTION AGREEMENTS EX-10.26 25 $28,500,000 COMMON STOCK AND PREFERRED STOCK PURCHASE AGREEMENT Dated as of May 30, 1997 between ERP OPERATING LIMITED PARTNERSHIP as Purchaser, and WELLSFORD REAL PROPERTIES, INC. as Company TABLE OF CONTENTS Article Page 1 DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.1 Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.2 Terms Generally . . . . . . . . . . . . . . . . . . . . . . . . . 7 2 THE AGGREGATE COMMITMENTS. . . . . . . . . . . . . . . . . . . . . . . 7 2.1 The Closing Date Purchase Commitment. . . . . . . . . . . . . . . 7 2.2 Payment of the Closing Date Purchase Commitment . . . . . . . . . 9 2.3 Term Purchase Commitment. . . . . . . . . . . . . . . . . . . . . 9 2.4 Notice of Purchase. . . . . . . . . . . . . . . . . . . . . . . . 9 2.5 Certificates. . . . . . . . . . . . . . . . . . . . . . . . . . . 9 2.6 Right of Purchaser to Purchase Uncalled Term Purchase Commitment. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 3 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . 10 3.1 Organization; Powers. . . . . . . . . . . . . . . . . . . . . . . 10 3.2 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . 11 3.3 The Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . 11 3.4 Enforceability. . . . . . . . . . . . . . . . . . . . . . . . . . 11 3.5 Governmental Approvals. . . . . . . . . . . . . . . . . . . . . . 12 3.6 Financial Statements. . . . . . . . . . . . . . . . . . . . . . . 12 3.7 Title to Properties; Default Under Agreements . . . . . . . . . . 12 3.8 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . 12 3.9 Litigation; Compliance with Laws. . . . . . . . . . . . . . . . . 12 3.10 Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 3.11 Investment Company Act; Public Utility Holding Company Act. . . . 13 3.12 Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 3.13 No Material Misstatements . . . . . . . . . . . . . . . . . . . . 13 3.14 Employee Benefit Plans. . . . . . . . . . . . . . . . . . . . . . 13 3.15 Environmental and Safety Matters. . . . . . . . . . . . . . . . . 13 4 CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . . . 14 4.1 First Purchase.. . . . . . . . . . . . . . . . . . . . . . . 14 4.2 All Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . 15 5 AFFIRMATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . 16 5.1 Existence: Businesses and Properties. . . . . . . . . . . . . . . 16 5.2 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 5.3 Obligations and Taxes . . . . . . . . . . . . . . . . . . . . . . 16 5.4 Financial Statements, Reports, etc. . . . . . . . . . . . . . . . 17 5.5 Litigation and Other Notices. . . . . . . . . . . . . . . . . . . 18 5.6 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 5.7 Maintaining Records; Access to Properties and Inspections . . . . 18 5.8 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . 18 5.9 Issuance of Preferred Stock and Class A Common Stock. . . . . . . 18 5.10 Closing Date Director . . . . . . . . . . . . . . . . . . . . . . 18 5.11 Nomination as Director; Appointment of Person to Attend and Observe Meetings. . . . . . . . . . . . . . . . . . . . . . . . . 18 5.12 Election as Director. . . . . . . . . . . . . . . . . . . . . . . 20 5.13 Voting of Stock . . . . . . . . . . . . . . . . . . . . . . . . . 21 5.14 Sale of Common Stock or Preferred Stock . . . . . . . . . . . . . 21 5.15 Confidentiality.. . . . . . . . . . . . . . . . . . . . . . . . . 22 6 EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . . . . 22 7 MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 7.1 Termination of the Agreement. . . . . . . . . . . . . . . . . . . 24 7.2 Securities Law Matters. . . . . . . . . . . . . . . . . . . . . . 24 7.3 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 7.4 Survival of Agreement . . . . . . . . . . . . . . . . . . . . . . 27 7.5 Binding Effect. . . . . . . . . . . . . . . . . . . . . . . . . . 27 7.6 Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 7.7 Applicable Law. . . . . . . . . . . . . . . . . . . . . . . . . . 27 7.8 Waivers; Amendment. . . . . . . . . . . . . . . . . . . . . . . . 27 7.9 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . . 28 7.10 Waiver of Jury Trial. . . . . . . . . . . . . . . . . . . . . . . 28 7.11 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . 28 7.12 Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 7.13 Jurisdiction; Consent to Service of Process.. . . . . . . . . . . 28 INDEX OF EXHIBITS AND SCHEDULES EXHIBITS Exhibit A - Articles Supplementary Classifying Preferred Stock Exhibit B - Purchase Notice Exhibit C - Charter and Bylaws of the Company Exhibit D - Opinion of Counsel Exhibit E - Registration Rights Agreement Exhibit F - Class A Common Stock Terms SCHEDULES Schedule 3.3 - Capital Stock Schedule 3.5 - Governmental Approvals Schedule 3.8 - Subsidiaries Schedule 3.9 - Litigation Schedule 3.15 - Environmental and Safety Matters COMMON STOCK AND PREFERRED STOCK PURCHASE AGREEMENT THIS COMMON STOCK AND PREFERRED STOCK PURCHASE AGREEMENT dated as of May 30, 1997, (this "Agreement") is entered into between ERP OPERATING LIMITED PARTNERSHIP, an Illinois limited partnership (the "Purchaser"), and WELLSFORD REAL PROPERTIES, INC., a Maryland corporation (the "Company"). In accordance with the terms and subject to the conditions set forth in this Agreement, the Purchaser has agreed to purchase from the Company (i) on the Closing Date the number of shares of Class A common stock, par value $.01 per share, of the Company (the "Class A Common Stock") equal to the Closing Date Purchase Commitment divided by the Issuance Price, and (ii) at any time during the Purchase Term, the aggregate number of shares of Series A Convertible Redeemable Preferred Stock of the Company (the "Preferred Stock") having the terms set forth in Exhibit A hereto, not in excess of the Term Purchase Commitment at the Purchase Price on the date of any such purchase. Accordingly, the Company and the Purchaser agree as follows: ARTICLE 1 DEFINITIONS 1.1 Defined Terms. As used in this Agreement, the following terms shall have the meanings specified below: "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. "Aggregate Purchase Commitment" shall mean the Purchaser's Closing Date Purchase Commitment and Term Purchase Commitment. "Agreement" shall have the meaning ascribed to such term in the preamble hereto. "Business Day" shall mean any day (other than a day which is a Saturday, Sunday or legal holiday in the State of Illinois) on which banks are open for business in Chicago. "Capital Lease" shall mean any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet under GAAP and, for the purposes of this Agreement, the amount of such obligations at any time shall be the capitalized amount thereof at such time determined in accordance with GAAP. "Capital Lease Obligations" of any Person shall mean the obligations of such Person to pay rent or other amounts under any Capital Lease. A "Change in Control" shall be deemed to have occurred with respect to the Company 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) other than the Purchaser or any of its Affiliates 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 the Company; or (b) a change shall occur during any period in the Board of Directors of the Company in which the individuals who constituted the Board of Directors of the Company at the beginning of such period (together with any other director whose election by the Board of Directors of the Company or whose nomination for election by the stockholders of the Company 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 the Company then in office. "Closing Date" shall mean May 30, 1997. "Closing Date Purchase Commitment" shall mean the commitment of Purchaser to purchase the number of shares of Class A Common Stock equal to $3,500,000 divided by the Issuance Price on the Closing Date. "Code" shall mean the Internal Revenue Code of 1986, as the same may be amended from time to time. "Class A Common Stock" shall have the meaning set forth in the preamble hereto. "Common Stock" shall mean shares of common stock, par value $.01 per share, of the Company. "Control" including the terms "Controlling", "Controlled by" and "under common Control with", shall mean the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. "ERISA" shall mean Employment Retirement Income Securities Act, 29 USC 1001, et. seq. (1974), as amended. "ERISA Affiliate" shall mean an affiliate as defined in Section 407(d)(7) of ERISA. "Event of Default" shall have the meaning given such term in Article 6. "Fiscal Year" shall mean the fiscal year of the Company as provided in the Bylaws of the Company. "GAAP" shall mean generally accepted accounting principles, applied on a consistent basis. "Governmental Authority" shall mean any Federal, state, local or foreign court or governmental agency, authority, instrumentality or regulatory body. "Gross Sales Price Per Share of Common Stock" shall mean (a) the gross proceeds from all sales of Common Stock to institutional purchasers taking place on or prior to the Closing Date and subject to written commitments to purchase from institutional purchasers received on or prior to the Closing Date, divided by (b) the aggregate number of shares so sold and subject to such commitments. "Guarantee," when used with respect to any Person, shall mean the incurrence of any obligation, contingent or otherwise, of such Person guaranteeing or having the economic effect of guaranteeing any Indebtedness of any other Person (the "primary obligor") in any manner, whether directly or indirectly, and including any obligation of such Person, direct or indirect, (a) to purchase or pay (or advance or supply funds for the purpose or payment of) such Indebtedness or to purchase (or to advance or supply funds for the purchase of) any security for the payment of such Indebtedness, (b) to purchase property, securities or services for the purpose of assuring the owner of such Indebtedness of the payment of such Indebtedness or (c) to maintain working capital, equity capital or other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness; provided, however, that the term "Guarantee" shall not include endorsements of items by any Person for collection or deposit in the ordinary course of business. "Indebtedness" as applied to any Person shall mean (without duplication) (a) any indebtedness for borrowed money which such Person has directly or indirectly created, incurred or assumed, including, without limitation, Capital Lease Obligations of such Person, (b) any indebtedness incurred other than in the ordinary course of business, whether or not for borrowed money, secured by any Lien in respect of property owned by such Person, whether or not such Person has assumed or become liable for the payment of such indebtedness, (c) any indebtedness, whether or not for borrowed money, with respect to which such Person has become directly or indirectly liable and which represents or has been incurred to finance the purchase price (or a portion thereof) of any property or services or business acquired by such Person, whether by purchase, consolidation, merger or otherwise, (d) any Indebtedness of the character referred to in clauses (a), (b) or (c) of this definition deemed to be extinguished under generally accepted accounting principles but for which such Person remains legally liable and (e) any Indebtedness of any other Person of the character referred to in subdivision (a), (b), (c) or (d) of this definition with respect to which the Person whose Indebtedness is being determined has become liable by way of a Guarantee, including, without limitation, any such Indebtedness of any partnership in which such Person is a general partner. "Issuance Price" shall mean the Gross Sales Price Per Share of Common Stock determined as of the Closing Date or, in the event no sales of Common Stock to any institutional purchaser take place on or prior to the Closing Date or are subject to a written commitment to purchase from any institutional purchaser received on or prior to the Closing Date, "Issuance Price" shall mean the Net Book Value Per Share of Common Stock determined as of the Closing Date. "Lien" shall mean, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, encumbrance, charge or security interest in or on such asset, (b) the interest of a vendor or a lessor under any conditional sale agreement or title retention agreement relating to such asset and (c) in the case of securities, any purchase option, call or similar right of a third party with respect to such securities. "Material Adverse Effect" shall mean a materially adverse effect on the business, assets, prospects, operations or financial condition of the Company and its Subsidiaries taken as a whole. "Merger Agreement" shall mean that certain Agreement and Plan of Merger by and between Equity Residential Properties Trust and Wellsford Residential Property Trust ("Wellsford"), dated as of January 16, 1997. "Multiemployer Plan" shall mean a multiemployer plan as defined in Section 4001(a)(3) of ERISA to which the Company or any ERISA Affiliate (other than one considered an ERISA Affiliate only pursuant to subsection (m) or (o) of Section 414 of the Code) is making or accruing an obligation to make contributions, or has within any of the preceding five plan years made or accrued an obligation to make contributions. "Net Book Value Per Share of Common Stock" shall mean the stockholders' equity of the Company determined in accordance with GAAP as adjusted for all liabilities, including all costs related to the formation of the Company as set forth in the financial statements of the Company, less the liquidation value of all outstanding shares of preferred stock including the Preferred Stock, divided by the number of shares of Common Stock of the Company outstanding on such date, excluding the shares of Class A Common Stock being purchased by the Purchaser on the Closing Date. Net Book Value Per Share of Common Stock shall be determined in accordance with Section 2.1 of this Agreement. "PBGC" shall mean the Pension Benefit Guaranty Corporation referred to and defined in ERISA. "Person" shall mean any natural person, corporation, business trust, joint venture, association, company, partnership or government, or any agency or political subdivision thereof. "Potential Event of Default" shall mean any event or condition which upon notice, lapse of time or both would constitute an Event of Default. "Preferred Stock" shall have the meaning set forth in the preamble hereto. "Purchase" shall have the meaning given such term in Article 4. "Purchase Notice" shall have the meaning given such term in Section 2.4. "Purchase Price" shall mean $25.00 per share of Preferred Stock. "Purchase Term" shall mean the period of time beginning on the Closing Date and ending three years from the Closing Date. "Purchaser" shall have the meaning given to such term in the preamble hereto. "Purchaser Director" shall mean the director which the holders of the Class A Common Stock are entitled to elect pursuant to the Charter of the Company. "Registration Rights Agreement" shall mean that certain Registration Rights Agreement between the Purchaser and the Company dated as of the date hereof. "Responsible Officer" of any corporation shall mean any executive officer of such corporation, and any other officer or similar official thereof responsible for the administration of the obligations of such corporation in respect of this Agreement. "subsidiary" shall mean, with respect to any Person (herein referred to as the "parent"), any corporation, partnership, association or other business entity (a) of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or more than 50% of the general partnership interests are, at the time any determination is being made, owned, controlled or held, or (b) which is, at the time any determination is made, otherwise Controlled, by the parent or one or more subsidiaries of the parent or by the parent and one or more subsidiaries of the parent. "Subsidiary" shall mean any subsidiary of the Company. "Term Closing Date" shall have the meaning given to such term in Section 2.4. "Term Purchase Commitment" shall mean the commitment of Purchaser to purchase 1,000,000 shares of Preferred Stock at the Purchase Price per share. The Term Purchase Commitment is in addition to the Closing Date Purchase Commitment. "Warrant" shall mean any warrant issued pursuant to the Articles Supplementary classifying the Preferred Stock. "Wellsford" shall mean Wellsford Residential Property Trust, a Maryland real estate investment trust. 1.2 Terms Generally. The definitions in Section 1.1 shall apply equally to both the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words "include", "includes" and "including" shall be deemed to be followed by the phrase "without limitation". All references herein to Articles, Sections, Exhibits and Schedules shall be deemed references to Articles and Sections of, and Exhibits and Schedules to, this Agreement unless the context shall otherwise require. Except as otherwise expressly provided herein, all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time; provided, however, that, for purposes of determining compliance with any covenant set forth in Article 5, such terms shall be construed in accordance with GAAP as in effect on the date of this Agreement applied on a basis consistent with the application used in preparing the Company's audited financial statements; provided, further, that in making any calculation required by this Agreement, for the purpose of determining the net income or deficit or item of expense of or for any Subsidiary, notwithstanding any reference herein to any period, the income, deficit or expense included in such calculation with respect to such Subsidiary shall be included only from the date such Subsidiary became a Subsidiary. ARTICLE 2 THE AGGREGATE COMMITMENTS 2.1 The Closing Date Purchase Commitment. Subject to the terms and conditions set forth in this Agreement, the Purchaser hereby agrees to purchase from the Company on the Closing Date, Class A Common Stock, having the terms set forth on Exhibit G hereto, and having an aggregate purchase price of $3,500,000 at a price per share equal to the Issuance Price. The number of shares of Class A Common Stock to be issued on the Closing Date will be $3,500,000 divided by the Issuance Price, unless the Issuance Price is the Net Book Value Per Share of Common Stock. In such event, the number of shares issued on the Closing Date will be 350,000 based upon an estimated Issuance Price of $10.00 per share and such number of shares shall be subject to adjustment after the Closing Date in accordance with the following procedures: (a) Within 30 days after the Closing Date, the Company shall furnish to Purchaser (a) the balance sheet of the Company as of the Closing Date ("Closing Balance Sheet"), showing in reasonable detail the assets and liabilities of the Company, accompanied by the report thereon of Ernst & Young LLP stating that the Closing Balance Sheet has been prepared in conformity with GAAP applied consistently with the principles used in preparing the pro forma financial statements of the Company included in the information furnished to the shareholders of Wellsford in connection with Wellsford's distribution of the capital stock of the Company to the shareholders of Wellsford, and (b) the Company's determination of Net Book Value Per Share of Common Stock in accordance with this Agreement based upon the Closing Balance Sheet. (b) Purchaser shall have the right to object to the Company's determination of the Net Book Value Per Share of Common Stock as not being determined in accordance with this Agreement. If Purchaser does not object to the Company's determination of the Net Book Value Per Share of Common Stock within 15 days after delivery of the Closing Balance Sheet and such determination to Purchaser (such period being referred to as the "Contest Period"), then the Company's determination of the Net Book Value Per Share of Common Stock shall be final, binding and conclusive on the parties. If Purchaser objects to the Company's determination of Net Book Value Per Share of Common Stock, it shall do so by notifying the Company thereof within the Contest Period, which notice shall specify the grounds for such objection in reasonable detail. The parties shall endeavor in good faith to resolve promptly the matters to which Purchaser has objected. If the parties are unable to resolve Purchaser's objections within ten (10) days after Purchaser notified the Company of its objections, the Company shall engage the Chicago, Illinois offices of Ernst & Young LLP (the "Independent Accountants") to examine the calculation of the Net Book Value Per Share of Common Stock in accordance with this Agreement. The Independent Accountants' determination of the Net Book Value Per Share of Common Stock shall be final, binding and conclusive on the parties. (c) The fees of the Independent Accountants for making such determination shall be borne by the parties in the proportion that the difference between the ultimate determination of the Issuance Price by the Independent Accountants and each party's position as to the Issuance Price bears to each other. For example, if one party's position was that the Issuance Price was $2.50 and the other party's was $3.00 and the Independent Accounts' determination was $2.75, each party would bear 50% of the Independent Accountants' fees. (d) The actual number of shares of Class A Common Stock to be purchased by Purchaser shall be $3,500,000 divided by the Issuance Price as finally determined pursuant to clause (b) of this Section (the "Final Number"). If the Final Number is more than 350,000 shares of Class A Common Stock, within 10 days after the Issuance Price has been so finally determined, the Company shall issue to Purchaser a certificate dated the Closing Date evidencing the number of shares of Class A Common Stock equal to the difference. If the Final Number is less than 350,000 shares of Class A Common Stock, within 10 days after the Issuance Price has been so finally determined, Purchaser shall surrender to the Company the certificate for 350,000 shares of Class A Common Stock issued to the Company on the Closing Date in exchange for a new certificate, dated the Closing Date, evidencing the Final Number of shares of Class A Common Stock. (e) The Purchaser and the Company hereby agree that the Net Book Value Per Share of Common Stock determined in accordance with this Section 2.1 shall be the Net Book Value Per Share of Common Stock for all purposes of the Articles Supplementary Classifying the Preferred Stock attached hereto as Exhibit A. 2.2 Payment of the Closing Date Purchase Commitment. Subject to fulfillment of the conditions precedent set forth in Section 4.1, on the Closing Date, Purchaser shall pay $3,500,000 to the Company on the Closing Date by wire transfer of immediately available funds to such account as has been designated to Purchaser by the Company prior to the Closing Date. 2.3 Term Purchase Commitment. (a) Each Purchase of Preferred Stock pursuant to the Term Purchase Commitment shall be in a minimum aggregate purchase price of $1,000,000 and in multiples of $500,000 in excess thereof. (b) Subject to the fulfillment of the conditions precedent set forth in Section 4.2, on each Term Closing Date during the Purchase Term, Purchaser shall purchase the number of shares of Preferred Stock equal to the dollar amount of the Purchase requested divided by the Purchase Price. Notwithstanding anything to the contrary in this Agreement, the aggregate dollar amount of Purchases pursuant to the Term Purchase Commitment shall not exceed $25,000,000. 2.4 Notice of Purchase. The Company shall give the Purchaser written or telecopy notice (each a "Purchase Notice") ten (10) days before a proposed Purchase pursuant to the Term Purchase Commitment in the event of a Purchase in the amount of $5,000,000 or less, and twenty (20) days before a proposed Purchase pursuant to the Term Purchase Commitment in the event of a Purchase in an amount greater than $5,000,000. Each such notice shall be in substantially the form of Exhibit B. Such notice shall be irrevocable if not revoked within five (5) days after delivery and shall in each case refer to this Agreement and specify a date (the "Term Closing Date") on which the Purchase shall occur. 2.5 Certificates. (a) The Company shall deliver to the Purchaser on the Closing Date a certificate or certificates representing 350,000 shares of Class A Common Stock, representing the estimated number of shares of Class A Common Stock purchased by the Purchaser on the Closing Date. (b) The Company shall deliver to the Purchaser on each Term Closing Date a certificate or certificates representing the aggregate number of shares of Preferred Stock purchased by the Purchaser on such Term Closing Date. 2.6 Right of Purchaser to Purchase Uncalled Term Purchase Commitment. If at the end of the Purchase Term Purchaser has purchased Preferred Stock having an aggregate purchase price of less than $25,000,000 (the excess of $25,000,000 over the aggregate purchase price paid by Purchaser for Preferred Stock during the Purchase Term being referred to herein as the "Uncalled Commitment"), then provided that Purchaser is not in breach of its obligation to purchase Preferred Stock pursuant to a Purchase Notice delivered during the Purchase Term, Purchaser shall have the right to purchase up to that number of shares of Preferred Stock equal to the Uncalled Commitment divided by the Purchase Price, exercisable at any time during the thirty (30) days following the expiration of the Purchase Term by giving the Company written notice ("Subscription Notice") stating that Purchaser has elected to purchase shares of Preferred Stock pursuant to this Section and specifying the number of shares to be purchased (which may not exceed the Uncalled Commitment divided by the Purchase Price). Such notice shall be irrevocable. The closing of the purchase pursuant to the Subscription Notice shall take place five (5) business days after the date the Subscription Notice was delivered to the Company (the "Subscription Closing Date"). On the Subscription Closing Date, Purchaser shall pay the aggregate Purchase Price for the number of shares of Preferred Stock which Purchaser elected to purchase pursuant to the Subscription Notice by wire transfer to such account as has been designated to Purchaser by the Company prior to the Subscription Closing Date, and the Company shall deliver to Purchaser (a) a certificate or certificates representing the aggregate number of shares of Preferred Stock purchased by Purchaser on the Subscription Closing Date; and (b) an opinion of counsel to the Company licensed to practice in Maryland and reasonably satisfactory to Purchaser dated the Subscription Closing Date in form and substance reasonably satisfactory to Purchaser stating that the shares of Preferred Stock issued to Purchaser on the Subscription Closing Date are duly and validly issued, fully paid and nonassessable. ARTICLE 3 REPRESENTATIONS AND WARRANTIES The Company represents and warrants to the Purchaser that: 3.1 Organization; Powers. The Company and each of the Subsidiaries (a) is a an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (b) has all requisite 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 the Company and the Subsidiaries, (c) 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, and (d) in the case of the Company, has the corporate power and authority to execute, deliver and perform its obligations under this Agreement (including, without limitation, the offering, issuance, sale and delivery to the Purchaser of the shares of Preferred Stock and the issuance of Common Stock upon conversion of any of the shares of Preferred Stock). The Charter and Bylaws of the Company as amended to date, which are attached as Exhibit C hereto, are complete and correct as of the date hereof and contain the provisions attached hereto as Exhibit F. 3.2 Authorization. The execution, delivery and performance by the Company of this Agreement and the transactions contemplated hereby, (including, without limitation, the offering, issuance, sale and delivery to the Purchaser of the shares of Preferred Stock, Class A Common Stock and the issuance of Common Stock upon conversion of any shares of Preferred Stock or Class A Common Stock), (a) have been duly authorized by all requisite corporate and, if required, stockholder action and (b) will not (i) violate (A) any provision of law, statute, rule or regulation to which the Company or any of its Affiliates shall be subject, or of the certificate or articles of incorporation or other constitutive documents or bylaws of the Company or any Subsidiary, (B) any order of any Governmental Authority or (C) any provision of any indenture or other material agreement or instrument to which the Company or any Subsidiary is a party or by which any of them or any of their property is or may be bound, (ii) 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 (iii) result in the creation or imposition of any Lien upon or with respect to any property or assets now owned or hereafter acquired by the Company or any Subsidiary. 3.3 The Capital Stock. Pursuant to the Charter of the Company, the Company is authorized to issue 2,000,000 shares of Preferred Stock, none of which have been issued as of the date hereof, 350,000 shares of Class A Common Stock, 339,806 of which have been issued as of the date hereof, and 17,650,000 shares of Common Stock, 4,596,313 of which have been issued as of the date hereof. Except as disclosed on Schedule 3.3 hereto, there are no existing options, warrants, calls, subscriptions, convertible securities, or other rights, agreements or commitments which obligate the Company to issue, transfer or sell any shares of stock or equity interest of the Company. GAR Enforceability. This Agreement has been duly executed and delivered by the Company and constitutes a legal, valid and binding obligation of the Company enforceable against the Company 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. 3.5 Governmental Approvals. Except as set forth in Schedule 3.5, the Company and the Company's Affiliates are not required to obtain any consent or approval of, registration or filing with or any other action by any Governmental Authority in connection with the execution, delivery and performance of this Agreement, except such as have been made or obtained and are in full force and effect. 3.6 Financial Statements. Any financial statements delivered pursuant to Section 5.4 hereof (collectively, the "Financial Statements") have been prepared in accordance with GAAP, and fairly present the financial condition of the Company and its Subsidiaries as of the dates shown and the results of their operations for the periods indicated. 3.7 Title to Properties; Default Under Agreements. (a) Each of the Company and the Subsidiaries has good and valid title to, or valid leasehold interests in, all its material properties and assets, except for minor defects in title that do not interfere with its ability to conduct its business as currently conducted or to utilize such properties and assets for their intended purposes. (b) Each of the Company and the Subsidiaries has complied with all material obligations under all material agreements to which it is a party and all such agreements are in full force and effect and the Company is not in default under any of such agreements, except for defaults that would not be likely, individually or in the aggregate, to result in a Material Adverse Effect. 3.8 Subsidiaries. All Subsidiaries as of the date of this Agreement are listed on Schedule 3.8 hereto. Except as set forth on Schedule 3.8 hereto, as of the date of this Agreement, all the issued and outstanding capital stock of each Subsidiary is owned by the Company or any other Subsidiary. There are no other Persons in which the Company has an ownership interest or a right to acquire an ownership interest as of the date of this Agreement. 3.9 Litigation; Compliance with Laws. (a) Except as set forth in Schedule 3.9, there are not any actions, suits or proceedings at law or in equity or by or before any Governmental Authority now pending or, to the actual knowledge of the Company, threatened against or affecting the Company, any Subsidiary or any business, property or rights of any such Person (i) which involve this Agreement or (ii) as to which there is a likelihood of an adverse determination and which, if adversely determined, would be likely, individually or in the aggregate, to result in a Material Adverse Effect. (b) Neither the Company nor any of the Subsidiaries is in violation of any law, rule or regulation, or in default with respect to any judgment, writ, injunction or decree of any Governmental Authority, where such violation or default would be likely to result in a Material Adverse Effect. 3.10 Agreements. Neither the Company nor any of the Subsidiaries is in default in any manner under any provision of any indenture or other agreement or instrument evidencing Indebtedness, or any other material agreement or instrument to which it is a party or by which it or any of its properties or assets are or may be bound, where such default would be likely to result in a Material Adverse Effect. 3.11 Investment Company Act; Public Utility Holding Company Act. Neither the Company nor any Subsidiary is (a) an "investment company" as defined in, or subject to regulation under, the Investment Company Act of 1940 or (b) a "holding company" as defined in, or subject to regulation under, the Public Utility Holding Company Act of 1935. 3.12 Tax Returns. The Company and each of the Subsidiaries has filed or caused to be filed all Federal, state and local tax returns required to have been filed by it and has paid or caused to be paid all taxes shown to be due and payable on such returns or on any assessments received by it, except taxes that are being contested in good faith by appropriate proceedings and for which the Company or such Subsidiary, as the case may be, shall have set aside on its books adequate reserves. 3.13 No Material Misstatements. No representation or warranty herein or in any Exhibit or Schedule hereto contains any material misstatement of fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they are made not misleading. 3.14 Employee Benefit Plans. Each of the Company and each ERISA Affiliate is in compliance in all material respects with the applicable provisions of ERISA and the regulations and published interpretations thereunder. 3.15 Environmental and Safety Matters. Except as set forth in Schedule 3.15, each of the Company and the Subsidiaries has complied with all Federal, state, local and other statutes, ordinances, orders, judgments, rulings and regulations relating to environmental pollution or to environmental regulation or control or to employee health or safety, except for instances of non-compliance that, individually or in the aggregate, are not reasonably likely to result in a Material Adverse Effect. Except as set forth in Schedule 3.15, neither the Company nor any Subsidiary has received written notices of any material failure so to comply, which, if adversely determined, individually or in the aggregate, would be reasonably likely to result in a Material Adverse Effect. Except as set forth in Schedule 3.15, the Company and the Subsidiaries do not generate, treat, store, transport, dispose of or release at any facility owned or operated by any of them any hazardous wastes, hazardous substances, hazardous materials, toxic substances, toxic pollutants or substances similarly denominated, as those terms or similar terms are used in the Resource Conservation and Recovery Act, the Comprehensive Environmental Response Compensation and Liability Act, the Hazardous Materials Transportation Act, the Toxic Substance Control Act, the Clean Air Act, the Clean Water Act or any other applicable law relating to environmental pollution in violation of any law or any regulations promulgated pursuant thereto, except for violations that, individually or in the aggregate, would not be reasonably likely to result in a Material Adverse Effect. Except as set forth in Schedule 3.15, the Company is aware of no events, conditions or circumstances involving environmental pollution or contamination or employee health or safety that could reasonably be expected to result in liability on the part of the Company or any Subsidiary, except for such events, conditions or circumstances that, individually or in the aggregate, would not be reasonably likely to result in a Material Adverse Effect. ARTICLE 4 CONDITIONS PRECEDENT The obligations of the Purchaser to purchase any shares of Preferred Stock and Class A Common Stock (each of such events being called a "Purchase") on and after the Closing Date, are subject to the condition precedent that the Spin-Off and Merger (as defined in the Merger Agreement) shall have occurred and to the satisfaction of all of the applicable conditions set forth below: 4.1 First Purchase. On the Closing Date: (a) The Purchaser shall have received from the Company the following documents: (i) a good standing certificate of the Company issued by the Secretary of State of Maryland and the Secretary of State of each state in which the Company owns any property, except for any state in which the failure of the Company to be in good standing will not have a Material Adverse Effect; (ii) Charter of the Company, and all amendments and supplements thereto, certified by the Maryland Secretary of State; (iii) Bylaws of the Company, as amended, certified as true and correct by a Responsible Officer of the Company; and (iv) the resolutions adopted by the Board of Directors of the Company authorizing its execution, delivery and performance of its obligations under this Agreement, certified by the Secretary of the Company. (b) The Purchaser shall have received an opinion of Ballard Spahr Andrews & Ingersoll dated the Closing Date in form and substance reasonably satisfactory to Purchaser addressing the matters set forth in Exhibit D hereto. (c) The Purchaser and the Company shall have entered into the Registration Rights Agreement. 4.2 All Purchases. On the date of each Purchase: (a) Except in connection with the Purchase on the Closing Date, the Purchaser shall have received a Purchase Notice with respect to each such other Purchase as required by Section 2.4. (b) The representations and warranties set forth in Article 3 hereof shall be true and correct in all material respects on and as of the date of each Purchase with the same effect as though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date. (c) The Company shall be in compliance with all the terms and provisions set forth herein on its part to be observed or performed, and at the time of and as a result of each Purchase no Potential Event of Default or Event of Default shall have occurred and be continuing, other than an event which can be completely cured by applying the proceeds of such Purchase, in which case the Company covenants and agrees to apply the proceeds of the requested Purchase to the extent required to effect such cure. (d) There shall not have occurred, since the date of this Agreement, any change that has resulted in or could reasonably be expected to result in a Material Adverse Effect other than an event which can be completely cured by applying the proceeds of such Purchase, in which case the Company covenants and agrees to apply the proceeds of the requested Purchase to the extent required to effect such cure. (e) Purchaser shall have received an opinion of counsel to the Company licensed to practice in Maryland and reasonably satisfactory to Purchaser dated the Term Closing Date in form and substance reasonably satisfactory to Purchaser stating that the shares of Preferred Stock issued to Purchaser on the Term Closing Date are duly and validly issued, fully paid and nonassessable. Each Purchase shall be deemed to constitute a representation and warranty by the Company on the Closing Date or applicable Term Closing Date relating to such Purchase as to the matters specified in paragraphs (b), (c) and (d) of this Section 4.2. ARTICLE 5 AFFIRMATIVE COVENANTS The Company covenants and agrees with the Purchaser that so long as this Agreement shall remain in effect, the Company will, and will cause each of the Subsidiaries to, and the Purchaser will, where applicable: 5.1 Existence: Businesses and Properties. (a) Keep in full force and effect its legal existence. (b) Do or cause to be done all things necessary to obtain, preserve, renew, extend and keep in full force and effect the rights, licenses, permits, franchises, authorizations, patents, copyrights, trademarks and trade names material to the conduct of its business; comply in all material respects with all applicable laws, rules, regulations and orders of any Governmental Authority, whether now in effect or hereafter enacted; and at all times maintain and preserve all property material to the conduct of such business and keep such property in good repair, working order and condition (reasonable wear and tear excepted) and from time to time make, or cause to be made, all needful and proper repairs thereto necessary in order that the business carried on in connection therewith may be properly conducted at all times, except in each case described in this Section 5.1(b) where the failure to do so would not result in a Material Adverse Effect. 5.2 Insurance. Keep its material insurable real properties adequately insured at all times by financially sound and reputable insurers; maintain such other insurance, to such extent and against such risks, including fire and other risks insured against by extended coverage and public liability insurance against claims for personal injury or death or property damage occurring upon, in, about or in connection with the use of any properties owned, occupied or controlled by it as is customary with companies in the same or similar businesses; and maintain such other insurance as may be required by law. 5.3 Obligations and Taxes. Pay its material Indebtedness and other obligations promptly and in accordance with their terms and pay and discharge promptly when due all taxes, assessments and governmental charges or levies imposed upon it or upon its income or profits or in respect of its property, before the same shall become delinquent or in default, as well as all lawful claims for labor, materials and supplies or otherwise which, if unpaid, might give rise to a Lien upon such properties or any part thereof; provided, however, that such payment and discharge shall not be required with respect to any such Indebtedness, tax, assessment, charge, levy or claim so long as the validity or amount thereof shall be contested in good faith by appropriate proceedings and the Company or the Subsidiary, as the case may be, shall have set aside on its books adequate reserves with respect thereto. 5.4 Financial Statements, Reports, etc. Furnish to the Purchaser: (a) as soon as available, but not later than 90 days (60 days for a preliminary copy of such statements) after the end of each Fiscal Year, the consolidated and consolidating balance sheets and statements of operations, stockholders' equity and cash flows, showing the financial condition of the Company and its consolidated subsidiaries as of the close of such Fiscal Year and the results of its operations and the operations of such subsidiaries during such year, all audited by independent public accountants of recognized national standing and accompanied by an opinion of such accountants (which shall not be qualified in any material respect) to the effect that such consolidated financial statements fairly present the financial condition and results of operations of the Company on a consolidated basis in accordance with GAAP consistently applied; (b) as soon as available, but not later than 45 days (30 days for a preliminary copy of such statements) after the end of each of the first three fiscal quarters of each Fiscal Year, the consolidated and consolidating balance sheets and statements of operations, stockholders' equity and cash flows, showing the financial condition of the Company and its consolidated subsidiaries as of the close of such fiscal quarter and the results of its operations and the operations of such subsidiaries during such fiscal quarter and the then elapsed portion of the Fiscal Year, all certified by one of its Responsible Officers as fairly presenting the financial condition and results of operations of the Company on a consolidated basis in accordance with GAAP consistently applied, subject to normal year-end audit adjustments; (c) concurrently with any delivery of financial statements under (a) or (b) above, a certificate of the accounting firm (in the case of paragraph (a) above) or Responsible Officer of the Company (in the case of paragraph (b) above) certifying that no Event of Default or Potential Event of Default has occurred or, if such an Event of Default or Potential Event of Default has occurred, specifying the nature and extent thereof and any corrective action taken or proposed to be taken with respect thereto; (d) within five (5) Business Days after the same become publicly available, copies of all periodic and other reports, proxy statements and other materials filed by the Company with the Securities and Exchange Commission, or any governmental authority succeeding to any of or all the functions of said Commission, or with any national securities exchange, or distributed to its shareholders, as the case may be; and (e) promptly, from time to time, such other information regarding the operations, business affairs and financial condition of the Company or any Subsidiary, or compliance with the terms of this Agreement, as the Purchaser may reasonably request. 5.5 Litigation and Other Notices. Furnish to the Purchaser prompt written notice of the following: (a) any Event of Default or Potential Event of Default, specifying the nature and extent thereof and the corrective action (if any) proposed to be taken with respect thereto; (b) the filing or commencement of any action, suit or proceeding, whether at law or in equity or by or before any Governmental Authority, against the Company or any Affiliate of the Company which could reasonably be anticipated to result in a Material Adverse Effect; and (c) any other development that has resulted in, or could reasonably be anticipated to result in, a Material Adverse Effect. 5.6 ERISA. Comply in all material respects with the applicable provisions of ERISA. 5.7 Maintaining Records; Access to Properties and Inspections. Maintain all financial records in accordance with GAAP and so long as Purchaser is obligated to purchase any shares of Preferred Stock pursuant to this Agreement, permit any representatives designated by any Purchaser to visit and inspect the financial records and the properties of the Company or any Subsidiary at reasonable times during business hours and as often as requested upon reasonable written notice, and permit any representatives designated by the Purchaser to discuss the affairs, finances and condition of the Company or any Subsidiary with the senior officers thereof and the independent accountants therefor with prior written notice to and, if requested by Company, participation of a Responsible Officer of the Company. 5.8 Use of Proceeds. The proceeds of any Purchase hereunder shall be used by the Company for any proper corporate purpose. 5.9 Issuance of Preferred Stock and Class A Common Stock. The Company shall issue Preferred Stock and Class A Common Stock solely to the Purchaser pursuant to this Agreement and not to any other Person. 5.10 Closing Date Director. On the Closing Date, the Company agrees to elect Douglas Crocker II to the Board of Directors of the Company for a term expiring in 1999, and Mr. Crocker shall be deemed to be the nominee for election to the Board of Directors of the Company during such period for purposes of Section B(2) of the Company's Articles Supplementary for Class A Common Stock. 5.11 Nomination as Director; Appointment of Person to Attend and Observe Meetings. (a) During the period specified in Section B(2) of the Articles Supplementary of the Company for Class A Common Stock, at each annual meeting of shareholders of the Company at which the Board seat of the nominee of Purchaser is up for election, the Purchaser agrees to nominate Douglas Crocker II for election to the Board of Directors of the Company, or if Douglas Crocker II is unable or unwilling to serve, such member of senior management of the Purchaser ("Senior Officer Nominee") as Purchaser and the Company shall mutually agree. If the Company and the Purchaser cannot agree on such Senior Officer Nominee to be nominated at least thirty (30) days prior to the date on which the proxy statement relating to such annual meeting of shareholders is proposed by the Company to be mailed to the shareholders of the Company, Purchaser shall provide written notice (the "Nominee Designation Notice") at least twenty-five (25) days prior to the proposed mailing date to the Company of Purchaser's proposed Senior Officer Nominee to be nominated for election to the Board of Directors of the Company and three (3) alternative Senior Officer Nominees. Within three (3) days after the Company's receipt of such notice from the Purchaser, the Company shall give Purchaser written notice of which of such four Senior Officer Nominees the Company designates from the Purchaser's written list of Senior Officer Nominees to be nominated for election to the Board of Directors of the Company (the "Designated Senior Officer Nominee") and the Purchaser shall nominate such Designated Senior Officer Nominee for election to the Board of Directors of the Company. If the Company does not provide the Purchaser with written notice of its Designated Senior Officer Nominee within three (3) days after the Company's receipt of the Nominee Designation Notice, the Purchaser may nominate the proposed Senior Officer Nominee of its choice for election to the Board of Directors of the Company. The Company agrees to solicit proxies for Mr. Crocker or such other Senior Officer Nominee nominated for election to the Board of Directors of the Company by the Purchaser pursuant to this Section 5.11 in the same manner as the Company solicits proxies for all other nominees for election to the Board of Directors of the Company. (b) In the event Mr. Crocker (or such other person subsequently nominated by the Purchaser for election to the Board of Directors of the Company ("Purchaser Nominee")), is unable or unwilling to serve as a director if elected by the shareholders of the Company or is no longer employed by Purchaser during such time as such person is a director of the Company, Mr. Crocker or such Purchaser Nominee shall resign as a director of the Company and a member of senior management of Purchaser (determined in the manner set forth below) shall have the right to attend and observe all special and regular meetings and other formal or informal proceedings of the Board of Directors of the Company to which all members of the Board have been invited until the next annual meeting of shareholders of the Company. In the event that the Purchaser Nominee is not elected to the Board of Directors of the Company at any annual meeting of the shareholders of the Company, such Purchaser Nominee or another member of senior management of Purchaser (as determined in the manner set forth below) shall have the right to attend and observe all special and regular meetings and other formal or informal proceedings of the Board of Directors of the Company to which all members of the Board have been invited until such time as a Purchaser Nominee is elected to the Board of Directors of the Company by the shareholders of the Company. In the event the Purchaser shall have a right to cause a member of its senior management to attend and observe regular and special meetings and other formal or informal proceedings of the Board of Directors of the Company under this Section 5.11(b), the Purchaser shall deliver written notice to the Company of the member of its senior management it desires to attend and observe such meetings or informal proceedings (the "Senior Officer Observer"). In the event the Purchaser and the Company cannot agree upon the Senior Officer Observer within three (3) days after delivery of such notice to the Company, Purchaser shall provide written notice (the "Observer Designation Notice") to the Company of Purchaser's proposed Senior Officer Observer and three (3) alternative Senior Officer Observers. Within three (3) days after the Company's receipt of such notice from the Purchaser, the Company shall deliver written notice to Purchaser of which of such four Senior Officer Observers the Company designates from the Purchaser's written list of Senior Officer Observers (the "Designated Senior Officer Observer"). If the Company does not provide the Purchaser with written notice of its Designated Senior Officer Observer within three (3) days after the Company's receipt of the Observer Designation Notice, the Purchaser may select the proposed Senior Officer Observer of its choice. 5.12 Election as Director. (a) Upon the occurrence and continuation of an Event of Default, if Douglas Crocker II or such other Purchaser Nominee is not a member of the Board of Directors of the Company, the Company agrees (i) to amend the Bylaws of the Company to provide that the Board of Directors of the Company shall consist of not less than eleven (11) directors; and (ii) that Section 5.12(b) hereof shall apply in lieu of Section 5.11 hereof. (b) Upon the receipt by Purchaser of a ruling by the Internal Revenue Service or an opinion of counsel satisfactory to the Purchaser, that the right to elect the Purchaser Director will not cause EQR to lose its status as a real estate investment trust under the Code Section 5.11 hereof shall not apply and the Purchaser agrees to elect Douglas Crocker II to the Board of Directors of the Company as the Purchaser Director. In the event Mr. Crocker (or such other person subsequently elected by the Purchaser to the Board of Directors of the Company), is unable or unwilling to serve as a director or is no longer employed by Purchaser, the Purchaser agrees to elect such member of senior management of the Purchaser ("Senior Officer") to the Board of Directors of the Company as Purchaser and the Company shall mutually agree. If the Company and the Purchaser cannot agree on such Senior Officer to be elected within five (5) days after the date on which the office of the Purchaser Director becomes vacant, Purchaser shall provide written notice (the "Designation Notice") to the Company of Purchaser's proposed Senior Officer to be elected and three (3) alternative Senior Officers. Within three (3) days after the Company's receipt of such notice from the Purchaser, the Company shall give Purchaser written notice of which of such four Senior Officers the Company designates from the Purchaser's written list of Senior Officers to be elected to the Board of Directors of the Company (the "Designated Senior Officer") and the Purchaser shall elect such Designated Senior Officer as the Purchaser Director. If the Company does not provide the Purchaser with written notice of its Designated Senior Officer within three (3) days after the Company's receipt of the Designation Notice, the Purchaser may elect its proposed Senior Officer as the Purchaser Director. The Company agrees not to hold any meeting of the Board of Directors or take any Board of Directors' action if the Purchaser Director office is vacant; provided, however, this sentence shall not be applicable if Purchaser has failed within five (5) Business Days of written notice from the Company that it proposes to hold a Board of Directors meeting or have the Board of Directors otherwise act to provide the Company with the Designation Notice. Notwithstanding the foregoing, if an Event of Default has occurred, Purchaser may elect any person it chooses to serve as the Purchaser Director and shall not be required to comply with the procedures set forth in this Section. 5.13 Voting of Stock. So long as any shares of Preferred Stock, Class A Common Stock or Common Stock are owned by Purchaser and any of its Affiliates during the period ten (10) years from the Closing Date, the Company shall have the right to direct the voting of all of such shares held by Purchaser and any of its Affiliates, except as to the election of the Purchaser Director or any matter relating to rights, preferences and privileges of the Preferred Stock or Class A Common Stock. During such ten (10) year period, Purchaser agrees to vote, and to cause its Affiliates to vote, such shares as directed by the Company, except as to the election of the Purchaser Director or any matter relating to rights, preferences and privileges of the Preferred Stock or Class A Common Stock. 5.14 Sale of Common Stock or Preferred Stock. During the period beginning on the Closing Date and ending ten (10) years from the Closing Date, Purchaser shall first offer, in writing (a "Notice of Proposed Sale") to sell any shares of Common Stock, Class A Common Stock, Preferred Stock or warrants to purchase Common Stock owned by it to the Company prior to selling such shares to any Person. The Notice of Proposed Sale shall specify the terms and conditions of any sale. If the Company has not agreed, within twenty (20) days of receipt of the Notice of Proposed Sale to purchase the shares of Common Stock, Class A Common Stock or Preferred Stock offered by Purchaser upon the terms and conditions set forth in the Notice of Proposed Sale, Purchaser shall have the right to sell such shares offered to the Company to any other Person for a period of ninety (90) days provided any sale is made on terms and conditions no more favorable to such person than specified in the Notice of Proposed Sale. If the Company agrees to purchase shares of Common Stock, Class A Common Stock or Preferred Stock from the Purchaser, unless otherwise agreed by the Company and the Purchaser, such purchase shall be consummated within twenty (20) days of such agreement. 5.15 Confidentiality. The receipt of any information which is not publicly available pursuant to Sections 5.4(e) and 5.7 shall be subject to such reasonable confidentiality provisions (in writing signed by the Purchaser and/or its representative effecting an inspection pursuant to Section 5.7 of this Agreement, as the case may be) as the Company may reasonably require. 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 in this Agreement, 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 due observance or performance by the Company or any Subsidiary of any material covenant, condition or agreement contained in this Agreement, or under the terms of the Articles Supplementary Classifying the Preferred Stock attached hereto as Exhibit A, after written notice of such default is given to the Company and such default is not cured within fifteen (15) days of receipt of such notice; (c) 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 the Company or any Subsidiary, or of a substantial part of the property or assets of the Company or a 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 the Company or any Subsidiary or for a substantial part of the property or assets of the Company or a Subsidiary or (iii) the winding-up or liquidation of the Company 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; (d) the Company 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) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Company or any Subsidiary or for a substantial part of the property or assets of the Company or any Subsidiary, (iii) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (iv) make a general assignment for the benefit of creditors, (v) become unable, admit in writing its inability or fail generally to pay its debts as they become due or (vi) take any action for the purpose of effecting any of the foregoing; (e) one or more judgments for the payment of money in an aggregate amount in excess of $250,000 shall be rendered against the Company, any Subsidiary or any combination thereof and the same shall remain undischarged for a period of 30 consecutive days during which execution shall not be effectively stayed, or any judgment creditor shall levy upon assets or properties of the Company or any Subsidiary to enforce any such judgment which shall not be effectively stayed within 30 days; (f) any material breach of any obligation under ERISA or any plan under ERISA or any liability under ERISA in an amount exceeding $250,000, which is not discharged within 60 days after the Company becomes aware of same; (g) there shall have occurred a Change in Control with respect to the Company; (h) there shall have occurred an Event of Default as defined in clause (i) of the definition of an "Event of Default" in the Articles Supplementary Classifying the Preferred Stock attached hereto as Exhibit A; or (i) There shall have occurred a change that has resulted or could reasonably be expected to result in a Material Adverse Effect. 6.2 Remedies. Upon the occurrence of an Event of Default described in Article 6, all obligations of the Purchaser to purchase any shares of Preferred Stock hereunder shall automatically terminate unless the Purchase by the Purchaser of shares of Preferred Stock pursuant to a Purchase Notice received by Purchaser would cure such Event of Default (in which case the Company covenants to apply the proceeds of the sale of such Preferred Stock to the extent required to effect such cure), and (with respect to Events of Default described in Section 6.1(c), (d), and (h)), the Purchaser shall have the right to have the Company redeem the outstanding Preferred Stock upon the terms and conditions set forth in the Articles Supplementary Classifying the Preferred Stock attached hereto as Exhibit A. Notwithstanding the foregoing, the occurrence of an Event of Default shall not be considered an Event of Default for purposes of any Section of this Agreement if the Company, within five (5) days of the occurrence of such Event of Default, delivers to Purchaser a Purchase Notice and the proceeds of such related Purchase will completely cure such Event of Default, in which case Purchaser shall use such proceeds to the extent required to effect such cure. ARTICLE 7 MISCELLANEOUS 7.1 Termination of the Agreement. Unless otherwise agreed by each of the parties to this Agreement, if the Merger Agreement shall have been terminated, all obligations of the Purchaser under this Agreement shall automatically terminate at such time without notice to the Company. The Company shall have the right at any time to terminate Purchaser's obligation to purchase any additional Preferred Stock by giving notice thereof to Purchaser. Upon the giving of such notice (which shall be irrevocable), Purchaser shall be relieved of its commitment to purchase any Preferred Stock from the Company. The termination of such commitment shall not relieve the parties of their respective obligations under Sections 5.10, 5.11 and 5.12 of this Agreement. 7.2 Securities Law Matters. The Purchaser acknowledges and understands that: (a) The Purchaser has been furnished with and has carefully reviewed the information relating to the Company set forth in the Equity Residential Properties Trust and Wellsford Residential Property Trust Joint Proxy Statement/Equity Residential Properties Trust Prospectus/Wellsford Real Properties, Inc. Information Statement, dated April 25, 1997. (b) The Purchaser has been afforded full and complete access to all information and other materials relating to the Company and its affiliates, and the properties and financial condition of the foregoing, and any other matters relating to the Preferred Stock, Class A Common Stock, Common Stock and Warrants of the Company which the Purchaser has requested, or deems necessary in evaluating the merits and risks of acquiring the Preferred Stock, Class A Common Stock, Common Stock and Warrants, and has been afforded the opportunity to obtain any additional information necessary to verify the accuracy of any representations or information set forth in the Information. (c) The Purchaser has had the opportunity to have answered any questions concerning the financial condition or business or other information with respect to the Company and its affiliates and the business, properties and financial condition of the foregoing or with respect to the merits and risks of an acquisition of the Preferred Stock, Class A Common Stock, Common Stock and Warrants, and the undersigned has received complete and satisfactory answers to all such questions. (d) The Purchaser has not relied upon any information or representation not contained in the Information. Neither the Company nor any of its agents nor anyone purporting to act on their behalf have made any representation to the undersigned with respect to any tax or economic benefits to be derived from an investment in the Preferred Stock, Class A Common Stock, Common Stock and Warrants. The Purchaser is relying solely upon its own knowledge and upon the advice of its advisors with respect to the tax, economic and other aspects of an investment in the Preferred Stock, Class A Common Stock, Common Stock and Warrants. (e) The Purchaser has carefully reviewed and understands the risks of, and other considerations relating to, the acquisition of the Preferred Stock, Class A Common Stock, Common Stock and Warrants and an investment in the Company. (f) An owner of Preferred Stock, Class A Common Stock, Common Stock and Warrants must bear the economic risk of ownership thereof for an indefinite period of time since purchase of Preferred Stock, Class A Common Stock, Common Stock and Warrants involves the purchase of securities that have not been registered under the Securities Act of 1933, as amended, and therefore cannot be Transferred (as defined below) except as provided below. (g) No federal or state agency has passed upon the Preferred Stock, Class A Common Stock, Common Stock or Warrants or made any finding or determination as to the fairness of an investment in the Preferred Stock, Class A Common Stock, Common Stock or Warrants. (h) Purchaser hereby covenants and agrees that the Preferred Stock, Class A Common Stock, Common Stock and Warrants, including any Common Stock issued upon conversion of the Preferred Stock or Class A Common Stock, or any portion thereof, or upon exercise of the Warrants, may not be pledged, encumbered, sold, transferred or otherwise disposed of (each a "Transfer") except (a) pursuant to an effective registration statement under the Securities Act of 1993, as amended (the "Act") or (b) pursuant to an exemption from such registration pursuant to the Act and in compliance with state securities and blue sky laws and an opinion of counsel provided to the Company to the effect of this subparagraph (b), which opinion shall be in form and substance reasonably satisfactory to the Company. The Purchaser agrees that any Transfer of the Preferred Stock, Class A Common Stock, Common Stock or Warrants in violation of this Agreement will be null and void and the certificates representing the Preferred Stock, Class A Common Stock, Common Stock and Warrants will bear an appropriate restrictive legend. (i) The Purchaser represents and warrants to the Company that: (i) It is able to bear the economic risk of the acquisition of the Preferred Stock, Class A Common Stock, Common Stock and Warrants. (ii) It is an "accredited investor" as defined in Regulation D promulgated under the Act. (iii) The representatives of the Purchaser have been furnished with and have carefully reviewed the Information. Such representatives have such knowledge and experience in financial, business, securities and real estate matters that they are capable of evaluating the merits and risks of the acquisition of the Preferred Stock, Class A Common Stock, Common Stock and Warrants and of making an informed investment decision. (iv) The Purchaser is acquiring and will acquire the Preferred Stock, Class A Common Stock, Common Stock and Warrants, including any Common Stock issuable upon conversion of the Preferred Stock or Class A Common Stock or upon exercise of the Warrants for its own account, as principal, for investment and not with a view to a Transfer thereof. 7.3 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 the Company: Wellsford Real Properties, Inc. 610 Fifth Avenue, 7th Floor New York, New York 10020 Attn: Edward Lowenthal Telecopy No.: (212) 333-2323 with a copy to: Robinson Silverman Pearce Aronsohn & Berman LLP 1290 Avenue of the Americas New York, New York 10104-0053 Attn: Alan S. Pearce, Esq. Telecopy No.: (212) 541-1411 (b) if to the Purchaser: ERP Operating Limited Partnership c/o Equity Residential Properties Trust Two North Riverside Plaza, Suite 400 Chicago, Illinois 60606 Attn: President Telecopy No.: (312) 207-5243 with a copy to: Equity Residential Properties Trust Two North Riverside Plaza, Suite 400 Chicago, Illinois 60606 Attn: Bruce C. Strohm, Esq. Telecopy No.: (312) 454-0039 and: Rudnick & Wolfe 203 N. LaSalle St., Suite 1800 Chicago, Illinois 60601 Attn: Errol R. Halperin, Esq. Telecopy No.: (312) 236-7516 Such notice will be deemed given when received. 7.4 Survival of Agreement. All covenants, agreements, representations and warranties made by the Company 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 the Purchaser and shall survive the date of this Agreement, regardless of any investigation made by the Purchaser or on its behalf, and shall continue in full force and effect so long as the Aggregate Purchase Commitment has not been fulfilled or terminated. 7.5 Binding Effect. This Agreement shall become effective when it shall have been executed by the Company and the Purchaser. 7.6 Assignment. Neither the Company nor the Purchaser shall have the right to assign its rights hereunder or any interest herein; provided, however, the foregoing provision shall not limit the Purchaser's right to sell, transfer or assign any shares of Common Stock, Class A Common Stock or Preferred Stock owned by it subject to the provisions of Section 5.12 of this Agreement and applicable securities laws. 7.7 Applicable Law. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF MARYLAND. 7.8 Waivers; Amendment. (a) No failure or delay of the Purchaser 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 the Purchaser 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 the Company 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. Unless otherwise specifically required, no notice or demand on the Company in any case shall entitle the Company 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 the Company and the Purchaser. 7.9 Entire Agreement. This Agreement, including the exhibits and schedules thereto, constitute 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 any rights, remedies, obligations or liabilities under or by reason of this Agreement. 7.10 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. 7.11 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. 7.12 Headings. Article and Section headings and the Table of Contents 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. 7.13 Jurisdiction; Consent to Service of Process. (a) EACH OF THE PURCHASER AND THE COMPANY HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF ANY ILLINOIS OR NEW YORK STATE COURT OR FEDERAL COURT OF THE UNITED STATES OF AMERICA SITTING IN THE CITY OF CHICAGO OR NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, 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 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) EACH OF THE PURCHASER AND THE COMPANY 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, the Company and the Purchaser have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. ERP OPERATING LIMITED PARTNERSHIP By: EQUITY RESIDENTIAL PROPERTIES TRUST, its general partner By:/s/ Bruce C. Strohm -------------------------------- Name: Bruce C. Strohm Title: Executive Vice President WELLSFORD REAL PROPERTIES, INC. By:/s/ Edward Lowenthal -------------------------------- Name: Edward Lowenthal Title: President EXHIBIT A See Exhibit 3.3 to this Registration Statement EXHIBIT B FORM OF NOTICE OF DRAW TO: ERP OPERATING LIMITED PARTNERSHIP ------------------------- ------------------------- Attention: -------------------- Telephone: (---) -------------- Telecopy: (---) ------------------- Pursuant to Section 4.2 of that certain Common Stock and Preferred Stock Purchase Agreement (the "Agreement") dated as of ------------, 1997 by and among WELLSFORD REAL PROPERTIES, INC., a Maryland corporation (the "Company") and ERP OPERATING LIMITED PARTNERSHIP, an Illinois limited partnership ("Purchaser"), this notice represents the Company's notice to Purchaser to cause Purchaser to purchase --------- shares of Preferred Stock pursuant to the Purchaser's Term Purchase Commitment on ---------------, 199-- (the "Term Closing Date"). The aggregate purchase price of such Purchase shall be $------ . The Company hereby certifies as follows: (i) the representations and warranties as set forth in Article 3 (except to the extent that such statements expressly are made only as of an earlier date) of the Agreement are and shall be true and correct in all material respects on and as of the date hereof and the Term Closing Date specified herein; and (ii) the Company has and shall have performed, or shall have caused to be performed, in all material respects all agreements and satisfied all conditions set forth in Section 4.2 of the Agreement. Unless otherwise defined herein, terms used herein shall have the meanings in the Agreement. Dated: --------------, 199-- WELLSFORD REAL PROPERTIES, INC. By:--------------------------------- Name:--------------------------- Title:-------------------------- EXHIBIT C See Exhibits 3.1 and 3.4 to this Registration Statement. EXHIBIT D 1. The Company is a corporation duly organized and existing and in good standing under the laws of the State of Maryland and has the corporate power to own its properties and to carry on its business as presently conducted by it. 2. The Company has the requisite corporate power and authority to execute, deliver and perform the obligations set forth in the Agreement and the Registration Rights Agreement, each of which has been duly authorized by all necessary corporate action, and the execution and performance of which will not conflict with, or result in a breach of the Company's Charter or Bylaws or, to the best of our knowledge and belief without any duty of inquiry, any order, writ, injunction or decree of any court or governmental authority, or any of the material terms, conditions or provisions of any agreement or instrument to which the Company is a party or by which the Company is bound. 3. The Agreement and the Registration Rights Agreement have been duly executed and delivered by a duly authorized officer of the Company and constitute the valid and binding obligations of the Company, enforceable in accordance with their respective terms. [BANKRUPTCY EXCEPTION] 4. The Class A Common Stock issued to Purchaser on the date of this opinion pursuant to the terms of the Agreement shall be duly and validly issued, fully paid and nonassessable. 5. The Preferred Stock issuable pursuant to the terms of the Agreement has been duly and validly reserved for issuance and, upon issuance in accordance with the terms of the Agreement, shall be duly and validly issued, fully paid and nonassessable. 6. The Common Stock issuable upon conversion of the Class A Common Stock and Preferred Stock and upon exercise of the Warrants has been duly and validly reserved for issuance and, upon issuance in accordance with the terms of the Company's Charter and the Articles Supplementary, shall be duly and validly issued, fully paid and nonassessable. EXHIBIT E See Exhibit 10.27 to this Registration Statement EXHIBIT F See Exhibit 3.2 to this Registration Statement SCHEDULE 3.3 CAPITAL STOCK 1. Options being assumed by the Company pursuant to the Contribution and Distribution Agreement, dated as of the date hereof, between the Company and Wellsford Residential Property Trust. 2. Options described in the Equity Residential Properties Trust and Wellsford Residential Property Trust Joint Proxy Statement/Equity Residential Properties Trust Prospectus/ Wellsford Real Properties, Inc. Information Statement, dated April 25, 1997, under the heading "Management of WRP Newco--Compensation of Directors." 3. Options issued to lower level employees of the Company to purchase 12,000 shares of Common Stock in the aggregate. 4. The shares of Common Stock to be issued pursuant to purchase agreements to be executed on the date hereof in connection with the Company's private placement of shares of Common Stock. 5. Shares of Common Stock issuable under the Warrant issued to Purchaser on the date hereof. SCHEDULE 3.5 GOVERNMENTAL APPROVALS Appropriate blue sky filings, if any. SCHEDULE 3.8 SUBSIDIARIES Wellsford Chatham Corp. Wellsford Wayne Corp. Wellsford Greenbrook Corp. Wellsford Park Highlands Corp. Park at Highlands, L.L.C. Red Canyon at Polomino Park L.L.C. North American Medical Research Corp. SCHEDULE 3.9 LITIGATION; COMPLIANCE WITH LAWS None SCHEDULE 3.15 ENVIRONMENTAL AND SAFETY MATTERS Spray-on asbestos fireproofing is located at the Serpentine Building (part of the Point View Complex). EX-10.27 26 REGISTRATION RIGHTS AGREEMENT THIS REGISTRATION RIGHTS AGREEMENT is made as of the 30th day of May, 1997, by and among WELLSFORD REAL PROPERTIES, INC., a Maryland corporation (the "Company"), and ERP OPERATING LIMITED PARTNERSHIP, an Illinois limited partnership, and its successors, assigns and transferees (herein referred to collectively as the "Holders" and individually as a "Holder"). W I T N E S S E T H: WHEREAS, on the date hereof, Holder and the Company have entered into that certain Common Stock and Preferred Stock Purchase Agreement (the "Stock Purchase Agreement"); WHEREAS, pursuant to the terms of the Stock Purchase Agreement, Holder is obligated to purchase shares of Class A common stock, par value $.01 per share, of the Company ("Class A Common Stock") and Series A 8% Convertible Redeemable Preferred Stock of the Company (the "Preferred Stock"); WHEREAS, pursuant to the Articles Supplementary classifying the Preferred Stock attached as Exhibit A to the Stock Purchase Agreement ("Articles Supplementary"), the Holder shall have the right to convert all or any of the outstanding shares of Preferred Stock into shares of common stock, par value $.01 per share, of the Company (the "Common Stock"); WHEREAS, pursuant to the Articles Supplementary classifying the Class A Common Stock, the Holder shall have the right to convert all or any of the outstanding shares of Class A Common Stock into shares of Common Stock; and WHEREAS, the Company has agreed to provide the Holders with certain registration rights as set forth herein. NOW, THEREFORE, in consideration of the mutual covenants and undertakings contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and subject to and on the terms and conditions herein set forth, the parties hereto agree as follows: 1. Definitions. As used in this Agreement, the following capitalized defined terms shall have the following meanings: "Company" shall have the meaning set forth in the preamble and shall also include the Company's successors. "Demand Notice" shall have the meaning set forth in Section 2 hereof. "Effective Date" shall mean the date of this Agreement. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from time to time. "Holder" or "Holders" shall have the meaning set forth in the preamble. "Person" shall mean an individual, partnership, corporation, trust, or unincorporated organization, or a government or agency or political subdivision thereof. "Prospectus" shall mean the prospectus included in a Registration Statement, and any such prospectus as amended or supplemented by any prospectus supplement with respect to the terms of the offering of any portion of the Registrable Securities covered by a Registration Statement, and by all other amendments and supplements to such prospectus, including post-effective amendments, and in each case including all material incorporated by reference therein. "Public Sale" shall mean a public sale or distribution of Registrable Securities, including a sale pursuant to Rule 144 (or any similar provision then in effect) under the Securities Act. "Registrable Securities" shall mean the Shares, excluding (i) Shares for which a Registration Statement relating to the sale thereof by the Holder shall have become effective under the Securities Act and which have been disposed of by the Holder under such Registration Statement, and (ii) Shares sold or otherwise distributed pursuant to Rule 144 under the Securities Act. "Registration Expenses" shall mean any and all expenses incident to performance of or compliance with this Agreement, including, without limitation: (i) all SEC or National Association of Securities Dealers, Inc. ("NASD") registration and filing fees, (ii) all fees and expenses incurred in connection with compliance with state securities or blue sky laws (including reasonable fees and disbursements of counsel in connection with blue sky qualification of any of the Registrable Securities and the preparation of a Blue Sky Memorandum) and compliance with the rules of the NASD, (iii) all expenses of any Persons engaged by the Company in preparing or assisting in preparing, word processing, printing and distributing any Registration Statement, any Prospectus, certificates and other documents relating to the performance of and compliance with this Agreement, (iv) all fees and expenses incurred in connection with the listing, if any, of any of the Registrable Securities on any securities exchange or exchanges pursuant to Section 4(a)(viii) hereof, (v) the fees and disbursements of counsel for the Company and of the independent public accountants of the Company, including the expenses of any special audits or "cold comfort" letters, if any, required by or incident to such performance and compliance, and (vi) the fees and disbursements of counsel representing a selling Holder. Registration Expenses shall specifically exclude underwriting discounts and commissions, and transfer taxes, if any, relating to the sale or disposition of Registrable Securities by a selling Holder, all of which shall be borne by such Holder in all cases. "Registration Notice" shall have the meaning set forth in Section 3 hereof. "Registration Statement" shall mean a registration statement of the Company and any other entity required to be a registrant with respect to such registration statement pursuant to the requirements of the Securities Act which covers the Registrable Securities requested by Holders to be covered by such registration statement, and all amendments and supplements to such registration statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all materials incorporated by reference therein. "Requesting Holder" shall mean each Holder who requests to participate in an underwritten public offering of Company Common Stock. "SEC" shall mean the Securities and Exchange Commission. "Securities Act" shall mean the Securities Act of 1933, as amended from time to time. "Shares" shall mean Preferred Stock issuable or issued, Common Stock issuable or issued upon conversion of all or any portion of the shares of Preferred Stock or Class A Common Stock and Common Stock issuable or issued upon the exercise of warrants issued pursuant to the Articles Supplementary. 2. Registration Under the Securities Act. (a) Filing of Registration Statement. After one (1) year from the Effective Date hereof, as promptly as practicable after written notice (a "Demand Notice") from the Holder requesting that the Company effect the registration under the Securities Act of Registrable Securities having an aggregate fair market value of $5,000,000 during the period three (3) years from the Effective Date hereof ("Initial Period") or $7,500,000 at any time after the Initial Period, the Company shall cause to be filed promptly a Registration Statement or an amendment to a Registration Statement as determined by the Company providing for the resale by the Holder of Registrable Securities in accordance with the terms hereof and will use its best efforts to cause any such Registration Statement to be declared effective by the SEC as soon as reasonably practicable. Notwithstanding the foregoing, Holder shall only have the right to deliver one Demand Notice during any calendar year; provided, however, that during the period five (5) years from the Effective Date hereof Holder shall not deliver more than four (4) Demand Notices in the aggregate. Any such registration request by Holder shall include all Shares which may be included in such Registration Statement at such time. The Company agrees to use its best efforts to keep any such Registration Statement continuously effective under the Securities Act until such Shares covered thereby are no longer Registrable Securities and further agrees to supplement or amend the Registration Statement, if and as required by the rules, regulations or instructions applicable to the registration form used by the Company for such Registration Statement or by the Securities Act or by any other rules and regulations thereunder for such Registration Statement. The Company may elect to register all Shares at any time. (b) Expenses. The Company shall pay all Registration Expenses in connection with any Registration Statement filed pursuant to this Section 2. (c) Inclusion in Registration Statement. The Company may require each Holder of Registrable Securities to furnish to the Company in writing such information regarding the proposed offer or sale by such Holder of such Registrable Securities as the Company may from time to time reasonably request in writing. Any Holder who does not provide the information reasonably requested by the Company in connection with the Registration Statement as promptly as practicable after receipt of such request, but in no event later than ten (10) days thereafter, shall not be entitled to have its Registrable Securities included in the Registration Statement. 3. Incidental Registration. If the Company proposes to register any shares of Common Stock for Public Sale pursuant to an underwritten offering under the Securities Act (whether proposed to be offered for sale by the Company or by any other Person) it will give prompt written notice (a "Registration Notice") to the Holders of its intention to do so. Upon the written request of any Holder (a "Requesting Holder") delivered to the Company within fifteen (15) Business Days after the receipt of a Registration Notice, which request shall specify the number of Registrable Securities intended to be disposed of by such Requesting Holder, the Company shall include the Shares specified in the request of such Requesting Holder in the registration statement; provided, however, the Registrable Securities requested by such Requesting Holder to be included in the Registration Statement shall have an aggregate fair market value of $5,000,000 during the Initial Period or $7,500,000 thereafter. The Company will not be required to effect any registration pursuant to this Section 3 if the Company shall have been advised in writing (with a copy to each Requesting Holder) by a nationally recognized independent investment banking firm selected by the Company to act as lead underwriter in connection with the public offering of securities that, in such firm's opinion, a registration at that time of additional securities would materially and adversely affect the offering, in which case in the discretion of the Company, either: (i) the Registrable Securities of the Requesting Holders shall nevertheless be included in such Registration Statement subject to the condition that the Requesting Holders may not offer or sell their Registrable Securities included therein for a period of at least 90 days after the initial effective date of such Registration Statement, or (ii) if the Company should reasonably determine that the inclusion of such Registrable Securities, notwithstanding the provisions of the preceding clause (i), would materially adversely affect the offering contemplated in such Registration Statement, and based on such determination recommends inclusion in such Registration Statement of fewer or none of the Registrable Securities of the Requesting Holders, then (x) the number of Registrable Securities of the Requesting Holders included in such Registration Statement shall be reduced, if the Company recommends the inclusion of fewer Registrable Securities, or (y) none of the Registrable Securities of the Requesting Holders shall be included in such Registration Statement, if the Company recommends the inclusion of none of such Registrable Securities; provided, however, that if Registrable Securities are being offered for the account of other persons or entities as well as the Company, such reduction shall not represent a greater fraction of the number of securities intended to be offered by the Requesting Holders than the fraction of similar reductions imposed on such other persons or entities (other than the Company). Notwithstanding the foregoing, Holder shall only have the right to deliver one Registration Notice during any calendar year; provided, however, that during the period five (5) years from the Effective Date hereof Holder shall not deliver more than four (4) Registration Notices in the aggregate. With respect to any proposed sale by the Holder of Registrable Securities pursuant to this Section 3 the Company shall pay all Registration Expenses. No registration of Registrable Securities effected under this Section 3 shall relieve the Company of its obligation to effect registrations of Registrable Securities pursuant to Section 2. The rights of the Holder under this Section 3 are solely incidental in nature, and nothing in this Section 3 shall prevent the Company from reversing a decision to file a Registration Statement pursuant to this Section 3 or from withdrawing any such Registration Statement before it has become effective. The incidental registration rights granted pursuant to this Section 3 shall not apply to (a) a registration relating to employee or director stock option, purchase or other employee benefit plans, (b) a registration related to a dividend reinvestment or share purchase plan or (c) a registration on Form S-4 or Form S-8. 4. Registration Procedures. (a) Obligations of the Company. In connection with any Registration Statement pursuant to Sections 2 or 3 hereof, the Company shall: (i) cause the Registration Statement to be available for the sale of the Registrable Securities by Holders in one or more transactions, in negotiated transactions, through the writing of options on the Registrable Securities, or a combination of such methods of sale, and to comply as to form in all material respects with the requirements of the applicable form and include all financial statements required by the SEC to be filed therewith, and in the event the Company is listed on the Nasdaq National Market System ("NMS"), in one or more transactions on NMS or otherwise in special offerings, exchange distributions or secondary distribution pursuant to and in accordance with the rules of the NMS, in the over-the-counter market; (ii) (A) prepare and file with the SEC such amendments and post-effective amendments to any Registration Statement as may be necessary to keep each such Registration Statement effective for the applicable period; (B) cause the Prospectus included in each such Registration Statement to be supplemented by any required prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 or any similar rule that may be adopted under the Securities Act; (C) respond promptly to any comments received from the SEC with respect to each Registration Statement, or any amendment, post-effective amendment or supplement relating thereto; and (D) comply with the provisions of the Securities Act applicable to issuers registering securities under the circumstances provided herein with respect to the disposition of securities covered by each Registration Statement, except as otherwise provided in Section 3 hereof; (iii) furnish to each Holder of Registrable Securities, without charge, as many copies of each Prospectus, and any amendment or supplement thereto and such other documents as they may reasonably request, in order to facilitate the public sale or other disposition of the Registrable Securities; the Company consents to the use of the Prospectus, by each such Holder of Registrable Securities, in connection with the offering and sale of the Registrable Securities covered by the Prospectus; (iv) notify promptly each Holder of Registrable Securities and confirm such advice in writing (A) of the issuance by the SEC or any state securities authority of any stop order suspending the effectiveness of a Registration Statement or the initiation of any proceedings for that purpose, (B) if the Company receives any notification with respect to the suspension of the qualification of the Registrable Securities for sale in any jurisdiction or the initiation of any proceeding for such purpose, and (C) of the happening of any event during the period a Registration Statement is effective as a result of which such Registration Statement or the related Prospectus contains any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made (in the case of the Prospectus), not misleading; (v) use its best effort to obtain the withdrawal of any order suspending the effectiveness of a Registration Statement at the earliest possible moment; (vi) use its best efforts to register or qualify the Registrable Securities by the time the applicable Registration Statement is declared effective by the SEC under all applicable state securities or "blue sky" laws of such jurisdictions as any Holder of Registrable Securities covered by a Registration Statement shall reasonably request in writing, keep each such registration or qualification effective during the period such Registration Statement is required to be kept effective and do any and all other acts and things which may be reasonably necessary or advisable to enable such Holder to consummate the disposition in each such jurisdiction of such Registrable Securities owned by such Holder; provided, however, that the Company shall not be required to (A) qualify generally to do business in any jurisdiction or to register as a broker or dealer in such jurisdiction where it would not otherwise be required to qualify but for this Section 4(a)(vi), (B) subject itself to taxation in any such jurisdiction, or (C) submit to the general service of process in any such jurisdiction; (vii) upon the occurrence of any event contemplated by Section 4(a)(iv)(C) hereof, use its best efforts promptly to prepare and file a supplement or prepare, file and obtain effectiveness of a post-effective amendment to a Registration Statement or the related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of the Registrable Securities, such Prospectus will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; (viii) use its best efforts to cause all Registrable Securities to be listed on any securities exchange on which similar securities issued by the Company are then listed; (ix) provide a CUSIP number for all Registrable Securities, not later than the effective date of the Registration Statement or amendment thereto relating to such Registrable Securities; (x) otherwise use its best efforts to comply with all applicable rules and regulations of the SEC and make available to its security holders, as soon as reasonably practicable, an earning statement covering at least twelve (12) months which shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder; and (xi) use its best efforts to cause the Registrable Securities covered by a Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be necessary by virtue of the business and operations of the Company to enable Holders to consummate the disposition of such Registrable Securities. (b) Obligations of Holders. In connection with and as a condition to the Company's obligations with respect to a Registration Statement pursuant to Sections 2 and 3 hereof and this Section 4, each Holder agrees that (i) it will not offer or sell its Registrable Securities under the Registration Statement until it has received copies of the supplemental or amended Prospectus contemplated by Section 4(a)(ii) hereof and receives notice that any post-effective amendment has become effective; and (ii) upon receipt of any notice from the Company of the happening of any event of the kind described in Section 4(a)(iv)(C) hereof, such Holder will forthwith discontinue disposition of Registrable Securities pursuant to a Registration Statement until such Holder receives copies of the supplemented or amended Prospectus contemplated by Section 4(a)(vii) hereof and receives notice that any post-effective amendment has become effective, and, if so directed by the Company, such Holder will deliver to the Company (at the expense of the Company) all copies in its possession, other than permanent file copies then in such Holder's possession, of the Prospectus covering such Registrable Securities current at the time of receipt of such notice. Each Holder will furnish to the Company all information relating to the Holder required by the Securities Act to be included in the Registration Statement. The Company may require, as a condition to fulfilling its obligations to register the Registrable Securities under Sections 2 or 3 hereof, that the Holders execute reasonable and customary indemnification agreements for the benefit of the underwriters of the registration; provided, however, that the Holders may not be required to indemnify the Company's underwriters except with respect to information relating to the Holders furnished by the Holders for use in such Registration Statement. (c) Lockup. In the event the Company proposes to effect the distribution of its securities through an underwritten public offering, each Holder who then beneficially owns in excess of 100,000 shares agrees for a period of time, beginning seven (7) days prior to the pricing of such offering and ending thirty (30) days after such pricing that such Holder will forthwith cease any sale or other disposition of any of the Registrable Securities during such period of time, if requested in writing by the Company or representatives of the underwriters for any such underwritten public offering; provided, however, that Holders shall not be subject to more than one Lockup Period during any twelve (12) month period. (d) Postponement. The Company shall be entitled to postpone for a reasonable period of time (but not in excess of 60 days) the filing of any Registration Statement otherwise required to be prepared and filed by it pursuant to Section 2 hereof, if the Board of Directors of the Company determines, in its reasonable judgment, that such registration and offering would materially interfere with any proposed financing, acquisition, corporate reorganization or other material transaction involving the Company, and the Company gives the Holders written notice of such determination within fourteen (14) days of its receipt of a Demand Notice. 5. Indemnification; Contribution. (a) Indemnification by the Company. The Company agrees to indemnify and hold harmless each Holder, each officer and director of such Holder, and each Person, if any, who controls any Holder within the meaning of Section 15 of the Securities Act as follows: (i) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, arising out of any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement (or any amendment thereto) pursuant to which Registrable Securities were registered under the Securities Act, including all documents incorporated therein by reference, or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; (ii) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, to the extent of the aggregate amount paid in settlement of any litigation, or investigation or proceeding by any governmental agency or body, commenced or threatened, or of any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, if such settlement is effected with the written consent of the Company; and (iii) against any and all expense whatsoever, as incurred (including reasonable fees and disbursements of counsel), reasonably incurred in investigating, preparing or defending against any litigation, or investigation or proceeding by any governmental agency or body, commenced or threatened, in each case whether or not a party, or any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, to the extent that any such expense is not paid under subparagraph (i) or (ii) above; provided, however, that the indemnity provided pursuant to this Section 5(a) does not apply to any Holder with respect to any loss, liability, claim, damage or expense to the extent arising out of any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with written information furnished to the Company by such Holder expressly for use in a Registration Statement (or any amendment thereto) or any Prospectus (or any amendment or supplement thereto). (b) Indemnification by the Holders. Each Holder severally agrees to indemnify and hold harmless the Company and the other selling Holders, and each of their respective directors and officers (including each director and officer of the Company who signed the Registration Statement), and each Person, if any, who controls the Company or any other selling Holder within the meaning of Section 15 of the Securities Act, to the same extent as the indemnity contained in Section 5(a) hereof (except that any settlement described in Section 5(a)(ii) shall be effected only with the written consent of such Holder), but only insofar as such loss, liability, claim, damage or expense arises out of or is based upon (i) any untrue statement or omission, or alleged untrue statements or omissions, made in a Registration Statement (or any amendment thereto) or any Prospectus (or any amendment or supplement thereto) in reliance upon and in conformity with written information furnished to the Company by such selling Holder expressly for use in such Registration Statement (or any amendment thereto) or such Prospectus (or any amendment or supplement thereto), or (ii) such Holder's failure to deliver a Prospectus to any purchaser of Registrable Securities where such a delivery obligation was applicable to such Holder's sale of Registrable Securities and such Holder had been provided with a reasonable number of copies of such Prospectus for the relevant deliveries thereof. In no event shall the liability of any Holder under this Section 5(b) be greater in amount than the dollar amount of the proceeds received by such Holder upon the sale of the Registrable Securities giving rise to such indemnification obligation. (c) Conduct of Indemnification Proceedings. Each indemnified party shall give reasonably prompt notice to each indemnifying party of any action or proceeding commenced against it in respect of which indemnity may be sought hereunder, but failure to so notify an indemnifying party (i) shall not relieve it from any liability which it may have under the indemnity agreement provided in Section 5(a) or (b) above, unless and to the extent it did not otherwise learn of such action and the lack of notice by the indemnified party results in the forfeiture by the indemnifying party of substantial rights and defenses and (ii) shall not, in any event, relieve the indemnifying party from any obligations to any indemnified party other than the indemnification obligation provided under Section 5(a) or (b) above. If the indemnifying party so elects within a reasonable time after receipt of such notice, the indemnifying party may assume the defense of such action or proceeding at such indemnifying party's own expense with counsel chosen by the indemnifying party and approved by the indemnified parties defendant in such action or proceeding, which approval shall not be unreasonably withheld; provided, however, that, if such indemnified party or parties reasonably determine that a conflict of interest exists where it is advisable for such indemnified party or parties to be represented by separate counsel or that, upon advice of counsel, there may be legal defenses available to them which are different from or in addition to those available to the indemnifying party, then the indemnifying party shall not be entitled to assume such defense and the indemnified party or parties shall be entitled to one separate counsel at the indemnifying party's expense. If an indemnifying party is not entitled to assume the defense of such action or proceeding as a result of the proviso to the preceding sentence, such indemnifying party's counsel shall be entitled to conduct the defense of such indemnified party or parties, it being understood that both such counsel will cooperate with each other to conduct the defense of such action or proceeding as efficiently as possible. If an indemnifying party is not so entitled to assume the defense of such action or does not assume such defense, after having received the notice referred to in the first sentence of this paragraph, the indemnifying party or parties will pay the reasonable fees and expenses of counsel for the indemnified party or parties. In such event, however, no indemnifying party will be liable for any settlement effected without the written consent of such indemnifying party. If an indemnifying party is entitled to assume, and assumes, the defense of such action or proceeding in accordance with this paragraph, such indemnifying party shall not be liable for any fees and expenses of counsel for the indemnified parties incurred thereafter in connection with such action or proceeding. The indemnification obligations provided pursuant to Sections 5(a) and (b) hereof survive, with respect to a Holder, the transfer of Registrable Securities by such Holder, and with respect to a Holder or the Company, shall remain in full force and effect regardless of any investigation made by or on behalf of any indemnified party. (d) Contribution. (i) In order to provide for just and equitable contribution in circumstances in which the indemnity agreement provided for in this Section 5 is for any reason held to be unenforceable although applicable in accordance with its terms, the Company and the selling Holders shall contribute to the aggregate losses, liabilities, claims, damages and expenses of the nature contemplated by such indemnity agreement incurred by the Company and the selling Holders, in such proportion as is appropriate to reflect the relative fault of and benefits to the Company on the one hand and the selling Holders on the other (in such proportions that the selling Holders are severally, not jointly, responsible for the balance), in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative benefits to the indemnifying party and indemnified parties shall be determined by reference to, among other things, the total proceeds received by the indemnified party and indemnified parties in connection with the offering to which such losses, claims, damages, liabilities or expenses relate. The relative fault of the indemnifying party and indemnified parties shall be determined by reference to, among other things, whether the action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact, has been made by, or relates to information supplied by, such indemnifying party or the indemnified parties, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such action. (ii) The Company and the Holders agree that it would not be just or equitable if contribution pursuant to this Section 5(d) were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. Notwithstanding the provisions of this Section 5(d), no selling Holder shall be required to contribute any amount in excess of the amount by which the total price at which the Registrable Securities of such selling Holder were offered to the public exceeds the amount of any damages which such selling Holder would otherwise have been required to pay by reason of such untrue statement or omission. ELLSF Notwithstanding the foregoing, no Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 5(d), each Person, if any, who controls a Holder within the meaning of Section 15 of the Securities Act and directors and officers of a Holder shall have the same rights to contribution as such Holder, and each director of the Company, each officer of the Company who signed the Registration Statement and each Person, if any, who controls the Company within the meaning of Section 15 of the Securities Act shall have the same rights to contribution as the Company. (iv) The contribution provided for in this Section 5(d) shall survive, with respect to a Holder, the transfer of Registrable Securities by such Holder, and with respect to a Holder or the Company, shall remain in full force and effect regardless of any investigation made by or on behalf of any indemnified party. 6. Rule 144 Sales. (a) Reports. The Company covenants that it will file the reports required to be filed by the Company under the Securities Act and the Securities Exchange Act of 1934, as amended, and will take such further action as any Holder of Registrable Securities may reasonably request, all to the extent required to enable such Holder to sell Registrable Securities pursuant to Rule 144 under the Securities Act. (b) Certificates. In connection with any sale, transfer or other disposition by any Holder of any Registrable Securities pursuant to Rule 144 under the Securities Act, the Company shall cooperate with such Holder to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold and not bearing any Securities Act legend, and enable certificates for such Registrable Securities to be for such number of shares and registered in such names as the selling Holders may reasonably request at least two (2) business days prior to any sale of Registrable Securities. (c) Opinion That Shares Not Required to be Registered. The Company shall not be required to fulfill any registration obligations under this Agreement if the Company provides the Holder who desires to sell Registrable Securities with an opinion, satisfactory to Holder in its reasonable discretion, of counsel, satisfactory to Holder in its reasonable discretion, stating that (i) the Holder is free to sell the Registrable Securities that they desired to register in the manner proposed by such Holder (including but, not limited to, an underwritten offering), without registering such Registrable Securities, or (ii) such Registrable Securities can be sold under Rule 144 of the Securities Act or otherwise without registration in the open market in compliance with the Securities Act. 7. Miscellaneous. (a) Amendments and Waivers. The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given without the written consent of the Company and the Holders of a majority in amount of the outstanding Registrable Securities; provided, however, that no amendment, modification or supplement or waiver or consent to the departure with respect to the provisions of Sections 2, 3, 4, 5, 6 or 7 hereof shall be effective as against any Holder of Registrable Securities unless consented to in writing by such Holder of Registrable Securities, as the case may be. Notice of any amendment, modification or supplement to this Agreement adopted in accordance with this Section 7(a) shall be provided by the Company to each Holder of Registrable Securities at least fifteen (15) days prior to the effective date of such amendment, modification or supplement. (b) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, registered first-class mail, telex, telecopier, or any courier guaranteeing overnight delivery, (i) if to a Holder, at the most current address given by such Holder to the Company by means of a notice given in accordance with the provisions of this Section 7(b), which address initially is, with respect to each Holder, the address set forth next to such Holder's name on the books and records of the Company, or (ii) if to the Company, at: Wellsford Real Properties, Inc., 610 Fifth Avenue, 7th Floor, New York, New York 10020, Attention: President, Fax No. (212) 333-2323. All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; three (3) business days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt is acknowledged, if telecopied; or at the time delivered if delivered by an air courier guaranteeing overnight delivery. (c) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors, assigns and transferees of each of the Company and the Holder, including without limitation and without the need for an express assignment, subsequent Holders. If any successor, assignee or transferee of any Holder shall acquire Registrable Securities, in any manner, whether by operation of law or otherwise, such Registrable Securities, as the case may be, shall be held subject to all of the terms of this Agreement, and by taking and holding such Registrable Securities such Person shall be entitled to receive the benefits hereof and shall be conclusively deemed to have agreed to be bound by all of the terms and provisions hereof. (d) Headings. The headings in this Agreement are for the convenience of reference only and shall not limit or otherwise affect the meaning hereof. (e) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF MARYLAND WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAW PROVISIONS THEREOF. (f) Specific Performance. The Company and the Holders hereto acknowledge that there would be no adequate remedy at law if any party fails to perform any of its obligations hereunder, and accordingly agree that each party, in addition to any other remedy to which it may be entitled at law or in equity, shall be entitled to compel specific performance of the obligations of any other party under this Agreement in accordance with the terms and conditions of this Agreement in any court of the United States or any State thereof having jurisdiction. (g) Entire Agreement. This Agreement is intended by the Company and the Holder as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the Company and the Holder in respect of the subject matter contained herein. This Agreement supersedes all prior agreements and understandings of the Company and the Holder with respect to such subject matter. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above. WELLSFORD REAL PROPERTIES, INC. By:/s/ Edward Lowenthal --------------------------- Name: Edward Lowenthal Title: President ERP OPERATING LIMITED PARTNERSHIP* By:/s/ Bruce C. Strohm --------------------------- Name: Bruce C. Strohm Title: Executive Vice President BY: EQUITY RESIDENTIAL PROPERTIES TRUST, its general partner EX-10.41 27 ASSIGNMENT AND ACCEPTANCE AGREEMENT THIS ASSIGNMENT AND ACCEPTANCE AGREEMENT (this "Agreement") dated June 19, 1997, by and between BANKBOSTON, N.A. (formerly known as The First National Bank of Boston) ("Assignor"), and WELLSFORD REAL PROPERTIES, INC. ("Assignee"). W I T N E S S E T H: WHEREAS, Assignor is a party to that certain Credit Agreement dated as of April 25, 1997 (as amended and in effect from time to time, the "Credit Agreement"), by and among Park Avenue Financing Company, LLC, a Delaware limited liability company, and PAMC Co-Manager Inc., a Delaware corporation (collectively the "Borrower"), The First National Bank of Boston (now known as BankBoston, N.A.), Assignee, the other banks which may become parties thereto from time to time (collectively, the "Banks"), The First National Bank of Boston (now known as BankBoston, N.A.), as Agent for the Banks (in such capacity, the "Agent"), and certain other parties; and WHEREAS, Assignor desires to transfer to Assignee a Commitment under the Credit Agreement and its rights under the Credit Agreement (i) with respect to the Commitment being assigned and (ii) its outstanding Loan with respect to the Commitment; NOW, THEREFORE, for and in consideration of the sum of Ten and No/100 Dollars ($10.00) and other good and valuable considerations, the receipt and sufficiency of which are hereby acknowledged, Assignor and Assignee hereby agree as follows: 1. Definitions. Terms defined in the Credit Agreement and used herein without definition shall have the respective meanings assigned to such terms in the Credit Agreement. 2. Assignment. (a) Subject to the terms and conditions of this Agreement and in consideration of the payment to be made by Assignee to Assignor pursuant to Paragraph 5 of this Agreement, effective as of the "Assignment Date" (as defined in Paragraph 7 below), Assignor hereby irrevocably sells, transfers and assigns to Assignee, without recourse a portion of its Note in the amount of $5,000,000.00 representing a $5,000,000.00 Commitment, a six and one-fourth percent (6.25%) Commitment Percentage and a six and one-fourth percent (6.25%) interest in and to all of the other rights and obligations under the Credit Agreement, the other Loan Documents and the Intercreditor Agreement dated as of April 25, 1997 among the Banks and Agent (the "Intercreditor Agreement") (the assigned interests being hereinafter referred to as the "Assigned Interests"), including without limitation, Assignor's share of the outstanding Loan under the Assigned Interests and the right to receive interest and principal on and all other fees and amounts with respect to, the Assigned Interests, all from and after the Assignment Date, all as if Assignee were an original Bank under and signatory to the Credit Agreement having a Commitment Percentage equal to such amount of the Assigned Interests. EDG Assignee, subject to the terms and conditions hereof, hereby assumes all obligations of Assignor with respect to the Assigned Interests from and after the Assignment Date as if Assignee were an original Bank under and signatory to the Credit Agreement and the Intercreditor Agreement, which obligations shall include, but shall not be limited to, the obligation to indemnify the Agent as provided therein (such obligations, together with all other obligations set forth in the Credit Agreement, the other Loan Documents and the Intercreditor Agreement, are hereinafter collectively referred to as the "Assigned Obligations"). Assignor shall have no further duties or obligations with respect to, and shall have no further interest in, the Assigned Obligations or the Assigned Interests. 3. Representations and Requests of Assignor. (a) Assignor represents and warrants to Assignee (i) that it is legally authorized to, and has full power and authority to, enter into this Agreement and perform its obligations under this Agreement; (ii) that as of the date hereof, before giving effect to the assignment contemplated hereby, the principal face amount of Assignor's Note is $60,000,000.00 and the aggregate principal balance of the Loan made by it equals $60,000,000.00; and (iii) that it has forwarded to the Agent the Note held by Assignor. Assignor makes no representation or warranty, express or implied, and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Loan Documents or the execution, legality, validity, enforceability, genuineness or sufficiency of any Loan Document or any other instrument or document furnished pursuant thereto or in connection with the Loan, the collectibility of the Loan, the continued solvency of the Borrower, the Guarantor or any Additional Pledgor or the continued existence, sufficiency or value of the Collateral or any assets of the Borrower, the Guarantor or any Additional Pledgor which may be realized upon for the repayment of the Loan, or the performance or observance by the Borrower, the Guarantor, any Additional Pledgor or any other Person of any of their respective obligations under the Loan Documents to which it is a party or any other instrument or document delivered or executed pursuant thereto or in connection with the Loan; other than that it is the legal and beneficial owner of, or has the right to assign, the interest being assigned by it hereunder and that such interest is free and clear of any adverse claim. (b) Assignor requests that the Agent obtain replacement notes for each of Assignor and Assignee as provided in the Credit Agreement. 4. Representations of Assignee. Assignee makes and confirms to the Agent, Assignor and the other Banks all of the representations, warranties and covenants of a Bank under Article 13 and 17 of the Credit Agreement and in Paragraph 3 of the Intercreditor Agreement. Without limiting the foregoing, Assignee (a) represents and warrants that it is legally authorized to, and has full power and authority to, enter into this Agreement and perform its obligations under this Agreement; (b) confirms that it has received a copy of the Loan Documents and the Intercreditor Agreement, together with copies of the most recent financial statements delivered pursuant to the Credit Agreement and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Agreement; (c) agrees that it has and will, independently and without reliance upon Assignor, any other Bank or the Agent and based upon such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in evaluating the Loan, the Loan Documents, the creditworthiness of the Borrower, the Guarantor and the Additional Pledgors and the value of the Collateral and other assets of the Borrower, the Guarantor and the Additional Pledgors and taking or not taking action under the Loan Documents and the Intercreditor Agreement; (d) appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers as are reasonably incidental thereto pursuant to the terms of the Loan Documents and the Intercreditor Agreement; (e) agrees that it will become a party to and will perform in accordance with their terms all the obligations which by the terms of the Loan Documents and the Intercreditor Agreement are required to be performed by it as a Bank; and (f) represents and warrants that Assignee does not control, is not controlled by, is not under common control with and is otherwise free from influence or control by, the Borrower, the Guarantor, the Managing Member and the Additional Pledgors. 5. Payments to Assignor. In consideration of the assignment made pursuant to Paragraph 1 of this Agreement, Assignee agrees to pay to Assignor on the Assignment Date, an amount equal to the aggregate principal amount outstanding of the Loan owing to Assignor, in connection with the Assigned Interests under the Credit Agreement and the other Loan Documents. 6. Intentionally Omitted. 7. Effectiveness. (a) The effective date for this Agreement shall be June 19, 1997 (the "Assignment Date"). Following the execution of this Agreement, each party hereto shall deliver its duly executed counterpart hereof to the Agent for acceptance and recording in the Register by the Agent. (b) Upon such acceptance and recording and from and after the Assignment Date, (i) Assignee shall be a party to the Credit Agreement and the Intercreditor Agreement and shall, to the extent of the Assigned Interests, have the rights and obligations of a Bank thereunder, and (ii) Assignor shall, with respect to the Assigned Interests, relinquish its rights and be released from its obligations under the Credit Agreement and the Intercreditor Agreement. (c) Upon such acceptance and recording and from and after the Assignment Date, the Agent shall make all payments in respect of the Assigned Interests accruing after the Assignment Date (including payments of principal, interest, fees and other amounts) to Assignee, and Agent is authorized to retain from the next payment of Borrower and pay to Assignor interest at the rate of twelve percent per annum as provided in the Credit Agreement with respect to the Assigned Interests for the period accruing prior to the Assignment Date. 8. Notices. Assignee specifies as its address for notices and its Lending Office for all Loans, the offices set forth below: Notice Address: Wellsford Real Properties, Inc. 610 Fifth Avenue 7th Floor New York, New York 10020 Attn: Gregory Hughes Fax: 212/333-2323 9. Payment Instructions. All payments to Assignee under the Credit Agreement shall be made as provided in the Credit Agreement in accordance with the following instructions: Wellsford Real Properties, Inc. Chase Manhattan Bank, N.A. For the account of United States Trust Company of New York Account No. 920-1-073195 In favor of: Wellsford Real Properties, Inc. Operating Account 69-7266-7 10. Governing Law. THIS AGREEMENT IS INTENDED TO TAKE EFFECT AS A SEALED INSTRUMENT FOR ALL PURPOSES AND TO BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (WITHOUT REFERENCE TO CONFLICT OF LAWS). 11. Counterparts. This Agreement may be executed in any number of counterparts which shall together constitute but one and the same agreement. 12. Amendments. This Agreement may not be amended, modified or terminated except by an agreement in writing signed by Assignor and Assignee, and consented to by Agent. 13. Successors. This Agreement shall inure to the benefit of the parties hereto and their respective successors and assigns as permitted by the terms of Credit Agreement and the Intercreditor Agreement. IN WITNESS WHEREOF, intending to be legally bound, each of the undersigned has caused this Agreement to be executed on its behalf by its officers thereunto duly authorized, as of the date first above written. ASSIGNOR: BANKBOSTON, N.A. (formerly known as The First National Bank of Boston) By:/s/ Jeffrey L. Warwick -------------------------------- Title: Director ASSIGNEE: WELLSFORD REAL PROPERTIES, INC. By:/s/ Gregory F. Hughes ------------------------------- Title: CFO [SEAL] The undersigned, as Agent, acknowledges receipt of the foregoing assignment and consents thereto (including, without limitation, such consents as may be required by Section 17.1(a), (e) or (f) under the Credit Agreement). BANKBOSTON, N.A. (formerly known as The First National Bank of Boston), as Agent By:/s/ Jeffrey L. Warwick ----------------------------------- Title: Director The undersigned is a "Guarantor" and/or "Additional Pledgor" under one or more of the Loan Documents. The Loan Documents executed by the undersigned provide that the obligations of the undersigned extend to each other Note as may be issued under the Credit Agreement. Each of the undersigned executes the foregoing Agreement for the purpose of acknowledging that the Loan Documents to which each of the undersigned is a party extends to and is applicable to each new Note which is issued pursuant to the Credit Agreement in connection with the foregoing Agreement and with respect to any Commitment being retained by Assignor from and after such assignment. GUARANTOR AND ADDITIONAL PLEDGOR: - ------------------------------ /s/ Stanley Stahl - ---------------------------------- STANLEY STAHL ADDITIONAL PLEDGOR: PAFC MANAGEMENT, INC., a Delaware corporation By:/s/ Stanley Stahl ---------------------------------- Title: Stanley Stahl, President [CORPORATE SEAL] EX-10.42 28 REVOLVING CREDIT AGREEMENT DATED AS OF MAY 30, 1997 among WELLSFORD REAL PROPERTIES, INC., as Borrower and BANKBOSTON, N.A., MORGAN GUARANTY TRUST COMPANY OF NEW YORK, and OTHER BANKS WHICH MAY BECOME PARTIES TO THIS AGREEMENT, as Banks and BANKBOSTON, N.A., AS AGENT and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, AS CO-AGENT REVOLVING CREDIT AGREEMENT THIS REVOLVING CREDIT AGREEMENT is made as of the 30th day of May, 1997, by and among WELLSFORD REAL PROPERTIES, INC., a Maryland corporation having its principal place of business at 610 Fifth Avenue, Seventh Floor, New York, New York 10020 ("Borrower"), BANKBOSTON, N.A., a national banking association, MORGAN GUARANTY TRUST COMPANY OF NEW YORK, a New York banking corporation, and the other lending institutions which may become parties hereto pursuant to Section 18 (collectively, the "Banks"), and BANKBOSTON, N.A., as Agent for the Banks (the "Agent"), and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Co- Agent for the Banks (the "Co-Agent"). Section 14. DEFINITIONS AND RULES OF INTERPRETATION. Section 14.1. Definitions. The following terms shall have the meanings set forth in this Section l or elsewhere in the provisions of this Agreement referred to below: Adjustment Date. The earlier to occur of (i) the first anniversary of the Closing Date, (ii) the date on which an Equity Offering is completed having raised an amount of not less than $50,000,000; and (iii) the date on which the Point View Office Complex is 90% leased pursuant to bona-fide arms- length leases requiring the payment of current rent with tenants in actual occupancy. Agent. BankBoston, N.A., a national banking association, its successors and assigns, acting as agent for the Banks. Agent's Head Office. The Agent's head office located at 100 Federal Street, Boston, Massachusetts 02110, or at such other location as the Agent may designate from time to time by notice to the Borrower and the Banks. Agent's Special Counsel. Long Aldridge Norman LLP or such other counsel as may be approved by the Agent. Agreement. This Revolving Credit Agreement, including the Schedules and Exhibits hereto. Agreement Regarding Common Stock Purchase. The Agreement Regarding Common Stock and Preferred Stock Purchase Agreement dated of even date herewith among EQR, Borrower and Agent. Agreement Regarding Fees. The Agreement Regarding Fees dated of even date herewith among Borrower, BKB and Morgan. Appraisal. An MAI appraisal of the value of a parcel of Mortgaged Property or Collateral Property, determined on a fair market value basis, performed by an independent appraiser selected by the Agent who is not an employee of the Borrower, any Subsidiary of the Borrower, the Agent or a Bank, the form and substance of such appraisal and the identity of the appraiser to be in accordance with regulatory laws and policies (both regulatory and internal) applicable to the Banks, including, without limitation, FIRREA, and otherwise acceptable to the Majority Banks. Appraised Value. The fair market value of a parcel of Mortgaged Property or Collateral Property, determined by the most recent Appraisal of such parcel or update obtained pursuant to Section 5.2 or Section 10.7, subject, however, to such changes or adjustments to the value determined thereby as may be required by the appraisal departments of the Majority Banks in their good faith business judgment. Assignment of Common Stock Agreement. The Assignment of Common Stock Agreement from the Borrower to the Agent pursuant to which there shall be assigned to the Agent for the benefit of the Banks a security interest in the EQR Preferred Equity Commitment, such assignment to be in form and substance satisfactory to the Majority Banks. Assignment of Leases and Rents. Each of the collateral assignments of leases and rents from the Borrower and the Guarantor to the Agent pursuant to which there shall be assigned to the Agent for the benefit of the Banks a security interest in the interest of such party, as lessor with respect to all Leases of all or any part of a Mortgaged Property, each such collateral assignment to be in form and substance satisfactory to the Majority Banks. Balance Sheet Date. December 31, 1996 Banks. BKB, Morgan and any other Person who becomes an assignee of any rights of a Bank pursuant to Section 18 (but not including any Participant, as defined in Section 18). Base Rate. The higher of (a) the annual rate of interest announced from time to time by BKB at its head office in Boston, Massachusetts as its "base rate", and (b) one-half of one percent (0.5%) above the Federal Funds Effective Rate (rounded upwards, if necessary, to the next one-eighth of one percent). Any change in the rate of interest payable hereunder resulting from a change in the Base Rate shall become effective as of the opening of business on the day on which such change in the Base Rate becomes effective. Base Rate Loans. Those Loans bearing interest calculated by reference to the Base Rate. BKB. BankBoston, N.A., a national banking association. Borrower. As defined in the preamble hereto. Borrowing Base. At any time, the lesser of (a) the sum of (i) the EQR Preferred Equity Commitment Allowance plus (ii) the Debt Service Coverage Amount and (b) the sum of (i) the EQR Preferred Equity Commitment Allowance plus (ii) the Designated Collateral Value. Borrower Substitute Collateral. See Section 5.4. Building. All of the buildings, structures and improvements now or hereafter located on any Mortgaged Property or on any Collateral Property. Building Service Equipment. All apparatus, fixtures and articles of personal property owned by the Borrower or the Guarantor, now or hereafter attached to or used or procured for use in connection with the operation or maintenance of any building, structure or other improvement located on or included in the Mortgaged Property, including, but without limiting the generality of the foregoing, all engines, furnaces, boilers, stokers, pumps, heaters, tanks, dynamos, motors, generators, switchboards, electrical equipment, heating, plumbing, lifting and ventilating apparatus, air-cooling and air-conditioning apparatus, gas and electric fixtures, elevators, escalators, fittings, and machinery and all other equipment of every kind and description, used or procured for use in the operation of a Building (except apparatus, fixtures or articles of personal property belonging to lessees or other occupants of such building or to persons other than the Borrower or the Guarantor, unless the same be abandoned by any such lessee or other occupant or person and shall become the Borrower's or the Guarantor's property by reason of such abandonment), together with any and all replacements thereof and additions thereto. Business Day. Any day on which banking institutions in the city in which the Agent's Head Office is located are open for the transaction of banking business and, in the case of Eurodollar Rate Loans, which also is a Eurodollar Business Day. Capital Improvement Project. With respect to any Real Estate now or hereafter owned by the Borrower or the Guarantor which is utilized principally as commercial office space, capital improvements consisting of rehabilitation, refurbishment, replacement and improvements to the existing Buildings on such Real Estate which may be properly capitalized under generally accepted accounting principles. Capital Improvement Reserve. For any period (a) for the purpose of testing compliance with the Consolidated Operating Cash Flow Coverage ratio set forth in Section 9.2 hereof, an amount equal to thirty cents ($0.30) multiplied by the weighted average of rentable square footage of Real Estate owned by the Borrower and its Subsidiaries during such period; and (b) for the purpose of testing compliance with the Borrowing Base covenant set forth in Section 9.3 hereof, an amount equal to One and 50/100 Dollars ($1.50) multiplied by the weighted average of rentable square footage of Real Estate owned by the Borrower and its Subsidiaries during such period. CERCLA. See Section 6.20. Closing Date. The first date on which all of the conditions set forth in Section 10 and Section 11 have been satisfied. Co-Agent. Morgan. Code. The Internal Revenue Code of 1986, as amended. Collateral. All of the property, rights and interests of the Borrower or the Guarantor, which are or are intended to be subject to the security interests, liens and mortgages created by the Security Documents, including, without limitation, the Mortgaged Property, the EQR Preferred Equity Commitment and the Collateral Notes. Collateral Assignment. Each of the Collateral Assignment of Documents, Rights and Claims by the Borrower or the Guarantor to the Agent for the benefit of the Banks pursuant to which the Collateral Notes and related documents are pledged to the Agent. Collateral Property. Collectively, the real property securing (or for the purposes of this Agreement deemed to be securing) the Collateral Notes at any time and, individually, any one such parcel of real property. Collateral Notes. Collectively, the Qualifying Collateral Notes that are pledged pursuant to the Collateral Assignments. Initially, the Collateral Notes are the Sonterra Note and the 277 Park Avenue Note. Commitment. With respect to each Bank, the amount set forth on Schedule 1 hereto as the amount of such Bank's Commitment to make or maintain Loans to the Borrower, as the same may be reduced from time to time in accordance with the terms of this Agreement. Commitment Percentage. With respect to each Bank, the percentage set forth on Schedule 1 hereto as such Bank's percentage of the aggregate Commitments of all of the Banks. Compliance Certificate. See Section 7.4(e). Consolidated or combined. With reference to any term defined herein, that term as applied to the accounts of the Borrower and its Subsidiaries, consolidated or combined in accordance with generally accepted accounting principles. Consolidated Operating Cash Flow. With respect to any Test Period, an amount equal to the Operating Cash Flow of the Borrower and its Subsidiaries for such period consolidated in accordance with generally accepted accounting principles. The Consolidated Operating Cash Flow of the Borrower and its Subsidiaries on the consolidated financial statements of the Borrower and its Subsidiaries shall be adjusted as of the Closing Date to reflect the Borrower's allocable share of such Consolidated Operating Cash Flow for the relevant period or as of the date of determination. Consolidated Tangible Net Worth. The amount by which Consolidated Total Assets exceeds Consolidated Total Liabilities, and less the sum of: (a) the total book value of all assets of the Borrower and its Subsidiaries properly classified as intangible assets under generally accepted accounting principles, including such items as good will, the purchase price of acquired assets in excess of the fair market value thereof, trademarks, trade names, service marks, brand names, copyrights, patents and licenses, and rights with respect to the foregoing; plus (b) all amounts representing any write-up in the book value of any assets of the Borrower or its Subsidiaries resulting from a revaluation thereof subsequent to the Balance Sheet Date. Consolidated Total Assets. All assets of the Borrower and its Subsidiaries determined on a consolidated basis in accordance with generally accepted accounting principles. All Real Estate shall be valued on an undepreciated cost basis. The assets of the Borrower and its Subsidiaries on the consolidated financial statements of the Borrower and its Subsidiaries shall be adjusted as of the Closing Date to reflect the Borrower's allocable share of such assets for the relevant period or as of the date of determination. Consolidated Total Liabilities. All liabilities of the Borrower and its Subsidiaries determined on a consolidated basis in accordance with generally accepted accounting principles and all Indebtedness of the Borrower and its Subsidiaries, whether or not so classified. The liabilities of the Borrower and its Subsidiaries on the consolidated financial statements of the Borrower and its Subsidiaries shall be adjusted as of the Closing Date to reflect the Borrower's allocable share of such liabilities for the relevant period or as of the date of determination. Construction Inspector. A firm of professional engineers or architects selected by the Agent and reasonably acceptable to the Borrower. Conversion Request. A notice given by the Borrower to the Agent of its election to convert or continue a Loan in accordance with Section 4.1. Debt Offering. The issuance and sale by the Borrower or the Guarantor of any debt securities of the Borrower or the Guarantor. Debt Service. For any period of four consecutive fiscal quarters, the sum of actual interest expense and mandatory or scheduled principal payments due and payable during such period with respect to the Indebtedness, excluding any balloon payments due upon maturity of any Indebtedness, amortized loan fees and the capitalized interest expense and principal payments due with respect to the construction loans on the Palomino Park Project. For the initial twelve (12) months following the Closing Date, Debt Service shall be determined by annualizing the Debt Service from and after the Closing Date in a manner reasonably acceptable to the Agent and the Co-Agent. Debt Service Coverage Amount. At any time determined by the Agent, an amount equal to the maximum principal loan amount which, when bearing interest at a rate per annum equal to the sum of the then-current annual yield on seven (7) year obligations issued by the United States Treasury most recently prior to such date plus one and three-quarters percent (1.75%), payable based on a 25 year mortgage style amortization schedule, could be paid by the monthly principal and interest payment amount resulting from dividing (a) the aggregate Operating Cash Flow from the Mortgaged Property and the Collateral Notes for the preceding four fiscal quarters minus the Capital Improvement Reserve (with respect to the Mortgaged Property only) divided by 1.5, by (b) 12. The determination of the Debt Service Coverage Amount and the components thereof by the Agent shall, so long as the same shall be determined in good faith, be conclusive and binding absent manifest error. Default. See Section 12.1. Designated Collateral Value. At the relevant time of reference thereto, the sum of (a) 70% of the outstanding principal balance of the Sonterra Note, (b) 60% of the outstanding principal balance of the 277 Park Avenue Note and any other Collateral Notes, and (c) not less than 40% but not greater than 60% as determined by the consent of all of the Banks in their sole discretion, of the Appraised Value of the Mortgaged Property. Distribution. The declaration or payment of any dividend or distribution on or in respect of any shares of the Borrower, other than dividends or distributions payable solely in equity securities of the Borrower; the purchase, redemption, exchange or other retirement of any shares of the Borrower; directly or indirectly through a Subsidiary of the Borrower or otherwise; the return of capital by the Borrower to its shareholders as such; or any other distribution on or in respect of any shares of the Borrower. Dollars or $. Dollars in lawful currency of the United States of America. Domestic Lending Office. Initially, the office of each Bank designated as such in Schedule 1 hereto; thereafter, such other office of such Bank, if any, located within the United States that will be making or maintaining Base Rate Loans. Drawdown Date. The date on which any Loan is made or is to be made, and the date on which any Loan is converted or combined in accordance with Section 4.1. Eligible Real Estate. Real Estate: (a) which is owned in fee by the Borrower (or the Guarantor upon the approval of all of the Banks in accordance with Section 5.4 hereof); (b) which is located within the northeastern United States, excluding those States which prescribe a "single-action" or similar rule limiting the rights of creditors secured by real property, except to the extent such exclusion is waived in writing by all of the Banks with respect to a specific parcel of Real Estate; (c) which is utilized principally for commercial office purposes; (d) which is approved by all of the Banks after the date hereof in their sole judgment; (e) as to which all of the representations set forth in Section 6 of this Agreement concerning Mortgaged Property are true and correct; and (f) as to which the Agent has received all Eligible Real Estate Qualification Documents, so long as all of such documents remain in full force and effect. Eligible Real Estate Qualification Documents. With respect to any parcel of Real Estate proposed to be included in the Eligible Real Estate each of the following: (a) Security Documents. Such Security Documents relating to such Real Estate as the Majority Banks shall require, in form and substance satisfactory to the Agent and the Majority Banks and duly executed and delivered by the respective parties thereto. (b) Enforceability Opinion. The favorable legal opinion of counsel to the Borrower (or the Guarantor, as applicable) reasonably acceptable to the Majority Banks qualified to practice in the State in which such Real Estate is located, addressed to the Banks and in form and substance satisfactory to the Majority Banks as to the enforceability of such Security Documents and such other matters as the Majority Banks shall reasonably request. (c) Perfection of Liens. Evidence reasonably satisfactory to the Majority Banks that the Security Documents are effective to create in favor of the Agent a legal, valid and enforceable first (except for Permitted Liens entitled to priority under applicable law) lien and security interest in such Real Estate and that all filings, recordings, deliveries of instruments and other actions necessary or desirable to protect and preserve such liens or security interests have been duly effected. (d) Survey and Taxes. The Survey of such Real Estate, together with the Surveyor Certification and evidence of payment of all real estate taxes, assessments and municipal charges on such Real Estate which on the date of determination are required to have been paid under Section 7.8. (e) Title Insurance; Title Exception Documents. The Title Policy covering such Real Estate, including all endorsements thereto, and together with proof of payment of all fees and premiums for such policy, and true and accurate copies of all documents listed as exceptions under such policy. (f) UCC Certification. A certification from the Title Insurance Company or counsel satisfactory to the Majority Banks that a search of the public records designated by the Majority Banks disclosed no conditional sales contracts, security agreements, chattel mortgages, leases of personalty, financing statements or title retention agreements which affect any property, rights or interests of the Borrower (or the Guarantor owning the fee simple interest in such Real Estate, as applicable) that are or are intended to be subject to the security interest, assignments, and mortgage liens created by the Security Documents relating to such Real Estate except to the extent that the same are discharged and removed prior to or simultaneously with the inclusion of the Real Estate in the Collateral. (g) Management Agreement. A true copy of the Management Agreement relating to such Real Estate. (h) Service Agreements. True copies of all material Service Agreements relating to such Real Estate. (i) Standard Form Leases. The forms of Lease to be used by the Borrower (or the Guarantor owning the fee simple interest in such Real Estate, as applicable) in connection with future leasing of such Mortgaged Property, such forms of Lease to be in form and substance satisfactory to the Agent. (j) Subordination Agreements. A Subordination, Attornment and Non- Disturbance Agreement from each tenant of such Real Estate as required by the Agent, dated not more than sixty (60) days prior to the inclusion of such Real Estate in the Collateral and satisfactory in form and substance to the Agent. (k) Estoppel Certificates. Estoppel certificates from each tenant of such parcel of Real Estate which occupies 10,000 square feet or more of such Real Estate and in the aggregate from tenants which occupy not less than seventy-five percent (75%) of the total square footage of such Real Estate, such certificates to be dated not more than sixty (60) days prior to the inclusion of such Real Estate in the Collateral and to be satisfactory in form and substance to the Agent. (l) Certificates of Insurance. Each of (i) a current certificate of insurance as to the insurance maintained on such Real Estate (including flood insurance if necessary) from the insurer or an independent insurance broker dated as of the date of determination, identifying insurers, types of insurance, insurance limits, and policy terms; (ii) certified copies of all policies evidencing such insurance (or certificates therefor signed by the insurer or an agent authorized to bind the insurer); and (iii) such further information and certificates from the Borrower (or the Guarantor owning the fee simple interest in such Real Estate, as applicable), its insurers and insurance brokers as the Majority Banks may reasonably request, all of which shall be in compliance with the requirements of this Agreement. (m) Hazardous Substance Assessments. A hazardous waste site assessment report concerning Hazardous Substances and asbestos on such Real Estate dated or updated not more than three months prior to the inclusion of such Real Estate in the Collateral, from an Environmental Engineer, such report to contain no qualifications except those that are acceptable to the Majority Banks in their sole discretion and to otherwise be in form and substance satisfactory to the Majority Banks. (n) Certificate of Occupancy. A copy of the certificate(s) of occupancy issued to the Borrower (or the Guarantor owning the fee simple interest in such Real Estate, as applicable) for such parcel of Real Estate permitting the use and occupancy of the Building thereon (or evidence that any previously issued certificate(s) of occupancy is not required to be reissued to the Borrower or the Guarantor), or a legal opinion reasonably satisfactory to the Agent that no certificates of occupancy are necessary to the use and occupancy thereof. (o) Appraisal. An Appraisal of such Real Estate, in form and substance satisfactory to the Majority Banks and dated not more than three months prior to the inclusion of such Real Estate in the Collateral. (p) Zoning and Land Use Opinion of Counsel. A favorable opinion concerning the Real Estate addressed to the Agent and dated the date of the inclusion of such Real Estate in the Collateral, in form and substance satisfactory to the Majority Banks, from counsel approved by the Majority Banks admitted to practice in the State in which such parcel is located, as to zoning and land use compliance, or such other evidence regarding zoning and land use compliance as the Majority Banks may approve in their reasonable discretion. (q) Construction Inspector Report. A report or written confirmation from the Construction Inspector satisfactory in form and content to the Majority Banks, dated or updated not more than three months prior to the inclusion of such Real Estate in the Collateral, addressing such matters as the Majority Banks may reasonably require, including without limitation that the Construction Inspector has reviewed the plans and specifications or other available materials for all Buildings on the Real Estate, that the condition of the Buildings is good, that all Buildings were constructed and completed in a good and workmanlike manner, that the Buildings satisfy all applicable building, zoning, handicapped access and Environmental Laws applicable thereto, whether or not the Real Estate and the Buildings thereon are a conforming use under applicable zoning laws, and that utilities and public water and sewer service are available at the lot lines of the Real Estate through dedicated right-of-way or through insured perpetual private easements approved by the Majority Banks and connected directly to the Building with all necessary permits. (r) Permit and Legal Compliance Assurances. Evidence satisfactory to the Majority Banks that all activities being conducted on such Real Estate which require federal, state or local licenses or permits have been duly licensed and that such licenses or permits are in full force and effect, and that the Real Estate, the Buildings and the use and occupancy thereof are in compliance in all material respects with all applicable federal, state or local laws, ordinances or regulations. (s) Operating Statements. Operating statements for such Real Estate in the form of such statements delivered to the Banks under Section 6.4(c) covering each of the four fiscal quarters ending immediately prior to the addition of such Mortgaged Property to the Collateral. (t) Doing Business Opinion. An opinion, dated the date of the inclusion of such Real Estate in the Collateral, of legal counsel to the Borrower (or the Guarantor owning the fee simple interest in such Real Estate, as applicable) reasonably acceptable to the Majority Banks qualified to practice in the State in which such Real Estate is located to the effect that neither the Agent nor any Bank shall be required to qualify to do business in such State or any political subdivision thereof or to become liable to pay any taxes in such State or any political subdivision thereof solely on account of the receipt of the lien on such Real Estate securing the Obligation, such opinion to be satisfactory to the Majority Banks. (u) Additional Documents. Such other documents, certificates, reports or assurances as the Majority Banks may reasonably require in their discretion. Employee Benefit Plan. Any employee benefit plan within the meaning of Section 3(3) of ERISA maintained or contributed to by the Borrower or any ERISA Affiliate, other than a Multiemployer Plan. Environmental Engineer. A firm of independent professional engineers or other scientists generally recognized as expert in the detection, analysis and remediation of Hazardous Substances and related environmental matters and reasonably acceptable to the Agent. Environmental Laws. See Section 6.20(a). EQR. ERP Operating Limited Partnership. EQR Preferred Equity Commitment. That certain Common Stock and Preferred Stock Purchase Agreement dated as of May 30, 1997 between EQR and Borrower, as modified and supplemented by the Agreement Regarding Common Stock Purchase. EQR Preferred Equity Commitment Allowance. At any time, an amount equal to ninety percent (90%) of the amount then available to be funded or paid pursuant to the EQR Preferred Equity Commitment; provided that (a) EQR has not notified the Borrower, Agent or any Bank of a refusal to pay the purchase price to the Agent pursuant to the EQR Preferred Equity Commitment, or notice of its intention to so refuse to pay the purchase price, (b) EQR has not claimed that a default or event of default by Borrower has occurred under the EQR Preferred Equity Commitment such that EQR is not obligated to pay amounts to the Agent pursuant to the EQR Preferred Equity Commitment, (c) none of the events described in Section 12.1(h), (i) or (j) have occurred with respect to EQR, (d) EQR has not denied that it has any liability or obligation to the Agent under the EQR Preferred Equity Commitment, has not notified the Borrower, the Agent or any of the Banks of EQR's intention to attempt to cancel or terminate the EQR Prefered Equity Commitment, and has not failed to observe or comply with any term, covenant, condition or agreement under the EQR Preferred Equity Commitment, or (e) no event has occurred which would permit EQR to refuse to pay amounts to the Agent pursuant to the EQR Preferred Equity Commitment. Equity Offering. The issuance and sale by the Borrower or the Guarantor of any of its equity securities. ERISA. The Employee Retirement Income Security Act of 1974, as amended and in effect from time to time. ERISA Affiliate. Any Person which is treated as a single employer with the Borrower under Section 414 of the Code. ERISA Reportable Event. A reportable event with respect to a Guaranteed Pension Plan within the meaning of Section 4043 of ERISA and the regulations promulgated thereunder as to which the requirement of notice has not been waived. Eurocurrency Reserve Rate. For any day with respect to a Eurodollar Rate Loan, the maximum rate (expressed as a decimal) at which any lender subject thereto would be required to maintain reserves under Regulation D of the Board of Governors of the Federal Reserve System (or any successor or similar regulations relating to such reserve requirements) against "Eurocurrency Liabilities" (as that term is used in Regulation D or any successor or similar regulation), if such liabilities were outstanding. The Eurocurrency Reserve Rate shall be adjusted automatically on and as of the effective date of any change in the Eurocurrency Reserve Rate. Eurodollar Business Day. Any day on which commercial banks are open for international business (including dealings in Dollar deposits) in London or such other eurodollar interbank market as may be selected by the Agent and the Banks in their sole discretion acting in good faith. Eurodollar Lending Office. Initially, the office of each Bank designated as such in Schedule 1 hereto; thereafter, such other office of such Bank, if any, that shall be making or maintaining Eurodollar Rate Loans. Eurodollar Rate. For any Interest Period with respect to a Eurodollar Rate Loan, the rate per annum equal to the quotient (rounded upwards to the nearest 1/16 of one percent) of (a) the rate at which the Reference Bank's Eurodollar Lending Office is offered Dollar deposits two Eurodollar Business Days prior to the beginning of such Interest Period in whatever interbank eurodollar market may be selected by the Reference Bank in its sole discretion, acting in good faith, for delivery on the first day of such Interest Period for the number of days comprised therein and in an amount comparable to the amount of the Eurodollar Rate Loan to which such Interest Period applies, divided by (b) a number equal to 1.00 minus the Eurocurrency Reserve Rate. Eurodollar Rate Loans. Loans bearing interest calculated by reference to a Eurodollar Rate. Event of Default. See Section 12.1. Federal Funds Effective Rate. For any day, the rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for such day on such transactions received by the Agent from three Federal funds brokers of recognized standing selected by the Agent. generally accepted accounting principles. Principles that are (a) consistent with the principles promulgated or adopted by the Financial Accounting Standards Board and its predecessors, as in effect from time to time and (b) consistently applied with past financial statements of the Borrower adopting the same principles; provided that a certified public accountant would, insofar as the use of such accounting principles is pertinent, be in a position to deliver an unqualified opinion (other than a qualification regarding changes in generally accepted accounting principles) as to financial statements in which such principles have been properly applied. Guaranteed Pension Plan. Any employee pension benefit plan within the meaning of Section 3(2) of ERISA maintained or contributed to by the Borrower or any ERISA Affiliate the benefits of which are guaranteed on termination in full or in part by the PBGC pursuant to Title IV of ERISA, other than a Multiemployer Plan. Guarantor. Collectively, each Subsidiary of the Borrower owning Mortgaged Property which becomes a Guarantor in accordance with Section 5.4 hereof and, individually, any one such Subsidiary. Guaranty. Collectively, the Unconditional Guaranty of Payment and Performance, in form and substance satisfactory to the Agent in its sole discretion, which is required to be executed and delivered to the Agent by each Guarantor pursuant to Section 5.4 hereof. Hazardous Substances. See Section 6.20(b). Indebtedness. All obligations, contingent and otherwise, that in accordance with generally accepted accounting principles should be classified upon the obligor's balance sheet as liabilities, or to which reference should be made by footnotes thereto, including in any event and whether or not so classified: (a) all debt and similar monetary obligations, whether direct or indirect (including, without limitation, all obligations evidenced by bonds, debentures, notes or similar debt instruments and subordinated indebtedness); (b) all liabilities secured by any mortgage, pledge, security interest, lien, charge or other encumbrance existing on property owned or acquired subject thereto, whether or not the liability secured thereby shall have been assumed; and (c) all guarantees, interest rate and currency swap obligations, endorsements and other contingent obligations whether direct or indirect in respect of indebtedness of others, including contingent obligations that in accordance with generally accepted accounting principles are required to be footnoted on the Borrower's consolidated balance sheets and any obligation to supply funds to or in any manner to invest directly or indirectly in a Person, to purchase indebtedness, or to assure the owner of indebtedness against loss through an agreement to purchase goods, supplies or services for the purpose of enabling the debtor to make payment of the indebtedness held by such owner or otherwise, and the obligation to reimburse the issuer in respect of any letter of credit; (d) any obligation as a lessee or an obligor under a capitalized lease; and (e) the Borrower's pro rata share of any of the above- described obligations of its unconsolidated affiliates. Indemnity Agreement. Collectively, the Indemnity Agreements Regarding Hazardous Materials, dated or to be dated on or prior to the Closing Date, made by the Borrower (and the Guarantor, if applicable) in favor of the Agent and the Banks, pursuant to which such party agrees to indemnify the Agent and the Banks with respect to Hazardous Substances and Environmental Laws, such Indemnity Agreement to be in form and substance satisfactory to the Majority Banks. Interest Payment Date. (a) As to each Loan, the first day of each calendar month during the term of such Loan, and (b) also as to each Eurodollar Rate Loan, the last day of the Interest Period relating thereto. Interest Period. With respect to each Eurodollar Rate Loan (a) initially, the period commencing on the Drawdown Date of such Loan and ending one, two, three or six months thereafter, and (b) thereafter, each period commencing on the day following the last day of the next preceding Interest Period applicable to such Loan and ending on the last day of one of the periods set forth above, as selected by the Borrower in a Conversion Request; provided that all of the foregoing provisions relating to Interest Periods are subject to the following: (A) if any Interest Period with respect to a Eurodollar Rate Loan would otherwise end on a day that is not a Eurodollar Business Day, that Interest Period shall end and the next Interest Period shall commence on the next preceding or succeeding Eurodollar Business Day as determined conclusively by the Reference Bank in accordance with the then current bank practice in the applicable eurodollar interbank market; (B) if the Borrower shall fail to give notice as provided in Section 4.1, the Borrower shall be deemed to have requested a conversion of the affected Eurodollar Rate Loan to a Base Rate Loan on the last day of the then current Interest Period with respect thereto; and (C) no Interest Period relating to any Eurodollar Rate Loan shall extend beyond the Maturity Date. Investments. With respect to any Person, all shares of capital stock, evidences of Indebtedness and other securities issued by any other Person, all loans, advances, or extensions of credit to, or contributions to the capital of, any other Person, all purchases of the securities or business or integral part of the business of any other Person and commitments and options to make such purchases, all interests in real property, and all other investments; provided, however, that the term "Investment" shall not include (i) equipment, inventory and other tangible personal property acquired in the ordinary course of business, or (ii) current trade and customer accounts receivable for services rendered in the ordinary course of business and payable in accordance with customary trade terms. In determining the aggregate amount of Investments outstanding at any particular time: (a) there shall be included as an Investment all interest accrued with respect to Indebtedness constituting an Investment unless and until such interest is paid; (b) there shall be deducted in respect of each such Investment any amount received as a return of capital (but only by repurchase, redemption, retirement, repayment, liquidating dividend or liquidating distribution); (c) there shall not be deducted in respect of any Investment any amounts received as earnings on such Investment, whether as dividends, interest or otherwise, except that accrued interest included as provided in the foregoing clause (a) may be deducted when paid; and (d) there shall not be deducted from the aggregate amount of Investments any decrease in the value thereof. Leases. Leases, licenses and agreements whether written or oral, relating to the use or occupation of space in or on the Building or on the Real Estate. Liens. See Section 8.2. Loan Documents. This Agreement, the Notes, the Security Documents, the Guaranty, and all other documents, instruments or agreements executed or delivered by or on behalf of the Borrower or the Guarantor evidencing or securing the Loans. Loan Request. See Section 2.6. Loans. The aggregate Loans to be made by the Banks hereunder. Majority Banks. As of any date, the Bank or Banks whose aggregate Commitment Percentage is equal to or greater than the required percentage, as determined by the Banks, required to approve such matter, as disclosed by the Agent to the Borrower from time to time. Management Agreements. Agreements, whether written or oral, providing for the management of the Mortgaged Property or any of them. Maturity Date. May 30, 1999, as the same may be extended as provided in Section 2.8, or such earlier date on which the Loans shall become due and payable pursuant to the terms hereof. Morgan. Morgan Guaranty Trust Company of New York, a New York banking corporation. Mortgaged Property. Collectively, the Eligible Real Estate which is conveyed to and accepted by the Agent as security for the Obligations pursuant to the Security Deeds. Multiemployer Plan. Any multiemployer plan within the meaning of Section 3(37) of ERISA maintained or contributed to by the Borrower or any ERISA Affiliate. Net Capital Expenditures. With respect to any Person or asset for any fiscal period, an amount equal to the amount of capital expenditures incurred by such Person or with respect to such asset during such fiscal period determined in accordance with generally accepted accounting principles. Net Income (or Deficit). With respect to any Person (or any asset of any Person) for any fiscal period, the net income (or deficit) of such Person (or attributable to such asset), after deduction of all expenses, taxes and other proper charges, determined in accordance with generally accepted accounting principles. Notes. See Section 2.4. Notice. See Section 19. Obligations. All indebtedness, obligations and liabilities of the Borrower to any of the Banks and the Agent, individually or collectively, under this Agreement or any of the other Loan Documents or in respect of any of the Loans or the Notes, or other instruments at any time evidencing any of the foregoing, whether existing on the date of this Agreement or arising or incurred hereafter, direct or indirect, joint or several, absolute or contingent, matured or unmatured, liquidated or unliquidated, secured or unsecured, arising by contract, operation of law or otherwise. Operating Cash Flow. With respect to any Person (or any asset of any Person) for any period, an amount equal to the sum of (a) the Net Income of such Person (or attributable to such asset) for such period plus (b) depreciation and amortization, interest expense, and any extraordinary or non-recurring losses deducted in calculating such Net Income minus (c) any extraordinary or nonrecurring gains included in calculating such Net Income. Outstanding. With respect to the Loans, the aggregate unpaid principal thereof as of any date of determination. PBGC. The Pension Benefit Guaranty Corporation created by Section 4002 of ERISA and any successor entity or entities having similar responsibilities. Palomino Park Bonds. The Palomino Park Public Improvements Corporation Assessment Lien Revenue Bonds, Series 1995, in the aggregate principal amount of $14,755,000.00. Palomino Park Project. A master planned five-phase multifamily development project comprising approximately 182 acres located in Douglas County, Colorado, Phase I of which is owned by Park at Highlands LLC, Phase II of which is owned by Red Canyon at Palomino Park LLC and Phase III of which is owned by Wellsford Park Highlands Corp. Wellsford Park Highlands Corp. holds options to purchase Phases IV and V of the Palomino Park Project. Permitted Liens. Liens, security interests and other encumbrances permitted by Section 8.2. Person. Any individual, corporation, partnership, limited liability company, trust, unincorporated association, business, or other legal entity, and any government or any governmental agency or political subdivision thereof. Pledge Agreement. Each agreement from time to time in effect in form and substance satisfactory to the Majority Banks pursuant to which the Borrower or the Guarantor may pledge cash, Short-term Investments or other property referred to in clause (vii) of Section 5.1 as part of the Collateral securing the Obligations. Point View Office Complex. Certain real property and improvements located in Wayne, New Jersey, consisting of the following: (i) a main campus of two office buildings and (ii) two smaller office buildings located at 1700 and 1800 Valley Road. Potential Collateral. Any property of the Borrower (or the Guarantor in accordance with Section 5.4 hereof) which is not at the time included in the Collateral and which consists of (i) Eligible Real Estate, (ii) Real Estate which is capable of becoming Eligible Real Estate through the approval of all of the Banks and the completion and delivery of Eligible Real Estate Qualification Documents, (iii) Qualifying Collateral Notes, (iv) promissory notes which may become Qualifying Collateral Notes through the approval of all of the Banks and the completion and delivery of Qualifying Collateral Note Qualification Documents, (v) cash, (vi) Short-term Investments and (vii) other property referred to in clause (vii) of Section 5.1. Qualifying Collateral Notes. Collectively, the Sonterra Note, the 277 Park Avenue Note and any other notes held by the Borrower or any of its Subsidiaries which meet all of the following conditions: (i) no event which with the passage of time or the giving of notice, or both, might constitute a default shall have occurred under the applicable note or related loan documents, (ii) the note and the related documents shall be free and clear of all Liens other than the liens in favor of the Agent, (iii) the underlying collateral for the note shall be a commercial office building (excluding the collateral for the Sonterra Note which is multi-family housing) or shares or other interests in an entity owning a commercial office building, and, based on the Appraised Value of such underlying collateral, provides a loan to value ratio of no more than eighty percent (80%) on all senior and subordinated indebtedness secured thereby (for the purposes hereof, the collateral for the 277 Park Avenue Note shall be deemed to be the real property securing the senior indebtedness of 277 Park Avenue, LLC to Column Financial, Inc., as the initial mortgagee), and shall not have any material title, survey, environmental or other defects and shall be otherwise acceptable to all of the Banks, (iv) all such notes which evidence senior debt shall have a minimum pay rate of 8-3/4%, (v) all such notes which evidence subordinate debt shall have a minimum pay rate of 10-1/2%, (vi) the Agent shall have received all Qualifying Collateral Note Qualification Documents, all of which remain in full force and effect, and (vii) all of the Banks shall have approved the note in the exercise of their sole discretion. Qualifying Collateral Note Qualification Documents. With respect to any note proposed to be included as a Qualifying Collateral Note each of the following: (a) a duly executed and delivered Collateral Assignment with respect to such note and related documents, including Uniform Commercial Code financing statements; (b) the original note duly endorsed and delivered to the Agent; (c) true and correct copies of any and all other instruments, documents and agreements evidencing, securing or relating to such note; (d) the items described in subsections (a) through (s) under the definition of "Eligible Real Estate Qualification Documents" with respect to the underlying collateral for the note, to the extent applicable; and (e) such other documents, certificates, reports or assurances as the Majority Banks may reasonably require in their discretion with regard to such note or the underlying collateral therefor. Real Estate. All real property at any time owned or leased (as lessee or sublessee) by the Borrower or any of its Subsidiaries. Record. The record, including computer records, maintained by the Agent with respect to any Loan referred to in the Notes. Reference Bank. BKB. Register. See Section 18.2. Release. See Section 6.20(c)(iii). Rent Roll. A report prepared by the Borrower or the Guarantor, as applicable, showing for each tenant its occupancy status, lease expiration date, market rent, lease rent and other information in such form as may have been approved by the Agent, such approval not to be unreasonably withheld. Reportable Event. Any of the events set forth in Section 4043(b) of ERISA or the regulations thereunder. SEC. The federal Securities and Exchange Commission. Security Deeds. The Mortgages, Deeds to Secure Debt and Deeds of Trust from the Borrower (or the Guarantor in accordance with Section 5.4 hereof) to the Agent for the benefit of the Banks (or to trustees named therein acting on behalf of the Agent for the benefit of the Banks) pursuant to which the Borrower or the Guarantor, if applicable, has conveyed a Mortgaged Property as security for the Obligations. Security Documents. Collectively, the Collateral Assignment, the Security Deeds, the Assignments of Rents and Leases, the Indemnity Agreement, the Guaranty, the Agreement Regarding Common Stock Purchase, the Assignment of Common Stock Agreement, any further collateral assignments to the Agent for the benefit of the Banks, and each Pledge Agreement, including, without limitation, U.C.C.-1 financing statements executed and delivered in connection therewith. Service Agreement(s). Service agreements with third parties, whether written or oral, relating to the operation, maintenance, security, finance or insurance of Mortgaged Property. Shareholders' Equity. At any date, the total consolidated shareholders' equity of the Borrower and its Subsidiaries determined in accordance with generally accepted accounting principles. Short-term Investments. Investments described in subsections (a) through (g), inclusive, of Section 8.3. For all purposes of this Agreement and the other Loan Documents, the value of Short-term Investments at any time shall be the current market value thereof determined in a manner reasonably satisfactory to the Majority Banks. Sonterra Note. That certain Promissory Note dated June 28, 1996, in the original principal amount of $17,800,000.00, made by Specified Properties VIII, L.P. payable to the order of Wellsford Residential Property Trust and transferred by Wellsford Residential Property Trust to Borrower. State. A state of the United States of America. Subordination, Attornment and Non-Disturbance Agreement. An agreement among the Agent, the Borrower (or the Guarantor, as applicable) and a tenant under a Lease pursuant to which such tenant agrees to subordinate its rights under the Lease to the lien of the Security Deed and agrees to recognize the Agent or its successor in interest as landlord under the Lease in the event of a foreclosure under the Security Deed, such agreement to be in form and substance satisfactory to the Agent. Subsidiary. Any corporation, association, partnership, limited liability company, trust, or other business or other legal entity of which the designated parent shall at any time own directly or indirectly through a Subsidiary or Subsidiaries at least a majority (by number of votes or controlling interests) of the outstanding Voting Interests. Subsidiary Collateral. See Section 5.4. Survey. An instrument survey of Mortgaged Property prepared by a registered land surveyor which shall show the location of all buildings, structures, easements and utility lines on such property, shall be sufficient to remove the standard survey exception from the Title Policy, shall show that all buildings and structures are within the lot lines of the Mortgaged Property and shall not show any encroachments by others (or to the extent any encroachments are shown, such encroachments shall be acceptable to the Majority Banks in their sole discretion), shall show rights of way, adjoining sites, establish building lines and street lines, the distance to, and names of the nearest intersecting streets and such other details as the Majority Banks may reasonably require; shall show the zoning district or districts in which the Mortgaged Property is located and shall show whether or not the Mortgaged Property is located in a flood hazard district as established by the Federal Emergency Management Agency or any successor agency or is located in any flood plain, flood hazard or wetland protection district established under federal, state or local law and shall otherwise be in form and substance reasonably satisfactory to the Majority Banks. Surveyor Certification. With respect to each parcel of Mortgaged Property, a certificate executed by the surveyor who prepared the Survey with respect thereto, dated as of a recent date and containing such information relating to such parcel as the Majority Banks or the Title Insurance Company may reasonably require, such certificate to be reasonably satisfactory to the Majority Banks in form and substance. Syndication Agent. J. P. Morgan Securities, Inc., acting as syndication agent for the Banks. Test Period. See Section 9.2. Title Insurance Company. Chicago Title Insurance Company or another title insurance company or companies reasonably approved by the Majority Banks. Title Policy. With respect to each parcel of Mortgaged Property, an ALTA standard form title insurance policy (or, if such form is not available, an equivalent form of or legally promulgated form of mortgagee title insurance policy reasonably acceptable to the Majority Banks) issued by a Title Insurance Company (with such reinsurance or co-insurance as the Majority Banks may require, any such reinsurance to be with direct access endorsements to the extent available under applicable law) in such amount as the Majority Banks may require insuring the priority of the Security Deeds and that the Borrower (or the Guarantor, as applicable), holds marketable fee simple title (or good and indefeasible fee simple title to any Real Estate in the State of Texas) to such parcel, subject only to the encumbrances permitted by the Security Deed and which shall not contain standard exceptions for mechanics liens, persons in occupancy (other than tenants as tenants only under Leases) or matters which would be shown by a survey, shall not insure over any matter except to the extent that any such affirmative insurance is acceptable to the Majority Banks in their sole discretion, and shall contain (a) a revolving credit endorsement and (b) such other endorsements and affirmative insurance as the Majority Banks reasonably may require and is available in the State in which the Real Estate is located, including but not limited to (i) a comprehensive endorsement, (ii) a variable rate of interest endorsement, (iii) a usury endorsement, (iv) a doing business endorsement, (v) in States where available, an ALTA form 3.1 zoning endorsement, (vi) a "tie-in" endorsement and (vii) a "first loss" endorsement. Total Commitment. The sum of the Commitments of the Banks, as in effect from time to time. 277 Park Avenue Note. The Note dated as of April 25, 1997 made by Park Avenue Financing Company, LLC and PAMC Co-Manager Inc. to the order of Borrower in the original principal face amount of $20,000,000.00. Type. As to any Loan, its nature as a Base Rate Loan or a Eurodollar Rate Loan. Voting Interests. Stock or similar ownership interests, of any class or classes (however designated), the holders of which are at the time entitled, as such holders, (a) to vote for the election of a majority of the directors (or persons performing similar functions) of the corporation, association, partnership, trust or other business entity involved, or (b) to control, manage, or conduct the business of the corporation, partnership, association, trust or other business entity involved. Section 14.2. Rules of Interpretation. (a) A reference to any document or agreement shall include such document or agreement as amended, modified or supplemented from time to time in accordance with its terms and the terms of this Agreement. (b) The singular includes the plural and the plural includes the singular. (c) A reference to any law includes any amendment or modification to such law. (d) A reference to any Person includes its permitted successors and permitted assigns. (e) Accounting terms not otherwise defined herein have the meanings assigned to them by generally accepted accounting principles applied on a consistent basis by the accounting entity to which they refer. (f) The words "include", "includes" and "including" are not limiting. (g) The words "approval" and "approved", as the context so determines, means an approval in writing given to the party seeking approval after full and fair disclosure to the party giving approval of all material facts necessary in order to determine whether approval should be granted. (h) All terms not specifically defined herein or by generally accepted accounting principles, which terms are defined in the Uniform Commercial Code as in effect in the State of New York, have the meanings assigned to them therein. (i) Reference to a particular "Section ", refers to that section of this Agreement unless otherwise indicated. (j) The words "herein", "hereof", "hereunder" and words of like import shall refer to this Agreement as a whole and not to any particular section or subdivision of this Agreement. Section 15. THE REVOLVING CREDIT FACILITY. Section 15.1. Commitment to Lend. Subject to the terms and conditions set forth in this Agreement, each of the Banks severally agrees to lend to the Borrower, and the Borrower may borrow (and repay and reborrow) from time to time between the Closing Date and the Maturity Date upon notice by the Borrower to the Agent given in accordance with Section 2.6, such sums as are requested by the Borrower for the purposes set forth in Section 7.11 up to the lesser of (a) a maximum aggregate principal amount outstanding (after giving effect to all amounts requested) at any one time equal to such Bank's Commitment and (b) such Bank's Commitment Percentage of the Borrowing Base; provided, that, in all events no Default or Event of Default shall have occurred and be continuing and the Borrower's financial statements as required pursuant to Section 2.6(iv) shall demonstrate compliance with all covenants set forth therein; and provided, further, that the outstanding principal amount of the Loans (after giving effect to all amounts requested) shall not at any time exceed the Total Commitment. The Loans shall be made pro rata in accordance with each Bank's Commitment Percentage. The Loan Request shall constitute a representation and warranty by the Borrower that all of the conditions set forth in Section 10 and Section 11, in the case of the initial Loan, and Section 11, in the case of all other Loans, have been satisfied on the date of such funding. Section 15.2. Facility Fee. The Borrower agrees to pay to the Agent for the accounts of the Banks in accordance with their respective Commitment Percentages a facility fee calculated at the rate of one-fourth of one percent (1/4%) per annum on the average daily amount by which the Total Commitment exceeds the outstanding principal amount of Loans during each calendar quarter or portion thereof commencing on the date hereof and ending on the Maturity Date. The facility fee shall be payable quarterly in arrears on the first day of each calendar quarter for the immediately preceding calendar quarter or portion thereof, or on any earlier date on which the Commitments shall be reduced or shall terminate as provided in Section 2.3, with a final payment on the Maturity Date. Section 15.3. Reduction of Commitment. The Borrower shall have the right at any time and from time to time upon five Business Days' prior written notice to the Agent to reduce by $1,000,000 or an integral multiple of $1,000,000 in excess thereof or to terminate entirely the unborrowed portion of the Commitments, whereupon the Commitments of the Banks shall be reduced pro rata in accordance with their respective Commitment Percentages of the amount specified in such notice or, as the case may be, terminated, any such reduction to be without penalty (unless such reduction requires repayment of a Eurodollar Rate Loan). Promptly after receiving any notice of the Borrower delivered pursuant to this Section 2.3, the Agent will notify the Banks of the substance thereof. Upon the effective date of any such reduction or termination, the Borrower shall pay to the Agent for the respective accounts of the Banks the full amount of any facility fee under Section 2.2 then accrued on the amount of the reduction. No reduction or termination of the Commitments may be reinstated. Notwithstanding the foregoing, in no event shall the Commitments be reduced to less than $35,000,000. Section 15.4. Notes. The Loans shall be evidenced by a single promissory note of the Borrower to each Bank in substantially the form of Exhibit A hereto (collectively, the "Notes"), dated as of the Closing Date and completed with appropriate insertions. One Note shall be payable to the order of each Bank in the principal amount equal to such Bank's Commitment or, if less, the outstanding amount of all Loans made by such Bank, plus interest accrued thereon, as set forth below. The Borrower irrevocably authorizes the Agent to make or cause to be made, at or about the time of the Drawdown Date of any Loan or at the time of receipt of any payment of principal thereof, an appropriate notation on the Agent's Record reflecting the making of such Loan or (as the case may be) the receipt of such payment. The outstanding amount of the Loans set forth on the Agent's Record shall be prima facie evidence of the principal amount thereof owing and unpaid to each Bank, but the failure to record, or any error in so recording, any such amount on the Agent's Record shall not limit or otherwise affect the obligations of the Borrower hereunder or under any Note to make payments of principal of or interest on any Note when due. Section 15.5. Interest on Loans. (a) Each Base Rate Loan shall bear interest for the period commencing with the Drawdown Date thereof and ending on the date on which such Base Rate Loan is converted to a Eurodollar Rate Loan at the Base Rate. (b) Each Eurodollar Rate Loan shall bear interest for the period commencing with the Drawdown Date thereof and ending on the last day of the Interest Period with respect thereto at the rate of one and three-quarters percent (1.75%) per annum above the Eurodollar Rate determined for such Interest Period. (c) The Borrower promises to pay interest on each Loan in arrears on each Interest Payment Date with respect thereto. (d) Base Rate Loans and Eurodollar Rate Loans may be converted to Loans of the other Type as provided in Section 4.1. Section 15.6. Requests for Loans. Except with respect to the initial Loan, the Borrower shall give to the Agent written notice in the form of Exhibit B hereto (or telephonic notice confirmed in writing in the form of Exhibit B hereto) of each Loan requested hereunder (a "Loan Request") no less than five (5) Business Days prior to the proposed Drawdown Date. The Borrower shall not make a Loan Request more frequently than two times each month. Each such notice shall specify with respect to the requested Loan the proposed principal amount, Drawdown Date, Interest Period (if applicable) and Type. Each such notice shall also contain (i) a statement as to the purpose for which such advance shall be used (which purpose shall be in accordance with the terms of Section 7.11), (ii) in the case of any advance relating to any Capital Improvement Project (A) a statement that such advance will reimburse the Borrower for or pay costs incurred for work on the applicable Capital Improvement Project together with such evidence as the Majority Banks may reasonably require to verify the cost of such work (which evidence may include, without limitation, invoices and receipts) and that such work is in place or that stored materials are properly secured (which evidence may include a satisfactory report from the Construction Inspector), and (B) in the event that such Capital Improvement Project relates to a Mortgaged Property and if requested by the Majority Banks, delivery to the Agent of affidavits, lien waivers or other evidence reasonably satisfactory to the Majority Banks showing that all materialmen, laborers, subcontractors and any other parties who might or could claim statutory or common law liens and are furnishing or have furnished material or labor to the Mortgaged Property have been paid all amounts due for such labor and materials, (iii) a certification by the chief financial or chief accounting officer of the Borrower that the Borrower and the Guarantor are and will be in compliance with all covenants under the Loan Documents after giving effect to the making of such Loan, and (iv) a Compliance Certificate prepared using the financial statements of the Borrower most recently provided or required to be provided to the Agent under Section 6.4 or Section 7.4 adjusted in the best good faith estimate of the Borrower to give effect to the proposed advance. Promptly upon receipt of any such notice, the Agent shall notify each of the Banks thereof. Except as provided in this Section 2.6, each such Loan Request shall be irrevocable and binding on the Borrower and shall obligate the Borrower to accept the Loan requested from the Banks on the proposed Drawdown Date, provided that, in addition to the Borrower's other remedies against any Bank which fails to advance its proportionate share of a requested Loan, such Loan Request may be revoked by the Borrower by notice received by the Agent no later than the Drawdown Date if any Bank fails to advance its proportionate share of the requested Loan in accordance with the terms of this Agreement, provided further that the Borrower shall be liable in accordance with the terms of this Agreement (including, without limitation, amounts due pursuant to Section 4.8) to any Bank which is prepared to advance its proportionate share of the requested Loan for any costs, expenses or damages incurred by such Bank as a result of the Borrower's election to revoke such Loan Request. Nothing herein shall prevent the Borrower or the funding Banks from seeking recourse against any Bank that fails to advance its proportionate share of a requested Loan (but not any other Bank) as required by this Agreement for the actual and consequential damages incurred by the Borrower (including, without limitation, amounts required to be paid under this Agreement by the Borrower to any Bank) and such funding Banks proximately caused by such Bank that has failed to advance its proportionate share, provided that in no event shall such Bank be liable for punitive or exemplary damages. The Borrower may without cost or penalty revoke a Loan Request by delivering notice thereof to each of the Banks no later than three (3) Business Days prior to the Drawdown Date. Each Loan Request shall be (a) for a Base Rate Loan in a minimum aggregate amount of $1,000,000 or an integral multiple of $100,000 in excess thereof, or (b) for a Eurodollar Rate Loan in a minimum aggregate amount of $2,000,000 or an integral multiple of $100,000 in excess thereof; provided, however, that there shall be no more than five (5) Eurodollar Rate Loans outstanding at any one time. In the event that the proceeds from such Loan are to be used for a purpose other than a Capital Improvement Project, then the Borrower shall provide to the Agent as soon as practicable thereafter such evidence as the Majority Banks shall reasonably require to evidence that such funds have been used for such purpose (which evidence may include, without limitation, a closing statement). Section 15.7. Funds for Loans. (a) Not later than 11:00 a.m. (Boston time) on the proposed Drawdown Date of any Loans, each of the Banks will make available to the Agent, at the Agent's Head Office, in immediately available funds, the amount of such Bank's Commitment Percentage of the amount of the requested Loans which may be disbursed pursuant to Section 2.1. Upon receipt from each Bank of such amount, and upon receipt of the documents required by Section 10 and Section 11 and the satisfaction of the other conditions set forth therein, to the extent applicable, the Agent will make available to the Borrower the aggregate amount of such Loans made available to the Agent by the Banks by crediting such amount to the account of the Borrower maintained at the Agent's Head Office. The failure or refusal of any Bank to make available to the Agent at the aforesaid time and place on any Drawdown Date the amount of its Commitment Percentage of the requested Loans shall not relieve any other Bank from its several obligation hereunder to make available to the Agent the amount of such other Bank's Commitment Percentage of any requested Loans, including any additional Loans that may be requested subject to the terms and conditions hereof to provide funds to replace those not advanced by the Bank so failing or refusing, provided that the Borrower may by notice received by the Agent no later than the Drawdown Date refuse to accept any Loan which is not fully funded in accordance with the Borrower's Loan Request subject to the terms of Section 2.6. In the event of any such failure or refusal, the Banks not so failing or refusing shall be entitled to a priority secured position as against the Bank or Banks so failing or refusing for such Loans as provided in Section 12.4. (b) Unless Agent shall have been notified by any Bank prior to the applicable Drawdown Date that such Bank will not make available to Agent such Bank's pro rata share of a proposed Loan, Agent may in its discretion assume that such Bank has made such Loan available to Agent in accordance with the provisions of this Agreement and Agent may, if it chooses, in reliance upon such assumption make such Loan available to Borrower, and such Bank shall be liable to the Agent for the amount of such advance. Section 15.8. Extension of Maturity Date. (a) The Borrower has requested the ability to extend the Maturity Date. The Borrower acknowledges and agrees that the Banks have no agreement or obligation to extend the Maturity Date. Notwithstanding the foregoing, the Borrower may request that the Banks extend the Maturity Date by one (1) year to May 30, 2000. If the Borrower desires to request that the Maturity Date be extended to such date, the Borrower shall deliver written notice of such request to the Agent not later than the date which is ninety (90) days prior to the then effective Maturity Date (an "Extension Request"). The Agent shall promptly provide a copy of such notice to each of the Banks. The Banks shall notify the Agent within thirty (30) days of receipt of such notice from the Agent of such Bank's approval or rejection of the Extension Request. No Extension Request shall be deemed approved unless approved by all of the Banks, which approval may be granted or withheld in each Bank's sole and absolute discretion. In the event that a Bank shall fail to respond in writing to the Agent within such thirty (30) day period, such Bank shall be deemed to have rejected the Extension Request. The Agent shall promptly notify the Borrower of the responses received from the Banks with respect to the Extension Request. (b) In the event that an Extension Request is approved as provided in Section 2.8(a), each and every such approval shall be conditioned upon (i) there being no Default or Event of Default outstanding as of the date of the Extension Request or the Maturity Date, (ii) submission of an acceptable Compliance Certificate, (iii) payment of an extension fee determined by the Agent and the Co-Agent, and (iv) satisfaction of such other conditions precedent as may be customarily required by the Banks prior to the effectiveness of any extension of the Maturity Date. Section 16. REPAYMENT OF THE LOANS. Section 16.1. Stated Maturity. The Borrower promises to pay on the Maturity Date, and there shall become absolutely due and payable on the Maturity Date, all of the Loans outstanding on such date, together with any and all accrued and unpaid interest thereon. Section 16.2. Mandatory Prepayments. The Borrower promises to pay principal of the Loans prior to the stated maturity as follows: (a) If at any time the aggregate outstanding principal amount of the Loans exceeds the Total Commitment or the Borrowing Base, then the Borrower shall., subject to Borrower's rights pursuant to Section 12.1B, immediately pay the amount of such excess to the Agent for the respective accounts of the Banks for application to the Loans, together with any additional interest payable pursuant to Section 4.8. (b) If at any time the Borrower receives a payment or prepayment of or in respect to the principal amount of any Collateral Note, then the Borrower shall immediately pay such amount to the Agent for the respective accounts of the Banks for application to the Loans, together with any additional interest payable pursuant to Section 4.8. Section 16.3. Optional Prepayments. The Borrower shall have the right, at the Borrower's election, to prepay the outstanding amount of the Loans, as a whole or in part, at any time without penalty or premium; provided, that the full or partial prepayment of the outstanding amount of any Eurodollar Rate Loans pursuant to this Section 3.3 may be made only on the last day of the Interest Period relating thereto except as otherwise required pursuant to Section 4.7. The Borrower shall give the Agent, no later than 10:00 a.m., Boston time, at least three Business Days prior written notice of any prepayment pursuant to this Section 3.3 of any Base Rate Loans and at least four Eurodollar Business Days notice of any proposed repayment pursuant to this Section 3.3 of Eurodollar Rate Loans, in each case specifying the proposed date of payment of Loans and the principal amount to be paid. Section 16.4. Partial Prepayments. Each partial prepayment of the Loans under Section 3.2(a) and Section 3.3 shall be in an integral multiple of $100,000, shall be accompanied by the payment of accrued interest on the principal prepaid to the date of payment and, after payment of such interest, shall be applied, in the absence of instruction by the Borrower, first to the principal of Base Rate Loans and then to the principal of Eurodollar Rate Loans. Section 16.5. Effect of Prepayments. Amounts of the Loans prepaid under Section 3.2 and Section 3.3 prior to the Maturity Date may be reborrowed as provided in Section 2. Section 17. CERTAIN GENERAL PROVISIONS. Section 17.1. Conversion Options. (a) The Borrower may elect from time to time to convert any outstanding Loan to a Loan of another Type and such Loan shall thereafter bear interest as a Base Rate Loan or a Eurodollar Rate Loan, as applicable; provided that (i) with respect to any such conversion of a Eurodollar Rate Loan to a Base Rate Loan, the Borrower shall give the Agent at least three Business Days' prior written notice of such election, and such conversion shall only be made on the last day of the Interest Period with respect to such Eurodollar Rate Loan; (ii) with respect to any such conversion of a Base Rate Loan to a Eurodollar Rate Loan, the Borrower shall give the Agent at least four Eurodollar Business Days' prior written notice of such election and the Interest Period requested for such Loan, the principal amount of the Loan so converted shall be in a minimum aggregate amount of $2,000,000 or an integral multiple of $100,000 in excess thereof and, after giving effect to the making of such Loan, there shall be no more than five (5) Eurodollar Rate Loans outstanding at any one time; and (iii) no Loan may be converted into a Eurodollar Rate Loan when any Default or Event of Default has occurred and is continuing. All or any part of the outstanding Loans of any Type may be converted as provided herein, provided that no partial conversion shall result in a Base Rate Loan in an aggregate principal amount of less than $1,000,000 or a Eurodollar Rate Loan in an aggregate principal amount of less than $2,000,000 and that the aggregate principal amount of each Loan shall be in an integral multiple of $100,000. On the date on which such conversion is being made, each Bank shall take such action as is necessary to transfer its Commitment Percentage of such Loans to its Domestic Lending Office or its Eurodollar Lending Office, as the case may be. Each Conversion Request relating to the conversion of a Base Rate Loan to a Eurodollar Rate Loan shall be irrevocable by the Borrower. (b) Any Loan may be continued as such Type upon the expiration of an Interest Period with respect thereto by compliance by the Borrower with the terms of Section 4.1; provided that no Eurodollar Rate Loan may be continued as such when any Default of the type described in subsections (a), (b), (c) or (d) of Section 12.1 or Event of Default has occurred and is continuing, but shall be automatically converted to a Base Rate Loan on the last day of the Interest Period relating thereto ending during the continuance of any Default or Event of Default. (c) In the event that the Borrower does not notify the Agent of its election hereunder with respect to any Loan, such Loan shall be automatically converted to a Base Rate Loan at the end of the applicable Interest Period. Section 17.2. Closing Fee. The Borrower agrees to pay, on or before the Closing Date, to the Agent for the ratable account of the Banks a closing fee as specified in the Agreement Regarding Fees. Section 17.3. Agent's Fee. The Borrower shall pay to the Agent, for the Agent's own account, an Agent's fee as specified in the Agreement Regarding Fees. Section 17.4. Funds for Payments. (a) All payments of principal, interest, facility fees, Agent's fees, closing fees and any other amounts due hereunder or under any of the other Loan Documents shall be made to the Agent, for the respective accounts of the Banks and the Agent, as the case may be, at the Agent's Head Office, not later than 3:00 p.m. (Boston time) on the day when due, in each case in immediately available funds. The Agent is hereby authorized to charge the account of the Borrower with BKB, on the dates when the amount thereof shall become due and payable, with the amounts of the principal of and interest on the Loans and all fees, charges, expenses and other amounts owing to the Agent and/or the Banks under the Loan Documents. (b) All payments by the Borrower hereunder and under any of the other Loan Documents shall be made without setoff or counterclaim and free and clear of and without deduction for any taxes, levies, imposts, duties, charges, fees, deductions, withholdings, compulsory loans, restrictions or conditions of any nature now or hereafter imposed or levied by any jurisdiction or any political subdivision thereof or taxing or other authority therein unless the Borrower is compelled by law to make such deduction or withholding. If any such obligation is imposed upon the Borrower with respect to any amount payable by it hereunder or under any of the other Loan Documents, the Borrower will pay to the Agent, for the account of the Banks or (as the case may be) the Agent, on the date on which such amount is due and payable hereunder or under such other Loan Document, such additional amount in Dollars as shall be necessary to enable the Banks or the Agent to receive the same net amount which the Banks or the Agent would have received on such due date had no such obligation been imposed upon the Borrower. The Borrower will deliver promptly to the Agent certificates or other valid vouchers for all taxes or other charges deducted from or paid with respect to payments made by the Borrower hereunder or under such other Loan Document. Section 17.5. Computations. All computations of interest on the Loans and of other fees to the extent applicable shall be based on a 360-day year and paid for the actual number of days elapsed. Except as otherwise provided in the definition of the term "Interest Period" with respect to Eurodollar Rate Loans, whenever a payment hereunder or under any of the other Loan Documents becomes due on a day that is not a Business Day, the due date for such payment shall be extended to the next succeeding Business Day, and interest shall accrue during such extension. The outstanding amount of the Loans as reflected on the records of the Agent from time to time shall be considered prima facie evidence of such amount. Section 17.6. Inability to Determine Eurodollar Rate. In the event that, prior to the commencement of any Interest Period relating to any Eurodollar Rate Loan, the Agent shall determine that adequate and reasonable methods do not exist for ascertaining the Eurodollar Rate for such Interest Period, the Agent shall forthwith give notice of such determination (which shall be conclusive and binding on the Borrower and the Banks) to the Borrower and the Banks. In such event (a) any Loan Request with respect to Eurodollar Rate Loans shall be automatically withdrawn and shall be deemed a request for Base Rate Loans and (b) each Eurodollar Rate Loan will automatically, on the last day of the then current Interest Period thereof, become a Base Rate Loan, and the obligations of the Banks to make Eurodollar Rate Loans shall be suspended until the Agent determines that the circumstances giving rise to such suspension no longer exist, whereupon the Agent shall so notify the Borrower and the Banks. Section 17.7. Illegality. Notwithstanding any other provisions herein, if any present or future law, regulation, treaty or directive or the interpretation or application thereof shall make it unlawful, or any central bank or other governmental authority having jurisdiction over a Bank or its Eurodollar Lending Office shall assert that it is unlawful, for any Bank to make or maintain Eurodollar Rate Loans, such Bank shall forthwith give notice of such circumstances to the Agent and the Borrower and thereupon (a) the commitment of the Banks to make Eurodollar Rate Loans or convert Loans of another type to Eurodollar Rate Loans shall forthwith be suspended and (b) the Eurodollar Rate Loans then outstanding shall be converted automatically to Base Rate Loans on the last day of each Interest Period applicable to such Eurodollar Rate Loans or within such earlier period as may be required by law. Section 17.8. Additional Interest. If any Eurodollar Rate Loan or any portion thereof is repaid or is converted to a Base Rate Loan for any reason on a date which is prior to the last day of the Interest Period applicable to such Eurodollar Rate Loan, the Borrower will pay to the Agent upon demand for the account of the Banks in accordance with their respective Commitment Percentages, in addition to any amounts of interest otherwise payable hereunder, any amounts required to compensate the Banks for any losses, costs or expenses which may reasonably be incurred as a result of such payment or conversion, including, without limitation, an amount equal to daily interest for the unexpired portion of such Interest Period on the Eurodollar Rate Loan or portion thereof so repaid or converted at a per annum rate equal to the excess, if any, of (a) the interest rate calculated on the basis of the Eurodollar Rate applicable to such Eurodollar Rate Loan minus (b) the yield obtainable by the Agent upon the purchase of debt securities customarily issued by the Treasury of the United States of America which have a maturity date most closely approximating the last day of such Interest Period (it being understood that the purchase of such securities shall not be required in order for such amounts to be payable). Section 17.9. Additional Costs, Etc. Notwithstanding anything herein to the contrary, if any future applicable law or any amendment or modification of present applicable law which expression, as used herein, includes statutes, rules and regulations thereunder and legally binding interpretations thereof by any competent court or by any governmental or other regulatory body or official with appropriate jurisdiction charged with the administration or the interpretation thereof and requests, directives, instructions and notices at any time or from time to time hereafter made upon or otherwise issued to any Bank or the Agent by any central bank or other fiscal, monetary or other authority (whether or not having the force of law), shall: (a) subject any Bank or the Agent to any tax, levy, impost, duty, charge, fee, deduction or withholding of any nature with respect to this Agreement, the other Loan Documents, such Bank's Commitment or the Loans (other than taxes based upon or measured by the income or profits of such Bank or the Agent), or (b) materially change the basis of taxation (except for changes in taxes on income or profits) of payments to any Bank of the principal of or the interest on any Loans or any other amounts payable to any Bank under this Agreement or the other Loan Documents, or (c) impose or increase or render applicable any special deposit, reserve, assessment, liquidity, capital adequacy or other similar requirements (whether or not having the force of law) against assets held by, or deposits in or for the account of, or loans by, or commitments of an office of any Bank beyond those in effect as of the date hereof, or (d) impose on any Bank or the Agent any other conditions or requirements with respect to this Agreement, the other Loan Documents, the Loans, such Bank's Commitment, or any class of loans or commitments of which any of the Loans or such Bank's Commitment forms a part; and the result of any of the foregoing is (i) to increase the cost to any Bank of making, funding, issuing, renewing, extending or maintaining any of the Loans or such Bank's Commitment, or (ii) to reduce the amount of principal, interest or other amount payable to such Bank or the Agent hereunder on account of such Bank's Commitment or any of the Loans, or (iii) to require such Bank or the Agent to make any payment or to forego any interest or other sum payable hereunder, the amount of which payment or foregone interest or other sum is calculated by reference to the gross amount of any sum receivable or deemed received by such Bank or the Agent from the Borrower hereunder, then, and in each such case, the Borrower will, within fifteen (15) days of demand made by such Bank or (as the case may be) the Agent at any time and from time to time and as often as the occasion therefor may arise, pay to such Bank or the Agent such additional amounts as such Bank or the Agent shall determine in good faith to be sufficient to compensate such Bank or the Agent for such additional cost, reduction, payment or foregone interest or other sum. Each Bank and the Agent in determining such amounts may use any reasonable averaging and attribution methods, generally applied by such Bank or the Agent. Section 17.10. Capital Adequacy. If after the date hereof any Bank determines that (a) the adoption of or change in any law, rule, regulation or guideline regarding capital requirements of general application for banks or bank holding companies or any change in the interpretation or application thereof by any governmental authority charged with the administration thereof, or (b) compliance by such Bank or its parent bank holding company with any future guideline, request or directive of any such entity regarding capital adequacy or any amendment or change in interpretation of any existing guideline, request or directive (whether or not having the force of law), has the effect of reducing the return on such Bank's or such holding company's capital as a consequence of such Bank's commitment to make Loans hereunder to a level below that which such Bank or holding company could have achieved but for such adoption, change or compliance (taking into consideration such Bank's or such holding company's then existing policies with respect to capital adequacy and assuming the full utilization of such entity's capital) by any amount deemed by such Bank to be material, then such Bank may notify the Borrower thereof. The Borrower agrees to pay to such Bank the amount of such reduction in the return on capital as and when such reduction is determined, upon presentation by such Bank of a statement of the amount setting for the Bank's calculation thereof. In determining such amount, such Bank may use any reasonable averaging and attribution methods, generally applied by such Bank or the Agent. Section 17.11. Indemnity of Borrower. The Borrower agrees to indemnify each Bank and to hold each Bank harmless from and against any loss, cost or expense that such Bank may sustain or incur as a consequence of (a) default by the Borrower in payment of the principal amount of or any interest on any Eurodollar Rate Loans as and when due and payable, including any such loss or expense arising from interest or fees payable by such Bank to lenders of funds obtained by it in order to maintain its Eurodollar Rate Loans, or (b) default by the Borrower in making a borrowing or conversion after the Borrower has given (or is deemed to have given) a Loan Request or a Conversion Request; provided, however, that the Borrower shall not be required to so indemnify any Bank pursuant to clause (b) above which fails or refuses to fund its proportionate share of a Loan in accordance with the terms of this Agreement. Section 17.12. Interest on Overdue Amounts; Late Charge. Overdue principal and (to the extent permitted by applicable law) interest on the Loans and all other overdue amounts payable hereunder or under any of the other Loan Documents shall bear interest payable on demand at a rate per annum equal to four percent (4.0%) above the Base Rate from the date due until such amount shall be paid in full (after as well as before judgment). In addition, the Borrower shall pay a late charge equal to three percent (3.0%) of any amount of interest and/or principal payable on the Loans or any other amounts payable hereunder or under the Loan Documents, which is not paid within ten days of the date when due. Section RDOC\W Intentionally Omitted. Section 17.14. Certificate. A certificate setting forth any amounts payable pursuant to Section 4.8, Section 4.9, Section 4.10, Section 4.11 or Section 4.12 and a brief explanation of such amounts which are due, submitted by any Bank or the Agent to the Borrower, shall be conclusive in the absence of manifest error. Section 17.15. Limitation on Interest. Notwithstanding anything in this Agreement to the contrary, all agreements between the Borrower and the Banks and the Agent, whether now existing or hereafter arising and whether written or oral, are hereby limited so that in no contingency, whether by reason of acceleration of the maturity of any of the Obligations or otherwise, shall the interest contracted for, charged or received by the Banks exceed the maximum amount permissible under applicable law. If, from any circumstance whatsoever, interest would otherwise be payable to the Banks in excess of the maximum lawful amount, the interest payable to the Banks shall be reduced to the maximum amount permitted under applicable law; and if from any circumstance the Banks shall ever receive anything of value deemed interest by applicable law in excess of the maximum lawful amount, an amount equal to any excessive interest shall be applied to the reduction of the principal balance of the Obligations and to the payment of interest or, if such excessive interest exceeds the unpaid balance of principal of the Obligations, such excess shall be refunded to the Borrower. All interest paid or agreed to be paid to the Banks shall, to the extent permitted by applicable law, be amortized, prorated, allocated and spread throughout the full period until payment in full of the principal of the Obligations (including the period of any renewal or extension thereof) so that the interest thereon for such full period shall not exceed the maximum amount permitted by applicable law. This section shall control all agreements between the Borrower and the Banks and the Agent. Section 18. COLLATERAL SECURITY. Section 18.1. Collateral. The Obligations shall be secured by (i) a perfected first priority pledge to the Agent, for the benefit of the Banks, of the Collateral Notes and related documents; (ii) a perfected first priority assignment and security interest in favor of the Agent, for the benefit of the Banks, in the EQR Preferred Equity Commitment; (iii) a perfected first priority lien or security title to be held by the Agent for the benefit of the Banks in the Mortgaged Property pursuant to the terms of the Security Deeds, (iv) a perfected first priority security interest to be held by the Agent for the benefit of the Banks in the Leases pursuant to the Assignments of Rents and Leases, (v) the Indemnity Agreement, (vi) a perfected first priority lien to be held by the Agent for the benefit of the Banks in cash and Short-term Investments of the Borrower from time to time pledged to the Agent pursuant to one or more Pledge Agreements and (vii) such additional collateral, if any, as the Agent for the benefit of the Banks from time to time may accept as security for the Obligations with the consent of the Majority Banks, whether pursuant to Section 5.4 hereof or otherwise, which consent may be given or withheld in the sole discretion of the Majority Banks. The Obligations shall also be guaranteed pursuant to the Guaranty. Section 18.2. Appraisals. (a) The Agent on behalf of the Banks shall require biennial Appraisals of each of the Mortgaged Property and Collateral Property, which will be ordered, reviewed and approved by the appraisal departments of the Majority Banks, in order to determine the current Appraised Value and Designated Collateral Value of the Mortgaged Property and whether a Note may be a Qualifying Collateral Note, and the Borrower shall pay to the Agent on demand all reasonable costs of all such Appraisals; provided, however, that so long as no Default or Event of Default shall have occurred and be continuing and regulatory requirements of any Bank generally applicable to real estate loans of the category made under this Agreement as reasonably interpreted by such Bank shall not require more frequent Appraisals, the Borrower shall not be required to pay for Appraisals more often than once in any 24-month period, with the result that unless such condition shall occur the first Appraisals for which the Borrower shall be financially responsible after the Closing Date shall not be required prior to the Maturity Date. (b) Notwithstanding the provisions of Section 5.2(a), the Majority Banks may require the Agent to obtain Appraisals or the Banks may jointly perform internal studies updating and revising prior Appraisals with respect to the Mortgaged Property or such portion thereof as the Majority Banks shall determine, for the purpose of determining the current Appraised Value and Designated Collateral Value of the Mortgaged Property or whether a note is a Qualifying Collateral Note (i) at any time following a condemnation of or uninsured casualty to a Mortgaged Property or a Collateral Property (provided that such Appraisal shall be limited to the affected Mortgaged Property or Collateral Property), or (ii) in the event that there is a material adverse change to the Borrower or the Guarantor or their respective assets. The expense of such Appraisals and updates performed pursuant to this Section 5.2(b) shall be borne by the Borrower. (c) In the event that the Agent shall advise the Borrower, on the basis of any Appraisal or update pursuant to Section 5.2, that the Designated Collateral Value is insufficient to comply with the requirements of Section 9.3, then until the Designated Collateral Value shall be restored to compliance with Section 9.3 the Banks shall not be required to make advances under Section 2.1. Section 18.3. Release of Collateral. Provided no Default or Event of Default shall have occurred hereunder and be continuing (or would exist immediately after giving effect to the transactions contemplated by this Section 5.3 except as provided in this Section 5.3), the Agent shall release a Mortgaged Property or Collateral Note from the lien of the Security Documents encumbering the same upon the request of the Borrower and upon the following terms and conditions: (a) The Borrower shall deliver to the Agent written notice of its desire to obtain each such release no later than fifteen (15) days prior to the date on which each such release is to be effected together with evidence satisfactory to the Agent that such release is to facilitate a sale of such Mortgaged Property or Collateral Note to an unrelated third party in a bona- fide arms-length transaction for a cash sales price or a bona-fide refinance; and (b) The Borrower shall submit to the Agent with such request a Compliance Certificate prepared using the financial statements of the Borrower most recently provided or required to be provided to the Agent under Section 6.4 or Section 7.4 adjusted in the best good faith estimate of the Borrower to give effect to the proposed release and demonstrating that no Default or Event of Default with respect to the covenants referred to therein shall exist after giving effect to such release; and (c) The Borrower shall pay all reasonable costs and expenses of the Agent in connection with such release, including without limitation, reasonable attorney's fees; and (d) The Borrower shall pay to the Agent for the account of the Banks, which payment shall be applied to reduce the outstanding principal balance of the Loans, a release price equal to 125% of the Designated Collateral Value of the Collateral to be released as most recently determined hereunder. Such payment shall be applied to reduce the outstanding principal balance of the Loans; provided, that the Borrower shall not be required to make a payment which would reduce the principal balance below zero. Section 18.4. Subsidiary Collateral; Substitute Collateral. (a) The Borrower from time to time may, by written request to the Agent who shall promptly notify the Banks, request that certain assets of one or more of its wholly-owned Subsidiaries (collectively, the "Subsidiary Collateral") or certain other Potential Collateral owned by the Borrower (the "Borrower Collateral") be included as Collateral to secure the Obligations and for the purpose of increasing the Borrowing Base or replacing existing Collateral. Notwithstanding the foregoing, no Subsidiary Collateral or Borrower Collateral shall be included as Collateral unless and until the following conditions precedent shall have been satisfied: (i) if such proposed collateral is Real Estate, such Real Estate shall be Eligible Real Estate, or if such collateral is a promissory note, such note shall be a Qualifying Collateral Note; (ii) the owner of any Subsidiary Collateral shall have executed a Guaranty of the Obligations in form and substance satisfactory to the Majority Banks, or, in the Majority Banks' sole discretion, shall have been added as an additional Borrower hereunder pursuant to an amendment to this Agreement in form and substance satisfactory to Agent and Agent's Special Counsel; (iii) the Borrower or the owner of the Subsidiary Collateral, as applicable, shall have executed and delivered to the Agent all Eligible Real Estate Qualification Documents, Qualifying Collateral Note Qualification Documents or other instruments, documents, or agreements, including Uniform Commercial Code financing statements, as the Agent shall deem necessary or desirable to perfect a first priority security interest in, or lien on, such Subsidiary Collateral or Borrower Collateral, all of which instruments, documents or agreements shall be in form and substance satisfactory to the Agent in its sole discretion; and (iv) the Agent, on behalf of the Banks, shall have received any other appraisals, surveys, rent rolls, environmental reports, title insurance reports, certificates, opinions or other information or documentation with respect to the Subsidiary Collateral or Borrower Collateral as the Agent, in its sole discretion, shall deem necessary or desirable. The Borrower acknowledges that the decision of all of the Banks to grant or withhold their consent to the acceptance of additional or Substitute Collateral under this Section 5.4 or to accept collateral from a Subsidiary of the Borrower or to provide for a co-Borrower shall be based entirely on such factors as the Banks deem relevant in their sole discretion, including, without limitation, those enumerated in clauses (i) through (iv) hereinabove, and such consent may be granted or withheld solely at the discretion of the Banks. (b) In connection with each such addition or substitution, the Borrower, within fifteen (15) days of the Borrower's request to add such assets to the Collateral, shall pay to the Agent for the account of the Banks a review fee of $5,000.00 for each asset to be added to be split equally by the Banks, without regard to their respective Commitment Percentages. Section 19. REPRESENTATIONS AND WARRANTIES. The Borrower represents and warrants to the Agent and the Banks as follows. Section GARDO Corporate Authority, Etc. (a) Incorporation; Good Standing. The Borrower (i) is a corporation duly organized pursuant to its organizational documents and amendments thereto filed with the Secretary of State of Maryland, and is validly existing and in good standing under the laws of the State of Maryland, (ii) has all requisite power to own its property and conduct its business as now conducted and as presently contemplated, and (iii) is in good standing as a foreign entity and is duly authorized to do business in the jurisdictions where the Mortgaged Property is located and in each other jurisdiction where a failure to be so qualified in such other jurisdiction could have a materially adverse effect on the business, assets or financial condition of the Borrower. (b) Subsidiaries. Each of the Subsidiaries of the Borrower and the Guarantor (i) is a corporation, limited partnership, limited liability company or trust duly organized under the laws of its State of organization and is validly existing and in good standing under the laws thereof, (ii) has all requisite power to own its property and conduct its business as now conducted and as presently contemplated and (iii) is in good standing and is duly authorized to do business in each jurisdiction where Mortgaged Property held by it is located and in each other jurisdiction where a failure to be so qualified could have a materially adverse effect on the business, assets or financial condition of the Borrower or such Subsidiary or the Guarantor. (c) Authorization. The execution, delivery and performance of this Agreement and the other Loan Documents to which the Borrower or the Guarantor are or are to become a party and the transactions contemplated hereby and thereby (i) are within the authority of the such Person, (ii) have been duly authorized by all necessary proceedings on the part of such Person, (iii) do not and will not conflict with or result in any breach or contravention of any provision of law, statute, rule or regulation to which such Person is subject or any judgment, order, writ, injunction, license or permit applicable to such Person, (iv) do not and will not conflict with or constitute a default (whether with the passage of time or the giving of notice, or both) under any provision of the articles of incorporation , bylaws, or other charter documents of, or any agreement or other instrument binding upon, such Person, or any of its properties, and (v) do not and will not result in or require the imposition of any lien or other encumbrance on any of the properties, assets or rights of the Borrower or the Guarantor, as applicable. (d) Enforceability. The execution and delivery of this Agreement and the other Loan Documents to which the Borrower or the Guarantor are or are to become a party are valid and legally binding obligations of such Person enforceable in accordance with the respective terms and provisions hereof and thereof, except as enforceability is limited by bankruptcy, insolvency, reorganization, moratorium or other laws relating to or affecting generally the enforcement of creditors' rights and except to the extent that availability of the remedy of specific performance or injunctive relief is subject to the discretion of the court before which any proceeding therefor may be brought. Section 19.2. Governmental Approvals. The execution, delivery and performance by the Borrower and the Guarantor of this Agreement and the other Loan Documents and the transactions contemplated hereby and thereby do not require the approval or consent of, or filing with, any governmental agency or authority other than those already obtained and the filing of the Security Documents in the appropriate records office with respect thereto. Section \EDGA Title to Properties: Leases. Except as indicated on Schedule 6.3 hereto, the Borrower and its Subsidiaries own all of the assets reflected in the consolidated balance sheet of the Borrower as at the Balance Sheet Date or acquired since that date (except property and assets sold or otherwise disposed of in the ordinary course of business since that date), subject to no rights of others, including any mortgages, leases, conditional sales agreements, title retention agreements, liens or other encumbrances except Permitted Liens. Section 19.4. Financial Statements. The Borrower has furnished to each of the Banks: (a) the consolidated balance sheet of the Borrower and its Subsidiaries as of the Balance Sheet Date and their related consolidated statements of income, changes in stockholder equity and cash flows for the fiscal year then ended, audited and certified by Ernst & Young LLP, (b) an unaudited consolidated balance sheet and an unaudited consolidated statement of income and cash flows of the Borrower and its Subsidiaries for the fiscal quarter of the Borrower ended since the Balance Sheet Date certified by Borrower's chief financial or chief accounting officer to have been prepared in accordance with generally accepted accounting principles consistent with those used in the preparation of the annual audited statements delivered pursuant to subsection (a) above and to fairly present the financial condition of the Borrower and its Subsidiaries as at the close of business on the dates thereof and the results of operations for the fiscal quarter then ended (subject to year-end adjustments), and (c) to the extent there is any Mortgaged Property, an unaudited consolidated statement of operating income for the Mortgaged Property satisfactory in form to the Majority Banks and certified by the Borrower's chief financial or accounting officer as fairly presenting the operating income for such parcels for such periods. Such balance sheet and statements of income, stockholder's equity and cash flows have been prepared in accordance with generally accepted accounting principles and fairly present the financial condition of the Borrower and its Subsidiaries as of such dates and the results of the operations of the Borrower and its Subsidiaries for such periods. There are no liabilities, contingent or otherwise, of the Borrower or any of its Subsidiaries involving material amounts not disclosed in said financial statements and the related notes thereto. Section 19.5. No Material Changes. Since the Balance Sheet Date, there has occurred no materially adverse change in the financial condition or business of the Borrower and its Subsidiaries taken as a whole as shown on or reflected in the consolidated balance sheet of the Borrower as of the Balance Sheet Date, or its consolidated statement of income or cash flows for the fiscal year then ended, other than changes in the ordinary course of business that have not had any materially adverse effect either individually or in the aggregate on the business or financial condition of the Borrower and its Subsidiaries taken as a whole. Section 19.6. Franchises, Patents, Copyrights, Etc. The Borrower and its Subsidiaries and the Guarantor possess all franchises, patents, copyrights, trademarks, trade names, service marks, licenses and permits, and rights in respect of the foregoing, adequate for the conduct of their business substantially as now conducted without known conflict with any rights of others. Section 19.7. Litigation. Except as stated on Schedule 6.7 there are no actions, suits, proceedings or investigations of any kind pending or threatened against the Borrower or any of its Subsidiaries or the Guarantor before any court, tribunal or administrative agency or board that, if adversely determined, might, either in any case or in the aggregate, materially adversely affect the properties, assets, financial condition or business of the Borrower or the Guarantor or materially impair the right of the Borrower or the Guarantor to carry on business substantially as now conducted by it, or result in any liability not adequately covered by insurance, or for which adequate reserves are not maintained on the balance sheet of the Borrower or the Guarantor, or which question the validity of this Agreement or any of the other Loan Documents, any action taken or to be taken pursuant hereto or thereto or any lien or security interest created or intended to be created pursuant hereto or thereto, or which will adversely affect the ability of the Borrower or the Guarantor to pay and perform the Obligations in the manner contemplated by this Agreement and the other Loan Documents. Section 19.8. No Materially Adverse Contracts, Etc. None of the Borrower, any of its Subsidiaries nor the Guarantor is subject to any charter, corporate or other legal restriction, or any judgment, decree, order, rule or regulation that has or is expected in the future to have a materially adverse effect on the business, assets or financial condition of the Borrower or the Guarantor. None of the Borrower, any of its Subsidiaries nor the Guarantor is a party to any contract or agreement that has or is expected, in the judgment of the officers of such Person, to have any materially adverse effect on the business of the Borrower or the Guarantor. Section 19.9. Compliance with Other Instruments, Laws, Etc. None of the Borrower, any of its Subsidiaries nor the Guarantor is in violation of any provision of its charter or other organizational documents, by-laws, or any agreement or instrument to which it may be subject or by which it or any of its properties may be bound or any decree, order, judgment, statute, license, rule or regulation, in any of the foregoing cases in a manner that could result in the imposition of substantial penalties or materially and adversely affect the financial condition, properties or business of the Borrower or the Guarantor. Section 19.10. Tax Status. The Borrower, each of its Subsidiaries and the Guarantor (a) has made or filed all federal and state income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject, (b) has paid all taxes and other governmental assessments and charges shown or determined to be due on such returns, reports and declarations, except those being contested in good faith and by appropriate proceedings and (c) has set aside on its books provisions reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of such Person know of no basis for any such claim. Section 19.11. No Event of Default. No Default or Event of Default has occurred and is continuing. Section 19.12. Holding Company and Investment Company Acts. None of the Borrower, any of its Subsidiaries nor the Guarantor is a "holding company", or a "subsidiary company" of a "holding company", or an "affiliate" of a "holding company", as such terms are defined in the Public Utility Holding Company Act of 1935; nor is it an "investment company", or an "affiliated company" or a "principal underwriter" of an "investment company", as such terms are defined in the Investment Company Act of 1940. Section 19.13. Absence of UCC Financing Statements, Etc. Except with respect to Permitted Liens, there is no financing statement, security agreement, chattel mortgage, real estate mortgage or other document filed or recorded with any filing records, registry, or other public office, that purports to cover, affect or give notice of any present or possible future lien on, or security interest or security title in, any property of the Borrower or its Subsidiaries or rights thereunder. Section 19.14. Setoff, Etc. The Collateral and the rights of the Agent and the Banks with respect to the Collateral are not subject to any setoff, claims, withholdings or other defenses. The Borrower and the Guarantor are the owners of the Collateral free from any lien, security interest, encumbrance or other claim or demand, except Permitted Liens. Section 19.15. Certain Transactions. None of the officers, trustees, directors, or employees of the Borrower, any of its Subsidiaries or the Guarantor is a party to any transaction with the Borrower or any of its Subsidiaries (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, trustee, director or such employee or, to the knowledge of the Borrower, any corporation, partnership, trust or other entity in which any officer, trustee, director, or any such employee has a substantial interest or is an officer, director, trustee or partner. Section 19.16. Employee Benefit Plans. The Borrower and each ERISA Affiliate are in compliance in all material respects with ERISA. There has been no Reportable Event with respect to any Employee Benefit Plan, Multiemployer Plan or Guaranteed Pension Plan. There has been no institution of proceedings or any other action by PBGC, the Borrower or any ERISA Affiliate to terminate or withdraw or partially withdraw from any such Plan under any circumstances which could lead to material liabilities to PBGC or, with respect to a Multiemployer Plan, the "Reorganization" or "Insolvency" (as each such term is defined in ERISA) of any such Plan. To the best of the Borrower's knowledge, no "prohibited transaction" (within the meaning of Section 406 of ERISA or Section 4975 of the Code) has occurred with respect to any such Plan, and neither the consummation of the transactions provided for in this Agreement and compliance by the Borrower with the provisions hereof and the other Loan Documents will involve any prohibited transaction. Section 19.17. ERISA Taxes. Neither the Borrower nor any ERISA Affiliate thereof is currently and the Borrower has no reason to believe that the Borrower or any ERISA Affiliate thereof will become subject to any liability (other than routine expenses or contributions relating to the Plans set forth on Schedule 6.17, if timely paid), tax or penalty whatsoever to any person whomsoever, which liability, tax or penalty is directly or indirectly related to any Plans set forth on Schedule 6.17 including, but not limited to, any penalty or liability arising under Title I or Title IV of ERISA, any tax or penalty resulting from a loss of deduction under Section s 404 and 419 of the Code, or any tax or penalty under Chapter 43 of the Code, except such liabilities, taxes or penalties (when taken as a whole) as will not have a material adverse effect on the Borrower or upon its financial condition, assets, business, operations, liabilities or prospects. Section 19.18. Plan Payments. The Borrower and each ERISA Affiliate has made full and timely payment of all amounts (i) required to be contributed under the terms of each Plan set forth on Schedule 6.17 and applicable law and (ii) required to be paid as expenses of each Plan set forth on Schedule 6.17. No Plan set forth on Schedule 6.17 would have an "amount of unfunded benefit liabilities" (as defined in Section 4001(a)(18) of ERISA) if such Plan were terminated as of the date on which this representation and warranty is made. Section 19.19. Regulations U and X. No portion of any Loan is to be used for the purpose of purchasing or carrying any "margin security" or "margin stock" as such terms are used in Regulations U and X of the Board of Governors of the Federal Reserve System, 12 C.F.R. Parts 221 and 224. Section 19.20. Environmental Compliance. The Borrower has conducted or caused to be conducted Phase I environmental site assessments with respect to the past usage and condition of the Real Estate and the Collateral Property and the operations conducted thereon, and is familiar with the present condition and usage of the Real Estate and the operations conducted thereon and, based upon such reports and knowledge, makes the following representations and warranties. (a) With respect to the Mortgaged Property, and to the best of the Borrower's knowledge with respect to any other Real Estate and the Collateral Property, none of the Borrower, its Subsidiaries, the Guarantor, the owner of the Collateral Property, or any operator of the Real Estate or the Collateral Property, or any operations thereon is in violation, or alleged violation, of any judgment, decree, order, law, license, rule or regulation pertaining to environmental matters, including without limitation, those arising under the Resource Conservation and Recovery Act ("RCRA"), the Comprehensive Environmental Response, Compensation and Liability Act of 1980 as amended ("CERCLA"), the Superfund Amendments and Reauthorization Act of 1986 ("SARA"), the Federal Clean Water Act, the Federal Clean Air Act, the Toxic Substances Control Act, or any state or local statute, regulation, ordinance, order or decree relating to the environment (hereinafter "Environmental Laws"), which violation involves the Mortgaged Property, the Collateral Property or involves other Real Estate and would have a material adverse effect on the environment or the business, assets or financial condition of the Borrower, the Guarantor or the owner of any of the Collateral Property. (b) None of the Borrower, any of its Subsidiaries nor the Guarantor has received any notice, nor to the best of the Borrower's knowledge has any owner of a Collateral Property received notice, from any third party including, without limitation, any federal, state or local governmental authority, (i) that it has been identified by the United States Environmental Protection Agency ("EPA") as a potentially responsible party under CERCLA with respect to a site listed on the National Priorities List, 40 C.F.R. Part 300 Appendix B (1986); (ii) that any hazardous waste, as defined by 42 U.S.C. Section 9601(5), any hazardous substances as defined by 42 U.S.C. Section 9601(14), any pollutant or contaminant as defined by 42 U.S.C. Section 9601(33) or any toxic substances, oil or hazardous materials or other chemicals or substances regulated by any Environmental Laws ("Hazardous Substances") which it has generated, transported or disposed of have been found at any site at which a federal, state or local agency or other third party has conducted or has ordered that the Borrower, any of its Subsidiaries, the Guarantor or, to the best of Borrower's knowledge, any owner of a Collateral Property conduct a remedial investigation, removal or other response action pursuant to any Environmental Law; or (iii) that it is or shall be a named party to any claim, action, cause of action, complaint, or legal or administrative proceeding (in each case, contingent or otherwise) arising out of any third party's incurrence of costs, expenses, losses or damages of any kind whatsoever in connection with the release of Hazardous Substances. (c) With respect to the Mortgaged Property, and to the best of the Borrower's knowledge with respect to any other Real Estate and the Collateral Property, except as specifically set forth in the environmental site assessment reports for Sonterra at Williams Center prepared by EMG and dated June 27, 1996 and for 277 Park Avenue prepared by IVI Environmental, Inc. dated July 3, 1996, each of which has been provided to the Agent on or about the date hereof or, in the case of Real Estate acquired after the date hereof, the environmental site assessment reports with respect thereto provided to the Agent under Section 7.4(h): (i) no portion of the Real Estate or the Collateral Property has been used for the handling, processing, storage or disposal of Hazardous Substances except in accordance with applicable Environmental Laws, and no underground tank or other underground storage receptacle for Hazardous Substances is located on any portion of the Mortgaged Property or the Collateral Property; (ii) in the course of any activities conducted by the Borrower, its Subsidiaries, the Guarantor or the operators of its properties or the owners or operators of the Collateral Property, no Hazardous Substances have been generated or are being used on the Real Estate or the Collateral Property except in the ordinary course of business and in accordance with applicable Environmental Laws; (iii) there has been no past or present releasing, spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, disposing or dumping (a "Release") or threatened Release of Hazardous Substances on, upon, into or from the Mortgaged Property, or, to the best of the Borrower's knowledge, on, upon, into or from the other properties of the Borrower, its Subsidiaries, the Guarantor or the Collateral Property, which Release would have a material adverse effect on the value of any of the Real Estate, the Collateral Property or adjacent properties or the environment; (iv) to the best of the Borrower's knowledge, there have been no Releases on, upon, from or into any real property in the vicinity of any of the Real Estate or the Collateral Property which, through soil or groundwater contamination, may have come to be located on, and which would have a material adverse effect on the value of, the Real Estate or the Collateral Property; and (v) any Hazardous Substances that have been generated on any of the Real Estate or the Collateral Property have been transported off-site only by carriers having an identification number issued by the EPA or approved by a state or local environmental regulatory authority having jurisdiction regarding the transportation of such substance and, to the best knowledge of the Borrower without independent investigation, treated or disposed of only by treatment or disposal facilities maintaining valid permits as required under all applicable Environmental Laws, which transporters and facilities have been and are, to the best of the Borrower's knowledge, operating in compliance with such permits and applicable Environmental Laws. (d) Neither the Borrower, its Subsidiaries, the Guarantor, the Mortgaged Property nor any other Real Estate is subject to any applicable Environmental Law requiring the performance of Hazardous Substances site assessments, or the removal or remediation of Hazardous Substances, or the giving of notice to any governmental agency or the recording or delivery to other Persons of an environmental disclosure document or statement by virtue of the transactions set forth herein and contemplated hereby, or as a condition to the recording of the Security Deed or to the effectiveness of any other transactions contemplated hereby. Section 19.21. Subsidiaries. Schedule 6.21 sets forth all of the Subsidiaries of the Borrower. The form and jurisdiction of organization of each of the Subsidiaries, and the Borrower's ownership interest therein, is set forth in said Schedule 6.21. Section 19.22. Leases. The Borrower has delivered to the Agent true copies of the Leases and any amendments thereto relating to the Mortgaged Property, to the extent there is any Mortgaged Property. Section 19.23. Loan Documents. All of the representations and warranties of the Borrower or the Guarantor made in the Loan Documents to which it is a party or any document or instrument delivered to the Agent or the Banks pursuant to or in connection with any of such Loan Documents are true and correct in all material respects, and no such party has failed to disclose such information as is necessary to make such representations and warranties not misleading. Section 19.24. Mortgaged Property. The Borrower makes the following representations and warranties concerning each Mortgaged Property, to the extent there is any Mortgaged Property: (a) Off-Site Utilities. All water, sewer, electric, gas, telephone and other utilities necessary for the use and operation of the Mortgaged Property are installed to the property lines of the Mortgaged Property through dedicated public rights-of-way or through perpetual private easements approved by the Majority Banks with respect to which the applicable Security Deed creates a valid and enforceable first lien and, except in the case of drainage facilities, are connected to the Building located thereon with valid permits and are adequate to service the Building in compliance with applicable law. (b) Access, Etc. The streets abutting the Mortgaged Property are dedicated and accepted public roads, to which the Mortgaged Property has direct access by trucks and other motor vehicles and by foot, or are perpetual private ways (with direct access by trucks and other motor vehicles and by foot to public roads) to which the Mortgaged Property has direct access approved by the Majority Banks and with respect to which the applicable Security Deed creates a valid and enforceable first lien. All private ways providing access to the Mortgaged Property are zoned in a manner which will permit access to the Building over such ways by trucks and other commercial and industrial vehicles. (c) Independent Building. The Building is fully independent in all respects including, without limitation, in respect of structural integrity, heating, ventilating and air conditioning, plumbing, mechanical and other operating and mechanical systems, and electrical, sanitation and water systems, all of which are connected directly to off-site utilities located in public streets or ways or through insured perpetual private easements approved by the Majority Banks. The Building is located on a lot which is separately assessed for purposes of real estate tax assessment and payment. The Building, all Building Service Equipment and all paved or landscaped areas related to or used in connection with the Building are, except as specifically disclosed on a Survey delivered to the Agent prior to the date hereof, located wholly within the perimeter lines of the lot or lots on which the Mortgaged Property is located. (d) Condition of Building; No Asbestos. Except as may otherwise be specifically disclosed in any written engineering report furnished or caused to be furnished by the Borrower to the Agent prior to the date hereof, the Building is structurally sound, in good repair and free of material defects in materials and workmanship. All major building systems located within the Building, including without limitation heating, ventilating and air conditioning, electrical, sprinkler, plumbing or other mechanical systems, are in good working order and condition. No asbestos is located in or on the Building, except for nonfriable asbestos or contained friable asbestos which is being monitored and/or remediated in accordance with the recommendations of an Environmental Engineer. (e) Building Compliance with Law. Except as may otherwise be specifically disclosed on the face of any certificate of occupancy delivered to the Agent prior to the date hereof, the Building as presently constructed, used, occupied and operated does not violate any applicable federal or state law or governmental regulation, or any local ordinance, order or regulation, including but not limited to laws, regulations, or ordinances relating to zoning, building use and occupancy, subdivision control, fire protection, health, sanitation, safety, handicapped access, historic preservation and protection, tidelands, wetlands, flood control and Environmental Laws. The Building complies with applicable zoning laws and regulations and is not a so-called non-conforming use. The zoning laws permit use of the Building for its current use. There is such number of parking spaces on the lot or lots on which the Mortgaged Property is located as is adequate under the zoning laws and regulations to permit use of the Building for its current use. (f) No Required Mortgaged Property Consents, Permits, Etc. Neither the Borrower, any of its Subsidiaries nor the Guarantor, as applicable, has received notice of, or has knowledge of, any approvals, consents, licenses, permits, utility installations and connections (including, without limitation, drainage facilities), curb cuts and street openings, required by applicable laws, rules, ordinances or regulations or any agreement affecting the Mortgaged Property for the maintenance, operation, servicing and use of the Mortgaged Property or the Building for its current use which have not been granted, effected, or performed and completed (as the case may be), or any fees or charges therefor which have not been fully paid, or which are no longer in full force and effect. No such approvals, consents, permits or licenses (including, without limitation, any railway siding agreements) will terminate, or become void or voidable or terminable on any foreclosure sale of the Mortgaged Property pursuant to the Security Deed. To the best knowledge of the Borrower, there are no outstanding notices, suits, orders, decrees or judgments relating to zoning, building use and occupancy, fire, health, sanitation or other violations affecting, against, or with respect to, the Mortgaged Property or any part thereof. (g) Insurance. Neither the Borrower, any of its Subsidiaries nor the Guarantor has received any notice from any insurer or its agent requiring performance of any work with respect to the Mortgaged Property or canceling or threatening to cancel any policy of insurance, and the Mortgaged Property complies with the requirements of all carriers of insurance on the Mortgaged Property. (h) Real Property Taxes; Special Assessments. There are no unpaid or outstanding real estate or other taxes or assessments on or against the Mortgaged Property or any part thereof which are payable by the Borrower, any Subsidiary of the Borrower or the Guarantor (except only real estate or other taxes or assessments, that are not yet due and payable). The Borrower has delivered or caused to be delivered to the Agent, or has requested from the appropriate authorities and will deliver to the Agent promptly upon receipt, true and correct copies of real estate tax bills for the Mortgaged Property for the past three fiscal tax years. No abatement proceedings are pending with reference to any real estate taxes assessed against the Mortgaged Property. There are no betterment assessments or other special assessments presently pending with respect to any portion of the Mortgaged Property, and none of Borrower, any of its Subsidiaries nor the Guarantor has received any notice of any such special assessment being contemplated. (i) Historic Status. The Building is not a historic structure or landmark and neither the Building nor the Mortgaged Property is located within any historic district pursuant to any federal, state or local law or governmental regulation. (j) Eminent Domain; Casualty. There are no pending eminent domain proceedings against the Mortgaged Property or any part thereof, and, to the knowledge of the Borrower, no such proceedings are presently threatened or contemplated by any taking authority. Neither the Mortgaged Property, the Building nor any part thereof is now damaged or injured as a result of any fire, explosion, accident, flood or other casualty. (k) Leases. An accurate and complete Rent Roll and summary thereof in a form reasonably satisfactory to the Majority Banks as of the date of inclusion of each Mortgaged Property in the Collateral (or such other recent date as may be acceptable to the Agent) with respect to all Leases of any portion of the Mortgaged Property has been provided to the Agent. The Leases reflected on such Rent Roll constitute as of the date thereof the sole agreements and understandings relating to leasing or licensing of space at such Mortgaged Property and in the Building relating thereto. There are no occupancies, rights, privileges or licenses in or to any Mortgaged Property or portion thereof other than pursuant to the Leases reflected in Rent Rolls previously furnished to the Agent for such Mortgaged Property. Except as set forth in each Rent Roll, the Leases reflected therein are in full force and effect in accordance with their respective terms, without any payment default or any other material default thereunder, nor are there any defenses, counterclaims, offsets, concessions or rebates available to any tenant thereunder, and none of the Borrower, any of its Subsidiaries nor the Guarantor has given or made, any notice of any payment or other material default, or any claim, which remains uncured or unsatisfied, with respect to any of the Leases. The Rent Rolls furnished to the Banks accurately and completely set forth all rents payable by and security, if any, deposited by tenants, no tenant having paid more than one month's rent in advance. The Borrower has reviewed the estoppel certificates delivered by the tenants of the Mortgaged Property to the Agent and such estoppel certificates are true and correct in all material respects. All tenant improvements or work to be done, furnished or paid for by the Borrower, any of its Subsidiaries or the Guarantor, as applicable, or credited or allowed to a tenant, for, or in connection with, the Building pursuant to any Lease has been completed and paid for or provided for in a manner satisfactory to the Agent. No material leasing, brokerage or like commissions, fees or payments are due from the Borrower, any of its Subsidiaries or the Guarantor in respect of the Leases. (l) Service Agreements; Management Agreements. Except as listed on Schedule 6.24, there are no material Service Agreements relating to the operation and maintenance of the Building, the Mortgaged Property, or any portion thereof. Borrower has delivered to Agent true, correct and complete copies of the Management Agreements for the Mortgaged Property. To the best knowledge of the Borrower, there are no material claims or any bases for material claims in respect of the Mortgaged Property or its operation by any party to any Service Agreement or Management Agreement. (m) Other Material Real Property Agreements; No Options. There are no material agreements pertaining to the Mortgaged Property, any Building thereon or the operation or maintenance of either thereof other than as described in this Agreement (including the Schedules hereto) or otherwise disclosed in writing to the Agent and the Banks by the Borrower; and no person or entity has any right or option to acquire the Mortgaged Property on any Building thereon or any portion thereof or interest therein. Section 19.25. Brokers. Neither the Borrower nor any of its Subsidiaries has engaged or otherwise dealt with any broker, finder or similar entity in connection with this Agreement or the Loans contemplated hereunder. Section 19.26. Fair Consideration. The Borrower (and, as applicable, the Guarantor), by receiving the benefits under this Agreement is receiving "reasonably equivalent value" within the meaning of Section 548 of the Bankruptcy Code, Title 11, U.S.C.A. and "fair consideration" within the meaning of Consolidated Laws of New York Annotated, Chapter 12, Article 10, Section 272 in exchange for the delivery of the Security Documents to Agent. Section 19.27. Solvency. As of the Closing Date and after giving affect to the transactions contemplated by this Agreement and the other Loan Documents, including all of the Loans made or to be made hereunder neither the Borrower nor the Guarantor is insolvent on a balance sheet basis, the sum of such Person's assets exceeds the sum of such Person's liabilities, the Borrower and the Guarantor is able to pay its debts as they become due, and the Borrower and the Guarantor has sufficient capital to carry on its business. Section 19.28. Other Debt. None of the Borrower, the Guarantor nor any of their respective Subsidiaries is in default in the payment of any other Indebtedness or under any agreement, mortgage, deed of trust, security agreement, financing agreement, indenture or lease to which any of them is a party. The Borrower is not a party to or bound by any agreement, instrument or indenture that may require the subordination in right or time of payment of any of the Obligations to any other indebtedness or obligation of the Borrower. The Borrower has provided to the Agent copies of all agreements, mortgages, deeds of trust, financing agreements or other material agreements binding upon Borrower, the Guarantor or their respective properties and entered into by such Person as of the date of this Agreement with respect to any Indebtedness of such Person. Section 20. AFFIRMATIVE COVENANTS OF THE BORROWER. The Borrower covenants and agrees that, so long as any Loan or Note is outstanding or any Bank has any obligation to make any Loans: Section 20.1. Punctual Payment. The Borrower will duly and punctually pay or cause to be paid the principal and interest on the Loans and all interest and fees provided for in this Agreement, all in accordance with the terms of this Agreement and the Notes as well as all other sums owing pursuant to the Loan Documents. Section 20.2. Maintenance of Office. The Borrower will maintain its chief executive office at 610 Fifth Avenue, 7th Floor, New York County, New York, New York, or at such other place in the United States of America as the Borrower shall designate upon prior written notice to the Agent and the Banks, where notices, presentations and demands to or upon the Borrower in respect of the Loan Documents may be given or made. Section 20.3. Records and Accounts. The Borrower will (a) keep, and cause each of its Subsidiaries to keep, true and accurate records and books of account in which full, true and correct entries will be made in accordance with generally accepted accounting principles and (b) maintain adequate accounts and reserves for all taxes (including income taxes), depreciation and amortization of its properties and the properties of its Subsidiaries, contingencies and other reserves. Neither the Borrower nor any of its Subsidiaries shall, without the prior written consent of the Majority Banks, (x) make any material changes to the accounting procedures used by such Person in preparing the financial statements and other information described in Section 6.4 (excluding the conversion of a Subsidiary's accounting procedures such that they are consistent with the Borrower's accounting procedures) or (y) change its fiscal year. Section 20.4. Financial Statements, Certificates and Information. The Borrower will deliver or cause to be delivered to each of the Banks: (a) as soon as practicable, but in any event not later than 90 days after the end of each fiscal year of the Borrower, the audited consolidated balance sheet of the Borrower and its Subsidiaries at the end of such year, and the related audited consolidated statements of income, changes in shareholders' equity and cash flows for such year, each setting forth in comparative form the figures for the previous fiscal year and all such statements to be in reasonable detail, prepared in accordance with generally accepted accounting principles, and accompanied by an auditor's report prepared without qualification by Ernst & Young LLP or by another "Big Six" accounting firm, the Form 10-K of the Borrower filed with the SEC (unless the SEC has approved an extension, in which event the Borrower will deliver to the Agent and each of the Banks a copy of the Form 10-K simultaneously with delivery to the SEC), together with the unaudited annual operating statement of each Mortgaged Property and Collateral Property (which statement shall also be reconciled to the budget for the Mortgaged Property and the Collateral Property), together with a certification by Borrower's chief financial or chief accounting officer that the information contain in such statement fairly presents the operations of the Mortgaged Property and the Collateral Property for such period, and any other information the Banks may need to complete a financial analysis of the Borrower; (b) as soon as practicable, but in any event not later than 45 days after the end of each fiscal quarter of the Borrower (including the fourth quarter), copies of the unaudited consolidated balance sheet of the Borrower and its Subsidiaries as at the end of such quarter, and the related unaudited consolidated statements of income, changes in shareholders' equity and cash flows for the portion of the Borrower's fiscal year then elapsed, and the unaudited operating statement for the Mortgaged Property and the Collateral Property for such quarter and year-to-date (which statement shall also be reconciled to the budget for the Mortgaged Property and the Collateral Property), all in reasonable detail and prepared in accordance with generally accepted accounting principles (which may be provided by inclusion in the Form 10-Q of the Borrower for such period provided pursuant to subsection (c) below), together with a certification by the principal financial or accounting officer of the Borrower that the information contained in such financial statements fairly presents the financial position of the Borrower and its Subsidiaries and the operations of the Mortgaged Property and the Collateral Property on the date thereof (subject to year-end adjustments); (c) as soon as practicable, but in any event not later than 45 days after the end of each of the first three fiscal quarters of the Borrower in each year, copies of Form 10-Q of the Borrower filed with the SEC (unless the SEC has approved an extension in which event the Borrower will deliver such copies of the Form 10-Q to the Agent and each of the Banks simultaneously with delivery to the SEC); (d) as soon as practicable, but in any event not later than 45 days after the end of each fiscal quarter of the Borrower (including the fourth fiscal quarter in each year), copies of a consolidated statement of Operating Cash Flow for such fiscal quarter for the Borrower and its Subsidiaries and a statement of Operating Cash Flow for such fiscal quarter for each of the Mortgaged Property and the Collateral Property, prepared in a manner reasonable satisfactory to the Agent, together with a certification by the Borrower's chief financial or chief accounting officer that the information contained in such statement fairly presents the Operating Cash Flow of the Borrower and its Subsidiaries and the Mortgaged Property and the Collateral Property for such period; (e) simultaneously with the delivery of the financial statements referred to in subsections (a) and (b) above, a statement (a "Compliance Certificate") certified by the principal financial or accounting officer of the Borrower in the form of Exhibit C hereto setting forth in reasonable detail computations evidencing compliance with the covenants contained in Section 9, and (if applicable) reconciliations to reflect changes in generally accepted accounting principles since the Balance Sheet Date; (f) concurrently with the delivery of the financial statements described in subsections (b) and (c) above, a certificate signed by the President or Chief Financial Officer of the Borrower to the effect that, having read this Agreement, and based upon an examination which they deem sufficient to enable them to make an informed statement, there does not exist any Default or Event of Default, or if such Default or Event of Default has occurred, specifying the facts with respect thereto; (g) contemporaneously with the filing, mailing or releasing thereof, copies of all press releases and all material of a financial nature filed with the SEC or sent to all of the stockholders of the Borrower; (h) as soon as practicable but in any event not later than 45 days after the end of each fiscal quarter of the Borrower (including the fourth fiscal quarter in each year), updated Rent Rolls with respect to the Mortgaged Property and the Collateral Property and a summary of each Rent Roll in form reasonably satisfactory to the Majority Banks; (i) not later than 30 days following each acquisition of an interest in Real Estate by the Borrower or any of its Subsidiaries (which for the purposes of this Section 7.4(h) shall include the Investments described in Section 8.3(j)), each of the following: (i) a description of the property or note acquired, (ii) an environmental site assessment prepared by an Environmental Engineer stating no material qualification with respect to such Real Estate or property, and (iii) a Compliance Certificate prepared using the financial statements of the Borrower most recently provided or required to be provided to the Banks under Section 6.4 or this Section 7.4 adjusted in the best good-faith estimate of the Borrower to give effect to such acquisition and demonstrating that no Default or Event of Default with respect to the covenants referred to therein shall exist after giving effect to such acquisition; (j) as soon as practicable, but in any event not later than 30 days prior to the beginning of each calendar year, the annual operating budget for each of the Mortgaged Property and the Collateral Property, in form and substance satisfactory to the Majority Banks; (k) as soon as practicable, but in any event not later than 30 days prior to the beginning of each calendar year, the annual operating budget for each of the Mortgaged Property and the Collateral Property, in form and substance satisfactory to the Majority Banks; (l) as soon as practicable but in no event later than the 15th day of each calendar month, a summary of each Rent Roll with respect to the Mortgaged Property and the Collateral Property in form reasonably satisfactory to the Majority Banks; (m) promptly after they are filed with the Internal Revenue Service, copies of all annual federal income tax returns and amendments thereto of the Borrower and the Guarantor; (n) not later than 45 days after the end of each fiscal quarter of the Borrower (including the fourth fiscal quarter in each year), the market comparable study conducted by the Borrower's internal staff or its property managers, and at other times copies of such market studies relating to the Mortgaged Property as are from time to time prepared by or on behalf of the Borrower; (o) within five (5) days of the funding of any amount pursuant to the EQR Preferred Equity Commitment, notice of such funding and the amount thereof; (p) as soon as practicable, but in any event not later than two (2) Business Days after the Borrower acquires knowledge of the same, (i) written notice that EQR has notified the Borrower of a refusal to fund an amount pursuant to the EQR Preferred Equity Commitment, or notice of its intention to so refuse to make an advance, (ii) a claim by EQR of an event of default or default by Borrower under the EQR Preferred Equity Commitment, or (iii) the occurrence of any of the events described in Section 12.1(h), (i) or (j) with respect to EQR; (q) notice of the occurrence of the Adjustment Date within five (5) days of the occurrence of the same; and (r) from time to time such other financial data and information in the possession of the Borrower (including without limitation auditors' management letters, property inspection and environmental reports and information as to zoning and other legal and regulatory changes affecting the Borrower) as the Agent may reasonably request. Section 20.5. Notices. (a) Defaults. The Borrower will promptly notify the Agent in writing of the occurrence of any Default or Event of Default. If any Person shall give any notice or take any other action in respect of a claimed default (whether or not constituting an Event of Default) under this Agreement or under any note, evidence of indebtedness, indenture or other obligation to which or with respect to which the Borrower, any of its Subsidiaries or the Guarantor is a party or obligor, whether as principal or surety, and such default would permit the holder of such note or obligation or other evidence of indebtedness to accelerate the maturity thereof, which acceleration would have a material adverse effect on the Borrower or the Guarantor, the Borrower shall forthwith give written notice thereof to the Agent and each of the Banks, describing the notice or action and the nature of the claimed default. (b) Environmental Events. The Borrower will promptly give notice to the Agent (i) upon the Borrower or the Guarantor obtaining knowledge of any potential or known Release, or threat of Release, of any Hazardous Substances at or from the Mortgaged Property or any Collateral Property; (ii) of any violation of any Environmental Law that the Borrower, any of its Subsidiaries or the Guarantor or, upon the Borrower obtaining knowledge thereof, any maker of a Collateral Note, reports in writing or is reportable by such Person in writing (or for which any written report supplemental to any oral report is made) to any federal, state or local environmental agency and (iii) upon becoming aware thereof, of any inquiry, proceeding, investigation, or other action, including a notice from any agency of potential environmental liability, of any federal, state or local environmental agency or board, that in either case involves the Mortgaged Property or any Collateral Property or has the potential to materially affect the assets, liabilities, financial conditions or operations of the Borrower, any Subsidiary of the Borrower or the maker of any Collateral Note or the Agent's liens on the Collateral pursuant to the Security Documents. (c) Notification of Claims Against Collateral. The Borrower will, immediately upon becoming aware thereof, notify the Agent in writing of any setoff, claims (including, with respect to the Mortgaged Property or any Collateral Property, environmental claims), withholdings or other defenses to which any of the Collateral, or the rights of the Agent or the Banks with respect to the Collateral, are subject. (d) Notice of Litigation and Judgments. The Borrower will give notice to the Agent in writing within 15 days of becoming aware of any litigation or proceedings threatened in writing or any pending litigation and proceedings affecting the Borrower or any of its Subsidiaries or any Guarantor or to which the Borrower, any of its Subsidiaries or the Guarantor is or is to become a party involving an uninsured claim against the Borrower, any of its Subsidiaries or the Guarantor that could reasonably be expected to have a materially adverse effect on the Borrower or the Guarantor and stating the nature and status of such litigation or proceedings. The Borrower will give notice to the Agent, in writing, in form and detail satisfactory to the Agent and each of the Banks, within ten days of any judgment not covered by insurance, whether final or otherwise, against the Borrower, any of its Subsidiaries or the Guarantor in an amount in excess of $250,000. (e) Notice of Proposed Sales, Encumbrances, Refinance or Transfer of Non-Mortgaged Property. The Borrower will give notice to the Agent of any proposed or completed sale, encumbrance, refinance or transfer of any Real Estate or other Investment described in Section 8.3 (j) of the Borrower or its Subsidiaries other than Mortgaged Property within any fiscal quarter of the Borrower, such notice to be submitted together with the Compliance Certificate provided or required to be provided to the Banks under Section 7.4 with respect to such fiscal quarter. The Compliance Certificate shall with respect to any proposed or completed sale, encumbrance, refinance or transfer be adjusted in the best good-faith estimate of the Borrower to give effect to such sale, encumbrance, refinance or transfer and demonstrate that no Default or Event of Default with respect to the covenants referred to therein shall exist after giving effect to such sale, encumbrance, refinance or transfer. Notwithstanding the foregoing, in the event of any sale, encumbrance, refinance or transfer of any Real Estate or other Investment described in Section 8.3(j) of the Borrower or its Subsidiaries other than the Mortgaged Property involving an amount in excess of $10,000,000.00, the Borrower shall promptly give notice to the Agent of such transaction, which notice shall be accompanied by a Compliance Certificate prepared using the financial statements of the Borrower most recently provided or required to be provided to the Banks under Section 6.4 or Section 7.4 adjusted as provided in the preceding sentence. (f) Notification of Banks. Promptly after receiving any notice under this Section 7.5, the Agent will forward a copy thereof to each of the Banks, together with copies of any certificates or other written information that accompanied such notice. Section 20.6. Existence; Maintenance of Properties. (a) The Borrower will do or cause to be done all things necessary to preserve and keep in full force and effect its existence as a Maryland corporation. The Borrower will cause each of its Subsidiaries to do or cause to be done all things necessary to preserve and keep in full force and effect its legal existence. The Borrower will do or cause to be done all things necessary to preserve and keep in full force all of its rights and franchises and those of its Subsidiaries. The Borrower will, and will cause each of its Subsidiaries to, continue to engage primarily in the respective businesses now conducted by each of them and in related businesses. (b) The Borrower (i) will cause all of its properties and those of its Subsidiaries used or useful in the conduct of its business or the business of its Subsidiaries to be maintained and kept in good condition, repair and working order (ordinary wear and tear excepted) and supplied with all necessary equipment, and (ii) will cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof in all cases in which the failure so to do would have a material adverse effect on the condition of the applicable Mortgaged Property or on the financial condition, assets or operations of the Borrower or the Guarantor. Section 20.7. Insurance. (a) The Borrower will, at its expense, procure and maintain, or cause to be procured and maintained, for the benefit of the Borrower and the Agent, insurance policies issued by such insurance companies, in such amounts, in such form and substance, and with such coverages, endorsements, deductibles and expiration dates as are acceptable to the Agent, providing the following types of insurance covering the Mortgaged Property: (i) "All Risks" property insurance (including broad form flood, broad form earthquake and comprehensive boiler and machinery coverages) on each Building and the contents therein of the Borrower and its Subsidiaries in an amount not less than one hundred percent (100%) of the full replacement cost of each Building and the contents therein of the Borrower and its Subsidiaries, with deductibles not to exceed $10,000 for any one occurrence, with a replacement cost coverage endorsement, and, if requested by the Majority Banks, a contingent liability from operation of building laws endorsement in such amounts as the Majority Banks may require. Full replacement cost as used herein means the cost of replacing the Building (exclusive of the cost of excavations, foundations and footings below the lowest basement floor) and the contents therein of the Borrower and its Subsidiaries without deduction for physical depreciation thereof; (ii) During the course of construction or repair of any Building having a cost in excess of $250,000, the insurance required by clause (i) above shall be written on a builders risk, completed value, non-reporting form, meeting all of the terms required by clause (i) above, covering the total value of work performed, materials, equipment, machinery and supplies furnished, existing structures, and temporary structures being erected on or near the Real Estate, including coverage against collapse and damage during transit or while being stored off-site, and containing a soft costs (including loss of rents) coverage endorsement and a permission to occupy endorsement; (iii) Flood insurance if at any time any Building is located in any federally designated "special hazard area" (including any area having special flood, mudslide and/or flood-related erosion hazards, and shown on a Flood Hazard Boundary Map or a Flood Insurance Rate Map published by the Federal Emergency Management Agency as Zone A, AO, Al-30, AE, A99, AH, VO, Vl-30, VE, V, M or E) and the broad form flood coverage required by clause (i) above is not available, in an amount equal to the full replacement cost or the maximum amount then available under the National Flood Insurance Program; (iv) Rent loss insurance in an amount sufficient to recover at least the total estimated gross receipts from all sources of income, including without limitation, rental income, for the Real Estate for a twelve month period; (v) Commercial general liability insurance against claims for personal injury (to include, without limitation, bodily injury and personal and advertising injury) and property damage liability, all on an occurrence basis, if commercially available, with such coverages as the Majority Banks may reasonably request (including, without limitation, contractual liability coverage, completed operations coverage for a period of two years following completion of construction of any improvements on the Real Estate, and coverages equivalent to an ISO broad form endorsement), with a general aggregate limit of not less than $1,000,000, a completed operations aggregate limit of not less than $1,000,000, and a combined single "per occurrence" limit of not less than $1,000,000 for bodily injury, property damage and medical payments; (vi) During the course of construction or repair of any improvements on the Real Estate, owner's contingent or protective liability insurance covering claims not covered by or under the terms or provisions of the insurance required by clause (v) above; (vii) Employers liability insurance (with respect to the Borrower's employees only); (viii) Umbrella liability insurance with limits of not less than $50,000,000 to be in excess of the limits of the insurance required by clauses (v), (vi) and (vii) above, with coverage at least as broad as the primary coverages of the insurance required by clauses (v), (vi) and (vii) above, with any excess liability insurance to be at least as broad as the coverages of the lead umbrella policy. All such policies shall be endorsed to provide defense coverage obligations; (ix) Workers' compensation insurance for all employees of the Borrower or its Subsidiaries engaged on or with respect to the Real Estate; and (x) Such other insurance in such form and in such amounts as may from time to time be required by the Majority Banks against other insurable hazards and casualties which at the time are commonly insured against in the case of properties of similar character and location to the Real Estate. The Borrower shall pay or cause to be paid all premiums on insurance policies. The insurance policies with respect to all Mortgaged Property provided for in clauses (v), (vi) and (viii) above with respect to all Mortgaged Property shall name the Agent and each Bank as an additional insured. The insurance policies provided for in clauses (i), (ii), (iii) and (iv) above shall name the Agent as mortgagee and loss payee, shall be first payable in case of loss to the Agent, and shall contain mortgage clauses and lender's loss payable endorsements in form and substance acceptable to the Majority Banks. The Borrower shall deliver duplicate originals or certified copies of all such policies to the Majority Banks, and the Borrower shall promptly furnish to the Majority Banks all renewal notices and evidence that all premiums or portions thereof then due and payable have been paid. At least 15 days prior to the expiration date of the policies, the Borrower shall deliver to the Banks evidence of continued coverage, including a certificate of insurance, as may be satisfactory to the Majority Banks. (b) All policies of insurance required by this Agreement shall contain clauses or endorsements to the effect that (i) no act or omission of either the Borrower or any Subsidiary of the Borrower or anyone acting for the Borrower or any Subsidiary of the Borrower shall affect the validity or enforceability of such insurance insofar as the Agent is concerned, (ii) the insurer waives any right of setoff, counterclaim, subrogation, or any deduction in respect of any liability of the Borrower or any Subsidiary of the Borrower and the Agent, (iii) such insurance is primary and without right of contribution from any other insurance which may be available, (iv) such policies shall not be modified, canceled or terminated prior to the scheduled expiration date thereof without the insurer thereunder giving at least 15 days prior written notice to the Agent by certified or registered mail, and (v) that the Agent or the Banks shall not be liable for any premiums thereon or subject to any assessments thereunder, and shall in all events be in amounts sufficient to avoid any coinsurance liability. (c) The insurance required by this Agreement may be effected through a blanket policy or policies covering additional locations and property of the Borrower, its Subsidiaries, and other Persons not included in the Mortgaged Property, provided that such blanket policy or policies comply with all of the terms and provisions of this Section 7.7 and contain endorsements or clauses reasonably satisfactory to the Agent. (d) All policies of insurance required by this Agreement shall be issued by companies licensed to do business in the State where the policy is issued and also in the states where the Real Estate is located and having a rating in Best's Key Rating Guide of at least "A" and a financial size category of at least "VIII". (e) Neither the Borrower nor any Subsidiary of the Borrower shall carry separate insurance, concurrent in kind or form or contributing in the event of loss, with any insurance required under this Agreement unless such insurance complies with the terms and provisions of this Section 7.7. (f) In the event of any loss or damage to the Mortgaged Property, the Borrower shall give immediate written notice to the insurance carrier and the Agent, and the Agent shall furnish a copy of such notice promptly to each of the Banks. The Borrower may make proof of loss and adjust and compromise any claim under insurance policies which is of an amount not more than $250,000.00 so long as no Event of Default has occurred and is continuing and so long as such claim is pursued diligently and in good faith. The Borrower hereby irrevocably authorizes and empowers the Agent, at the Agent's option in the Agent's sole discretion or at the request of the Majority Banks in their sole discretion, as attorney in fact for the Borrower, to make proof of any loss except as provided in the preceding sentence, to adjust and compromise any claim under insurance policies, to appear in and prosecute any action arising from such insurance policies, to collect and receive insurance proceeds, and to deduct therefrom the Agent's expenses incurred in the collection of such proceeds. If the Mortgaged Property is acquired by the Agent or any nominee through foreclosure, deed in lieu of foreclosure or otherwise is acquired from the owner thereof, all right, title and interest of the owner of such Mortgaged Property in and to any insurance policies and unearned premiums thereon and in and to the proceeds thereof resulting from loss or damage to the Mortgaged Property prior to such sale or acquisition shall pass to the Agent or any other successor in interest to the owner or purchaser or grantee of the Mortgaged Property. (g) Subject to the terms of the following sentence, the Borrower authorizes the Agent, at the Agent's option or at the request of the Majority Bank's in their sole discretion, to (i) apply the balance of such proceeds to the payment of the Obligations whether or not then due, or (ii) if the Agent or the Majority Bank shall require the reconstruction or repair of the Mortgaged Property, to hold the balance of such proceeds to be used to pay all taxes, charges, sewer use fees, water rates and assessments which may be imposed upon the Mortgaged Property and the Obligations as they become due during the course of reconstruction or repair of the Mortgaged Property and to reimburse the Borrower, in accordance with such terms and conditions as Agent may prescribe, for the cost of such reconstruction or repair of the Mortgaged Property, and on completion of such reconstruction or repair to pay any excess funds to the Borrower so long as no Default or Event of Default has occurred and is continuing, or if a Default or Event of Default has occurred and is continuing, to apply any of the excess to the payment of the Obligations. Notwithstanding the foregoing, the Agent shall make such net proceeds available to the Borrower to reconstruct and repair the Mortgaged Property, in accordance with such terms and conditions as the Agent may prescribe for the disbursement of such proceeds to assure completion of such reconstruction or repair provided that (x) no Default or Event of Default shall have occurred and be continuing, (y) the Borrower shall have provided to Agent additional cash security in an amount equal to the amount reasonably estimated by the Agent to be the amount in excess of such proceeds which will be required to complete such repair or restoration, and (z) the Agent shall determine that such repair or reconstruction can be completed prior to the Maturity Date. (h) The Borrower, at its expense, will procure and maintain or cause to be procured and maintained, insurance covering the Borrower and the Real Estate other than the Mortgaged Property in such amounts and against such risks and casualties as are customary for properties of similar character and location, due regard being given to the type of improvements thereon, their construction, location, use and occupancy. (i) The Borrower shall provide or cause to be provided to the Agent for the benefit of the Banks Title Policies for all of the Mortgaged Property which shall at all times be in an aggregate amount of not less than the initial Borrowing Base attributable to such Mortgaged Property. Each Title Policy shall also contain, to the extent available, a tie-in endorsement aggregating the insurance coverage provided under all of the policies with tie-in endorsements. Section 20.8. Taxes. The Borrower and each Subsidiary will duly pay and discharge, or cause to be paid and discharged, before the same shall become overdue, all taxes, assessments and other governmental charges imposed upon it and upon the Mortgaged Property and the other Real Estate, sales and activities, or any part thereof, or upon the income or profits therefrom, as well as all claims for labor, materials, or supplies that if unpaid might by law become a lien or charge upon any of its property; provided that any such tax, assessment, charge, levy or claim need not be paid if the validity or amount thereof shall currently be contested in good faith by appropriate proceedings and if the Borrower or such Subsidiary shall have set aside on its books adequate reserves with respect thereto; and provided, further, that forthwith upon the commencement of proceedings to foreclose any lien that may have attached as security therefor, the Borrower and each Subsidiary of the Borrower either (i) will provide a bond issued by a surety reasonably acceptable to the Majority Banks and sufficient to stay all such proceedings or (ii) if no such bond is provided, will pay each such tax, assessment, charge, levy or claim. Section 20.9. Inspection of Properties and Books. The Borrower shall permit the Banks, through the Agent or any representative designated by the Agent, at the Borrower's expense to visit and inspect any of the properties of the Borrower or any of its Subsidiaries, to examine the books of account of the Borrower and its Subsidiaries (and to make copies thereof and extracts therefrom) and to discuss the affairs, finances and accounts of the Borrower and its Subsidiaries with, and to be advised as to the same by, its officers, all at such reasonable times and intervals as the Agent or any Bank may reasonably request. The Banks shall use good faith efforts to coordinate such visits and inspections so as to minimize the interference with and disruption to the Borrower's normal business operations. Section 20.10. Compliance with Laws, Contracts, Licenses, and Permits. The Borrower will comply with, and will cause each of its Subsidiaries to comply in all respects with (i) all applicable laws and regulations now or hereafter in effect wherever its business is conducted, including all Environmental Laws, (ii) the provisions of its corporate charter, and other charter documents and bylaws, (iii) all agreements and instruments to which it is a party or by which it or any of its properties may be bound, (iv) all applicable decrees, orders, and judgments, and (v) all licenses and permits required by applicable laws and regulations for the conduct of its business or the ownership, use or operation of its properties. If at any time while any Loan or Note is outstanding or the Banks have any obligation to make Loans hereunder, any authorization, consent, approval, permit or license from any officer, agency or instrumentality of any government shall become necessary or required in order that the Borrower may fulfill any of its obligations hereunder, the Borrower will immediately take or cause to be taken all steps necessary to obtain such authorization, consent, approval, permit or license and furnish the Agent and the Banks with evidence thereof. Section 20.11. Use of Proceeds. The Borrower will use the proceeds of the Loans solely to provide short-term financing (a) for the acquisition of fee interests by Borrower or, subject to the approval of the Majority Banks, by a Subsidiary of the Borrower in Real Estate which is located in the northeastern United States and utilized principally as commercial office space, (b) for Capital Improvement Projects to Real Estate, provided, that 75% of the aggregate amount of the proceeds of each advance of the Loans used for such purpose shall be used for immediate income-enhancing purposes, (c) for the acquisition of the Investments described in Section 8.3(j), (d) for the repayment of Indebtedness incurred or assumed by the Borrower or any Subsidiary of the Borrower in connection with the acquisitions and investments described in Section 7.11(a) and (c), and to repay third party indebtedness of the Borrower or its Subsidiaries incurred or assumed in connection with assets acquired prior to the Closing Date, (e) for reasonable transaction costs related to the transactions referred to in the preceding clauses (a) and (c), (f) up to $5,000,000 for general working capital purposes, and (g) to finance capital requirements at the Palomino Park Project. Section 20.12. Further Assurances. The Borrower will cooperate with, and will cause each of its Subsidiaries and the Guarantor to cooperate with, the Agent and the Banks and execute such further instruments and documents as the Banks or the Agent shall reasonably request to carry out to their satisfaction the transactions contemplated by this Agreement and the other Loan Documents. Section 20.13. Management Agreements. The Borrower shall provide prompt written notice to the Agent of any termination or material modification or amendment of any Management Agreement, provided that, without the prior consent of the Majority Banks, none of the Management Agreements shall be modified or amended to increase the fees payable thereunder. None of the Borrower, any of its Subsidiaries nor the Guarantor shall enter into any Management Agreement or otherwise manage any of the Mortgaged Property except with property and leasing managers having sufficient expertise and resources to manage such properties as class B office buildings, and on leasing terms and conditions no less favorable to the Borrower, its Subsidiaries or the Guarantor than are contained in the Management Agreements delivered to the Agent prior to the date hereof or are otherwise on then commercially reasonable terms. Section 20.14. ERISA Compliance. The Borrower will not permit the present value of all employee benefits vested in all Employee Benefit Plans, Multiemployer Plans and Guaranteed Pension Plans maintained by the Borrower and any ERISA Affiliate thereof to exceed the present value of the assets allocable to such vested benefits by an amount greater than $500,000.00 in the aggregate. Neither the Borrower nor any ERISA Affiliate thereof will at any time permit any such Plan maintained by it to engage in any "prohibited transaction" as such term is defined in Section 4975 of the Code or Section 406 of ERISA, incur any "accumulated funding deficiency" as such term is defined in Section 302 of ERISA, whether or not waived, or terminate any such Plan in any manner which could result in the imposition of a lien on the property of the Borrower or the Guarantor pursuant to Section 4068 of ERISA. Section 20.15. Distribution of Income to the Borrower. The Borrower shall cause all of its Subsidiaries to promptly distribute to the Borrower (but not less frequently than once each fiscal quarter of the Borrower), whether in the form of dividends, distributions or otherwise, all profits, proceeds or other income relating to or arising from its Subsidiaries' use, operation, financing, refinancing, sale or other disposition of their respective assets and properties after (a) the payment by each Subsidiary of its operating expenses and debt service for such quarter and (b) the establishment of reasonable reserves for the payment of operating expenses not paid on at least a quarterly basis and capital improvements to be made to such Subsidiary's assets and properties approved by such Subsidiary in the ordinary course of business consistent with its past practices. Section 20.16. More Restrictive Agreements. Without limiting the terms of Section 8.1, should the Borrower or the Guarantor enter into or modify any agreements or documents pertaining to any existing or future Indebtedness, Debt Offering or Equity Offering, which agreements or documents include covenants (whether affirmative or negative), warranties, representations, defaults or events of default (or any other provision which may have the same practical effect as any of the foregoing) which are individually or in the aggregate more restrictive against the Borrower, the Guarantor or their respective Subsidiaries than those set forth herein or in any of the other Loan Documents, the Borrower shall promptly notify the Agent and, if requested by the Majority Banks, the Borrower, the Agent, and the Majority Banks shall (and if applicable, the Borrower shall cause the Guarantor to) promptly amend this Agreement and the other Loan Documents to include some or all of such more restrictive provisions as determined by the Majority Banks in their sole discretion. Section 21. CERTAIN NEGATIVE COVENANTS OF THE BORROWER. The Borrower covenants and agrees that, so long as any Loan or Note is outstanding or any of the Banks has any obligation to make any Loans: Section 21.1. Restrictions on Indebtedness. The Borrower will not, and will not permit any of its Subsidiaries owning Collateral to, create, incur, assume, guarantee or be or remain liable, contingently or otherwise, with respect to any Indebtedness other than: (a) Indebtedness to the Banks arising under any of the Loan Documents; (b) current liabilities of the Borrower or its Subsidiaries incurred in the ordinary course of business but not incurred through (i) the borrowing of money, or (ii) the obtaining of credit except for credit on an open account basis customarily extended and in fact extended in connection with normal purchases of goods and services; (c) Indebtedness in respect of taxes, assessments, governmental charges or levies and claims for labor, materials and supplies to the extent that payment therefor shall not at the time be required to be made in accordance with the provisions of Section 7.8; (d) Indebtedness in respect of judgments or awards that have been in force for less than the applicable period for taking an appeal so long as execution is not levied thereunder or in respect of which the Borrower or the relevant Subsidiary shall at the time in good faith be prosecuting an appeal or proceedings for review and in respect of which a stay of execution shall have been obtained pending such appeal or review; (e) endorsements for collection, deposit or negotiation and warranties of products or services, in each case incurred in the ordinary course of business; (f) the Palomino Park Bonds; and (g) Indebtedness in an amount not to exceed $20,000,000.00 to Equity Residential Properties Trust, a Maryland real estate investment trust, to be repaid no later than one week from the Closig Date with the proceeds of an Equity Offering. Nothing herein shall prohibit any Subsidiaries of Borrower that do not own any Collateral from incurring Indebtedness other than that permitted in this Section 8.1, provided that in no event shall the Borrower nor any of its Subsidiaries owning Collateral be liable, contingently or otherwise, for any such Indebtedness. Section 21.2. Restrictions on Liens, Etc. The Borrower will not, and will not permit any of its Subsidiaries owning Collateral to, (a) create or incur or suffer to be created or incurred or to exist any lien, encumbrance, mortgage, pledge, negative pledge, charge, restriction or other security interest of any kind upon any of its property or assets of any character whether now owned or hereafter acquired, or upon the income or profits therefrom; (b) transfer any of its property or assets or the income or profits therefrom for the purpose of subjecting the same to the payment of Indebtedness or performance of any other obligation in priority to payment of its general creditors; (c) acquire, or agree or have an option to acquire, any property or assets upon conditional sale or other title retention or purchase money security agreement, device or arrangement; (d) suffer to exist for a period of more than 30 days after the same shall have been incurred any Indebtedness or claim or demand against it that if unpaid might by law or upon bankruptcy or insolvency, or otherwise, be given any priority whatsoever over its general creditors; (e) sell, assign, pledge or otherwise transfer any accounts, contract rights, general intangibles, chattel paper or instruments, with or without recourse; or (f) incur or maintain any obligation to any holder of Indebtedness of the Borrower or such Subsidiary which prohibits the creation or maintenance of any lien securing the Obligations (collectively "Liens"); provided that the Borrower and any Subsidiary of the Borrower owning Collateral may create or incur or suffer to be created or incurred or to exist: (i) liens in favor of the Borrower on all or part of the assets of Subsidiaries of the Borrower securing Indebtedness owing by Subsidiaries of the Borrower to the Borrower (provided that no such liens shall be permitted with respect to any of the Collateral or on any other assets of a Subsidiary which also owns any portion of the Collateral); (ii) liens on properties to secure taxes, assessments and other governmental charges or claims for labor, material or supplies in respect of obligations not overdue; (iii) deposits or pledges made in connection with, or to secure payment of, workers' compensation, unemployment insurance, old age pensions or other social security obligations; (iv) liens on properties other than the Mortgaged Property or any other Collateral in respect of judgments, awards or indebtedness, the Indebtedness with respect to which is permitted by Section 8.1(d); (v) encumbrances on properties other than the Mortgaged Property consisting of easements, rights of way, zoning restrictions, restrictions on the use of real property and defects and irregularities in the title thereto, landlord's or lessor's liens under leases to which the Borrower or a Subsidiary of the Borrower is a party, and other minor non-monetary liens or encumbrances none of which interferes materially with the use of the property affected in the ordinary conduct of the business of the Borrower and its Subsidiaries, which defects do not individually or in the aggregate have a materially adverse effect on the business of the Borrower individually or of the Borrower and its Subsidiaries on a consolidated basis; (vi) liens in favor of the Agent and the Banks under the Loan Documents; and (vii) liens and encumbrances on a Mortgaged Property expressly permitted under the terms of the Security Deed relating thereto. Section 21.3. Restrictions on Investments. The Borrower will not, and will not permit any of its Subsidiaries to, make or permit to exist or to remain outstanding any Investment except Investments in: (a) marketable direct or guaranteed obligations of the United States of America that mature within one (1) year from the date of purchase by the Borrower or its Subsidiary; (b) marketable direct obligations of any of the following: Federal Home Loan Mortgage Corporation, Student Loan Marketing Association, Federal Home Loan Banks, Federal National Mortgage Association, Government National Mortgage Association, Bank for Cooperatives, Federal Intermediate Credit Banks, Federal Financing Banks, Export-Import Bank of the United States, Federal Land Banks, or any other agency or instrumentality of the United States of America; (c) demand deposits, certificates of deposit, bankers acceptances and time deposits of United States banks having total assets in excess of $100,000,000; provided, however, that the aggregate amount at any time so invested with any single bank having total assets of less than $1,000,000,000 will not exceed $200,000; (d) securities commonly known as "commercial paper" issued by a corporation organized and existing under the laws of the United States of America or any State which at the time of purchase are rated by Moody's Investors Service, Inc. or by Standard & Poor's Corporation at not less than "P 1" if then rated by Moody's Investors Service, Inc., and not less than "A 1", if then rated by Standard & Poor's Corporation; (e) mortgage-backed securities guaranteed by the Government National Mortgage Association, the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation and other mortgage-backed bonds which at the time of purchase are rated by Moody's Investors Service, Inc. or by Standard & Poor's Corporation at not less than "Aa" if then rated by Moody's Investors Service, Inc. and not less than "AA" if then rated by Standard & Poor's Corporation; (f) repurchase agreements having a term not greater than 90 days and fully secured by securities described in the foregoing subsection (a), (b) or (e) with banks described in the foregoing subsection (c) or with financial institutions or other corporations having total assets in excess of $500,000,000; (g) shares of so-called "money market funds" registered with the SEC under the Investment Company Act of 1940 which maintain a level per-share value, invest principally in investments described in the foregoing subsections (a) through (f) and have total assets in excess of $50,000,000; (h) Investments in fee interests in Real Estate utilized principally for commercial office space, including earnest money deposits relating thereto and transaction costs; (i) Investments in Subsidiaries of the Borrower; (j) Investments in loans secured principally by mortgages or deeds of trust on real property upon which are located completed improvements which are principally used for commercial office purposes, leasehold interests in properties which are used principally for commercial office purposes under ground leases having not less than fifty (50) years of the leasehold term remaining at the time of acquisition thereof by the Borrower, or interests in public or private real estate investment trusts or other real estate companies which principally own real property or shares or other interests in entities which own real property or other interests in real property, all of which real property is used principally for commercial office purposes; (k) Investments in shares of the Borrower, provided that the Borrower shall give notice to the Agent concurrently with the financial statements provided in Section 7.4(b) of any such Investments that have occurred during the preceding fiscal quarter of the Borrower; and (l) Investments in Park at Highlands LLC and Red Canyon at Palomino Park LLC, the entities owning the Palomino Park Project. Section 21.4. Merger, Consolidation. The Borrower will not, and will not permit any of its Subsidiaries to, become a party to any merger, consolidation or other business combination, or agree to effect any asset acquisition, stock acquisition or other acquisition without the prior written consent of the Majority Banks except (i) the merger or consolidation of one or more of the Subsidiaries of the Borrower with and into the Borrower and (ii) the merger or consolidation of two or more Subsidiaries of the Borrower. Section 21.5. Sale and Leaseback. The Borrower will not, and will not permit any of its Subsidiaries to, enter into any arrangement, directly or indirectly, whereby the Borrower or any Subsidiary of the Borrower shall sell or transfer any Real Estate owned by it in order that then or thereafter the Borrower or any Subsidiary shall lease back such Real Estate. Section 21.6. Compliance with Environmental Laws. The Borrower will not, and will not permit any of its Subsidiaries, to do any of the following: (a) use any of the Real Estate or any portion thereof as a facility for the handling, processing, storage or disposal of Hazardous Substances, except for small quantities of Hazardous Substances used in the ordinary course of business and in compliance with all applicable Environmental Laws, (b) cause or permit to be located on any of the Real Estate any underground tank or other underground storage receptacle for Hazardous Substances except in full compliance with Environmental Laws, (c) generate any Hazardous Substances on any of the Real Estate except in full compliance with Environmental Laws, (d) conduct any activity at any Real Estate or use any Real Estate in any manner so as to cause a Release of Hazardous Substances on, upon or into the Real Estate or any surrounding properties or any threatened Release of Hazardous Substances which might give rise to liability under CERCLA or any other Environmental Law, or (e) directly or indirectly transport or arrange for the transport of any Hazardous Substances (except in compliance with all Environmental Laws). The Borrower shall: (i) in the event of any change in Environmental Laws governing the assessment, release or removal of Hazardous Substances, which change would lead a prudent lender to require additional testing to avail itself of any statutory insurance or limited liability, take all action (including, without limitation, the conducting of engineering tests at the sole expense of the Borrower) to confirm that no Hazardous Substances are or ever were Released or disposed of on the Mortgaged Property; and (ii) if any Release or disposal of Hazardous Substances shall occur or shall have occurred on the Mortgaged Property (including without limitation any such Release or disposal occurring prior to the acquisition of such Mortgaged Property by the Borrower), cause the prompt containment and removal of such Hazardous Substances and remediation of the Mortgaged Property in full compliance with all applicable laws and regulations and to the satisfaction of the Majority Banks; provided, that the Borrower shall be deemed to be in compliance with Environmental Laws for the purpose of this clause (ii) so long as it or a responsible third party with sufficient financial resources is taking reasonable action to remediate or manage any event of noncompliance to the satisfaction of the Majority Banks and no action shall have been commenced by any enforcement agency. The Majority Banks may engage their own Environmental Engineer to review the environmental assessments and the Borrower's compliance with the covenants contained herein. At any time after an Event of Default shall have occurred hereunder, or, whether or not an Event of Default shall have occurred, at any time that the Agent or the Majority Banks shall have reasonable grounds to believe that a Release or threatened Release of Hazardous Substances may have occurred, relating to any Mortgaged Property, or that any of the Mortgaged Property is not in compliance with the Environmental Laws, the Agent may at its election (and will at the request of the Majority Banks) obtain such environmental assessments of such Mortgaged Property prepared by an Environmental Engineer as may be necessary or advisable for the purpose of evaluating or confirming (i) whether any Hazardous Substances are present in the soil or water at or adjacent to such Mortgaged Property and (ii) whether the use and operation of such Mortgaged Property comply with all Environmental Laws. Environmental assessments may include detailed visual inspections of such Mortgaged Property including, without limitation, any and all storage areas, storage tanks, drains, dry wells and leaching areas, and the taking of soil samples, as well as such other investigations or analyses as are necessary or appropriate for a complete determination of the compliance of such Mortgaged Property and the use and operation thereof with all applicable Environmental Laws. All such environmental assessments shall be at the sole cost and expense of the Borrower. Section 21.7. Distributions. Prior to the first (1st) anniversary of the Closing Date, the Borrower will not make any Distributions. Thereafter, the Borrower will not make any Distributions which would cause it to violate any of the following covenants: (a) The Borrower shall make no Distributions in the event that an Event of Default shall have occurred and be continuing or a Default or Event of Default would be created after giving effect to such Distribution; and (b) Notwithstanding the foregoing, at any time when an Event of Default shall have occurred and the maturity of the Obligations has been accelerated, the Borrower shall not make any Distributions whatsoever, directly or indirectly. Section 21.8. Asset Sales. Neither the Borrower nor any Subsidiary of the Borrower shall sell, transfer or otherwise dispose of any Real Estate or other Investment described in Section 8.3(j) (except as the result of a condemnation or casualty and except for the granting of Permitted Liens) unless there shall have been delivered to the Banks a statement that no Default or Event of Default exists and a Compliance Certificate demonstrating that the Borrower will be in compliance with its covenants referred to therein after giving effect to such sale, transfer or other disposition. Section 21.9. Development Activity. Neither the Borrower nor any Subsidiary of the Borrower shall, without the prior written consent of the Majority Banks, engage, directly or indirectly, in the development of properties to be used principally for commercial office purposes or otherwise, except for the Palomino Park Project. For purposes of this Section 8.9, the term "development" shall include the new construction of an office building or office park, but shall not include Capital Improvement Projects to existing Real Estate which is already used principally for commercial office purposes. The Borrower acknowledges that the decision of the Majority Banks to grant or withhold such consent shall be based on such factors as the Majority Banks deem relevant in their sole discretion, including without limitation, evidence of sufficient funds both from borrowings and equity to complete such development and evidence that the Borrower or its Subsidiary has the resources and expertise necessary to complete such project. Nothing herein shall prohibit the Borrower or any Subsidiary of the Borrower from entering into an agreement to acquire Real Estate which has been developed and initially leased by another Person. Section 22. FINANCIAL COVENANTS OF BORROWER. The Borrower covenants and agrees that, so long as any Loan or Note is outstanding or any Bank has any obligation to make any Loans it will comply with the following: Section 22.1. Liabilities to Assets Ratio. The Borrower will not, at the end of any fiscal quarter, permit the ratio of Consolidated Total Liabilities to Consolidated Total Assets of the Borrower to exceed 0.60 to 1. Section 22.2. Consolidated Operating Cash Flow Coverage. The Borrower will not, at the end of any fiscal quarter, (a) until the occurrence of the Adjustment Date, permit its Consolidated Operating Cash Flow for any period of four consecutive fiscal quarters (treated as a single accounting period) (the "Test Period"), minus the Capital Improvement Reserve for the Test Period to be less than 1.3 times the Debt Service for the Test Period; and (b) after the occurrence of the Adjustment Date, permit Consolidated Operating Cash Flow for the Test Period minus the Capital Improvement Reserve for the Test Period to be less than 1.5 times the Debt Service for the Test Period. In the event that the Borrower shall not have any of the foregoing components for four (4) consecutive fiscal quarters, then such components shall be annualized in a manner reasonably satisfactory to the Agent and the Co-Agent. Section 22.3. Borrowing Base. The Borrower will not permit the outstanding principal balance of the Loans as of the date of determination to be greater than the Borrowing Base as of the date of determination. Section 22.4. Minimum Shareholders Equity. The Borrower will not, at the end of any fiscal quarter, permit the Shareholders Equity to be less than the sum of (a) $35,000,000 plus (b) eighty percent (80%) of the net proceeds from any Equity Offering after the Closing Date. Section 22.5. Real Estate Assets. The Borrower shall not permit its direct or indirect interest in (i) undeveloped land and (ii) non-income producing land assets or mortgages secured by non-income producing land assets to exceed, in the aggregate, twenty-five percent (25%) of the Borrower's Consolidated Total Assets. Section 23. CLOSING CONDITIONS. The obligations of the Agent and the Banks to make the initial Loans shall be subject to the satisfaction of the following conditions precedent on or prior to May 30, 1997: Section 23.1. Loan Documents. Each of the Loan Documents shall have been duly executed and delivered by the respective parties thereto, shall be in full force and effect and shall be in form and substance satisfactory to the Majority Banks. The Agent shall have received a fully executed copy of each such document, except that each Bank shall have received a fully executed counterpart of its Note. Each of the Collateral Notes shall have been endorsed to and delivered to the Agent. Section 23.2. Certified Copies of Organizational Documents. The Agent shall have received from the Borrower a copy, certified as of a recent date by the appropriate officer of the State in which the Borrower is organized or in which the Mortgaged Property is located, and by a duly authorized officer of the Borrower to be true and complete, of the articles of incorporation or other organizational documents of the Borrower or its qualification to do business, as applicable, as in effect on such date of certification. Section 23.3. Bylaws; Resolutions. All action on the part of the Borrower necessary for the valid execution, delivery and performance by the Borrower of the Loan Documents to which it is or is to become a party shall have been duly and effectively taken, and evidence thereof satisfactory to the Agent shall have been provided to the Agent. The Agent shall have received from the Borrower true copies of its bylaws and the resolutions adopted by its board of directors or other governing body authorizing the transactions described herein, each certified by its secretary or other duly authorized officer as of a recent date to be true and complete. Section 23.4. Incumbency Certificate; Authorized Signers. The Agent shall have received from the Borrower an incumbency certificate, dated as of the Closing Date, signed by a duly authorized officer of the Borrower and giving the name and bearing a specimen signature of each individual who shall be authorized: (a) to sign, in the name and on behalf of the Borrower, each of the Loan Documents to which the Borrower is or is to become a party; (b) in the case of the Borrower to make Loan and Conversion Requests; and (c) to give notices and to take other action on behalf of the Borrower under the Loan Documents. Section 23.5. Opinion of Counsel. The Agent shall have received a favorable opinion addressed to the Banks and the Agent and dated as of the Closing Date, in form and substance satisfactory to the Banks and the Agent, from Robinson, Silverman, Pearce, Aronsohn & Berman, counsel of the Borrower, as to such matters as the Agent shall reasonably request. Section 23.6. Payment of Fees. The Borrower shall have paid to the Agent the commitment fee pursuant to Section 4.2. Section 23.7. Appraisals. The Agent shall have received Appraisals of the Mortgaged Property and the Collateral Property in form and substance satisfactory to the Majority Banks prior to the Closing Date demonstrating that the initial Collateral, when taken with the EQR Preferred Equity Commitment Allowance, has a Designated Collateral Value that is in compliance with the terms of this Agreement. Section 23.8. Environmental Reports. The Agent shall have received environmental site assessment reports for the Mortgaged Property and the Collateral Property prepared by an Environmental Engineer no more than three months prior to the Closing Date, which indicate the condition of the Mortgaged Property and the Collateral Property and such other properties and any Buildings thereon and which set forth no qualifications except those that are acceptable to the Majority Banks in their sole discretion, and disclosing that each piece of Mortgaged Property or Collateral Property and any Building thereon is free of oil, underground storage tanks, asbestos or asbestos containing material, lead paint and other Hazardous Substances (except to the extent acceptable to the Majority Banks in their sole discretion), and which reports are otherwise in form and substance satisfactory to the Majority Banks). Section 23.9. Insurance. The Agent shall have received duplicate originals or certified copies of all policies of insurance required by this Agreement. Section 23.10. Performance; No Default. The Borrower shall have performed and complied with all terms and conditions herein required to be performed or complied with by it on or prior to the Closing Date, and on the Closing Date there shall exist no Default or Event of Default. Section 23.11. Representations and Warranties. The representations and warranties made by the Borrower and the Guarantor in the Loan Documents or otherwise made by or on behalf of any Borrower, the Guarantor or any Subsidiary thereof, in connection therewith or after the date thereof shall have been true and correct in all material respects when made and shall also be true and correct in all material respects on the Closing Date. Section 23.12. Proceedings and Documents. All proceedings in connection with the transactions contemplated by this Agreement and the other Loan Documents shall be reasonably satisfactory to the Agent and the Agent's Special Counsel in form and substance, and the Agent shall have received all information and such counterpart originals or certified copies of such documents and such other certificates, opinions or documents as the Agent and the Agent's Special Counsel may reasonably require. Section 23.13. Eligible Real Estate Qualification Documents and Qualifying Collateral Note Qualification Documents. The Eligible Real Estate Qualification Documents for each parcel of Mortgaged Property included in the Collateral as of the Closing Date shall have been delivered to the Agent. The Qualifying Collateral Note Qualification Documents for each Collateral Note included in the Collateral as of the Closing Date shall have been delivered to the Agent. Section 23.14. Compliance Certificate. A Compliance Certificate dated as of the date of the Closing Date demonstrating compliance with each of the covenants calculated therein as of the most recent fiscal quarter end for which the Borrower has provided financial statements under Section 6.4 adjusted in the best good faith estimate of the Borrower dated as of the date of the Closing Date shall have been delivered to the Agent. Section 23.15. Other Documents. To the extent requested by the Majority Banks, executed copies of all material agreements of any nature whatsoever to which the Borrower or any Subsidiary of the Borrower is a party affecting or relating to the use, operation, development, construction or management of the Mortgaged Property or the other Collateral. Section 23.16. No Condemnation/Taking. The Agent shall have received written confirmation from the Borrower that no condemnation proceedings are pending or to the Borrower's knowledge threatened against any Mortgaged Property or Collateral Property or, if any such proceedings are pending or threatened, identifying the same and the Real Estate or Collateral Property affected thereby and the Agent shall have determined that none of such proceedings is or will be material to the Mortgaged Property or Collateral Property affected thereby. Section 23.17. Governmental Policy. Each Bank shall have determined that there have been no material changes in governmental regulations or policy affecting the Banks, the Borrower or the Guarantor. Section 23.18. Other. The Agent shall have reviewed such other documents, instruments, certificates, opinions, assurances, consents and approvals as the Agent or the Agent's Special Counsel may reasonably have requested. Section 23.19. Consummation of Merger. The Borrower shall have delivered or caused to be delivered evidence reasonably satisfactory to the Banks in their sole discretion that the merger of Equity Residential Property Trust and Wellsford Residential Property Trust shall have been consummated in all respects prior to the Closing Date, that the successor corporation is a public corporation listed on the New York Stock Exchange, and that the Borrower is a public corporation listed on the American Stock Exchange. Section 24. CONDITIONS TO ALL BORROWINGS. The obligations of the Banks to make any Loan, whether on or after the Closing Date, shall also be subject to the satisfaction of the following conditions precedent: Section 24.1. Prior Conditions Satisfied. All conditions set forth in Section 10 shall continue to be satisfied as of the date upon which any Loan is to be made. Section 24.2. Representations True; No Default. Each of the representations and warranties contained in this Agreement, the other Loan Documents or in any document or instrument delivered pursuant to or in connection with this Agreement shall be true as of the date as of which they were made and shall also be true at and as of the time of the making of such Loan, with the same effect as if made at and as of that time (except to the extent of changes resulting from transactions contemplated or permitted by this Agreement and the other Loan Documents and changes occurring in the ordinary course of business that singly or in the aggregate are not materially adverse, and except to the extent that such representations and warranties relate expressly to an earlier date) and no Default or Event of Default shall have occurred and be continuing. Each of the Banks shall have received a certificate of the Borrower signed by an authorized officer of the Borrower to such effect. Section 24.3. No Legal Impediment. No change shall have occurred in any law or regulations thereunder or interpretations thereof that in the reasonable opinion of any Bank would make it illegal for such Bank to make such Loan. Section 24.4. Governmental Regulation. Each Bank shall have received such statements in substance and form reasonably satisfactory to such Bank as such Bank shall require for the purpose of compliance with any applicable regulations of the Comptroller of the Currency or the Board of Governors of the Federal Reserve System. Section 24.5. Proceedings and Documents. All proceedings in connection with the Loan shall be satisfactory in substance and in form to the Majority Banks, and the Majority Banks shall have received all information and such counterpart originals or certified or other copies of such documents as the Majority Banks may reasonably request. Section 24.6. Borrowing Documents. In the case of any request for a Loan, the Agent shall have received a copy of each of the following: (a) the request for a Loan required by Section 2.6 in the form of Exhibit B hereto, fully completed; and (b) the Compliance Certificate required by clause (iv) of Section 2.6 prepared in a manner reasonably acceptable to the Agent. Section 24.7. Endorsement to Title Policy. At such time as the Agent shall determine in its discretion, to the extent available under applicable law, a "date down" endorsement to each Title Policy indicating no change in the state of title and containing no survey exceptions not approved by the Majority Banks, which endorsement shall, expressly or by virtue of a proper "revolving credit" clause or endorsement in the Title Policy, increase the coverage of the Title Policy to the aggregate amount of all Loans advanced and outstanding on or before the effective date of such endorsement (provided that the amount of coverage under an individual Title Policy for an individual Mortgaged Property need not equal the aggregate amount of all Loans), or if such endorsement is not available, such other evidence and assurances as the Majority Banks may reasonably require (which evidence may include, without limitation, an affidavit from the Borrower or the Guarantor, as applicable, stating that there have been no changes in title from the date of the last effective date of the Title Policy). Section 24.8. Future Advances Tax Payment. As a condition precedent to any Bank's obligations to make any Loans in excess of an aggregate amount of $50,000,000 (calculated as the sum of all Loans advanced hereunder without deduction for any repayments of such Loans and regardless of whether such Loans are outstanding at the time of reference hereto), the Borrower will pay or cause to be paid to the Agent any mortgage, recording, intangible, documentary stamp or other similar taxes and charges which the Agent reasonably determines to be payable as a result of such Loan to any state or any county or municipality thereof in which any of the Mortgaged Property is located and deliver to the Agent such affidavits or other information which the Agent reasonably determines to be necessary in connection with the payment of such tax, in order to insure that the Security Deeds on Mortgaged Property located in such state secure the Borrower's obligation with respect to the Loans then being requested. The provisions of this Section 11.8 shall be without limitation of the Borrower's obligations under other provisions of the Loan Documents, including without limitation Section 15 hereof. Section 25. EVENTS OF DEFAULT; ACCELERATION; ETC. Section 25.1. Events of Default and Acceleration. If any of the following events ("Events of Default" or, if the giving of notice or the lapse of time or both is required, then, prior to such notice or lapse of time, "Defaults") shall occur: (a) the Borrower shall fail to pay any principal of the Loans when the same shall become due and payable, whether at the stated date of maturity or any accelerated date of maturity or at any other date fixed for payment; (b) the Borrower shall fail to pay any interest on the Loans or any other sums due hereunder or under any of the other Loan Documents, when the same shall become due and payable, whether at the stated date of maturity or any accelerated date of maturity or at any other date fixed for payment; (c) the Borrower shall fail to comply with any covenant contained in Section 9.3, in which event, subject to the provisions of Section 12.1A, the Borrower shall have the cure period or periods provided in Section 12.1B; (d) the Borrower shall fail to comply with any covenant contained in Section 9.1, Section 9.2, Section 9.4 or Section 9.5 and such failure shall continue for 30 Business Days after written notice thereof shall have been given to the Borrower by the Agent; (e) the Borrower, any of its Subsidiaries, any Guarantor or any other party shall fail to perform any other term, covenant or agreement contained herein or in any of the other Loan Documents (other than those specified above in this Section 12.1); (f) any representation or warranty of the Borrower or any of its Subsidiaries or any Guarantor in this Agreement or any other Loan Document, or in any report, certificate, financial statement, request for a Loan, or in any other document or instrument delivered pursuant to or in connection with this Agreement, any advance of a Loan or any of the other Loan Documents shall prove to have been false in any material respect upon the date when made or deemed to have been made or repeated; (g) the Borrower or any of its Subsidiaries or any Guarantor shall fail to pay at maturity, or within any applicable period of grace, any obligation for borrowed money or credit received, or fail to observe or perform any material term, covenant or agreement contained in any agreement by which it is bound, evidencing or securing any such borrowed money or credit received for such period of time as would permit (assuming the giving of appropriate notice if required) the holder or holders thereof or of any obligations issued thereunder to accelerate the maturity thereof; provided that the events described in this Section 12.1(g) shall not constitute an Event of Default unless such failure to perform, together with other failures to perform as described in this Section 12.1(g), involve singly or in the aggregate obligations for borrowed money or credit received totaling in excess of $10,000,000; (h) the Borrower or any of its Subsidiaries or any Guarantor, (A) shall make an assignment for the benefit of creditors, or admit in writing its general inability to pay or generally fail to pay its debts as they mature or become due, or shall petition or apply for the appointment of a trustee or other custodian, liquidator or receiver of the Borrower or any of its Subsidiaries or any Guarantor or of any substantial part of the assets of any thereof, (B) shall commence any case or other proceeding relating to the Borrower or any of its Subsidiaries or any Guarantor under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation or similar law of any jurisdiction, now or hereafter in effect, or (C) shall take any action to authorize or in furtherance of any of the foregoing; (i) a petition or application shall be filed for the appointment of a trustee or other custodian, liquidator or receiver of the Borrower or any of its Subsidiaries or any Guarantor or any substantial part of the assets of any thereof, or a case or other proceeding shall be commenced against the Borrower or any of its Subsidiaries or any Guarantor under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation or similar law of any jurisdiction, now or hereafter in effect, and the Borrower or any of its Subsidiaries or any Guarantor shall indicate its approval thereof, consent thereto or acquiescence therein or such petition, application, case or proceeding shall not have been dismissed within 60 days following the filing or commencement thereof; (j) a decree or order is entered appointing any such trustee, custodian, liquidator or receiver or adjudicating the Borrower or any of its Subsidiaries or any Guarantor bankrupt or insolvent, or approving a petition in any such case or other proceeding, or a decree or order for relief is entered in respect of the Borrower or any of its Subsidiaries or any Guarantor, in each case of the foregoing in an involuntary case under federal bankruptcy laws as now or hereafter constituted; (k) there shall remain in force, undischarged, unsatisfied and unstayed, for more than 60 days, whether or not consecutive, any uninsured final judgment against the Borrower or any of its Subsidiaries or any Guarantor that, with other outstanding uninsured final judgments, undischarged, against the Borrower or any of its Subsidiaries or any Guarantor exceeds in the aggregate $1,000,000.00; (l) if any of the Loan Documents shall be canceled, terminated, revoked or rescinded otherwise than in accordance with the terms thereof or with the express prior written agreement, consent or approval of the Banks, or any action at law, suit in equity or other legal proceeding to cancel, revoke or rescind any of the Loan Documents shall be commenced by or on behalf of the Borrower, any of its Subsidiaries or any Guarantor or any of their respective holders of Voting Interests, or any court or any other governmental or regulatory authority or agency of competent jurisdiction shall make a determination that, or issue a judgment, order, decree or ruling to the effect that, any one or more of the Loan Documents is illegal, invalid or unenforceable in accordance with the terms thereof in any material respect as determined by the Majority Banks; (m) any dissolution, termination, partial or complete liquidation, merger or consolidation of the Borrower or any of its Subsidiaries or any Guarantor, or any sale, transfer or other disposition of the assets of the Borrower or any of its Subsidiaries or any Guarantor, other than as permitted under the terms of this Agreement or the other Loan Documents; (n) any suit or proceeding shall be filed against the Borrower, any of its Subsidiaries, any Guarantor, any of the Mortgaged Property, any other Collateral or any Collateral Property which in the good faith business judgment of the Majority Banks after giving consideration to the likelihood of success of such suit or proceeding and the availability of insurance to cover any judgment with respect thereto and based on the information available to them, if adversely determined, would have a materially adverse affect on the ability of the Borrower or the Guarantor to perform each and every one of their respective obligations under and by virtue of the Loan Documents; (o) the Borrower or any Guarantor shall be indicted for a federal crime, a punishment for which could include the forfeiture of any assets of the Borrower or such Guarantor included in the Mortgaged Property; (p) Jeffrey H. Lynford shall cease to be the Chairman of the Board of, or Edward Lowenthal shall cease to be the President of, the Borrower, and a competent and experienced successor for such Person shall not be approved by the Majority Banks within six (6) months of such event; (q) with respect to any Guaranteed Pension Plan, an ERISA Reportable Event shall have occurred and the Majority Banks shall have determined in their reasonable discretion that such event reasonably could be expected to result in liability of any of the Borrower or a Guarantor to the PBGC or such Guaranteed Pension Plan in an aggregate amount exceeding $1,000,000 and such event in the circumstances occurring reasonably could constitute grounds for the termination of such Guaranteed Pension Plan by the PBGC or for the appointment by the appropriate United States District Court of a trustee to administer such Guaranteed Pension Plan; or a trustee shall have been appointed by the United States District Court to administer such Plan; or the PBGC shall have instituted proceedings to terminate such Guaranteed Pension Plan; or (r) any Guarantor denies that such Guarantor has any liability or obligation under the Guaranty or the Indemnity Agreement, or shall notify the Agent or any of the Banks of such Guarantor's intention to attempt to cancel or terminate the Guaranty or the Indemnity Agreement, or shall fail to observe or comply with any term, covenant, condition or agreement under the Guaranty or the Indemnity Agreement; then, and in any such event, the Agent may, and upon the request of the Majority Banks shall, by notice in writing to the Borrower declare all amounts owing with respect to this Agreement, the Notes and the other Loan Documents to be, and they shall thereupon forthwith become, immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by the Borrower; provided that in the event of any Event of Default specified in Section 12.1(h), Section 12.1(i) or Section 12.1(j), all such amounts shall become immediately due and payable automatically and without any requirement of notice from any of the Banks or the Agent. Section 12.lA. Limitation of Cure Periods. (a) Notwithstanding anything contained in Section 12.1 to the contrary, (i) no Event of Default shall exist hereunder upon the occurrence of any failure described in Section 12.1(b) in the event that the Borrower cures such default within five (5) days following receipt of written notice of such default, provided, however, that Borrower shall not be entitled to receive more than two (2) notices in the aggregate pursuant to this clause (i) in any period of 365 days ending on the date of any such occurrence of default, and provided further that no such cure period shall apply to any payments due upon the maturity of the Notes, and (ii) no Event of Default shall exist hereunder upon the occurrence of any failure described in Section 12.1(e) in the event that the Borrower cures such default with thirty (30) days following receipt of written notice of such default, provided that the provisions of this clause (ii) shall not pertain to defaults consisting of a failure to provide insurance as required by Section 7.7, to any default consisting of a failure to comply with Section 2.8 or Section 7.4(e), or to any default excluded from any provision of cure of defaults contained in any other of the Loan Documents. (b) Notwithstanding the provisions of subsections (c) and (d) of Section 12.1 or of Section 12.1B, the cure periods provided therein shall not be allowed and the occurrence of a Default thereunder immediately shall constitute an Event of Default for all purposes of this Agreement and the other Loan Documents if, within the period of twelve months immediately preceding the occurrence of such Default, there shall have occurred two periods of cure or portions thereof under any one or more than one of said subsections. Section 12.lB. Certain Cure Periods. (a) In the event that there shall occur any Default under Section 12.1(c), then within five Business Days after receipt of notice of such Default from the Agent or the Majority Banks the Borrower may elect to cure such Default by providing additional Collateral consisting of Potential Collateral, and/or to reduce the Total Commitment and reduce the outstanding Loans, in which event such actions shall be completed not later than 15 days following the date on which the Borrower is notified that the Majority Banks have approved the Borrower's proposed actions (or 60 days in the event that the Borrower intends to provide additional Mortgaged Property). The Borrower's notice of its election pursuant to the preceding sentence shall be delivered to the Agent within the period of five Business Days provided above. Within five Business Days after receipt of such advice, the Majority Banks shall advise the Borrower as to whether in their good faith judgment the actions proposed by the Borrower are sufficient to cure such Default without the creation of any other Default hereunder. In the event that the Majority Banks determine that Borrower's proposal is insufficient to cure such Default or is otherwise not in accordance with the terms of this Agreement, the Borrower within an additional three Business Days after such negative notice may submit to the Agent an alternative plan or evidence establishing that the Borrower's original election was sufficient. In the event that within the times provided herein the Borrower shall have failed to provide evidence satisfactory to the Majority Banks that Borrower's proposed actions are sufficient to cure such Default in accordance with the terms hereof, the cure period shall terminate and such Default immediately shall constitute an Event of Default. (b) In the event that the Borrower shall elect in whole or in part under subsection 12.1B(a) to provide additional Collateral, the Real Estate or promissory note to be added to the Collateral shall be Eligible Real Estate or a Qualifying Collateral Note, respectively, and on or prior to the expiration of the 60-day period each of the Eligible Real Estate Qualification Documents or Qualifying Collateral Note Qualification Documents, respectively, shall have been completed and provided to the Agent for the benefit of the Banks, and, if such additional Collateral is owned by a Subsidiary of the Borrower, such Subsidiary shall have executed and delivered a Guaranty and all other provisions of Section 5.4 hereof shall have been satisfied. Section 25.2. Termination of Commitments. If any one or more Events of Default specified in Section 12.1(h), Section 12.1(i) or Section 12.1(j) shall occur, then immediately and without any action on the part of the Agent or any Bank any unused portion of the credit hereunder shall terminate and the Banks shall be relieved of all obligations to make Loans to the Borrower. If any other Event of Default shall have occurred and be continuing, the Agent, upon the election of the Majority Banks, may by notice to the Borrower terminate the obligation to make Loans to the Borrower. No termination under this Section 12.2 shall relieve the Borrower of its obligations to the Banks arising under this Agreement or the other Loan Documents. Section 25.3. Remedies. In case any one or more of the Events of Default shall have occurred and be continuing, and whether or not the Banks shall have accelerated the maturity of the Loans pursuant to Section 12.1, the Agent on behalf of the Banks, may, with the consent of the Majority Banks but not otherwise, proceed to protect and enforce their rights and remedies under this Agreement, the Notes or any of the other Loan Documents by suit in equity, action at law or other appropriate proceeding, whether for the specific performance of any covenant or agreement contained in this Agreement and the other Loan Documents or any instrument pursuant to which the Obligations are evidenced, including to the full extent permitted by applicable law the obtaining of the ex parte appointment of a receiver, and, if such amount shall have become due, by declaration or otherwise, proceed to enforce the payment thereof or any other legal or equitable right. Upon the occurrence of an Event of Default, the Borrower shall upon the request of the Agent cause EQR to fund or pay any and all amounts remaining to be paid or funded by EQR pursuant to the EQR Preferred Equity Commitment and shall pay such amounts, up to the amount of the Obligations, to the Agent. No remedy herein conferred upon the Agent or the holder of any Note is intended to be exclusive of any other remedy and each and every remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute or any other provision of law. In the event that all or any portion of the Obligations is collected by or through an attorney-at-law, the Borrower shall pay all costs of collection including, but not limited to, reasonable attorney's fees not to exceed fifteen percent (15%) of such portion of the Obligations. Section 25.4. Distribution of Collateral Proceeds. In the event that, following the occurrence or during the continuance of any Event of Default, any monies are received in connection with the enforcement of any of the Security Documents, or otherwise with respect to the realization upon any of the Collateral, such monies shall be distributed for application as follows: (a) First, to the payment of, or (as the case may be) the reimbursement of, the Agent for or in respect of all reasonable costs, expenses, disbursements and losses which shall have been incurred or sustained by the Agent to protect or preserve the collateral or in connection with the collection of such monies by the Agent, for the exercise, protection or enforcement by the Agent of all or any of the rights, remedies, powers and privileges of the Agent under this Agreement or any of the other Loan Documents or in respect of the Collateral or in support of any provision of adequate indemnity to the Agent against any taxes or liens which by law shall have, or may have, priority over the rights of the Agent to such monies; (b) Second, to all other Obligations in such order or preference as the Majority Banks shall determine; provided, however, that (i) distributions in respect of such Obligations shall be made pari passu among Obligations with respect to the Agent's fee payable pursuant to Section 4.3 and all other Obligations, (ii) in the event that any Bank shall have wrongfully failed or refused to make an advance under Section 2.7 and such failure or refusal shall be continuing, advances made by other Banks during the pendency of such failure or refusal shall be entitled to be repaid as to principal and accrued interest in priority to the other Obligations described in this subsection (b), and (iii) Obligations owing to the Banks with respect to each type of Obligation such as interest, principal, fees and expenses, shall be made among the Banks pro rata; and provided, further that the Majority Banks may in their discretion make proper allowance to take into account any Obligations not then due and payable; and (c) Third, the excess, if any, shall be returned to the Borrower or to such other Persons as are entitled thereto. Section 26. SETOFF. Regardless of the adequacy of any collateral, during the continuance of any Event of Default, any deposits (general or specific, time or demand, provisional or final, regardless of currency, maturity, or the branch of where such deposits are held) or other sums credited by or due from any of the Banks to the Borrower or any Guarantor and any securities or other property of the Borrower or any Guarantor in the possession of such Bank may be applied to or set off against the payment of Obligations and any and all other liabilities, direct, or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, of the Borrower or any Guarantor to such Bank. Each of the Banks agrees with each other Bank that if such Bank shall receive from the Borrower or any Guarantor, whether by voluntary payment, exercise of the right of setoff, or otherwise, and shall retain and apply to the payment of the Note or Notes held by such Bank any amount in excess of its ratable portion of the payments received by all of the Banks with respect to the Notes held by all of the Banks, such Bank will make such disposition and arrangements with the other Banks with respect to such excess, either by way of distribution, pro tanto assignment of claims, subrogation or otherwise as shall result in each Bank receiving in respect of the Notes held by it its proportionate payment as contemplated by this Agreement; provided that if all or any part of such excess payment is thereafter recovered from such Bank, such disposition and arrangements shall be rescinded and the amount restored to the extent of such recovery, but without interest. Section 27. THE AGENT. Section 27.1. Authorization. The Agent is authorized to take such action on behalf of each of the Banks and to exercise all such powers as are hereunder and under any of the other Loan Documents and any related documents delegated to the Agent, together with such powers as are reasonably incident thereto, provided that no duties or responsibilities not expressly assumed herein or therein shall be implied to have been assumed by the Agent. The obligations of Agent hereunder are primarily administrative in nature, and nothing contained in this Agreement or any of the other Loan Documents shall be construed to constitute the Agent as a trustee for any Bank or to create any agency or fiduciary relationship. The Borrower and any other Person shall be entitled to conclusively rely on a statement from the Agent that it has the authority to act for and bind the Banks pursuant to this Agreement and the other Loan Documents. Section 27.2. Employees and Agents. The Agent may exercise its powers and execute its duties by or through employees or agents and shall be entitled to take, and to rely on, advice of counsel concerning all matters pertaining to its rights and duties under this Agreement and the other Loan Documents. The Agent may utilize the services of such Persons as the Agent may reasonably determine, and all reasonable fees and expenses of any such Persons shall be paid by the Borrower. Section 27.3. No Liability. Neither the Agent nor any of its shareholders, directors, officers or employees nor any other Person assisting them in their duties nor any agent, or employee thereof, shall be liable for any waiver, consent or approval given or any action taken, or omitted to be taken, in good faith by it or them hereunder or under any of the other Loan Documents, or in connection herewith or therewith, or be responsible for the consequences of any oversight or error of judgment whatsoever, except that the Agent or such other Person, as the case may be, may be liable for losses due to its willful misconduct or gross negligence. Section 27.4. No Representations. The Agent shall not be responsible for the execution or validity or enforceability of this Agreement, the Notes, any of the other Loan Documents or any instrument at any time constituting, or intended to constitute, collateral security for the Notes, or for the value of any such collateral security or for the validity, enforceability or collectability of any such amounts owing with respect to the Notes, or for any recitals or statements, warranties or representations made herein or in any of the other Loan Documents or in any certificate or instrument hereafter furnished to it by or on behalf of the Borrower or any of its Subsidiaries or the Guarantor, or be bound to ascertain or inquire as to the performance or observance of any of the terms, conditions, covenants or agreements herein or in any other of the Loan Documents. The Agent shall not be bound to ascertain whether any notice, consent, waiver or request delivered to it by the Borrower or the Guarantor or any holder of any of the Notes shall have been duly authorized or is true, accurate and complete. The Agent has not made nor does it now make any representations or warranties, express or implied, nor does it assume any liability to the Banks, with respect to the creditworthiness or financial condition of the Borrower or any of its Subsidiaries or the Guarantor. Each Bank acknowledges that it has, independently and without reliance upon the Agent or any other Bank, and based upon such information and documents as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Bank also acknowledges that it will, independently and without reliance upon the Agent or any other Bank, based upon such information and documents as it deems appropriate at the time, continue to make its own credit analysis and decisions in taking or not taking action under this Agreement and the other Loan Documents. Section 27.5. Payments. (a) A payment by the Borrower or the Guarantor to the Agent hereunder or under any of the other Loan Documents for the account of any Bank shall constitute a payment to such Bank. The Agent agrees to distribute to each Bank not later than one Business Day after the Agent's receipt of good funds, determined in accordance with the Agent's customary practices, such Bank's pro rata share of payments received by the Agent for the account of the Banks except as otherwise expressly provided herein or in any of the other Loan Documents. (b) If in the opinion of the Agent the distribution of any amount received by it in such capacity hereunder, under the Notes or under any of the other Loan Documents might involve it in liability, it may refrain from making distribution until its right to make distribution shall have been adjudicated by a court of competent jurisdiction. If a court of competent jurisdiction shall adjudge that any amount received and distributed by the Agent is to be repaid, each Person to whom any such distribution shall have been made shall either repay to the Agent its proportionate share of the amount so adjudged to be repaid or shall pay over the same in such manner and to such Persons as shall be determined by such court. (c) Notwithstanding anything to the contrary contained in this Agreement or any of the other Loan Documents, any Bank that fails (i) to make available to the Agent its pro rata share of any Loan or (ii) to comply with the provisions of Section 13 with respect to making dispositions and arrangements with the other Banks, where such Bank's share of any payment received, whether by setoff or otherwise, is in excess of its pro rata share of such payments due and payable to all of the Banks, in each case as, when and to the full extent required by the provisions of this Agreement, shall be deemed delinquent (a "Delinquent Bank") and shall be deemed a Delinquent Bank until such time as such delinquency is satisfied. A Delinquent Bank shall be deemed to have assigned any and all payments due to it from the Borrower and the Guarantor, whether on account of outstanding Loans, interest, fees or otherwise, to the remaining nondelinquent Banks for application to, and reduction of, their respective pro rata shares of all outstanding Loans. The Delinquent Bank hereby authorizes the Agent to distribute such payments to the nondelinquent Banks in proportion to their respective pro rata shares of all outstanding Loans. A Delinquent Bank shall be deemed to have satisfied in full a delinquency when and if, as a result of application of the assigned payments to all outstanding Loans of the nondelinquent Banks or as a result of other payments by the Delinquent Banks to the nondelinquent Banks, the Banks' respective pro rata shares of all outstanding Loans have returned to those in effect immediately prior to such delinquency and without giving effect to the nonpayment causing such delinquency. Section 27.6. Holders of Notes. Subject to the terms of Article 18, the Agent may deem and treat the payee of any Note as the absolute owner or purchaser thereof for all purposes hereof until it shall have been furnished in writing with a different name by such payee or by a subsequent holder, assignee or transferee. Section 27.7. Indemnity. The Banks ratably agree hereby to indemnify and hold harmless the Agent from and against any and all claims, actions and suits (whether groundless or otherwise), losses, damages, costs, expenses (including any expenses for which the Agent has not been reimbursed by the Borrower as required by Section 15), and liabilities of every nature and character arising out of or related to this Agreement, the Notes, or any of the other Loan Documents or the transactions contemplated or evidenced hereby or thereby, or the Agent's actions taken hereunder or thereunder, except to the extent that any of the same shall be directly caused by the Agent's willful misconduct or gross negligence. Section 27.8. Agent as Bank. In its individual capacity, BKB shall have the same obligations and the same rights, powers and privileges in respect to its Commitment and the Loans made by it, and as the holder of any of the Notes as it would have were it not also the Agent. Section 27.9. Resignation. The Agent may resign at any time by giving 60 days' prior written notice thereof to the Banks and the Borrower. Upon any such resignation, the Majority Banks shall have the right to appoint as a successor Agent any Bank or any bank whose senior debt obligations are rated not less than "A" or its equivalent by Moody's Investors Service, Inc. or not less than "A" or its equivalent by Standard & Poor's corporation and which has total assets in excess of $10 billion. Unless a Default or Event of Default shall have occurred and be continuing, such successor Agent shall be reasonably acceptable to the Borrower. If no successor Agent shall have been so appointed by the Majority Banks and shall have accepted such appointment within 30 days after the retiring Agent's giving of notice of resignation, then the retiring Agent may, on behalf of the Banks, appoint a successor Agent, which shall be a Bank or any bank whose debt obligations are rated not less than "A" or its equivalent by Moody's Investors Service, Inc. or not less than "A" or its equivalent by Standard & Poor's Corporation and which has total assets in excess of $10 billion. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations hereunder as Agent. After any retiring Agent's resignation, the provisions of this Agreement and the other Loan Documents shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Agent. Section 27.10. Duties in the Case of Enforcement. In case one or more Events of Default have occurred and shall be continuing, and whether or not acceleration of the Obligations shall have occurred, the Agent shall, if (a) so requested by the Majority Banks and (b) the Banks have provided to the Agent such additional indemnities and assurances against expenses and liabilities as the Agent may reasonably request, proceed to enforce the provisions of the Security Documents authorizing the sale or other disposition of all or any part of the Collateral and exercise all or any such other legal and equitable and other rights or remedies as it may have in respect of such Collateral. The Majority Banks may direct the Agent in writing as to the method and the extent of any such sale or other disposition, the Banks hereby agreeing to indemnify and hold the Agent harmless from all liabilities incurred in respect of all actions taken or omitted in accordance with such directions, provided that the Agent need not comply with any such direction to the extent that the Agent reasonably believes the Agent's compliance with such direction to be unlawful or commercially unreasonable in any applicable jurisdiction. Section 28. EXPENSES. The Borrower agrees to pay (a) the reasonable costs of producing and reproducing this Agreement, the other Loan Documents and the other agreements and instruments mentioned herein, (b) any taxes (including any interest and penalties in respect thereto) payable by the Agent or any of the Banks (other than taxes based upon the Agent's or any Bank's gross or net income, except that the Agent and the Banks shall be entitled to indemnification for any and all amounts paid by them in respect of taxes based on income or other taxes assessed by any State in which Mortgaged Property or other Collateral is located, such indemnification to be limited to taxes due solely on account of the granting of Collateral under the Security Documents and to be net of any credit allowed to the indemnified party from any other State on account of the payment or incurrence of such tax by such indemnified party), including any recording, mortgage, documentary or intangibles taxes in connection with the Security Deeds and other Loan Documents, or other taxes payable on or with respect to the transactions contemplated by this Agreement, including any such taxes payable by the Agent or any of the Banks after the Closing Date (the Borrower hereby agreeing to indemnify the Agent and each Bank with respect thereto), (c) all title insurance premiums, appraisal fees, engineer's fees, reasonable internal charges of the Agent (determined in good faith and in accordance with the Agent's internal policies applicable generally to its customers) for commercial finance exams and engineering and environmental reviews and the reasonable fees, expenses and disbursements of the counsel to the Agent, counsel for the Majority Banks and any local counsel to the Agent incurred in connection with the preparation, administration or interpretation of the Loan Documents and other instruments mentioned herein (excluding, however, the preparation of agreements evidencing participations granted under Section 18.4), the review of any additional or substitute Collateral, the addition of any Guarantor, each closing hereunder, and amendments, modifications, approvals, consents or waivers hereto or hereunder, (d) the reasonable fees, expenses and disbursements of the Agent incurred by the Agent in connection with the preparation, administration or interpretation of the Loan Documents and other instruments mentioned herein, and the making of each advance hereunder, (e) all reasonable out-of-pocket expenses (including reasonable attorneys' fees and costs, which attorneys may be employees of any Bank or the Agent and the fees and costs of appraisers, engineers, investment bankers or other experts retained by any Bank or the Agent) incurred by any Bank or the Agent in connection with (i) the enforcement of or preservation of rights under any of the Loan Documents against the Borrower or the Guarantor or the administration thereof after the occurrence of a Default or Event of Default and (ii) any litigation, proceeding or dispute whether arising hereunder or otherwise, in any way related to the Agent's or any of the Bank's relationship with the Borrower or the Guarantor, and (f) all reasonable fees, expenses and disbursements of any Bank or the Agent incurred in connection with U.C.C. searches, U.C.C. filings, title rundowns, title searches or mortgage recordings. The covenants of this Section 15 shall survive payment or satisfaction of payment of amounts owing with respect to the Notes. Section DGA INDEMNIFICATION. The Borrower agrees to indemnify and hold harmless the Agent and the Banks and each director, officer, employee, agent and Person who controls the Agent or any Bank from and against any and all claims, actions and suits, whether groundless or otherwise, and from and against any and all liabilities, losses, damages and expenses of every nature and character arising out of or relating to this Agreement or any of the other Loan Documents or the transactions contemplated hereby and thereby including, without limitation, (a) any leasing fees and any brokerage, finders or similar fees asserted against any Person indemnified under this Section 16 based upon any agreement, arrangement or action made or taken, or alleged to have been made or taken, by the Borrower or any of its Subsidiaries or the Guarantor, (b) any condition of the Mortgaged Property, (c) any actual or proposed use by the Borrower of the proceeds of any of the Loans, (d) any actual or alleged infringement of any patent, copyright, trademark, service mark or similar right of the Borrower, any of its Subsidiaries or the Guarantor comprised in the Collateral, (e) the Borrower and the Guarantor entering into or performing this Agreement or any of the other Loan Documents, (f) any actual or alleged violation of any law, ordinance, code, order, rule, regulation, approval, consent, permit or license relating to the Mortgaged Property, or (g) with respect to the Borrower, its Subsidiaries and the Guarantor and their respective properties and assets, the violation of any Environmental Law, the Release or threatened Release of any Hazardous Substances or any action, suit, proceeding or investigation brought or threatened with respect to any Hazardous Substances (including, but not limited to claims with respect to wrongful death, personal injury or damage to property), in each case including, without limitation, the reasonable fees and disbursements of counsel and allocated costs of internal counsel incurred in connection with any such investigation, litigation or other proceeding; provided, however, that the Borrower shall not be obligated under this Section 16 to indemnify any Person for liabilities arising from such Person's own gross negligence or willful misconduct. In litigation, or the preparation therefor, the Banks and the Agent shall be entitled to select a single law firm as their own counsel and, in addition to the foregoing indemnity, the Borrower agrees to pay promptly the reasonable fees and expenses of such counsel. If, and to the extent that the obligations of the Borrower under this Section 16 are unenforceable for any reason, the Borrower hereby agrees to make the maximum contribution to the payment in satisfaction of such obligations which is permissible under applicable law. The provisions of this Section 16 shall survive the repayment of the Loans and the termination of the obligations of the Banks hereunder. Section 30. SURVIVAL OF COVENANTS, ETC. All covenants, agreements, representations and warranties made herein, in the Notes, in any of the other Loan Documents or in any documents or other papers delivered by or on behalf of the Borrower, any of its Subsidiaries or the Guarantor pursuant hereto or thereto shall be deemed to have been relied upon by the Banks and the Agent, notwithstanding any investigation heretofore or hereafter made by any of them, and shall survive the making by the Banks of any of the Loans, as herein contemplated, and shall continue in full force and effect so long as any amount due under this Agreement or the Notes or any of the other Loan Documents remains outstanding or any Bank has any obligation to make any Loans. The indemnification obligations of the Borrower provided herein and the other Loan Documents shall survive the full repayment of amounts due and the termination of the obligations of the Banks hereunder and thereunder to the extent provided herein and therein. All statements contained in any certificate or other paper delivered to any Bank or the Agent at any time by or on behalf of the Borrower, any of its Subsidiaries or the Guarantor pursuant hereto or in connection with the transactions contemplated hereby shall constitute representations and warranties by the Borrower or such Subsidiary or the Guarantor hereunder. Section 31. ASSIGNMENT AND PARTICIPATION. Section 31.1. Conditions to Assignment by Banks. Except as provided herein, each Bank may assign to one or more banks or other entities all or a portion of its interests, rights and obligations under this Agreement (including all or a portion of its Commitment Percentage and Commitment and the same portion of the Loans at the time owing to it, and the Notes held by it); provided that (a) the Agent shall have given its prior written consent to such assignment, which consent shall not be unreasonably withheld (provided that such consent shall not be required for any assignment to another Bank, to a bank which is under common control with the assigning Bank or to a wholly- owned Subsidiary of such Bank provided that such assignee shall remain a wholly-owned Subsidiary of such Bank), (b) each such assignment shall be of a constant, and not a varying, percentage of all the assigning Bank's rights and obligations under this Agreement, (c) the parties to such assignment shall execute and deliver to the Agent, for recording in the Register (as hereinafter defined), a notice of such assignment, together with any Notes subject to such assignment, (d) in no event shall any voting, consent or approval rights of a Bank be assigned to any Person controlling, controlled by or under common control with, or which is not otherwise free from influence or control by, the Borrower or the Guarantor, which rights shall instead be allocated pro rata among the other remaining Banks, (e) such assignee shall have a net worth as of the date of such assignment of not less than $500,000,000 and (f) such assignee shall acquire an interest in the Loans of not less than $10,000,000.00; provided, however, that after the occurrence of an Event of Default, the Assigning Bank shall not be required to obtain the prior written consent of the Agent to an assignment (but shall give prior written notice of same) or comply with the requirement contained in subsection (f) of this Section 18.1. No such assignment shall be made without the prior consent of the Borrower, which consent shall not be unreasonably withheld or delayed; provided that such consent shall not be required in the event that a Default or Event of Default shall have occurred. Upon such execution, delivery, acceptance and recording, of such notice of assignment, (i) the assignee thereunder shall be a party hereto and all other Loan Documents executed by the Banks and, to the extent provided in such assignment, have the rights and obligations of a Bank hereunder, (ii) the assigning Bank shall, to the extent provided in such assignment and upon payment to the Agent of the registration fee referred to in Section 18.2, be released from its obligations under this Agreement, and (iii) the Agent may unilaterally amend Schedule 1 to reflect such assignment. In connection with each assignment, the assignee shall represent and warrant to the Agent, the assignor and each other Bank as to whether such assignee is controlling, controlled by, under common control with or is not otherwise free from influence or control by, the Borrower or the Guarantor. Section 31.2. Register. The Agent shall maintain a copy of each assignment delivered to it and a register or similar list (the "Register") for the recordation of the names and addresses of the Banks and the Commitment Percentages of, and principal amount of the Loans owing to the Banks from time to time. The entries in the Register shall be conclusive, in the absence of manifest error, and the Borrower, the Agent and the Banks may treat each Person whose name is recorded in the Register as a Bank hereunder for all purposes of this Agreement. The Register shall be available for inspection by the Borrower and the Banks at any reasonable time and from time to time upon reasonable prior notice. Upon each such recordation, the assigning Bank agrees to pay to the Agent a registration fee in the sum of $2,000. Section 31.3. New Notes. Upon its receipt of an assignment executed by the parties to such assignment, together with each Note subject to such assignment, the Agent shall (a) record the information contained therein in the Register, and (b) give prompt notice thereof to the Borrower and the Banks (other than the assigning Bank). Within five Business Days after receipt of such notice, the Borrower, at its own expense, shall execute and deliver to the Agent, in exchange for each surrendered Note, a new Note to the order of such assignee in an amount equal to the amount assumed by such assignee pursuant to such assignment and, if the assigning Bank has retained some portion of its obligations hereunder, a new Note to the order of the assigning Bank in an amount equal to the amount retained by it hereunder, and shall cause the Guarantor to deliver to Agent an acknowledgment in form and substance satisfactory to the Agent to the effect that the Guaranty extends and is applicable to each new Note. Such new Notes shall provide that they are replacements for the surrendered Notes, shall be in an aggregate principal amount equal to the aggregate principal amount of the surrendered Notes, shall be dated the effective date of such assignment and shall otherwise be in substantially the form of the assigned Notes. The surrendered Notes shall be canceled and returned to the Borrower. Section 31.4. Participations. Each Bank may sell participations to one or more banks or other entities in all or a portion of such Bank's rights and obligations under this Agreement and the other Loan Documents; provided that (a) any such sale or participation shall not affect the rights and duties of the selling Bank hereunder to the Borrower, (b) such sale and participation shall not entitle such participant any rights or privileges under this Agreement or the Loan Documents (including, without limitation, the right to approve waivers, amendments or modifications), (c) such participant shall have no direct rights against the Borrower or the Guarantor except the rights granted to the Banks pursuant to Section 13, (d) such sale is effected in accordance with all applicable laws, and (e) such participant shall not be a Person controlling, controlled by or under common control with, or which is not otherwise free from influence or control by, the Borrower, any of its Subsidiaries or the Guarantor. Section 31.5. Pledge by Bank. Any Bank may at any time pledge all or any portion of its interest and rights under this Agreement (including all or any portion of its Note) to any of the twelve Federal Reserve Banks organized under Section 4 of the Federal Reserve Act, 12 U.S.C. Section 341. No such pledge or the enforcement thereof shall release the pledgor Bank from its obligations hereunder or under any of the other Loan Documents. Section 31.6. No Assignment by Borrower. The Borrower shall not assign or transfer any of its rights or obligations under any of the Loan Documents without the prior written consent of each of the Banks. Section 31.7. Disclosure. The Borrower agrees that in addition to disclosures made in accordance with standard banking practices any Bank may disclose information obtained by such Bank pursuant to this Agreement to assignees or participants and potential assignees or participants hereunder. Section 32. NOTICES. Each notice, demand, election or request provided for or permitted to be given pursuant to this Agreement (hereinafter in this Section 19 referred to as "Notice"), but specifically excluding to the maximum extent permitted by law any notices of the institution or commencement of foreclosure proceedings, must be in writing and shall be deemed to have been properly given or served by personal delivery or by sending same by overnight courier or by depositing same in the United States Mail, postpaid and registered or certified, return receipt requested, or as expressly permitted herein, by telegraph, telecopy, telefax or telex, and addressed as follows: If to the Agent or BKB: BankBoston, N.A. 100 Federal Street Boston, Massachusetts 02110 Attn: Real Estate Division With a copy to: BankBoston, N.A. 115 Perimeter Center Place, N.E. Suite 500 Atlanta, Georgia 30346 Attn: Mr. Dan Silbert Telecopy No.: 770/390-8434 If to the Borrower: Wellsford Real Properties, Inc. 620 Fifth Avenue 7th Floor New York, New York 10020 Attn: Gregory F. Hughes With a copy to: Alan S. Pearce, Esq. Robinson Silverman Pearce Aronsohn & Berman LLP 1290 Avenue of the Americas New York, New York 10104 if to another Bank now a party to this Agreement, to the address set forth on the signature page hereto, and to each other Bank which may hereafter become a party to this Agreement at such address as may be designated by such Bank. Each Notice shall be effective upon being personally delivered or upon being sent by overnight courier or upon being deposited in the United States Mail as aforesaid. The time period in which a response to such Notice must be given or any action taken with respect thereto (if any), however, shall commence to run from the date of receipt if personally delivered or sent by overnight courier, or if so deposited in the United States Mail, the earlier of three (3) Business Days following such deposit or the date of receipt as disclosed on the return receipt. Rejection or other refusal to accept or the inability to deliver because of changed address for which no notice was given shall be deemed to be receipt of the Notice sent. By giving at least fifteen (15) days prior Notice thereof, the Borrower, a Bank or Agent shall have the right from time to time and at any time during the term of this Agreement to change their respective addresses and each shall have the right to specify as its address any other address within the United States of America. Section 33. RELATIONSHIP. The relationship between each Bank and the Borrower is solely that of a lender and borrower, and nothing contained herein or in any of the other Loan Documents shall in any manner be construed as making the parties hereto partners, joint venturers or any other relationship other than lender and borrower. Section 34. GOVERNING LAW; CONSENT TO JURISDICTION AND SERVICE. THIS AGREEMENT AND EACH OF THE OTHER LOAN DOCUMENTS EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED THEREIN, ARE CONTRACTS UNDER THE LAWS OF THE STATE OF NEW YORK AND SHALL FOR ALL PURPOSES BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF SUCH STATE (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW). THE BORROWER AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR ANY FEDERAL COURT SITTING THEREIN AND CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURT AND THE SERVICE OF PROCESS IN ANY SUCH SUIT BRING MADE UPON THE BORROWER BY MAIL AT THE ADDRESS SPECIFIED IN Section 19. THE BORROWER HEREBY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN INCONVENIENT COURT. Section 35. HEADINGS. The captions in this Agreement are for convenience of reference only and shall not define or limit the provisions hereof. Section 36. COUNTERPARTS. This Agreement and any amendment hereof may be executed in several counterparts and by each party on a separate counterpart, each of which when so executed and delivered shall be an original, and all of which together shall constitute one instrument. In proving this Agreement it shall not be necessary to produce or account for more than one such counterpart signed by the party against whom enforcement is sought. Section 37. ENTIRE AGREEMENT, ETC. The Loan Documents and any other documents executed in connection herewith or therewith express the entire understanding of the parties with respect to the transactions contemplated hereby. Neither this Agreement nor any term hereof may be changed, waived, discharged or terminated, except as provided in Section 27. Section 38. WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE AGENT AND THE BANKS HEREBY WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT, ANY NOTE OR ANY OF THE OTHER LOAN DOCUMENTS, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS. THE BORROWER (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY BANK OR THE AGENT HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH BANK OR THE AGENT WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT THE AGENT AND THE BANKS HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS TO WHICH THEY ARE PARTIES BY, AMONG OTHER THINGS, THE WAIVER AND CERTIFICATIONS CONTAINED IN THIS Section 25. Section 39. DEALINGS WITH THE BORROWER. The Banks and their affiliates may accept deposits from, extend credit to and generally engage in any kind of banking, trust or other business with the Borrower, its Subsidiaries, the Guarantor or any of their affiliates regardless of the capacity of the Bank hereunder. Section 40. CONSENTS, AMENDMENTS, WAIVERS, ETC. Except as otherwise expressly provided in this Agreement, any consent or approval required or permitted by this Agreement may be given, and any term of this Agreement or of any other instrument related hereto or mentioned herein may be amended, and the performance or observance by the Borrower or the Guarantor of any terms of this Agreement or such other instrument or the continuance of any Default or Event of Default may be waived (either generally or in a particular instance and either retroactively or prospectively) with, but only with, the written consent of the Majority Banks. Notwithstanding the foregoing, none of the following may occur without the written consent of each Bank: a change in the rate of interest on and the term of the Notes; a change in the amount of the Commitments of the Banks; a forgiveness, reduction or waiver of the principal of any unpaid Loan or any interest thereon or fee payable under the Loan Documents; a change in the amount of any fee payable to a Bank hereunder; the postponement of any date fixed for any payment of principal of or interest on the Loan; an extension of the Maturity Date (except as provided in Section 2.8); a change in the manner of distribution of any payments to the Banks or the Agent; the release of the Borrower or the Guarantor or any Collateral except as otherwise provided herein; an amendment of the definition of Majority Banks or of any requirement for consent by all of the Banks; any modification to require a Bank to fund a pro rata share of a request for an advance of the Loan made by the Borrower other than based on its Commitment Percentage; an amendment to this Section 27; an amendment of the definition of Majority Banks; or an amendment of any provision of this Agreement or the Loan Documents which requires the approval of all of the Banks or the Majority Banks to require a lesser number of Banks to approve such action. The amount of the Agent's fee payable for the Agent's account and the provisions of Section 14 may not be amended without the written consent of the Agent. No waiver shall extend to or affect any obligation not expressly waived or impair any right consequent thereon. No course of dealing or delay or omission on the part of the Agent or any Bank in exercising any right shall operate as a waiver thereof or otherwise be prejudicial thereto. No notice to or demand upon the Borrower shall entitle the Borrower to other or further notice or demand in similar or other circumstances. Section 41. SEVERABILITY. The provisions of this Agreement are severable, and if any one clause or provision hereof shall be held invalid or unenforceable in whole or in part in any jurisdiction, then such invalidity or unenforceability shall affect only such clause or provision, or part thereof, in such jurisdiction, and shall not in any manner affect such clause or provision in any other jurisdiction, or any other clause or provision of this Agreement in any jurisdiction. Section 42. NO UNWRITTEN AGREEMENTS. THE WRITTEN LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. Section 43. TIME OF THE ESSENCE. Time is of the essence with respect to each and every covenant, agreement and obligation of the Borrower under this Agreement and the other Loan Documents. [Remainder of page intentionally left blank] IN WITNESS WHEREOF, the undersigned have duly executed this Agreement as a sealed instrument as of the date first set forth above. WELLSFORD REAL PROPERTIES, INC., a Maryland corporation By:/s/ Gregory F. Hughes --------------------------------------- Title: CFO [CORPORATE SEAL] BANKBOSTON, N.A., a national banking association, individually and as Agent By:/s/ Mark E. Bashman ----------------------------------- Title: Mark E. Bashman, MD [BANK SEAL] MORGAN GUARANTY TRUST COMPANY OF NEW YORK, a New York banking corporation, individually and as Co-Agent By:/s/ Timothy V. O'Donovan --------------------------------------- Title: Timothy V. O'Donovan Vice President [SEAL] Morgan Guaranty Trust Company of New York 60 Wall Street New York, New York 10260 Attn: Mr. Tim O'Donovan EXHIBIT A FORM OF NOTE $______________ May 30, 1997 FOR VALUE RECEIVED, the undersigned WELLSFORD REAL PROPERTIES, INC., a Maryland corporation, hereby promises to pay to ____________________________________ or order, in accordance with the terms of that certain Revolving Credit Agreement dated as of May 30, 1997 (the "Credit Agreement"), as from time to time in effect, among the undersigned, BankBoston, N.A., for itself and as Agent, Morgan Guaranty Trust Company of New York, for itself and as Co-Agent, and such other Banks as may be from time to time named therein, to the extent not sooner paid, on or before the Maturity Date, the principal sum of ____________________________ DOLLARS ($______________), or such amount as may be advanced by the payee hereof under the Credit Agreement with daily interest from the date hereof, computed as provided in the Credit Agreement, on the principal amount hereof from time to time unpaid, at a rate per annum on each portion of the principal amount which shall at all times be equal to the rate of interest applicable to such portion in accordance with the Credit Agreement, and with interest on overdue principal and, to the extent permitted by applicable law, on overdue installments of interest and late charges at the rates provided in the Credit Agreement. Interest shall be payable on the dates specified in the Credit Agreement, except that all accrued interest shall be paid at the stated or accelerated maturity hereof or upon the prepayment in full hereof. Capitalized terms used herein and not otherwise defined herein shall have the meanings set forth in the Credit Agreement. Payments hereunder shall be made to BankBoston, N.A., as Agent for the payee hereof, 100 Federal Street, Boston, Massachusetts 02110. This Note is one of one or more Notes evidencing borrowings under and is entitled to the benefits and subject to the provisions of the Credit Agreement. The principal of this Note may be due and payable in whole or in part prior to the maturity date stated above and is subject to mandatory prepayment in the amounts and under the circumstances set forth in the Credit Agreement, and may be prepaid in whole or from time to time in part, all as set forth in the Credit Agreement. Notwithstanding anything in this Note to the contrary, all agreements between the Borrower and the Banks and the Agent, whether now existing or hereafter arising and whether written or oral, are hereby limited so that in no contingency, whether by reason of acceleration of the maturity of any of the Obligations or otherwise, shall the interest contracted for, charged or received by the Banks exceed the maximum amount permissible under applicable law. If, from any circumstance whatsoever, interest would otherwise be payable to the Banks in excess of the maximum lawful amount, the interest payable to the Banks shall be reduced to the maximum amount permitted under applicable law; and if from any circumstance the Banks shall ever receive anything of value deemed interest by applicable law in excess of the maximum lawful amount, an amount equal to any excessive interest shall be applied to the reduction of the principal balance of the Obligations and to the payment of interest or, if such excessive interest exceeds the unpaid balance of principal of the Obligations, such excess shall be refunded to the Borrower. All interest paid or agreed to be paid to the Banks shall, to the extent permitted by applicable law, be amortized, prorated, allocated and spread throughout the full period until payment in full of the principal of the Obligations (including the period of any renewal or extension thereof) so that the interest thereon for such full period shall not exceed the maximum amount permitted by applicable law. This paragraph shall control all agreements between the Borrower and the Banks and the Agent. In case an Event of Default shall occur, the entire principal amount of this Note may become or be declared due and payable in the manner and with the effect provided in said Credit Agreement. This Note shall be governed by and construed in accordance with the laws of the State of New York (without giving effect to the conflict of laws rules of any jurisdiction). The undersigned maker and all guarantors and endorsers, hereby waive presentment, demand, notice, protest, notice of intention to accelerate the indebtedness evidenced hereby, notice of acceleration of the indebtedness evidenced hereby and all other demands and notices in connection with the delivery, acceptance, performance and enforcement of this Note, except as specifically otherwise provided in the Credit Agreement, and assent to extensions of time of payment or forbearance or other indulgence without notice. IN WITNESS WHEREOF the undersigned has by its duly authorized officers, executed this Note under seal as of the day and year first above written. WELLSFORD REAL PROPERTIES, INC. By: _________________________ Title: [CORPORATE SEAL] EXHIBIT B FORM OF REQUEST FOR LOAN BankBoston, N.A.,as Agent 115 Perimeter Center Place, N.E. Suite 500 Atlanta, Georgia 30346 Attn: Mr. Dan Silbert Ladies and Gentlemen: Pursuant to the provisions of Section 2.6 of the Revolving Credit Agreement dated as of May 30, 1997, as from time to time in effect (the "Credit Agreement"), among Wellsford Real Properties, Inc. (the "Borrower"), BankBoston, N.A., for itself and as Agent, Morgan Guaranty Trust Company of New York, for itself and as Co-Agent, and the other Banks from time to time party thereto, the Borrower hereby requests and certifies as follows: 1. Loan. The Borrower hereby requests a Loan under Section 2.1 of the Credit Agreement: Principal Amount: $ Type (Eurodollar, Base Rate): Drawdown Date: , 19 Interest Period: by credit to the general account of the Borrower with the Agent at the Agent's Head Office. 2. Use of Proceeds. Such Loan shall be used for the following purposes permitted by Section 7.11 of the Credit Agreement: [Describe] 3. Capital Improvement Project. In the event that such Loan relates to any Capital Improvement Project or portion thereof, the Borrower represents and warrants that such Loan will reimburse the Borrower for or pay costs incurred for work on the Capital Improvement Project identified above, which work covered by this request is in place or is for stored materials which are properly secured. Attached hereto are invoices, receipts or other evidence satisfactory to the Majority Banks to verify the cost of such work. [Also attached hereto are affidavits, lien waivers of other evidence reasonably satisfactory to the Majority Banks showing that all materialmen, laborers, subcontractors and any other parties who might or could claim statutory or common law liens and are furnishing or have furnished material or labor to the Mortgaged Property in connection with such Capital Improvement Project have been paid all amounts due for such labor and materials.] 4. No Default. The undersigned chief financial or chief accounting officer of the Borrower certifies that the Borrower is and will be in compliance with all covenants under the Loan Documents after giving effect to the making of the Loan requested hereby. Attached to this Request for Loan is a Compliance Certificate prepared using the financial statements of the Borrower most recently provided or required to be provided under Section 6.4 or Section 7.4 of the Credit Agreement adjusted in the best good-faith estimate of the Borrower to give effect to the making of the Loan requested hereby. 5. Representations True. Each of the representations and warranties made by or on behalf of the Borrower and its Subsidiaries and the Guarantor contained in the Credit Agreement, in the other Loan Documents or in any document or instrument delivered pursuant to or in connection with the Credit Agreement was true as of the date as of which it was made and shall also be true at and as of the Drawdown Date for the Loan requested hereby, with the same effect as if made at and as of such Drawdown Date (except to the extent of changes resulting from transactions contemplated or permitted by the Credit Agreement and the other Loan Documents and changes occurring in the ordinary course of business that singly or in the aggregate are not materially adverse, and except to the extent that such representations and warranties relate expressly to an earlier date) and no Default or Event of Default has occurred and is continuing. 6. Other Conditions. All other conditions to the making of the Loan requested hereby set forth in Section 11 of the Credit Agreement have been satisfied. (Reference title insurance "date down", if applicable.) 7. Drawdown Date. Except to the extent, if any, specified by notice actually received by the Agent prior to the Drawdown Date specified above, the foregoing representations and warranties shall be deemed to have been made by the Borrower on and as of such Drawdown Date. 8. Definitions. Terms defined in the Credit Agreement are used herein with the meanings so defined. IN WITNESS WHEREOF, I have hereunto set my hand this _____ day of _______________, 199___. WELLSFORD REAL PROPERTIES, INC. By: __________________________ Chief Financial or Chief Accounting Officer EXHIBIT C FORM OF COMPLIANCE CERTIFICATE BankBoston, N.A., for itself and as Agent 115 Perimeter Center Place, N.E. Suite 500 Atlanta, Georgia 30346 Attn: Mr. Dan Silbert Morgan Guaranty Trust Company of New York, for itself and as Co-Agent 60 Wall Street New York, New York 10260 Attn: Mr. Tim O'Donovan Ladies and Gentlemen: Reference is made to the Revolving Credit Agreement dated as of May 30, 1997 (the "Credit Agreement") by and among Wellsford Real Properties, Inc. (the "Borrower"), BankBoston, N.A., for itself and as Agent, Morgan Guaranty Trust Company of New York, for itself and as Co-Agent, and the other Banks from time to time party thereto. Terms defined in the Credit Agreement and not otherwise defined herein are used herein as defined in the Credit Agreement. Pursuant to the Credit Agreement, the Borrower is furnishing to you herewith (or has most recently furnished to you) the financial statements of the Borrower and its Subsidiaries for the fiscal period ended _______________ (the "Balance Sheet Date"). Such financial statements have been prepared in accordance with generally accepted accounting principles and present fairly the financial position of the Borrower and the Subsidiaries covered thereby at the date thereof and the results of their operations for the periods covered thereby, subject in the case of interim statements only to normal year-end audit adjustments. This certificate is submitted in compliance with requirements of Section 2.6(iv), Section 5.3(b), Section 7.4(i), Section 7.5(e), Section 8.8, Section 10.14 or Section 11.6(b) of the Credit Agreement. If this certificate is provided under a provision other than Section 7.4(i), the calculations provided below are made using the financial statements of the Borrower and its Subsidiaries as of the Balance Sheet Date adjusted in the best good-faith estimate of the Borrower to give effect to the making of a Loan, extension of the Maturity Date, acquisition or disposition of property or other event that occasions the preparation of this certificate; and the nature of such event and the Borrower's estimate of its effects are set forth in reasonable detail in an attachment hereto. The undersigned officer of the Borrower is its chief financial or chief accounting officer. The undersigned officer has caused the provisions of the Credit Agreement to be reviewed and has no knowledge of any Default or Event of Default. (Note: If the signer does have knowledge of any Default or Event of Default, the form of certificate should be revised to specify the Default or Event of Default, the nature thereof and the actions taken, being taken or proposed to be taken by the Borrower with respect thereto.] The Borrower is providing the following information to demonstrate compliance as of the date hereof with the following covenants: I. Section 9.1. Liabilities to Assets Ratio. A. Consolidated Total Liabilities per balance sheet $____________ B. Consolidated Total Assets per balance sheet $____________ Ratio of A to B may not exceed 0.60 to 1. II. Section 9.2. Consolidated Operating Cash Flow Coverage. A. Consolidated Operating Cash Flow = Consolidated Net Income for most recent quarter $____________ Plus depreciation and amortization $____________ Plus interest expense $____________ Plus extraordinary or non-recurring losses $____________ Minus extraordinary or non- recurring gains ($__________) Subtotal for most recent quarter $___________ Consolidated Operating Cash Flow for three prior quarters: Quarter ended __________ $___________ Quarter ended __________ $___________ Quarter ended __________ $___________ Total $___________ Minus Capital Improvement Reserve for four prior quarters ($__________) Total $ __________ B. Debt Service for four prior quarters $___________ Prior to the Adjustment Date, A must equal or exceed 130% of B. After the Adjustment Date, A must equal or exceed 150% of B. III. Section 9.3. Borrower Base. A. Total outstanding principal balance of Loans (after giving effect to any Loan Request) $__________ B. Borrowing Base Lesser of 1. EQR Preferred Equity Commitment Allowance $__________ Plus Debt Service Coverage Amount $ _________ Total $ _________ 2. EQR Preferred Equity Commitment Allowance $ _________ Plus Designated Collateral Value $ _________ Total $ _________ Ratio of A to B may not be more than 1 To 1. IV. Section 9.4. Minimum Shareholders' Equity A. Shareholders' Equity $ _________ B. $35,000,000.00 $35,000,000.00 Plus 80% of net proceeds from any Equity Offering after Closing Date $ _________ Total $ _________ A must equal or exceed B V. Section 9.5. Real Estate Assets A. Consolidated Total Assets $ _________ B. Value of direct or indirect interests in undeveloped land $ _________ Plus Value of direct or indirect interests in non-income producing land assets or mortgages secured by non-income producing land assets $ _________ Total $ _________ B may not exceed 25% of A SCHEDULE 1 BANKS AND COMMITMENTS Name and Address Commitment Commitment Percentage - ---------------- ---------- ---------------------- BankBoston, N.A. $25,000,000 50% 100 Federal Street Boston, Massachusetts 02110 Attn: Real Estate Division Eurodollar Lending Office Same as above Morgan Guaranty Trust $25,000,000 50% Company of New York 60 Wall Street New York, New York 10260 Attn: Tim O'Donovan Eurodollar Lending Office Same as above Total Commitment $50,000,000 100% - ---------------- SCHEDULE 6.3 TITLE TO PROPERTIES; LEASES 1. $36,757,533.00 construction loan from NationsBank to Park at Highlands LLC. 2. $29,379,819.00 constructon loan from NationsBank to Red Canyon at Palomino Park LLC. SCHEDULE 6.7 LITIGATION None. SCHEDULE 6.17 ERISA PLANS On May 28, 1997, the Borrower's board of directors authorized a qualified profit sharing plan pursuant to the provisons of Section 401(a) of the Code, including without limitation a plan pursuant to Section 401(k) of the Code. SCHEDULE 6.21 SUBSIDIARIES OF THE BORROWER . Wellsford Chatham Corp. (wholly-owned) . Wellsford Wayne Corp. (wholly-owned) (1) . Wellsford Greenbrook Corp. (wholly-owned) . Wellsford Park Highlands Corp. (80% upon consummation of merger on May 30, 1997) (2) ___________________ (1) North American Medical Research Corp. is a wholly-owned subsidiary of Wellsford Wayne Corp. (2) Wellsford Park Highlands Corp. owns 99% of Red Canyon at Palomino Park LLC and Park at Highlands LLC. SCHEDULE 6.24 AGREEMENTS NONE EX-10.43 29 AGREEMENT REGARDING COMMON STOCK AND PREFERRED STOCK PURCHASE AGREEMENT THIS AGREEMENT REGARDING COMMON STOCK AND PREFERRED STOCK PURCHASE AGREEMENT (this "Agreement") dated as of May 30, 1997 is entered into among ERP OPERATING LIMITED PARTNERSHIP, an Illinois limited partnership (the "Purchaser"), WELLSFORD REAL PROPERTIES, INC., a Maryland corporation (the "Borrower"), and BANKBOSTON, N.A., a national banking association ("BKB"), as Agent for itself and the other "Banks" from time to time party to the "Credit Agreement" (as such terms are hereinafter defined) (BKB, in its capacity as Agent is hereinafter referred to as "Agent"). W I T N E S S E T H: WHEREAS, the Purchaser and Borrower have entered into that certain Common Stock and Preferred Stock Purchase Agreement, dated as of May 30, 1997 (the "Stock Purchase Agreement"); and WHEREAS, pursuant to that certain Revolving Credit Agreement dated of even date herewith among the Borrower, BKB, Morgan Guaranty Trust Company of New York and Agent (as the same may be varied, extended, supplemented, consolidated, amended, renewed, modified or restated, the "Credit Agreement"), the "Banks" (as defined in the Credit Agreement) have agreed to provide a revolving credit loan to the Borrower of up to $50,000,000.00 (the "Loan"), which Loan is evidenced by those certain Notes made by the Borrower to the order of the Banks in the aggregate principal face amount of $50,000,000.00; and WHEREAS, Borrower has requested that the Banks advance certain funds to Borrower based on amounts available to be funded by Purchaser pursuant to the Stock Purchase Agreement; and WHEREAS, Agent and the Banks have required, as a condition to the advance of proceeds of the Loan against amounts available to be funded under the Stock Purchase Agreement, that the parties hereto execute and deliver this Agreement; NOW, THEREFORE, for and in consideration of the sum of Ten and No/100 Dollars ($10.00), to induce the Agent and the Banks to enter into the Credit Agreement, and other good and valuable considerations, the receipt and sufficiency of which are hereby acknowledged, the parties hereto to hereby covenant and agree as follows: 1. Definitions. Capitalized terms used herein that are not otherwise defined herein shall have the meaning set forth in the Credit Agreement. 2. Obligations Unconditional. Purchaser hereby agrees with Agent that, notwithstanding anything in the Stock Purchase Agreement to the contrary, the obligation of the Purchaser to consummate a "Purchase" (as defined in the Stock Purchase Agreement) during the "Purchase Term" (as defined in the Stock Purchase Agreement) and to pay the purchase price in connection with such purchase pursuant to the Stock Purchase Agreement shall be the absolute, unconditional and irrevocable obligation of Purchaser, and shall not be subject to the satisfaction of any condition set forth in the Stock Purchase Agreement, the absence of any "Potential Event of Default", "Event of Default" (as such terms are defined in the Stock Purchase Agreement) or any other default of any nature thereunder, or any set off, counterclaim, defense or other circumstance whatsoever; provided, however, that Purchaser shall have no obligation to consummate a "Purchase" (as such term is defined in the Stock Purchase Agreement) in the event that (x) an involuntary proceeding shall have been commenced or an involuntary petition shall have been filed in a court of competent jurisdiction seeking relief in respect of the Borrower under Title 11 of the United States Code, as now constituted or hereafter amended, and such proceeding or petition shall continue undismissed for ninety (90) days or an order or decree approving or ordering the foregoing shall be entered, or (y) the Borrower shall have voluntarily commenced any proceeding or filed any petition seeking relief under Title 11 of the United States Code, as now constituted or hereafter amended (the foregoing events described in (x) and (y) being hereinafter referred to as the "Bankruptcy Default"). Without limiting the generality of the foregoing, Purchaser agrees that its obligations under this Agreement and the Stock Purchase Agreement shall not be affected or impaired by, and hereby waives and agrees not to assert or take advantage or any defense based on, (a) any failure by Borrower to satisfy any conditions set forth in Article 4 of the Stock Purchase Agreement or the occurrence of any Potential Event of Default or Event of Default (other than a Bankruptcy Default) under the Stock Purchase Agreement, (b) any lack of validity or enforceability of the Stock Purchase Agreement, (c) the existence of any claim, setoff, defense or any right which Purchaser may have at any time against the Borrower, the Agent or the Banks, (d) any statement, certificate or any other document presented pursuant to the Stock Purchase Agreement or hereunder proving to be fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect whatsoever, (e) any breach of any agreement or dispute among or between Purchaser and the Borrower, (f) any non-application or misapplication by the Borrower of the proceeds of any "Purchase" (as such term is defined in the Stock Purchase Agreement), (g) any extension of time for or delay, renewal or compromise of other indulgence or modification granted or agreed to by the Agent or the Banks with or without notice to or approval by the Purchaser with respect to transactions contemplated by the Agreement, the Credit Agreement or any other Loan Documents; (h) any other legal or equitable defenses whatsoever to which Purchaser might otherwise be entitled, or (i) any failure on the part of Borrower to take any other action in connection with a Purchase or to deliver to Purchaser the certificate representing shares of Preferred Stock. Except as provided in Paragraph 3, below, Purchaser shall fund such amounts to Borrower as required by the terms of this Agreement upon receipt of written demand for such amounts. 3. Payment to Agent. Purchaser agrees to, and Borrower hereby irrevocably authorizes and directs Purchaser to, pay directly to Agent in immediately available funds any and all amounts to be funded or paid by Purchaser pursuant to the Stock Purchase Agreement upon receipt of a written notice from Agent, executed by a purported officer of Agent, demanding payment of any and all amounts to be funded or paid by Purchaser pursuant to the Stock Purchase Agreement. Agent shall be entitled to, and Borrower hereby irrevocably consents to and authorizes Agent to, make such demand at any time (whether before or after the occurrence of a Default or Event of Default) as determined by Agent in its sole and absolute discretion. No further notice or authorization shall be required from Borrower in order to authorize the payment of all such sums directly to Agent. Purchaser shall have no right or obligation to inquire as to the right of Agent to make such demand, and the obligation of Purchaser hereunder shall not be affected by any notice or claim of Borrower to the contrary. Borrower waives any right to require that such payments be made to Borrower following delivery of such demand by Agent unless and until such demand is revoked in writing by Agent. Borrower agrees that Borrower shall have no right or claim against Purchaser for or by reason of such payments made directly to Agent following the receipt of such written demand. Upon payment of such amounts to Agent, Borrower shall recognize such payments as having been made to Borrower pursuant to the Stock Purchase Agreement. Any such amounts received by Agent shall be applied to the Obligations in such order as the Agent shall determine. 4. Assignment of Stock Purchase Agreement. Purchaser acknowledges that the rights of the Borrower pursuant to the Stock Purchase Agreement and this Agreement have been assigned to Agent, and Purchaser expressly consents to said assignment and agrees that such assignment shall not constitute a "Potential Event of Default", "Event of Default" (as such terms are defined in the Stock Purchase Agreement) or other default of any nature under the Stock Purchase Agreement, and that upon the transfer to Agent or a nominee of Agent or the Banks of the rights of Borrower under this Agreement and Stock Purchase Agreement by foreclosure or transfer in lieu thereof, Agent, the Banks or such nominee shall be entitled to exercise all rights, powers and privileges under the Stock Purchase Agreement and this Agreement to collect and receive any and all amounts to be funded or paid by Purchaser pursuant thereto and this Agreement; provided that the foregoing shall not limit or impair the rights of the Agent to receive payments as provided in Paragraph 3, above. 5. Representations of Purchaser. Purchaser hereby represents and warrants to the Agent as follows: (a) the Stock Purchase Agreement is in full force and effect and has not been modified, and Borrower is entitled to the benefits thereof; (b) no default (or event which would with the giving of notice or the passage of any applicable grace or notice and cure period might become a default) exists under the Stock Purchase Agreement; (c) there are no setoffs, defenses or counterclaims in favor of Purchaser with respect to the Stock Purchase Agreement, and to the extent that any such setoffs, defenses or counterclaims might be alleged to exist, the same are hereby waived and released by Purchaser; (d) the execution, delivery and performance of the Stock Purchase Agreement and this Agreement are within the authority of Purchaser, have been duly authorized by all necessary proceedings on the part of Purchaser, do not and will not conflict with or result in any breach or contravention of any provision of law, statute, rule or regulation to which Purchaser is subject or any judgment, order, writ, injunction, license or permit applicable to Purchaser, do not and will not conflict with or constitute a default (with the passage of time or the giving of notice or both) under any provision of the organizational documents of, or any mortgage, indenture, agreement, contract or other instrument binding upon Purchaser or any of its properties; and (e) this Agreement and the Stock Purchase Agreement constitute the valid and legally binding obligations of Purchaser enforceable in accordance with their respective terms and provisions, except as enforceability is limited by bankruptcy or other laws relating to or affecting generally the enforcement of creditors' rights and the effect of general principles of equity. 6. Covenants of Purchaser. Purchaser hereby covenants and agrees with Borrower and Agent that it will not modify, amend, cancel, release, surrender or terminate the Stock Purchase Agreement or this Agreement without the prior written consent of the Agent, which consent may be withheld by the Agent in its sole and absolute discretion. 7. Liability of Agent and Banks. Anything herein, in the Stock Purchase Agreement or any other instrument to the contrary notwithstanding, (a) Borrower shall remain liable under the Stock Purchase Agreement, for the performance of its obligations, (b) the exercise by Agent of any of its rights hereunder or under the Loan Documents shall not release Borrower from any of its duties or obligations under the Stock Purchase Agreement or under the Loan Documents, and (c) Agent shall not have any obligations or liability under the Stock Purchase Agreement or otherwise by reason of this Agreement or the Loan Documents, nor shall Agent be obligated to perform any of the obligations or duties of Borrower thereunder; provided, however, that any failure of Borrower to perform such obligations shall not create a defense to the obligations of Purchaser hereunder. 8. Amendments and Waivers. No amendment or waiver of any provision of this Agreement nor consent to any departure therefrom shall in any event be effective unless the same shall be in writing and signed by all parties hereto, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. No delay or omission of Agent to exercise any right, power or remedy accruing upon any Event of Default shall exhaust or impair any such right, power or remedy or shall be construed to be a waiver of any such Event of Default, or acquiescence therein; and every right, power and remedy given by this Agreement to Agent may be exercised from time to time and as often as may be deemed expedient by Agent. 9. Governing Law; Terms. THIS ASSIGNMENT SHALL BE GOVERNED BY AND CONSTRUED UNDER THE INTERNAL LAWS OF THE STATE OF NEW YORK. 10. Notices. Each notice, demand, election or request provided or permitted to be given pursuant to this Assignment (hereinafter in this Paragraph 10 referred to as "Notice"), must be in writing and shall be deemed to have been properly given or served by personal delivery or by sending same by overnight courier or by depositing same in the United States Mail, postpaid and registered or certified, return receipt requested as follows: If to the Agent: Bank Boston, N.A. 100 Federal Street Boston, Massachusetts 02110 Attn: Real Estate Division With a copy to: Bank Boston, N.A. 115 Perimeter Center Place, N.E. Suite 500 Atlanta, GA 30346 Attn: Mr. Dan Silbert If to the Borrower: Wellsford Real Properties, Inc. 610 Fifth Avenue 7th Floor New York, New York 10020 Attn: Gregory Hughes If to Purchaser: ERP Operating Limited Partnership c/o Equity Residential Properties Trust Two North Riverside Plaza, Suite 400 Chicago, Illinois 60606 Attn: President Each Notice shall be effective upon being personally delivered or upon being sent by overnight courier or upon being deposited in the United States Mail as aforesaid. The time period in which a response to such Notice must be given or any action taken with respect thereto (if any), however, shall commence to run from the date of receipt if personally delivered or sent by overnight courier, or if so deposited in the United States Mail, the earlier of three (3) Business Days following such deposit or the date of receipt as disclosed on the return receipt. Rejection or other refusal to accept or the inability to deliver because of changed address for which no notice was given shall be deemed to be receipt of the Notice sent. By giving at least fifteen (15) days prior Notice thereof, the parties hereto shall have the right from time to time and at any time during the term of this Agreement to change their respective addresses and each shall have the right to specify as its address any other address within the United States of America. 11. Conflicting Provisions. In the event of a conflict between the terms of this Agreement and the terms of the Stock Purchase Agreement, the terms of this Agreement shall be deemed controlling in all respects until such time as the Obligations are paid in full. 12. Successors and Assigns. This Agreement shall be binding upon, and shall inure to the benefit of the parties hereto and the Banks, their respective legal representatives, successors, successors-in-title and assigns; provided that as to the Agent and the Banks, this Agreement may only be assigned to a successor Agent or Bank pursuant to the Credit Agreement, a nominee of any or all of them or any purchaser (other than Borrower) at a foreclosure of the collateral pledged pursuant to the Assignment of Common Stock Agreement. 13. Term. This Agreement shall continue and be effective until the indefeasible payment in full of the Obligations. 14. Waivers of Purchaser. All of the Obligations shall be deemed to have been made or incurred in reliance upon this Agreement, and Purchaser expressly waives all notice of the incurring of the Obligations from time to time under the Credit Agreement or otherwise and all other notices not specifically required pursuant to the terms of this Agreement or by law. Purchaser agrees that Agent and the Banks shall be entitled to manage and supervise the Loans to Borrower in accordance with such practices as they deem appropriate under the circumstances. Purchaser agrees that neither Agent nor any Bank has made any warranties or representations with respect to the due execution, legality, validity, completeness or enforceability of the Credit Agreement or the other Loan Documents or the collectability of the Obligations; and that neither the Agent nor the Banks shall have any responsibility to Purchaser to advise it of information known to any of them regarding the financial condition of Borrower or of any circumstances bearing upon the non-payment of the Obligations or any other indebtedness of Borrower. All agreements and obligations of Purchaser hereunder shall remain in full force and effect irrespective of: (a) any change in the time, manner or place of payment of the Obligations, or any other term of all or any of the Loan Documents; (b) any change, release or non-perfection of any Collateral, or any release or amendment or waiver of or consent to the departure from, any of the Loan Documents; or (c) any other circumstances which might otherwise constitute a defense available to, or a discharge of, Borrower in respect of the Obligations or Purchaser in respect to its obligations under this Agreement or the Stock Purchase Agreement. 15. Rights of Borrower. The rights of the Borrower pursuant to the Stock Purchase Agreement shall not be enlarged by this Agreement, which rights of Borrower shall continue to be governed by the Stock Purchase Agreement; provided that the rights of the Agent as a successor of the Borrower shall be subject to the terms of this Agreement. 16. Miscellaneous. Time is of the essence of this Agreement. Title or captions of paragraphs hereof are for convenience only and neither limit nor amplify the provisions hereof. If, for any circumstances whatsoever, fulfillment of any provision of this Agreement shall involve transcending the limit of validity presently prescribed by applicable law, the obligation to be fulfilled shall be reduced to the limit of such validity; and if any clause or provision herein operates or would prospectively operate to invalidate this Agreement, in whole or in part, then such clause or provision only shall be held for naught, as though not herein contained, and the remainder of this Agreement shall remain operative and in full force and effect. IN WITNESS WHEREOF, the parties hereto have executed this Agreement under seal on the date first above written. AGENT: BANK BOSTON, N.A., a national banking association, individually and as Agent By:/s/ Mark E. Bashman ------------------------------------ Mark E. Basham, Managing Director [Signatures continued on next page] BORROWER: WELLSFORD REAL PROPERTIES, INC., a Maryland corporation By:/s/ Gregory F. Hughes --------------------------------------- Name: Gregory F. Hughes Title: Chief Financial Officer [CORPORATE SEAL] [Signatures continued on next page] PURCHASER: ERP OPERATING LIMITED PARTNERSHIP By: Equity Residential Properties Trust, its sole General Partner By:/s/ Bruce Strohm ------------------------------- Name: Title: [CORPORATE SEAL] EX-10.44 30 ASSIGNMENT OF COMMON STOCK AGREEMENTS THIS ASSIGNMENT OF COMMON STOCK AGREEMENTS (this "Assignment"), made as of the 30th day of May, 1997, by WELLSFORD REAL PROPERTIES, INC., a Maryland corporation ("Assignor"), to BANKBOSTON, N.A., a national banking association ("BKB"), as Agent for itself and the other "Banks" from time to time party to the "Credit Agreement" (as such terms are hereinafter defined) (BKB, in its capacity as Agent is hereinafter referred to as "Agent"). W I T N E S S E T H: WHEREAS, Assignor and ERP Operating Limited Partnership, on Illinois limited partnership ("ERP"), have entered into that certain Common Stock and Preferred Stock Purchase Agreement dated as of May 30, 1997 (the "Stock Purchase Agreement"), pursuant to which ERP has agreed to purchase certain interests in Assignor; and WHEREAS, pursuant to that certain Revolving Credit Agreement dated of even date herewith among Assignor, BKB, Morgan Guaranty Trust Company of New York, individually and as Co-Agent, and Agent (as the same may be varied, extended, supplemented, consolidated, amended, replaced, renewed, modified or restated, the "Credit Agreement"), the "Banks" (as defined in the Credit Agreement) have agreed to provide a revolving credit loan to Assignor of up to $50,000,000.00 (the "Loan"), which Loan is evidenced by those certain Notes made by Assignor to the order of the Banks in the aggregate principal face amount of $50,000,000.00 (such Notes, as the same may be varied, extended, supplemented, consolidated, amended, replaced, renewed, modified or restated, is hereinafter collectively referred to as the "Note"); WHEREAS, Agent, Assignor and ERP have entered into that certain Agreement Regarding Common Stock and Preferred Stock Purchase Agreement dated of even date herewith (the "Common Stock Agreement"); and WHEREAS, Agent has required, as a condition to the making of the Loan to Assignor, that Assignor execute this Assignment to secure the obligations of Assignor under the Note, the Credit Agreement and certain other agreements; NOW, THEREFORE, for and in consideration of the sum of Ten and No/100 Dollars ($10.00), and other good and valuable considerations, the receipt and sufficiency of which are hereby acknowledged, the parties hereto do hereby covenant and agree as follows: 6. Definitions. Capitalized terms used herein that are not otherwise defined herein shall have the meaning set forth in the Credit Agreement. 7. Grant of Security Interest. As security for the payment and performance by Assignor of each and all of the duties, responsibilities and obligations under this Assignment and the Credit Agreement, the Note and any and all agreements evidencing, securing or otherwise relating to the obligations evidenced by the Note and the Credit Agreement (this Assignment, the Credit Agreement, the Note and such other agreements, together with any and all renewals, modifications, consolidations and extensions thereof, are hereinafter referred to collectively as the "Loan Documents"; and said duties, responsibilities and obligations of Assignor are hereinafter referred to collectively as the "Obligations"), Assignor does hereby transfer, assign, pledge, convey and grant to Agent, and does hereby grant a security interest to Agent in, all right, title and interest of Assignor in and to the following: (a) All right, title, interest, claims or rights of Assignor in and to the Stock Purchase Agreement and the Common Stock Agreement (collectively, the "Common Stock Agreements") together with any and all other property at any time and from time to time receivable or otherwise distributed in respect of or in exchange for all or any thereof; and (b) Any and all dividends, profits, proceeds, accounts, income, distributions, and payments of any kind or nature whatsoever now or hereafter distributable or payable by ERP to Assignor with respect to the Common Stock Agreements, and any and all proceeds from any transfer, assignment or pledge of any interest of Assignor in, or claim or right against, ERP (regardless of whether such transfer, assignment or pledge is permitted under the terms hereof or the other Loan Documents), and all claims, choses in action or things in action now or hereafter arising against ERP; and (c) All accounts, contract rights and general intangibles now or hereafter arising from any of the foregoing; and (d) All notes or other documents or instruments now or hereafter evidencing or securing any of the foregoing; and (e) All documents, writings, leases, books, files, records, computer tapes, programs, ledger books and ledger pages arising from or used in connection with any of the foregoing; and (f) All renewals, extensions, additions, substitutions or replacements of any of the foregoing; and (g) All powers, options, rights, privileges and immunities pertaining to any of the foregoing; and (h) All proceeds of any of the foregoing and all cash, security or other property distributed on account of any of the foregoing (including without limitation, all stock rights, stock splits, subscription rights, dividends, new certificates and new securities). All of the foregoing described in this paragraph 2 is hereinafter referred to collectively as the "Collateral". 8. Obligations Secured. This Assignment secures the payment and performance by Assignor of the Obligations. 9. Collection of Collateral. (a) It is acknowledged and agreed by the parties hereto that Agent shall have sole and exclusive possession of the Collateral and that this Assignment constitutes a present, absolute and current assignment of all the Collateral and is effective upon the execution and delivery hereof. Payments under or with respect to the Collateral shall be made as follows: (i) Assignor shall have no right to receive payments made under or with respect to the Collateral (including, without limitation any Collateral from or relating to any sale, transfer, assignment, conveyance, option or other disposition of, or any pledge, mortgage, encumbrance, financing or refinancing of any of the Collateral, regardless of whether such event is permitted under the terms of the Loan Documents), and all such payments shall be delivered directly by ERP to Agent. (ii) If Assignor shall receive any payments made under or with respect to the Collateral (including, without limitation any Collateral from or relating to any sale, transfer, assignment, conveyance, option or other disposition of, or any pledge, mortgage, encumbrance, financing or refinancing of any of the Collateral, regardless of whether such event is permitted under the terms of the Loan Documents), Assignor shall hold all such payments in trust for Agent, will not co- mingle such payments with other funds of Assignor, and will immediately pay and deliver in kind, all such payments directly to Agent for application by Agent in satisfaction of the Obligations in such order as Agent in its sole and absolute discretion shall determine. (iii) Assignor hereby agrees for the benefit of ERP that all payments actually received by Agent shall be deemed payments to Assignor by ERP. Agent shall apply any and all such payments actually received by Agent in satisfaction of the Obligations in such order as Agent in its sole and absolute discretion shall determine. Agent shall return to Assignor that portion of any payments actually received by Agent from ERP which Agent determines, in the exercise of its sole and absolute discretion, is not needed to repay the Obligations. (iv) In furtherance of the foregoing, Assignor does hereby notify and direct ERP and its partners that all payments under or with respect to the Collateral shall be made directly to Agent at the address of Agent set forth in the Common Stock Agreement. (b) Assignor shall cause ERP promptly to pay all sums payable by ERP or any partner thereof under the terms of the Common Stock Agreements. (c) Assignor hereby irrevocably designates and appoints Agent its true and lawful attorney-in-fact, which appointment is coupled with an interest, either in the name of Agent, or in the name of Assignor, at Assignor's sole cost and expense, to take any or all of the following actions: (i) to ask, demand, sue for, attach, levy, settle, compromise, collect, compound, recover, receive and give receipt and acquittances for any and all Collateral and to take any and all actions as Agent may deem necessary or desirable in order to realize upon the Collateral, or any portion thereof, including, without limitation, making any statements and doing and taking any actions on behalf of Assignor which are otherwise required of Assignor under the terms of any agreement as conditions precedent to the receipt of payments with respect to the Collateral, and the right and power to receive, endorse, assign and deliver, in the name of Assignor, any checks, notes, drafts, instruments or other evidences of payment received in payment of or on account of all or any portion of the Collateral, and Assignor hereby waives presentment, demand, protest and notice of demand, protest and non-payment of any instrument so endorsed; and (ii) to institute one or more actions against ERP or any partner thereof in connection with the collection of the Collateral, to prosecute to judgment, settle or dismiss any such actions, and to make any compromise or settlement deemed desirable, in Agent's good faith judgment, with respect to the Collateral, to extend the time of payment, arrange for payment in installments or otherwise modify the terms of the Common Stock Agreements with respect to the Collateral or release ERP or any partner thereof from their respective obligations to pay any sums due under the Common Stock Agreements, without incurring responsibility to, or affecting any liability of, Assignor under the Common Stock Agreements; it being specifically understood and agreed, however, that Agent shall not be obligated in any manner whatsoever to give any notices of default (except as may be specifically required herein or the other Loan Documents) or to exercise any such power or authority or be in any way responsible for the preservation, maintenance, collection of or realizing upon the Collateral, or any portion thereof, or any of Assignor' rights therein. The foregoing appointment is irrevocable and continuing and any such rights, powers and privileges shall be exclusive in Agent, its successors and assigns until this Assignment terminates as provided in Paragraph 13, below. 10. Warranties and Covenants. Assignor does hereby warrant and represent to, and covenant and agree with, Agent as follows: (a) All duties, obligations and responsibilities required to be performed by Assignor as of the date hereof under the Common Stock Agreements have been performed, and no default or condition which with the passage of time or the giving of notice, or both, would constitute a default exists under the Common Stock Agreements. (b) A true, correct and complete copy of the Common Stock Agreements, together with all amendments thereto, is attached hereto as Exhibit "A". The Common Stock Agreements are in full force and effect. Except for the Loan Documents and the Common Stock Agreement, neither Assignor nor any of its directors, officers or shareholders is a party to or is bound by any indenture, contract or other agreement which purports to prohibit, restrict, limit or control the transfer or pledge of the Collateral. (c) Assignor is and shall remain the sole, lawful, beneficial and record owner of the Collateral, free and clear of all liens, restrictions, claims, pledges, encumbrances, charges, claims of third parties and rights of set-off or recoupment whatsoever (other than those in favor of Agent hereunder with respect to the Collateral), and Assignor has the full and complete right, power and authority to create a security interest in the Collateral in favor of Agent, in accordance with the terms and provisions of this Assignment. Assignor is not and will not become a party to or otherwise be bound by any agreement, other than the Loan Documents and the Common Stock Agreement, which restricts in any manner the rights of any present or future holder of any of the Collateral. No Person has any option, right of first refusal, right of first offer or other right to acquire all or any portion of the Collateral. (d) Upon the delivery to Agent of the Common Stock Agreements, this Assignment creates a valid and binding first priority security interest in the Collateral securing the payment and performance of the Obligations and the performance by Assignor of its obligations hereunder and by Assignor of its obligations under the Loan Documents, and upon the filing of U.C.C. Financing Statements with the Secretary of State of New York and the Office of the Register of the City of New York, New York County, all filings and other actions necessary to perfect and protect such security interests shall have been duly made and taken. Neither Assignor nor ERP has performed or will perform any acts which might prevent Agent from enforcing any of the terms and conditions of this Assignment or which would limit Agent in any such enforcement. (e) All original notes and other documents or instruments evidencing, constituting, guaranteeing or securing any of the Collateral or any right to receive payments with respect to the Collateral have been endorsed to and delivered to Agent. (f) For the purposes of Article 9-401 of the New York Uniform Commercial Code, the principal place of business of Assignor is located in New York County, New York. In the event that Assignor has more than one place of business in the State of New York, its chief executive office is located in New York County, New York. In order to perfect the pledge and security interests granted herein against Assignor, U.C.C. Financing Statements must be filed with Secretary of State of New York and the Office of the Register of the City of New York, New York County. 11. General Covenants. Assignor covenants and agrees that, so long as this Assignment is continuing: (a) Assignor shall not, without the prior written consent of Agent, which consent may be withheld by Agent in its sole and absolute discretion, directly, indirectly or by operation of law, sell, transfer, assign, dispose of, pledge, convey, option, mortgage, hypothecate or encumber any of the Collateral. (b) Assignor shall at all times defend the Collateral against all claims and demands of all persons at any time claiming any interest in the Collateral adverse to Agent's interest in the Collateral as granted hereunder. (c) So long as this Assignment remains in effect, Assignor shall not modify, amend, cancel, release, surrender, terminate or permit the modification, amendment, cancellation, release, surrender or termination of, the Common Stock Agreements, without in each instance the prior written consent of Agent, which consent may be withheld by Agent in its sole and absolute discretion; provided, however, that Agent shall not unreasonably withhold its consent to any modification or amendment of the Common Stock Agreements which does not affect or have an impact on the Collateral or the rights and benefits afforded to Agent pursuant to this Assignment (such modifications or amendments described in the foregoing proviso are hereinafter referred to as the "Minor Amendments"). (d) Assignor shall perform all of its respective duties, responsibilities and obligations under the Common Stock Agreements and with respect to the Collateral and shall diligently and in good faith protect the value of the Collateral. Assignor shall not, without the prior written consent of Agent, which consent may be withheld by Agent in its sole and absolute discretion, take any action that would, in the exercise of Agent's reasonable judgment, jeopardize or diminish the security afforded to Agent by the Collateral. (e) Assignor shall pay all taxes and other charges against the Collateral, shall not use the Collateral illegally, and shall not suffer to exist any loss, theft, damage or destruction of the Collateral and shall suffer to exist no levy, seizure or attachment of the Collateral. (f) Assignor, at the request of Agent, shall take such actions as Agent may reasonably require to enforce the terms of the Common Stock Agreements or any other contract, agreement or instrument included in, giving rise to, creating, establishing, evidencing or relating to the Collateral or to collect or enforce any claim for payment or other right or privilege assigned to Agent hereunder. (g) Assignor authorizes Agent, at the expense of Assignor, to execute and file any financing statement or statements reasonably deemed necessary by Agent to perfect its security interest in any of the Collateral. Any such financing statement may be signed by Agent alone. Assignor will sign and deliver any financing statements and other documents, and perform such other acts as Agent reasonably may deem necessary or desirable from time to time to establish and maintain in favor of Agent, valid and perfected security interests in the Collateral, free of all other liens, encumbrances, security interests and claims other than as permitted by the terms of this Assignment. Assignor shall do anything else Agent may reasonably require from time to time to establish a valid security interest in and to further protect and perfect its security interest in the Collateral. (h) Except for those items of the Collateral that are delivered to Agent as provided herein, the Collateral, and all records of Assignor relative to the Collateral, are and will be kept at the office of Assignor located in New York County, New York. Assignor shall give Agent not fewer than thirty (30) days prior written notice of any proposed change in the Company's or Assignor's name and any proposed change in the location of the Collateral or of such records, and Assignor will not, without the prior written consent of Agent, move the Collateral or such records to a location outside of New York County, New York or keep duplicate records with respect to the Collateral at any address outside such county. Nothing contained in this subparagraph shall be construed so as to prevent Assignor from keeping material abstracted from the books and records described herein at any of its offices as necessity or convenience dictates. Assignor shall permit the Agent or any representative designated by the Agent, at Agent's expense and upon reasonable advance notice (which may be oral), to examine the books of account of Assignor (and to make copies thereof and extracts therefrom) and to discuss the affairs, finances and accounts of Assignor, and to be advised as to the same by, its officers and directors, all at such reasonable times and intervals as the Agent may reasonably request. The Agent shall use good faith efforts to coordinate such visits and inspections so as to minimize the interference with and disruption to Assignor's normal business operations. (i) If any amounts are due from ERP to Assignor and the obligations to repay such amount is to be evidenced by a separate document or instrument, then as evidence of such obligations, Assignor shall cause ERP to issue Assignor, as the evidence of any obligations of ERP to pay such amount to Assignor in the future, a promissory note bearing the legend attached hereto as Exhibit "B" and which note shall provide that all payments due under such promissory note are to be paid directly to Agent as required by and applied as provided in the Loan Documents until the Obligations are paid in full or this Assignment is otherwise terminated as provided herein. No other evidence of such obligations shall be executed by ERP to Assignor. (j) Assignor shall promptly deliver to Agent any note or other document or instrument entered into after the date hereof which evidences, constitutes, guarantees or secures any of the Collateral or any right to receive payments with respect to the Collateral, which notes or other documents and instruments shall be accompanied by such endorsements or assignments as Agent may require to transfer title to Agent. (k) Assignor will provide to Agent such documents and reports respecting the Collateral in such form and detail as Agent reasonably may request from time to time. (l) Anything herein to the contrary notwithstanding, (i) Assignor shall remain liable under the Common Stock Agreements and all other contracts, agreements and instruments included in, giving rise to, creating, establishing, evidencing or relating to the Collateral to the extent set forth therein to perform all of its duties and obligations to the same extent as if this Assignment had not been executed, (ii) the exercise by Agent of any of its rights hereunder shall not release Assignor from any of its duties or obligations under the Common Stock Agreements or any such contracts, agreements and instruments, and (iii) Agent shall not have any obligation or liability under the Common Stock Agreements or any such contract, agreement or instrument by reason of this Assignment, nor shall Agent be obligated to perform any of the obligations or duties of Assignor thereunder or to take any action to collect or enforce any claim for payment or other right or privilege assigned to Agent hereunder. (m) If Assignor shall at any time be entitled to receive or shall receive any cash, stock certificate or other property, option or right, upon, in respect of, as an addition to, or in substitution or exchange for any of the Collateral, whether for value paid by Assignor or otherwise, Assignor agrees that the same shall be deemed to be Collateral and shall be delivered directly to Agent in each case accompanied by proper instruments of assignment duly executed by Assignor in such a form as may be required by Agent, to be held by Agent subject to the terms hereof, as further security for the Obligations (except as otherwise provided herein with respect to the application of the foregoing to the Obligations). If Assignor receives any of the foregoing directly, Assignor agrees to hold such cash or other property in trust for the benefit of Agent, and to surrender such cash or other property to Agent immediately. (n) Assignor shall not, without the prior written consent of Agent, which consent may be withheld by Agent in its sole and absolute discretion, vote on, approve or otherwise take any action with respect to any matter which pursuant to the terms of the Common Stock Agreements requires the approval of Assignor as the owner of the Collateral. 12. Events of Default. An Event of Default shall exist hereunder upon the occurrence of any of the following: (a) Any warranty, representation or statement made by or on behalf of Assignor in this Assignment proves untrue or misleading in any material respect; or (b) Assignor shall fail to duly and fully comply with any covenant, condition or agreement in Paragraph 6(a), 6(c), 6(d), 6(e), 6(i), 6(j), 6(m) or 6(n) of this Assignment; or (c) Assignor shall fail to duly and fully comply with any other covenant, condition or agreement of this Assignment (other than those specified above in this Paragraph 7) and the same is not cured within thirty (30) days following receipt of written notice of such default; or (d) The occurrence of an Event of Default under any of the Loan Documents. 13. Remedies. (a) Upon the occurrence and during the continuance of any Event of Default, Agent may take any action deemed by Agent to be necessary or appropriate to the enforcement of the rights and remedies of Agent under this Assignment and the Loan Documents, including, without limitation, the exercise of its rights and remedies with respect to any or all of the Collateral. The remedies of Agent shall include, without limitation, all rights and remedies specified in the Loan Documents and this Assignment, all remedies of Agent under applicable general or statutory law, and the remedies of a secured party under the Uniform Commercial Code as enacted in the State of New York, regardless of whether the Uniform Commercial Code has been enacted or enacted in that form in any other jurisdiction in which such right or remedy is asserted. Any notice required by law, including, but not limited to, notice of the intended disposition of all or any portion of the Collateral, shall be reasonably and properly given in the manner prescribed for the giving of notice herein, and, in the case of any notice of disposition, if given at least ten (10) calendar days prior to such disposition. Agent may require Assignor to assemble the Collateral and make it available to Agent at any place to be designated by Agent which is reasonably convenient to both parties. It is expressly understood and agreed that Agent shall be entitled to dispose of the Collateral at any public or private sale, and that Agent shall be entitled to bid and purchase at any such sale. In the event that Agent is the successful bidder at any public or private sale of any note or other document or instrument evidencing Assignor' right to receive a Distribution, Agent shall be entitled to credit the amount bid by Agent against the obligations evidenced by such note, document or instrument rather than the obligations evidenced by the Note. To the extent the Collateral consist of marketable securities, Agent shall not be obligated to sell such securities for the highest price obtainable, but shall sell them at the market price available on the date of sale. Agent shall not be obligated to make any sale of the Collateral if it shall determine not to do so regardless of the fact that notice of sale of the Collateral may have been given. Agent may, without notice or publication, adjourn any public sale from time to time by announcement at the time and place fixed for sale, and such sale may, without further notice, be made at the time and place to which the same was so adjourned. Each such purchaser at any such sale shall hold the Collateral sold absolutely free from claim or right on the part of Assignor. In the event that any consent, approval or authorization of any governmental agency or commission will be necessary to effectuate any such sale or sales, Assignor shall execute all such applications or other instruments as Agent may deem reasonably necessary to obtain such consent, approval or authorization. Agent may notify any account debtor or obligor with respect to the Collateral to make payment directly to Agent, and may demand, collect, receipt for, settle, compromise, adjust, sue for, foreclose or realize upon the Collateral as Agent may determine whether or not the Obligations or the Collateral are due, and for the purpose of realizing Agent's rights therein, Agent may receive, open and dispose of mail addressed to Assignor and endorse notes, checks, drafts, money orders, documents of title or other evidences of payment, shipment or storage of any form of Collateral on behalf and in the name of Assignor, as its attorney-in-fact. In addition, Assignor hereby irrevocably designates and appoints Agent its true and lawful attorney-in-fact either in the name of Agent or Assignor to (i) sign Assignor's name on any Collateral, drafts against account debtors, assignments, any proof of claim in any bankruptcy or other insolvency proceeding involving any account debtor, any notice of lien, claim of lien or assignment or satisfaction of lien, or on any financing statement or continuation statement under the Uniform Commercial Code; (ii) send verifications of accounts receivable to any account debtor; and (iii) in connection with a transfer of the Collateral as described above sign in Assignor's name any documents necessary to transfer title to the Collateral to Agent or any third party. All acts of said power of attorney are hereby ratified and approved and Agent shall not be liable for any mistake of law or fact made in connection therewith. This power of attorney is coupled with an interest and shall be irrevocable so long as any amounts remain unpaid on any of the Obligations. All remedies of Agent shall be cumulative to the full extent provided by law, all without liability except to account for property actually received, but the Agent shall have no duty to exercise such rights and shall not be responsible for any failure to do so or delay in so doing. Pursuit by Agent of certain judicial or other remedies shall not abate nor bar other remedies with respect to the Obligations or to other portions of the Collateral. Agent may exercise its rights to the Collateral without resorting or regard to other collateral or sources of security or reimbursement for the Obligations. (b) If Assignor fails to perform any agreement or covenant contained in this Assignment beyond any applicable period for notice and cure, Agent may itself perform, or cause to be performed, any agreement or covenant of Assignor contained in this Assignment which Assignor shall fail to perform, and the cost of such performance, together with any reasonable expenses, including reasonable attorneys' fees actually incurred (including attorneys' fees incurred in any appeal) by Agent in connection therewith, shall be payable by Assignor upon demand and shall constitute a part of the Obligations and shall bear interest at the rate for overdue amounts as set forth in the Credit Agreement. (c) Whether or not an Event of Default has occurred and whether or not Agent is the absolute owner of the Collateral, Agent may take such action as Agent may deem necessary to protect the Collateral or its security interest therein, Agent being hereby authorized to pay, purchase, contest and compromise any encumbrance, charge or lien which in the reasonable judgment of Agent appears to be prior or superior to its security interest, and in exercising any such powers and authority to pay necessary expenses, employ counsel and pay reasonable attorney's fees. Any such advances made or expenses incurred by Agent shall be deemed advanced under the Loan Documents, shall increase the indebtedness evidenced and secured thereby, shall be payable upon demand and shall bear interest at the rate for overdue payments set forth in the Credit Agreement. 14. Duties of Agent. The powers conferred on Agent hereunder are solely to protect its interest in the Collateral and shall not impose any duty upon it to exercise any such powers. Agent's duty with reference to the Collateral shall be solely to use slight care in the custody and preservation of the Collateral, which shall not include any steps necessary to preserve rights against prior parties. Agent shall have no responsibility or liability for the collection of any Collateral or by reason of any invalidity, lack of value or uncollectability of any of the payments received by it. 15. Indemnification. C\W It is specifically understood and agreed that this Assignment shall not operate to place any responsibility or obligation whatsoever upon Agent, and that in accepting this Assignment, Agent neither assumes nor agrees to perform at any time whatsoever any obligation or duty of Assignor relating to the Collateral or under the Common Stock Agreements or any other mortgage, indenture, contract, agreement or instrument to which Assignor is a party or to which it is subject, all of which obligations and duties shall be and remain with and upon Assignor. (b) Assignor agrees to indemnify, defend and hold Agent harmless from and against any and all claims, expenses, losses and liabilities growing out of or resulting from this Assignment (including, without limitation, enforcement of this Assignment) or acts taken or omitted by Agent hereunder or in connection herewith, except claims, expenses, losses or liabilities resulting from Agent's gross negligence or wilful misconduct. (c) Assignor upon demand shall pay to Agent the amount of any and all reasonable expenses, including, without limitation, the reasonable fees and disbursements of counsel actually incurred (including those incurred in any appeal), and of any experts and agents, which Agent may incur in connection with (i) the administration of this Assignment, (ii) the sale of, collection from, or other realization upon, any of the Collateral, (iii) the exercise or enforcement of any of the rights of Agent hereunder, or (iv) the failure by Assignor to perform or observe any of the provisions hereof beyond any applicable period for notice and cure. 16. Security Interest Absolute. All rights of Agent, and the security interests hereunder, and all of the obligations secured hereby, shall be absolute and unconditional, irrespective of: (a) Any lack of validity or enforceability of the Loan Documents or any other agreement or instrument relating thereto; (b) Any change in the time (including the extension of the maturity date of the Note), manner or place of payment of, or in any other term of, all or any of the Obligations or any other amendment or waiver of or any consent to any departure from the Loan Documents; (c) Any exchange, release or nonperfection of any other collateral for the Obligations, or any release or amendment or waiver of or consent to departure from any of the Loan Documents with respect to all or any part of the Obligations; or (d) Any other circumstance (other than payment of the Obligations in full) that might otherwise constitute a defense available to, or a discharge of, Assignor or any third party for the Obligations or any part thereof. 17. Amendments and Waivers. No amendment or waiver of any provision of this Assignment nor consent to any departure therefrom shall in any event be effective unless the same shall be in writing and signed by Agent, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. No delay or omission of Agent to exercise any right, power or remedy accruing upon any Event of Default shall exhaust or impair any such right, power or remedy or shall be construed to be a waiver of any such Event of Default, or acquiescence therein; and every right, power and remedy given by this Assignment to Agent may be exercised from time to time and as often as may be deemed expedient by Agent. Failure on the part of Agent to complain of any act or failure to act which constitutes an Event of Default, irrespective of how long such failure continues, shall not constitute a waiver by Agent of Agent's rights hereunder or impair any rights, powers or remedies consequent on any Event of Default. Assignor hereby waives to the extent permitted by law all rights which Assignor has or may have under and by virtue of the Uniform Commercial Code as enacted in the State of New York, and any federal, state, county or municipal statute, regulation, ordinance, Constitution or charter, now or hereafter existing, similar in effect thereto providing any right of Assignor to notice and to a judicial hearing prior to seizure by Agent of any of the Collateral. Assignor hereby waives and renounces for itself, its heirs, successors and assigns, all rights to the benefits of any statute of limitations and any moratorium, reinstatement, marshaling, forbearance, valuation, stay, extension, homestead, redemption and appraisement now provided or which may hereafter be provided by the Constitution and laws of the United States and of any state thereof, both as to itself and in and to all of its property, real and personal, against the enforcement of this Assignment and the collection of any of the Obligations. 18. Continuing Security Interest; Transfer of Note; Release of Collateral. This Assignment shall create a continuing security interest in the Collateral and shall (a) remain in full force and effect until the indefeasible payment in full of the Obligations, (b) be binding upon Assignor and its permitted successors and assigns, and (c) inure, together with the rights and remedies of Agent hereunder, to the benefit of Agent and its successors, transferees and assigns. Upon the indefeasible payment in full of the Obligations, the security interest granted hereby shall terminate and all rights to the Collateral shall revert to Assignor. Upon any such termination, Agent will execute and deliver to Assignor such documents as Assignor shall reasonably request to evidence such termination. 19. Modifications, Etc. Assignor hereby consents and agrees that Agent may at any time and from time to time, without notice to or further consent from Assignor, either with or without consideration, surrender any property or other security of any kind or nature whatsoever held by it or by any person, firm or corporation on its behalf or for its account, securing the Obligations; substitute for any Collateral so held by it, other collateral of like kind; agree to modification of the terms of the Loan Documents; extend or renew the Loan Documents for any period; grant releases, compromises and indulgences with respect to the Loan Documents for any period; grant releases, compromises and indulgences with respect to the Loan Documents to any persons or entities now or hereafter liable thereunder or hereunder; release any guarantor, endorser or any other Person liable with respect to the Obligations; or take or fail to take any action of any type whatsoever; and no such action which Agent shall take or fail to take in connection with the Loan Documents, or any of them, or any security for the payment of the Obligations or for the performance of any obligations or undertakings of Assignor, nor any course of dealing with Assignor or any other person, shall release Assignor' obligations hereunder, affect this Assignment in any way or afford Assignor any recourse against Agent. 20. Securities Act. In view of the position of Assignor in relation to the Collateral, or because of other current or future circumstances, a question may arise under the Securities Act of 1933, as amended, and all rules and regulations issued pursuant thereto or any similar federal, state or local law, rule, regulation or order (collectively the "Applicable Law") hereafter enacted analogous in purpose or effect (such Act and any such similar law as from time to time in effect being called the "Federal Securities Laws") with respect to any disposition of the Collateral permitted hereunder. Assignor understands that compliance with the Federal Securities Laws might very strictly limit the course of conduct of Agent if Agent were to attempt to dispose of all or any part of the Collateral in accordance with the terms hereof, and might also limit the extent to which or the manner in which any subsequent transferee of any Collateral could dispose of the same. Similarly, there may be other legal restrictions or limitations affecting the Agent in any attempt to dispose of all or part of the Collateral in accordance with the terms hereof under applicable Blue Sky or other state securities laws or similar Applicable Law analogous in purpose or effect. Assignor recognizes that in light of the foregoing restrictions and limitations Agent may, with respect to any sale of the Collateral, limit the purchasers to those who will agree, among other things, to acquire such Collateral for their own account, for investment, and not with a view to the distribution or resale thereof. Assignor acknowledges and agrees that in light of the foregoing restrictions and limitations, the Agent in its sole and absolute discretion may, in accordance with Applicable Law, (a) proceed to make such a sale whether or not a registration statement for the purpose of registering such Collateral or part thereof shall have been filed under the Federal Securities Laws and (b) approach and negotiate with a single potential purchaser to effect such sale. Assignor acknowledges and agrees that any such sale might result in prices and other terms less favorable to the seller if such sale were a public sale without such restrictions. In the event of any such sale, Agent shall incur no responsibility or liability for selling all or any part of the Collateral in accordance with the terms hereof at a price that Agent, in its sole and absolute discretion, may in good faith deem reasonable under the circumstances, notwithstanding the possibility that a substantially higher price might have been realized if the sale were deferred until after registration as aforesaid or if more than a single purchaser were approached. The provisions of this paragraph will apply notwithstanding the existence of a public or private market upon which the quotations or sales prices may exceed substantially the price at which the Agent sells. 21. Governing Law; Terms. THIS ASSIGNMENT SHALL BE GOVERNED BY AND CONSTRUED UNDER THE INTERNAL LAWS OF THE STATE OF NEW YORK. 22. Notices. Each notice, demand, election or request provided for or permitted to be given pursuant to this Assignment shall be deemed to have been properly given or served if given in the manner provided in the Credit Agreement. 23. No Unwritten Agreements. THE WRITTEN LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. 24. Miscellaneous. Time is of the essence of this Assignment. Title or captions of paragraphs hereof are for convenience only and neither limit nor amplify the provisions hereof. If, for any circumstances whatsoever, fulfillment of any provision of this Assignment shall involve transcending the limit of validity presently prescribed by applicable law, the obligation to be fulfilled shall be reduced to the limit of such validity; and if any clause or provision herein operates or would prospectively operate to invalidate this Assignment, in whole or in part, then such clause or provision only shall be held for naught, as though not herein contained, and the remainder of this Assignment shall remain operative and in full force and effect. [Remainder of page intentionally left blank] IN WITNESS WHEREOF, Assignor and Agent have executed this Assignment under seal on the date first above written. AGENT: BANKBOSTON, N.A., a national banking association, individually and as Agent By:/s/ Mark E. Basham ---------------------------------- Mark E. Basham, Managing Director [Signatures continued on next page] ASSIGNOR: WELLSFORD REAL PROPERTIES, a Maryland corporation By:/s/ Gregory F. Hughes ------------------------------ Title: chief Financial Officer [CORPORATE SEAL] EXHIBIT "A" COMMON STOCK AGREEMENTS EXHIBIT "B" PROMISSORY NOTE LEGEND "THIS NOTE HAS BEEN PLEDGED BY WELLSFORD REAL PROPERTIES, INC., ("ASSIGNOR") TO BANKBOSTON, N.A. ("AGENT") PURSUANT TO AN ASSIGNMENT OF COMMON STOCK AGREEMENT DATED AS OF MAY 30, 1997 (THE "AGREEMENT"). ALL AMOUNTS PAYABLE TO ASSIGNOR PURSUANT TO THIS NOTE SHALL BE PAID DIRECTLY TO AGENT AS REQUIRED BY THE AGREEMENT." EX-10.45 31 COLLATERAL ASSIGNMENT OF DOCUMENTS, RIGHTS AND CLAIMS (INCLUDING COLLATERAL ASSIGNMENT OF DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT AND FIXTURE FILING) NOTE TO PIMA COUNTY, ARIZONA RECORDER: THIS COLLATERAL ASSIGNMENT RELATES TO SEVERAL DOCUMENTS PREVIOUSLY RECORDED IN THE OFFICE OF THE PIMA COUNTY, ARIZONA RECORDER. THE DOCUMENTS (INCLUDING THE RECORDING INFORMATION RELATED TO THE DOCUMENTS) ARE DESCRIBED AT ITEMS A.3., A.5, A.9. AND A.10. ON THE ATTACHED EXHIBIT A. PLEASE ENSURE THAT THIS COLLATERAL ASSIGNMENT IS INDEXED IN THE RECORDS RELATING TO EACH OF THOSE DOCUMENTS. THIS COLLATERAL ASSIGNMENT OF DOCUMENTS, RIGHTS AND CLAIMS (INCLUDING COLLATERAL ASSIGNMENT OF DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT AND FIXTURE FILING) (hereinafter referred to as this "Assignment"), made as of the 30th day of May, 1997, by WELLSFORD REAL PROPERTIES, INC., a Maryland corporation ("Borrower"), to BANKBOSTON, N.A., a national banking association, whose mailing address is 100 Federal Street, Boston, Massachusetts 02110, as Agent for itself, Morgan Guaranty Trust Company of New York, whose mailing address is 60 Wall Street, New York, New York 10260 and the other lenders (collectively, the "Lenders") from time to time party to the Credit Agreement (as hereinafter defined) (in such capacity, "Agent"). The Agent is acting as agent for the Lenders pursuant to the Credit Agreement. The Lenders as of the date hereof are BankBoston, N.A. and Morgan Guaranty Trust Company of New York. W I T N E S S E T H: WHEREAS, the Lenders have agreed to provide a revolving credit facility (the "Loan") to Borrower pursuant to the Credit Agreement, which Loan is evidenced by the Notes (as hereinafter defined); and WHEREAS, as additional security for the Loan, Borrower desires to assign to Agent, for the benefit of the Lenders, and grant to Agent, for the benefit of the Lenders, a security interest in and to, all of Borrower's right, title, equity and interest in and to the Collateral (as hereinafter defined); NOW THEREFORE, for and in consideration of the sum of Ten and No/100 Dollars ($10.00), the mutual covenants and promises herein contained, and other good and valuable considerations, the receipt and sufficiency of which are hereby acknowledged, Borrower and Agent do hereby covenant and agree as follows: ARTICLE ONE DEFINITIONS 1.01 In addition to such other terms as are elsewhere defined herein, the following terms shall have the following meanings, as used in this Assignment and in any exhibits attached hereto, unless the context requires otherwise: "BKB" shall mean BankBoston, N.A., a national banking association. "Collateral" shall mean collectively, (a) The notes, deeds of trust, assignments, pledges, financing statements and other documents and instruments described on Exhibit "A" attached hereto and made a part hereof, including, without limitation, the Collateral Notes and the Collateral Deeds of Trust, the Collateral Security Documents and all rights and interests thereunder, together with any and all amendments, modifications, consolidations, replacements, renewals, restatements or supplements thereto; and (b) All security for the indebtedness evidenced by the documents and instruments described in Section 1.01(a) above, including without limitation the Property, and all liens, security interests and title of Borrower with respect thereto; and (c) All documents evidencing the documents and instruments described in Section 1.01(a) above or any security therefor or guaranties thereof, all title insurance (whether evidenced by policies, commitments or otherwise) issued with respect to the Property and to any other security for the documents and instruments described in Section 1.01(a) above, all accounts, funds, lockboxes, leases, books, files, records, programs, ledger books, computer tapes arising from or created in connection with such documents and instruments and all other instruments, documents, agreements and writings now or hereafter executed by or in favor of Borrower or any prior holder of such documents and instruments in connection with any of the foregoing, and all other documents now or hereafter delivered or to be delivered to Borrower or any prior holder of such documents and instruments under the documents and instruments described in Section 1.01(a) above (all of said Collateral Notes, Collateral Deeds of Trust, Collateral Security Documents and other documents, policies, instruments and agreements, and any and all additions, renewals, extensions, amendments, modifications, consolidations, restatements or supplements thereto of any of the foregoing, being hereinafter referred to collectively as the "Collateral Documents"); and (d) All payments of any kind or nature whatsoever, now or hereafter due and to become due under the Collateral Documents, all collections thereon and all other amounts paid thereunder, including without limitation all prepayments under the Collateral Documents, and all other cash and non-cash proceeds of the Collateral Documents, or of any other collateral for the obligations of Maker under the Collateral Documents and on account of any claim, rights or choses in action against Maker or otherwise pursuant to the Collateral Documents held by Borrower; and (e) All claims, rights and privileges obtained by Borrower in connection with the making of the loan to Maker evidenced by the Collateral Documents, together with the Property and all other property described in the Collateral Documents, and all the powers, options, privileges, immunities, claims, actions and causes of action contained in or arising from any of the foregoing; (f) All present and future accounts, general intangibles, contract rights, chattel paper or instruments arising out of or with respect to any of the foregoing; (g) Any and all renewals and extensions of any of the foregoing and any and all replacements or substitutions for any of the foregoing; and (h) All proceeds and products of the foregoing of every type. "Collateral Deeds of Trust" shall mean collectively, the deeds of trust, mortgages and deeds to secure debt described as item A.3 on Exhibit "A" attached hereto and made a part hereof as the same may now or hereafter be modified, amended, extended, renewed, consolidated, restated or supplemented. "Collateral Notes" shall mean, collectively, the Sonterra Note, the 277 Park Avenue Note and the other promissory notes described as items A.2 and B.2 on Exhibit "A" attached hereto and made a part hereof as the same may now or hereafter be modified, amended, extended, renewed, consolidated, restated or supplemented. "Collateral Security Documents" shall mean, collectively, the stock pledge agreements, assignments of member's interests, credit agreement and other instruments and documents described as items B.1, B.3-7, B.14 and B.15 on Exhibit "A" attached hereto. "Credit Agreement" shall mean the Revolving Credit Agreement dated of even date herewith among Borrower, BKB, Morgan, the other lending institutions party thereto and Agent, as originally executed, or if varied, extended, supplemented, consolidated, amended or restated from time to time as so varied, extended, supplemented, consolidated, amended or restated. "Default" shall mean any event which, with the giving of notice or the lapse of time, or both, would become and Event of Default. "Event of Default" shall mean (a) any default in the payment or performance of the obligations of Borrower hereunder, or (b) any representation or warranty of Borrower hereunder proving to be untrue in any material respect, or (c) any Event of Default under the Credit Agreement, or (d) any default (for which no cure period is provided, or with respect to which the applicable cure period has expired without cure having been accepted) shall exist under the Collateral Documents or any of them (there shall be no right to cure an Event of Default under (d), above.) "Loan Documents" shall have the meaning given to such term in the Credit Agreement. "Maker" shall mean, individually and collectively, the maker of each of the Collateral Notes. "Morgan" shall mean Morgan Guaranty Trust Company of New York, a New York banking corporation. "Notes" shall have the meaning given such term in the Credit Agreement. "Obligations" shall mean: (a) The debt evidenced by the Notes together with interest as therein provided; (b) The full and prompt and payment and performance of all of the provisions, agreements, covenants and obligations contained in the Credit Agreement; (c) The full and prompt payment and performance of all of the provisions, agreements, covenants and obligations herein contained and contained in any other of the Loan Documents, and the payment of all other sums therein covenanted to be paid; and (d) Any and all additional advances made by Agent or any Lender to protect or preserve the Collateral or the security interest created hereby. "Property" shall mean the real and personal property encumbered by the Collateral Documents. "Sonterra Note" shall have the meaning given to such term in the Credit Agreement. "277 Park Avenue Note" shall have the meaning given to such term in the Credit Agreement. ARTICLE TWO ASSIGNMENT 2.01 Assignment of, and Grant of Security Interest in, the Collateral. As security for the full and prompt payment and performance by Borrower of the Obligations, Borrower hereby transfers, assigns, pledges, conveys to, grants a security interest in, and deposits with, Agent, for the benefit of Lenders, the Collateral and all right, title, equity and interest of Borrower in and to the Collateral. It is the intention of the parties hereto that Agent shall have a continuing, general lien upon, security title to and security interest in the Collateral for the benefit of Lenders. 2.02 Terms of Assignment. It is acknowledged and agreed by the parties hereto that Agent shall have sole and exclusive possession of the Collateral and that this Assignment constitutes a present and current assignment of all the Collateral and is effective upon the execution and delivery hereof. Payments under or with respect to the Collateral shall be made as follows: (a) Except as hereinafter specifically set forth, Borrower shall have no right to receive payments made under or with respect to the Collateral, and all such payments shall be delivered directly by Maker or any other party liable thereon to Agent for the benefit of Lenders. (b) If Borrower shall receive any payments made under or with respect to the Collateral, Borrower shall hold all such payments in trust for Agent, will not co-mingle such payments with other funds of Borrower, and will immediately pay and deliver in kind, all such payments directly to Agent for application by Agent and Lenders in satisfaction of the Obligations in such order as Agent and Lenders shall determine in accordance with the applicable provisions of the Credit Agreement. (c) Borrower hereby agrees for the benefit of Maker that all payments actually received by Agent shall be deemed payments to Borrower by Maker. Agent and Lenders shall apply any and all such payments actually received by Agent in satisfaction of the Obligations in such order as Agent and Lenders shall determine in accordance with the applicable provisions of the Credit Agreement. Agent shall return to Borrower that portion of any payments actually received by Agent from Maker which Agent determines, in the exercise of its sole discretion, is not needed to repay the Obligations. (d) In furtherance of the foregoing, Borrower does hereby notify and direct Maker that all payments under or with respect to the Collateral shall be made directly to Agent at the address of Agent set forth in the Credit Agreement. Notwithstanding anything in this Section 2.02 to the contrary, so long as no Event of Default has occurred, Borrower shall have a license (revocable upon the occurrence of an Event of Default) to collect, but no more than one (1) month prior to accrual, all amounts payable and to be applied as current interest under the Collateral Notes or any other Collateral Document; it being understood and agreed that such license shall not extend to other amounts payable under the Collateral Notes or other Collateral Documents, including, without limitation, any voluntary or involuntary payment of principal. ARTICLE THREE COVENANTS, REPRESENTATIONS AND WARRANTIES OF BORROWER Borrower hereby warrants and represents to, and covenants and agrees with, Agent as follows: 3.01 Delivery of Collateral The original of each Collateral Note, endorsed by Borrower, and the original of each Collateral Deed of Trust and Collateral Security Document has been delivered to Agent. All actions required under any Collateral Note or any other Collateral Document and applicable law have been duly taken in order to constitute Borrower the holder of the Collateral Notes and the Collateral Documents and to constitute Agent the holder of a first priority security interest in each Collateral Note and Collateral Document. None of the Collateral Notes, Collateral Deeds of Trust, Collateral Security Documents and other Collateral Documents has been amended, modified, consolidated, supplemented or replaced except as expressly described on Exhibit "A" attached hereto. 3.02 Enforceability of This Assignment. This Assignment constitutes the legal, valid and binding obligation of Borrower enforceable in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or other laws generally affecting the rights of creditors. 3.03 Right to Execute This Assignment. There are no restrictions on the transfer of the Collateral, and Borrower has full right, power and authority to enter into, deliver and execute this Assignment. The execution and delivery of this Assignment, and the consummation of the transactions contemplated herein, and the fulfillment of, and the compliance with, the terms and conditions of this Assignment do not and will not (i) violate or conflict with any of the terms or provisions of the Collateral; (ii) violate any provision of any judicial or administrative order, award, judgment or decree applicable to Borrower or the Property; or (iii) conflict with, result in a breach of or a right to cancel, or constitute a default under, the articles of incorporation or by-laws of Borrower, or any agreement or instrument to which Borrower is a party or by which Borrower or the Property is bound. 3.04 No Amendment of Collateral. Borrower shall not make any additional loans or advances which would be secured by the Collateral Deeds of Trust or the Collateral Security Documents except for protective advances thereunder, and shall not abandon, alter, amend, cancel, modify, release, relinquish, supplement, surrender, terminate or waive, and shall not enter into or give any agreement, approval or consent with respect to, any of the Collateral or any part thereof or any interest therein or any collateral for the obligations evidenced by the Collateral Notes or other Collateral Documents, and any attempt to do so without the prior written consent of Agent shall be void and ineffective. 3.05 Pending Litigation. There are no actions, suits or proceedings pending, or to the knowledge of Borrower, threatened against or affecting Borrower, Maker or the Property, or any of them at law or in equity, or before or by any government authority. 3.06 No Defenses. The assignment of the Collateral pursuant to this Assignment creates no defense to the payment thereof and is effective to convey to Agent, for the benefit of Lenders, all rights of Borrower to collect the Collateral. 3.07 Information About Collateral. The names, amounts owing, due dates and other facts furnished to Agent with respect to any of the Collateral have been and will be correctly stated. Borrower shall, immediately upon request by Agent, execute and deliver to Agent a sworn affidavit setting forth in detail any and all amounts or payments received by Borrower with respect to the Collateral or any portion thereof during any period specified by Agent or such other reports or information in such form and detail as Agent shall request from time to time. Borrower shall promptly forward to Agent copies of all financial or property information, budgets, leases, leasing reports, rent rolls, insurance certificates and policies, default notices, acceleration notices and all other communications or information received by Borrower or any agent for Borrower from Maker or from any other party, or sent by Borrower or any agent for Borrower, relating to the Collateral and/or Maker and/or the Property. All records of Borrower relative to the Collateral are and will be kept at the office of Borrower located in New York County, New York. Borrower shall give Agent not fewer than thirty (30) days prior written notice of any proposed change in Borrower's name and any proposed change in the location of the Collateral or of such records, and Borrower will not, without the prior written consent of Agent, move the Collateral or such records to a location outside of New York County, New York or keep duplicate records with respect to the Collateral at any address outside such county. Nothing contained in this subparagraph shall be construed so as to prevent Borrower from keeping material abstracted from the books and records described herein at any of its offices as necessity or convenience dictates. 3.08 Good Title. Borrower is and shall remain the sole, lawful and beneficial owner of the Collateral free and clear of all liens, restrictions, claims, pledges and encumbrances whatsoever and has the full and complete right, power and authority to create a security interest in the Collateral in favor of Agent in accordance with the terms and provisions of this Assignment. The security interest in the Collateral created hereunder constitutes and will at all times continue to constitute a valid and enforceable first priority perfected security interest in the Collateral in favor of Agent, free and clear of all liens, claims, encumbrances and rights of others. Borrower has made no contract or arrangement of any kind or type whatsoever (whether oral or written, formal or informal), the performance of which by the other party thereto could give rise to a lien on the Collateral. Borrower at all times will defend the Collateral and its proceeds against the claims and demands of all third persons at any time claiming any interest in the Collateral adverse to Agent's interest in the Collateral as granted hereunder. 3.09 Status of the Collateral. The Collateral is valid and enforceable in accordance with its terms, subject to insolvency, bankruptcy, moratorium and other laws affecting creditors' rights generally, and is in compliance with all applicable laws. The Collateral Documents create a valid, enforceable and perfected first priority lien and security interest in all collateral covered thereby, and the Borrower shall take such actions as are necessary (including, without limitation, the filing of continuation statements) to cause the Collateral Documents to remain a valid, enforceable and perfected first priority lien and security interest therein. 3.10 No Future Encumbrance or Transfer. Borrower shall not encumber, pledge, anticipate, borrow against, or create any right of offset against the Collateral, and shall not transfer, assign, sell, dispose of, pledge, or convey, option, mortgage, hypothecate or encumber all or any portion of the Collateral. 3.11 Consents. Any and all consents required to be obtained in connection with the execution, delivery and performance of this Assignment, including without limitation any such consents required by the Collateral Documents, have been obtained. Without limiting the generality of the foregoing, the execution, delivery and performance of all obligations under this Assignment do not and will not require any authorization, consent, approval, order, license or permit from, or filing, registration, or qualification with, or exemption from any of the foregoing from, any governmental agency or other person. 3.12 Perfection of Security Interest. (a) For the purposes of Article 9-401 of the New York Uniform Commercial Code, the principal place of business of Borrower is located in New York County, New York. In the event that Borrower has more than one place of business in the State of New York, its chief executive office is located in New York County, New York. In order to perfect the pledge and security interests granted herein against Borrower, U.C.C. Financing Statements must be filed with Secretary of State of New York and the Office of the Register of the City of New York, New York County. (b) Borrower shall, at the request of Agent, execute, acknowledge, and deliver all such further assignments, security agreements, financing statements, endorsements, and assurances as Agent from time to time may require for the better assuring, conveying, assigning and confirming to Agent the Collateral and the rights hereby conveyed or assigned or intended now or hereafter to be conveyed or assigned, and for carrying out the intention or facilitating the performance of the terms of this Assignment, and upon any failure by Borrower so to do, Agent may make, execute, record, file, rerecord and/or refile, acknowledge and deliver any and all such further assignments, security agreements, financing statements, endorsements and assurances for and in the name of Borrower, and Borrower hereby irrevocably appoints Agent the agent and attorney-in-fact (with full power of substitutions) of Borrower so to do. This power is coupled with an interest. Without limiting the generality of the foregoing, Borrower will obtain such waivers of lien, estoppel certificates or subordination agreements as Lender may require to insure the priority of its security interest in the Collateral. Borrower also shall furnish to Agent such evidence as Agent reasonably may require from time to time to confirm the value of the Collateral. 3.13 Collateral Compliance and Defense. Borrower shall remain liable and comply with all obligations of Borrower under the Collateral and all other contracts, agreements and instruments related thereto to the extent set forth therein and to the same extent as if this Assignment had not been executed. Borrower, at its sole cost and expense, shall defend any claims against the Collateral or any action that might affect the Collateral or any interest therein. The exercise by Agent of any of its rights hereunder shall not release Maker from any of its duties or obligations under the Collateral or any contracts, agreements and instruments related thereto. 3.14 Protecting Collateral. Borrower will, but only with the prior written approval of Agent, diligently and in good faith do all things and take all actions, including, without limitation, bringing appropriate actions against any Maker which are necessary or desirable to enforce the obligations of such Maker to make all payments under the Collateral Documents to which it is a party, and to protect and preserve the interest of Agent under this Assignment. Borrower shall pay all taxes and other charges against the Collateral, shall not use the Property illegally, and shall not suffer to exist any loss, theft, damage or destruction of the Property or levy, seizure or attachment of the Property. 3.15 Borrower Conduct. Borrower has done no act or omitted to do any act which might prevent Agent from, or limit Agent in, acting under any of the provisions herein. 3.16 No Offset. The Collateral Notes evidence bona fide indebtedness owing to Borrower by Maker, and no Maker has any rights to setoff, counterclaim or defenses with respect to the payment or performance of any obligations under the Collateral Documents. 3.17 No Event of Default Under Loan Documents. No Default or Event of Default by Borrower or any other party exists under this Assignment, and no event has occurred and is continuing which with notice or the passage of time or both would constitute a Default or Event of Default hereunder or under any of the other Loan Documents. 3.18 Custody of Collateral. Agent's duty with reference to the Collateral shall be solely to use slight care in the custody and preservation of the Collateral, which shall not include any steps necessary to preserve rights against prior parties. 3.19 Related Documents. There are no documents or agreements which conflict with or vary the terms of the Collateral Documents, and there are no other documents which have not been delivered to Agent which affect or in any way relate to the Collateral Documents. 3.20 No Maker Default. Each Maker is the sole obligor and grantor under the Collateral to which it is a party as reflected on Exhibit "A" attached hereto, and no event or circumstance has occurred which, with the passage of time or the giving of notice, or both, might constitute a default under any of the terms, covenants or conditions of the Collateral. In the event of a default of any nature under the terms and conditions of the Collateral or the Collateral Documents, Borrower shall promptly deliver to Agent written notice of such default, which notice shall specify in reasonable detail the nature of such default. 3.21 No Prepayment. No prepayment with respect to the Collateral has been collected or received by Borrower. No prepayment of the indebtedness evidenced by the Collateral Documents will be collected or received by Borrower without the prior written consent of Agent except for such prepayment as may be expressly permitted by the terms of the Collateral Documents. 3.22 Collateral Indebtedness. As of May 30, 1997, the aggregate unpaid principal balance of the Sonterra Note is $17,800,000.00, and the aggregate unpaid principal balance of the 277 Park Avenue Note is $20,000,000.00. 3.23 Non-Disturbance Agreements. Borrower has not, and to the best of Borrower's knowledge and belief, no Maker or any prior holder of the Collateral Documents has, entered into any agreement with any tenant or other occupant of the Property which is real property, the effect of which is to permit such tenant to remain in possession of such Property following a foreclosure of any Collateral Deed of Trust. Borrower shall not execute or deliver, nor permit to be executed or delivered, any such non-disturbance agreement without the prior written consent of Agent. 3.24 Leasing Approvals. Borrower shall not approve any leasing parameters or leases for any Property which is real property without the prior written consent of Agent, and Borrower shall deliver all such leases and leasing parameters to Agent promptly upon receipt to enable Agent an adequate period of time to review the same prior to the expiration of any applicable review period permitted under the Collateral Documents. 3.25 Escrows. Any amounts deposited with Borrower as escrows or deposits pursuant to any Collateral Document (including, without limitation, escrows for taxes and insurance) shall be deposited with Agent and shall be used only for the purposes permitted in the Collateral Documents. 3.26 Additions; Substitutions. If Borrower shall at any time be entitled to receive or shall receive any cash, certificate or other property, option or right, upon, in respect of, as an addition to, or in substitution or exchange for any of the Collateral or as a result of the exercise of any rights or remedies under the Collateral Documents, whether for value paid by Borrower or otherwise, Borrower agrees that the same shall be deemed to be Collateral and shall be delivered directly to Agent in each case accompanied by proper instruments of encumbrance or assignment (including without limitation a deed of trust) as reasonably required by Agent duly executed by Borrower in such a form as may be required by Agent to be held by Agent subject to the terms hereof, as further security for the Obligations (except as otherwise provided herein with respect to the application of the foregoing to the Obligations). If Borrower receives any of the foregoing directly, Borrower agrees to hold such cash or other property in trust for the benefit of Agent, and to surrender such cash or other property to Agent immediately. ARTICLE FOUR ACTION BY LENDER 4.01 Action by Agent. Whether or not an Event of Default has occurred and whether or not Agent is the absolute owner of the Collateral: (a) Agent may take such action as Agent may deem necessary to protect the Collateral or its security interest therein, Agent being hereby authorized to pay, purchase, contest and compromise any encumbrance, charge or lien which in the judgment of Agent appears to be prior or superior to its security interest, and in exercising any such powers and authority to pay necessary expenses, employ counsel and pay attorney's fees. (b) Agent shall be under no duty or obligation to (i) preserve, process, develop, maintain or protect the Collateral or any of Borrower's rights or interests therein, or (ii) make or give any notices of default (except as may be specifically required herein), presentments, demands for performance, notices of non-performance or dishonor, protests, notices of protests or notices of any other nature whatsoever in connection with the Collateral on behalf of Borrower or any other person having any interest therein; and Agent does not assume and shall not be obligated to perform the obligations of Borrower, if any, with respect to the Collateral. Agent may, at any time and from time to time, without notice or demand and at the expense of Borrower, make requests for information concerning the Collateral from any obligor thereon. (c) Agent may, at its sole option, make advances to protect the Collateral and its security therein, or for any reason for which Borrower is permitted under the terms of the Collateral Documents to make advances, and any such advances made by Agent shall be deemed advanced under the Collateral Documents, increasing the indebtedness evidenced and secured thereby, and also shall be deemed advances under the Loan Documents, increasing the Obligations. (d) Agent may at any time compromise, transfer and assign the Collateral or any portion thereof and this Assignment. 4.02 Attorney-In-Fact. Borrower hereby nominates and irrevocably designates and appoints Agent its true and lawful agent and attorney-in-fact (with full power of substitution), which appointment is coupled with an interest either in the name of Agent or in the name of Borrower, at Borrower's sole cost and expense, to take any or all of the following actions:: (a) To do all acts and things and execute all documents which Agent may deem necessary or advisable to perfect and continue perfected the security interest created by this Assignment and to preserve, process, develop, maintain and protect the Collateral and the value thereof and Agent's interest therein, including, without limitation, preparing, signing, filing and recording, for Borrower in Borrower's name, or for Borrower on behalf of any Maker, any financing statement covering or constituting a part of the Collateral; (b) To do any and every act which Borrower is obligated to do under this Assignment; (c) Whether before or after the occurrence of an Event of Default, to ask for, demand, sue for, attach, levy, settle, compromise, collect, compound, recover, receive and give receipt and acquittances for any and all sums owing or which may become due with respect to the Collateral; to endorse, in the name of Borrower, all checks, notes, drafts, money orders, evidences of payment, or other instruments received in payment of, or on account of, the Collateral or any portion thereof; and to take any and all actions as Agent may deem necessary or desirable in order to realize upon the Collateral, or any portion thereof, including, without limitation, making any statements and doing or taking any acts on behalf of Borrower which are otherwise required of Borrower under the terms of the Collateral or any portion thereof as conditions precedent to the payment of the obligations evidenced by, or to the exercise of, the Collateral or any portion thereof; and to exercise any rights and remedies available under the Collateral Documents and to execute any document or instrument which Agent may deem necessary or desirable in connection therewith, including pleadings, consent orders, stipulations, and other documents and instruments which Agent may deem necessary or desirable in connection with judicial or nonjudicial foreclosure of the Collateral Deeds of Trust or any deed of trust or other security agreement included within the Collateral Documents or other legal actions or proceedings with respect to the Collateral. In addition, Assignor hereby irrevocably designates and appoints Agent its true and lawful attorney-in-fact (with full power of substitution) either in the name of Agent or Assignor (which power is coupled with an interest) to (i) sign Assignor's name on any Collateral, drafts against account debtors, assignments, any proof of claim in any bankruptcy or other insolvency proceeding involving any account debtor, any notice of lien, claim of lien or assignment or satisfaction of lien, or on any financing statement or continuation statement under the Uniform Commercial Code; (ii) send verifications of accounts receivable to any account debtor; and (iii) in connection with a transfer of the Collateral as described above sign in Assignor's name any documents necessary to transfer title to the Collateral to Agent or any third party. (d) To endorse and transfer the Collateral upon foreclosure; provided, however, that Agent shall be under no obligation whatsoever to take any of the foregoing actions or to exercise any of the foregoing authority or power, and Agent shall have no liability or responsibility for any act or omission taken with respect thereto. All of said rights and powers may be exercised by Agent at any time, whether or not an Event of Default has occurred and whether or not Agent is the absolute owner of the Collateral. The foregoing appointment of the Agent as Borrower's attorney-in-fact is irrevocable, coupled with an interest, with full power of substitution, and cannot be revoked by insolvency, reorganization, merger, consolidation or otherwise. All acts of said power of attorney are hereby ratified and approved and Agent shall not be liable for any mistake of law or fact made in connection therewith. 4.03 Necessity for Agent Action or Consent. So long as this Assignment shall be held by Agent as security for the Obligations, (a) no approval, consent, election, waiver or other matter which is given or required to be given or which inures to the benefit of Borrower under the Collateral Documents shall be deemed to have been given unless and until given by Agent; (b) any matter which is to be established or determined to the satisfaction of Borrower, or which is accepted or required to be accepted by Borrower, shall not be deemed to have been so established, determined or accepted unless and until so established, determined or accepted by Agent; (c) any matter which is to be received by, delivered to, assigned to or held by Borrower, including any notice to Borrower under the Collateral Documents, shall be deemed to have been received, delivered, assigned or held only when so received, delivered, assigned or held by or to Agent; (d) nothing contained in any of the Collateral Documents may be modified, amended or waived in any manner or respect whatsoever without the consent of Agent, and any such attempted modification, amendment or waiver without such consent shall be null and void; (e) no Collateral may be released without the execution of the documentation of release by Agent, and any attempted release without such execution by Agent shall be null and void; and (f) any exercise of discretion by Borrower, any requirements imposed or to be imposed, or permitted to be imposed, by Borrower hereunder, shall be deemed to have been exercised or imposed only when so exercised or imposed by Agent. The rights of Agent under this section may be exercised by Agent solely at the option of Agent or the Agent upon the direction of the Majority Banks (as defined in the Credit Agreement) in accordance with the Credit Agreement, and Agent shall have no obligation to give any consent or take any other action whatsoever contemplated hereby. Without implying any limitation upon the scope of Section 7.01 hereof, it is specifically noted that the provisions of Section 7.01 hereof apply, without limitation, to any action or failure to act on the part of Lender with respect to the matters contemplated by this Section 4.03. ARTICLE FIVE ENFORCEMENT OF COLLATERAL DOCUMENTS Borrower acknowledges and agrees that Agent at all times, whether or not an Event of Default has occurred and whether or not Agent is the absolute owner of the Collateral, shall have the right, but not the obligation, to exercise and enforce, in its own name or in Borrower's name, any or all rights and remedies of Borrower under the Collateral Documents to the exclusion of Borrower, including but not limited to the right to inspect the Property, to receive information and documents, to declare due the indebtedness secured by the Collateral Documents upon the occurrence of a default thereunder, to grant or withhold approvals, and to exercise discretion with respect to any matter. Borrower shall not exercise or attempt to exercise any such right or remedy except at the written request of Agent and only in strict accordance with the instructions of Agent. Agent may, at its option, enforce or conduct any action for foreclosure (including nonjudicial foreclosure) under the Collateral Documents in its own name or in the name of Borrower, and Borrower specifically consents to any foreclosure (including nonjudicial foreclosure) under any or all of the Collateral Documents or any other action taken by Agent even though such action may release any person from personal liability on any of the Collateral Documents. Upon the exercise by Agent of any such remedies, any amount bid by Agent or any Lender at any sale of any of the Property or any other Collateral for the Collateral Note may, at the option of Agent or such Lender, be deemed to be a credit bid of the indebtedness evidenced by the Collateral Note and the indebtedness evidenced by the Note, or either or both of them; Agent shall be entitled to set off the amount of any such bid against any such indebtedness, all at the election of Agent, in its sole discretion; and any or all proceeds of the Collateral Note may be applied against the indebtedness evidenced by the Note in such order as Agent and the Majority Banks shall elect in accordance with the Credit Agreement, and Agent or any Lender shall hold any property obtained by Agent or such Lender at any such sale free and clear of any interest or claims of Borrower, regardless of whether Agent shall have exercised any remedy under this Assignment with respect to any of the Collateral Documents, or shall have sold any of the Collateral Documents or obtained absolute title thereto pursuant to its rights and remedies under the Uniform Commercial Code. Borrower hereby agrees to pay to Agent, immediately upon demand, all costs and expenses, including without limitation attorney's fees, incurred by Agent in connection with the enforcement or foreclosure of any Collateral Documents, with interest from the date of expenditure at the rate for overdue payments specified in the Credit Agreement, to the extent permitted by applicable laws. ARTICLE SIX REMEDIES 6.01 Remedies. Upon the occurrence of any Event of Default, without prejudice to the rights of Agent to enforce claims against Borrower for damages for failure to fulfill any of its obligations under any of the Loan Documents, Agent, for the benefit of the Lenders, shall have, in addition to all other rights and remedies that Agent may have under this Assignment and by law, all of the rights and remedies hereinafter set forth, and it may exercise without further notice to Borrower, except as may be specifically required herein or in the other Loan Documents, any action deemed by Agent to be necessary or appropriate to the enforcement of the rights and remedies of Agent under the Assignment and the Loan Documents, including the exercise of any one, more, or all of the following remedies, in its sole discretion, without thereby waiving any of the others: (a) Agent shall have the right immediately to exercise all of its rights and remedies provided under the Notes, and any of the other Loan Documents. (b) Agent shall have the right to collect and to continue to collect all payments on the Collateral; to renew, extend, modify, amend, accelerate, accept partial payments on, make allowances and adjustments and issue credits with respect to, release, settle, compromise, compound, collect or otherwise liquidate, on terms acceptable to Agent, in whole or in part, the Collateral and any amounts owing thereon or any guaranty or security therefor; to enter into any other agreement relating to or affecting the Collateral; to give all consents, waivers and ratifications in respect of the Collateral and exercise all other rights, powers and remedies and otherwise act with respect thereto as if it were the owner thereof; and to enforce payments and prosecute any action or proceeding with respect to any and all of the Collateral and take or bring, in Agent's name or in the name of Borrower, all steps, actions, suits or proceedings deemed by Agent necessary or desirable to affect collection of or to realize upon the Collateral. (c) Agent shall have all of the rights and remedies of a secured party under the Uniform Commercial Code as in effect at that time, including, without limitation, the right to take possession of any of the Collateral, and to sell or otherwise dispose of the same. (d) Agent shall have all of the rights and remedies of a lender under applicable general or statutory law. (e) Agent shall have the right to foreclose the liens and security interests created under this Assignment or under any other agreement relating to the Collateral by any available judicial procedure or without judicial process; and to sell, assign, lease or otherwise dispose of the Collateral or any part thereof, either at public or private sale, in lots or in bulk, for cash, on credit or for future delivery, or otherwise, with or without representations or warranties, and upon such terms as shall be acceptable to Agent in its sole discretion. 6.02 Sale of Collateral. In the event Agent shall determine to sell the Collateral or any portion thereof, any such sale shall be held at such time or times and at such place or places as Agent may determine in the exercise of its sole discretion. Agent or any Lender may bid (which bid may be, in whole or in part, in the form of cancellation of Obligations) for and purchase for the account of Agent or such Lender or any nominee of Agent or such Lender the whole or any part of the Collateral. In the event that Agent or a Lender is the successful bidder at any public or private sale of the Collateral or any portion thereof, the amount bid by Agent or such Lender may be credited against the obligations as provided in Section 6.03. Agent shall not be obligated to make any sale of the Collateral if it shall determine not to do so regardless of the fact that notice of sale of the Collateral may have been given. Agent may, without notice or publication, adjourn any public sale from time to time by announcement at the time and place fixed for sale, and such sale may, without further notice, be made at the time and place to which the same was so adjourned. Any requirement of sending reasonable notice to Borrower, including, but not limited to, notice of the intended disposition of all or any portion of the Collateral, shall be deemed met if such notice is given to Borrower pursuant to the Credit Agreement at least ten (10) days before such disposition. Upon consummation of any sale of the Collateral, Agent shall have the right to assign, transfer and deliver to the purchaser or purchasers thereof the Collateral so sold. Each such purchaser at any such sale shall hold the Collateral sold absolutely free from claim or right on the part of Borrower, and Borrower hereby waives to the extent permitted by law all rights of redemption, stay and appraisal which it now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted. 6.03 Application of Net Proceeds. The net cash proceeds resulting from the collection, liquidation, sale, lease or other disposition of the Collateral shall be applied to the payment and satisfaction, pro tanto, of the Obligations as provided in the Credit Agreement. 6.04 No Limitation of Remedies. No remedy conferred upon or reserved to Agent herein or in any of the Loan Documents or in the Collateral is intended to be exclusive of any other remedy conferred upon or reserved to Agent under such instruments or under any applicable laws. Each such remedy shall be cumulative and concurrent and shall be in addition to each and every other remedy now or hereafter existing under such instruments or at law or in equity. No delay or omission by Agent to exercise any right, power or remedy provided in this Assignment, the Note, or the other Loan Documents or otherwise accruing upon any Event of Default shall impair in any manner any such right, power or remedy, or shall be construed to be a waiver of any such default or acquiescence therein, and each and every right, power and remedy of Agent may be exercised from time as often as may be deemed expedient by Agent. 6.05 Rights Independent; Adequacy of Collateral. The security interest created hereunder is independent of any other security for the Obligations or the obligations of any other party or any guarantor, and upon the occurrence of an Event of Default hereunder, Agent may proceed in the enforcement hereof independently of any other right or remedy that Agent may at any time hold with respect to the Obligations or any other security or guaranty therefor. Agent may file a separate action or actions against Borrower hereunder, whether action is brought and prosecuted with respect to any other security or against any other party or any guarantor, or whether any other party or any guarantor is joined in any such action or actions. 6.06 Performance of Borrower's Obligations. If Borrower fails to perform any agreement or covenant contained in this Assignment beyond any applicable period for notice and cure, Agent may itself perform, or cause to be performed, any agreement or covenant of Borrower contained in this Assignment which Borrower shall fail to perform, and the cost of such performance, together with any reasonable expenses, including reasonable attorneys' fees actually incurred (including attorneys' fees incurred in any appeal) by Agent in connection therewith, shall be payable by Borrower upon demand and shall constitute a part of the Obligations and shall bear interest at the rate for overdue amounts as set forth in the Credit Agreement. ARTICLE SEVEN GENERAL CONDITIONS 7.01 Indemnification. It is specifically understood and agreed that this Assignment shall not operate to place any responsibility or obligation whatsoever upon Agent, and that in accepting this Assignment, Agent neither assumes nor agrees to perform at any time whatsoever any obligation or duty of Borrower with respect to the Collateral, all of which obligations and duties shall be and remain with and upon Borrower. Borrower agrees to release, indemnify, defend and to hold harmless, and does hereby release, indemnify, defend and hold harmless, Agent and Lenders from and against any and all liabilities, obligations, claims, damages, penalties, causes of action, costs and expenses (including, without limitation, attorneys fees and expenses) imposed upon or incurred by Agent or any Lender by reason of this Assignment and any claim and demand whatsoever which may be asserted against Agent by reason of any alleged obligation or undertaking to be performed or discharged by Agent under or by reason of this Assignment. In the event Agent or any Lender incurs any such liability, obligation, claim, damage, penalty, costs or expenses under or by reason of this Assignment, or in the defense of any claims or demands arising out of or in connection with this Assignment, the amount of such liability, obligation, claim, damage, penalty, cost or expense shall be added to the Obligations, shall bear interest at the rate for overdue payments specified in the Credit Agreement from the date incurred until paid and shall be due and payable immediately upon demand. 7.02 Further Assurances. Borrower agrees to do such further acts and things, and to execute and deliver such additional conveyances, assignments, agreements, documents and instruments as Agent may at any time request in connection with the administration or enforcement of this Assignment or related to the Collateral or any part thereof or in order to better assure and confirm unto Agent its rights, powers and remedies hereunder. Without limiting the generality of the foregoing, at any time and from time to time, upon request by Agent, Borrower will make, execute and deliver, or cause to be made, executed and delivered, to Agent and, where appropriate, cause to be recorded and/or filed and from time to time thereafter to be re-recorded and/or refiled at such time and in such offices and places as shall be deemed desirable by Agent, any and all such other and further assignments, deeds to secure debt, mortgages, deeds of trust, security agreements, financing statements, continuation statements, instruments of further assurance, certificates and other documents as may, in the opinion of Agent, be necessary or desirable in order to effectuate, complete, or perfect, or to continue and preserve (a) the obligations of Borrower under this Assignment and (b) the security interest created by this Assignment as a first and prior security interest upon the Collateral. Upon any failure by Borrower so to do, Agent may make, execute, record, file, re-record and/or refile any and all such assignments, deeds to secure debt, mortgages, deeds of trust, security agreements, financing statements, continuation statements, instruments, certificates, and documents for and in the name of Borrower, and Borrower hereby irrevocably appoints Agent the agent and attorney-in-fact of Borrower (with full power of substitution) so to do. This power is coupled with an interest. 7.03 Expenses and Costs of Agent. Borrower agrees to pay to Agent all advances, charges, costs and expenses, including all reasonable attorney's fees, incurred or paid by Agent in exercising any right, power or remedy conferred by this Assignment, or in the enforcement thereof, whether or not an action is filed hereon, together with interest from the date of the expenditure at the rate for overdue payments specified in the Credit Agreement, to the extent permitted by applicable law, it being specifically understood and agreed by Borrower that all such advances, charges, costs and expenses shall constitute Obligations. 7.04 Release of Collateral and Termination. Upon the payment and satisfaction in full of the Obligations and the termination of the obligation of the Lenders to make further advances to Borrower under the Credit Agreement, Agent, upon receipt of written request therefor from Borrower and at Borrower's expense, shall execute and deliver to Borrower such documents as may be necessary to release the liens and interests on the Collateral created by this Assignment. 7.05 Security Interest Absolute. All rights of Agent, and the security interests hereunder, and all of the obligations secured hereby, shall be absolute and unconditional, irrespective of: (a) Any lack of validity or enforceability of the Loan Documents or any other agreement or instrument relating thereto; (b) Any change in the time (including the extension of the maturity date of the Notes), manner or place of payment of, or in any other term of, all or any of the Obligations or any other amendment or waiver of or any consent to any departure from the Loan Documents; (c) Any exchange, release or nonperfection of any other collateral for the Obligations, or any release or amendment or waiver of or consent to departure from any of the Loan Documents with respect to all or any part of the Obligations; or (d) Any other circumstance (other than payment of the Obligations in full) that might otherwise constitute a defense available to, or a discharge of, Borrower or any third party for the Obligations or any part thereof. 7.06 Amendments and Waivers. No amendment or waiver of any provision of this Assignment nor consent to any departure therefrom shall in any event be effective unless the same shall be in writing and signed by Agent, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. No delay or omission of Agent to exercise any right, power or remedy accruing upon any Event of Default shall exhaust or impair any such right, power or remedy or shall be construed to be a waiver of any such Event of Default, or acquiescence therein; and every right, power and remedy given by this Assignment to Agent may be exercised from time to time and as often as may be deemed expedient by Agent. Failure on the part of Agent to complain of any act or failure to act which constitutes an Event of Default, irrespective of how long such failure continues, shall not constitute a waiver by Agent of Agent's rights hereunder or impair any rights, powers or remedies consequent on any Event of Default. Borrower hereby waives to the extent permitted by law all rights which Borrower has or may have under and by virtue of the Uniform Commercial Code as enacted in the State of New York, and any federal, state, county or municipal statute, regulation, ordinance, Constitution or charter, now or hereafter existing, similar in effect thereto providing any right of Borrower to notice and to a judicial hearing prior to seizure by Agent of any of the Collateral. Borrower hereby waives and renounces for itself, its heirs, successors and assigns, all rights to the benefits of any statute of limitations and any moratorium, reinstatement, marshaling, forbearance, valuation, stay, extension, homestead, redemption and appraisement now provided or which may hereafter be provided by the Constitution and laws of the United States and of any state thereof, both as to itself and in and to all of its property, real and personal, against the enforcement of this Agreement and the collection of any of the Obligations. 7.07 Survival of Certain Agreements. Notwithstanding the repayment of the Obligations and the cancellation or transfer of the Loan Documents, or any foreclosure of or other realization upon the Collateral, the agreement of Borrower contained herein or in any of the other Loan Documents to pay the costs and expenses of Agent or the Lenders in connection with the Loan and all agreements of Borrower contained herein or in any of the other Loan Documents to indemnify and/or hold harmless Agent or the Lenders shall continue in full force and effect so long as there exists any possibility of expense or liability on the part of Agent or the Lenders. 7.08 Law Governing. THIS ASSIGNMENT SHALL BE GOVERNED BY AND CONSTRUED UNDER THE LAWS OF THE STATE OF NEW YORK, EXCEPT TO THE EXTENT OF PROCEDURAL AND SUBSTANTIVE MATTERS RELATING ONLY TO THE CREATION, PERFECTION AND FORECLOSURE OF LIENS, AND ENFORCEMENT OF RIGHTS AND REMEDIES AGAINST THE COLLATERAL DESCRIBED IN PART "A" OF EXHIBIT "A", WHICH MATTERS SHALL BE GOVERNED BY THE LAWS OF THE STATE OF ARIZONA. 7.09 Communications. All communications required or permitted under the terms of this Agreement shall be given in the manner set forth in the Credit Agreement. 7.10 Incorporation. The following provisions of the Credit Agreement are hereby incorporated by reference as though fully set forth herein: Sections 22, 27, 28, 29 and 30. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] IN WITNESS WHEREOF, Borrower has executed this Assignment under seal, as of the day and year first above written. WELLSFORD REAL PROPERTIES, INC., a Maryland corporation By:/s/ Gregory F. Hughes Name: Gregory F. Hughes Title: VP - CFO [CORPORATE SEAL] WITNESS: The undersigned has executed this Collateral Assignment solely for the purpose of witnessing the grant of power of attorney by Borrower to Agent, as described in this Collateral Assignment. /s/ Scott Zucker ------------------------------------ Print Name: Scott Zucker STATE OF NEW YORK ) ) COUNTY OF NEW YORK ) The foregoing instrument was acknowledged before me this 30th day of May, 1997, by Gregory F. Hughes, as Chief Financial Officer, of Wellsford Real Properties, Inc., a Maryland corporation. WITNESS MY HAND and official seal. My commission expires: 4/30/98 /s/ Walter Curchack ------------------------------------- Notary Public STATE OF NEW YORK ) ) COUNTY OF NEW YORK ) The foregoing instrument was acknowledged before me this 30th day of May, 1997, by Scott Zucker. WITNESS MY HAND and official seal. My commission expires: 4/30/98 /s/ Walter Curchack ----------------------------------- Notary Public EXHIBIT "A" COLLATERAL DOCUMENTS A. Sonterra Documents: 1. Loan Agreement dated June 28, 1996, in the original principal amount of $17,800,000.00, by and between Wellsford Residential Property Trust, as Lender, and Specified Properties VIII, L.P., as Borrower. 2. Promissory Note dated June 28, 1996, in the original principal amount of $17,800,000.00 made by Specified Properties VIII, L.P. to the order of Wellsford Residential Property Trust, its successors or assigns. 3. Deed of Trust, Security Agreement and Fixture Filing, dated June 28, 1996, from Specified Properties VIII, L.P., as trustor, to Chicago Title Insurance Company, as trustee, for Wellsford Residential Property Trust, as beneficiary, and recorded July 12, 1996, with the Office of the Recorder of Pima County, Arizona, in Docket 10335 at Page 367. 4. Guaranty Agreement dated June 28, 1996, by John R. Carmichael in favor of Wellsford Residential Property Trust. 5. Assignment of Leases and Rents dated June 28, 1996, by Specified Properties VIII, L.P. for the benefit of Wellsford Residential Property Trust and recorded July 12, 1996, with the Office of the Recorder of Pima County, Arizona, in Docket 10335 at Page 409. 6. Assignment of Agreements dated June 28, 1996, by Specified Properties VIII, L.P. to Wellsford Residential Property Trust. 7. Consent and Agreement of Manager dated July 15, 1996, by Lexford Properties, Inc. as manager. 8. Hazardous Substances Remediation and Indemnification Agreement dated June 28, 1996, by Specified Properties VIII, L.P., Westwood Residential No. 9 Limited Partnership, and Westwood Residential General Partner No. 9, Inc. in favor of Wellsford Residential Property Trust. 9. Security Agreement dated June 28, 1996, by Specified Properties VIII, L.P. in favor of Wellsford Residential Property Trust and recorded July 12, 1996, with the Office of the Recorder of Pima County, Arizona, in Docket 10335 at Page 420. 10. UCC-1 Financing Statements naming Specified Properties VIII, L.P., as debtor, and Wellsford Residential Property Trust, as secured party, recorded July 12, 1996, with the Office of the Recorder of Pima County, Arizona, in Docket 10335 at Page 433; filed July 19, 1996, with the Secretary of State of Arizona as No. 92564; and filed July 15, 1996 with the Secretary of State of Texas as No. 138070. 11. Waiver of Borrower's Conditions dated July 11, 1996, by Specified Properties VIII, L.P., as "Borrower", whereby Borrower agreed to waive Section 2.6 of the Loan Agreement described in Item 1, above, which conditioned the Borrower's obligations under the Loan Agreement upon the approval of the Loan Agreement by Borrower's limited partner. 12. Escrow Agreement dated July 9, 1996, among Chicago Title Insurance Company, Wellsford Residential Property Trust and Specified Properties VIII, L.P. 13. FIRPTA Certification dated July 9, 1996, by Specified Properties VIII, L.P., certifying that Specified Properties VIII, L.P. is not a foreign person. 14. Loan Closing Statement [Borrower's Statement] dated July 11, 1995 [sic], signed by Specified Properties VIII, L.P. 15. Opinion Letter of Jones, Day, Reavis & Pogue dated July 11, 1996, as counsel for Specified Properties VIII, L.P., Westwood Residential No. 9 Limited Partnership, and Westwood Residential General Partner No. 9, Inc. 16. Mortgagee's Title Insurance Policy dated July 12, 1996, issued by Chicago Title Insurance Company for the amount of $17,800,000.00 in favor of Wellsford Residential Property Trust, as insured. B. Park Avenue Documents: Credit Agreement dated as of April 25, 1997 among Park Avenue Financing Company, LLC ("Holding Company"), PAMC Co-Manager, Inc. ("Co-Managing Member"; Holding Company and Co-Managing Member are sometimes hereinafter referred to as the "Park Avenue Borrowers"), PAFC Management, Inc. ("Holding Company Managing Member"), Stanley Stahl ("Guarantor"), The First National Bank of Boston ("FNBB"), Borrower and FNBB, as Agent (the "Park Avenue Agent"). Note dated April 25, 1997 by the Park Avenue Borrowers to the order of Borrower in the principal face amount of $20,000,000.00; Assignment of Member's Interest dated as of April 25, 1997 by Holding Company Managing Member and Guarantor to Park Avenue Agent. Assignment of Member's Interest dated as of April 25, 1997, by Park Avenue Borrowers to Park Avenue Agent. Stock Pledge Agreement dated as of April 25, 1997 by Guarantor in favor of Park Avenue Agent, relating to stock of Guarantor in Park Avenue Management Corporation. Stock Pledge Agreement dated as of April 25, 1997 by Guarantor in favor of Park Avenue Agent, relating to the stock of Guarantor in Co-Managing Member. Stock Pledge Agreement dated as of April 25, 1997 by Guarantor in favor of Park Avenue Agent, relating to the stock of Guarantor in Holding Company Managing Member. Acknowledgment dated as of April 25, 1997 of 277 Park Avenue, LLC in favor of Park Avenue Agent. Acknowledgment dated as of April 25, 1997 by Holding Company in favor of Park Avenue Agent. Acknowledgment dated as of April 25, 1997 by Park Avenue Management Corporation in favor of Park Avenue Agent. Acknowledgments by Co-Managing Member, Holding Company Managing Member and Park Avenue Management Corporation in favor of Park Avenue Agent dated as of April 25, 1997. Acknowledgment and Agreement dated as of April 25, 1997 by Guarantor, Park Avenue Management Corporation, Co-Managing Member, Holding Company and Holding Company Managing Member for the benefit of the banks under the Credit Agreement described in Item B.1 above. Indemnity Agreement Regarding Hazardous Materials dated as of April 25, 1997 by Park Avenue Borrowers and Guarantor in favor of Park Avenue Agent and the banks under the Credit Agreement described in Item B.1 above. Conditional Guaranty of Payment and Performance dated as of April 25, 1997 by Guarantor in favor of Park Avenue Agent and the banks under the Credit Agreement described in Item B.1 above. Cash Collateral Account Security, Pledge and Assignment Agreement dated as of April 25, 1997 among 277 Park Avenue, LLC, Park Avenue Borrowers, Park Avenue Management Corporation, Guarantor and Park Avenue Agent. Intercreditor Agreement dated as of April 25, 1997, among FNBB and Borrower. UCC-1 Financing Statements executed by Holding Company in favor of Park Avenue Agent and recorded with the New York Secretary of State, Register of the City of New York, New York County, City of Boston, Massachusetts, Massachusetts Secretary of State and Delaware Secretary of State. UCC-1 Financing Statements executed by Co-Manager in favor of Park Avenue Agent and recorded with the Register of the City of New York, New York County, New York Secretary of State, City of Boston, Massachusetts, Massachusetts Secretary of State and Delaware Secretary of State. UCC-1 Financing Statements executed by Holding Company Managing Member in favor of Park Avenue Agent and recorded in the Register of the City of New York, New York County, New York Secretary of State and Delaware Secretary of State. UCC-1 Financing Statements executed by Guarantor in favor of Park Avenue Agent and recorded in the Register of the City of New York, New York County, New York Secretary of State and Delaware Secretary of State. Legal Opinions dated as of April 25, 1997 by Latham & Watkins in favor of Borrower and others. Management Company's Agreement dated as of April 25, 1997 by Stahl Real Estate Co. in favor of Park Avenue Agent and the banks a party to the Credit Agreement described in Item B.1 above. Recognition Agreement dated as of April 25, 1997 among FNBB, individually and as agent, Borrower, Column Financial, Inc., Park Avenue Borrowers and 277 Park Avenue, LLC. All rights, remedies, collateral instruments or other documents made or granted in favor of Borrower or its predecessors in interest in connection with the loans evidenced by the Loan Agreement described in Item A.1, above, and the Credit Agreement described in Item B.1, above and secured by the Deed of Trust, Security Agreement and Fixture Filing described in Item A.3, above, and the documents described in Items B.3 and B.3-7 above, (collectively the "Loans"), including, without limitation: (i) all guaranties, pledges, security interests, mortgages, deeds of trust, assignments of rents, assignments of management agreement, assignments of stock or partnership units, financing statements, or other rights, interests or collateral securing or guaranteeing payment of such Loans; and (ii) all other rights and remedies of the Borrower in connection with the Loans, whether provided by contract or otherwise available under applicable law or in equity, including, without limitation, all rights and remedies provided under any loan agreements, security agreements, indemnities, letters of credit, title insurance policies, fire and casualty insurance policies, flood hazard insurance policies, life insurance policies, escrow, accounts, certificates of deposit, proceeds, claims (including proofs of claim), demands, causes of action and judgments in favor of Borrower or its predecessors in interest relating to the Loans, or other instruments or documents made, issued or delivered to or in favor of Borrower or its predecessors in interest in connection with the Loans, all as the same may have been amended from time to time. EX-10.48 32 EMPLOYMENT AGREEMENT -------------------- AGREEMENT, dated as of May 30, 1997, between WELLSFORD REAL PROPERTIES, INC., a Maryland corporation with offices at 610 Fifth Avenue, New York, New York 10020 (the "Company"), and JEFFREY H. LYNFORD, an individual residing at 10 Holly Branch Road, Katonah, New York 10536 (the "Executive"). WHEREAS, the Executive is an executive of Wellsford Residential Property Trust, a Maryland real estate investment trust ("Wellsford Residential"); WHEREAS, Equity Residential Properties Trust, a Maryland real estate investment trust ("EQR"), is merging with and into Wellsford Residential as of the date hereof (the "Merger"); WHEREAS, immediately prior to the Merger, Wellsford Residential is distributing to its common shareholders, pro rata, all of the shares of common stock that it owns in the Company (the "Distribution"); and WHEREAS, the Company desires to employ the Executive, and the Executive desires to be employed by the Company. IT IS AGREED: 1. Duties. (a) During the term of the Executive's employment hereunder the Executive shall serve and the Company shall employ the Executive as Chairman of the Board to perform such executive or administrative services for the Company consistent with those of a Chairman of the Board as may be assigned to the Executive by the directors of the Company. The Executive hereby accepts such employment and agrees to perform such services. (b) The Executive shall devote such time, attention and energies during business hours to the performance of his duties hereunder as is necessary to properly carry out the responsibilities of his office. (c) The Executive shall cooperate with the Company, including taking such medical examinations as the Company reasonably shall deem necessary, if the Company shall desire to obtain medical, disability or life insurance with respect to the Executive. Where reasonably possible, the Company shall cooperate with the Executive's request to have such examinations performed by the Executive's personal physician or another physician reasonably acceptable to the Executive. (d) The Executive shall not be required to relocate or conduct the Company's business outside the New York, New York area in order to perform his duties under this Agreement but shall undertake such reasonable business travel as may be necessary to perform said duties (for which the Executive shall be reimbursed pursuant to Section 4 below for costs and expenses incurred in connection therewith). 2. Employment Term. This Agreement shall commence on May 30, 1997 and shall continue in effect through December 31, 2002; provided, however, that, on January 1, 2003 and on each January 1 thereafter, the term of this Agreement shall automatically be extended for one additional year beyond such January 1 unless, not later than June 30 of the preceding year, either the Executive or the Company shall have given notice to the other not to extend this Agreement. 3. Compensation. For all services rendered by the Executive pursuant to this Agreement: (a) The Company shall pay to the Executive an annual base salary at the following rates: (i) for the period from May 30, 1997 through December 31, 1997 - $275,000; (ii) for the period from January 1, 1998 through December 31, 1998 - $283,250; (iii) for the period from January 1, 1999 through December 31, 1999 - $291,748; (iv) for the period from January 1, 2000 through December 31, 2000 - $300,500; (v) for the period from January 1, 2001 through December 31, 2001 - $309,515; (vi) for the period from January 1, 2002 through December 31, 2002 - $318,800; and (vii) for each additional year thereafter, the annual base salary for the immediately preceding year plus 3% of such annual base salary. All such compensation shall be paid bi-weekly or at such other regular intervals, not less frequently than monthly, as the Company may establish from time to time for executive employees of the Company. (b) In addition to the compensation set forth in subsection 3(a) above, the Executive shall be awarded such bonus for each calendar year or partial calendar year of his employment hereunder as the directors of the Company shall determine in their sole discretion. In determining such bonus, the Executive understands that the directors will consider, without limitation, the following factors with respect to the applicable calendar year or partial calendar year: the Company's financial performance, business performance and growth during such period; Executive's responsibilities as an officer of the Company (including his participation in transactions of particular financial or business significance to the Company) during such period; the total compensation package paid to executive officers having similar responsibilities as the Executive who are employed by entities which are similar to the Company; and such other factors as the directors may deem appropriate in their sole discretion. Such bonus may consist of cash; grants of shares ("Shares") of Common Stock of the Company; options to purchase Shares; loans to purchase Shares; share appreciation rights (whether independent of or in conjunction with awards of options); and such other awards as the directors in their sole discretion may deem appropriate and which they believe are in furtherance of the growth of long-term stockholder value of the Company. 4. Expenses. (a) The Company shall pay for all legal and accounting fees and expenses incurred by the Executive in connection with the structuring, negotiation and preparation of this Agreement. The Company shall reimburse the Executive for all out-of-pocket expenses actually and necessarily incurred by him in the conduct of the business of the Company against reasonable substantiation submitted with respect thereto. (b) Unless the provisions of subsection 4(c) below shall apply, the Company shall reimburse the Executive for all legal fees and related expenses (including the costs of experts, evidence and counsel) paid by the Executive as a result of (i) the termination of Executive's employment (including all such fees and expenses, if any, incurred in contesting or disputing any such termination of employment), (ii) the Executive seeking to obtain or enforce any right or benefit provided by this Agreement or by any other plan or arrangement maintained by the Company under which the Executive is or may be entitled to receive benefits, (iii) the Executive's hearing before the directors as contemplated in subsection 6(c) of this Agreement or (iv) any action taken by the Company against the Executive; provided, however, that the Company shall reimburse the legal fees and related expenses described in this subsection 4(b) only if and when a final judgement has been rendered in favor of the Executive and all appeals related to any such action have been exhausted. (c) The Company shall pay all legal fees and related expenses (including the costs of experts, evidence and counsel) incurred by the Executive as they become due as a result of (i) the termination of Executive's employment (including all such fees and expenses, if any, incurred in contesting or disputing any such termination of employment), (ii) the Executive seeking to obtain or enforce any right or benefit provided by this Agreement or by any other plan or arrangement maintained by the Company under which the Executive is or may be entitled to receive benefits, (iii) the Executive's hearing before the directors as contemplated in subsection 6(c) of this Agreement or (iv) any action taken by the Company against the Executive, unless and until such time that a final judgement has been rendered in favor of the Company and all appeals related to any such action have been exhausted; provided, however, that the circumstances set forth above occurred on or after a change in control of the Company. (d) For purposes of this Agreement, a "change in control of the Company" shall be deemed to occur if: (i) there shall have occurred a change in control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as in effect on the date hereof, whether or not the Company is then subject to such reporting requirement, provided, however, that there shall not be deemed to be a "change in control" of the Company if immediately prior to the occurrence of what would otherwise be a "change in control" of the Company (a) the Executive is the other party to the transaction (a "Control Event") that would otherwise result in a "change in control" of the Company or (b) the Executive is an executive officer, trustee, director or more than 5% equity holder of the other party to the Control Event or of any entity, directly or indirectly, controlling such other party, (ii) the Company merges or consolidates with, or sells all or substantially all of its assets to, another company (each, a "Transaction"), provided, however, that a Transaction shall not be deemed to result in a "change in control" of the Company if (a) immediately prior thereto the circumstances in (i)(a) or (i)(b) above exist, or (b) (1) the shareholders of the Company, immediately before such Transaction own, directly or indirectly, immediately following such Transaction in excess of fifty percent (50%) of the combined voting power of the outstanding voting securities of the corporation or other entity resulting from such Transaction (the "Surviving Corporation") in substantially the same proportion as their ownership of the voting securities of the Company immediately before such Transaction and (2) the individuals who were members of the Company's Board of Directors immediately prior to the execution of the agreement providing for such Transaction constitute at least a majority of the members of the board of directors or the board of trustees, as the case may be, of the Surviving Corporation, or of a corporation or other entity beneficially directly or indirectly owning a majority of the outstanding voting securities of the Surviving Corporation, or (iii) the Company acquires assets of another company or a subsidiary of the Company merges or consolidates with another company (each, an "Other Transaction") and (a) the shareholders of the Company, immediately before such Other Transaction own, directly or indirectly, immediately following such Other Transaction 50% or less of the combined voting power of the outstanding voting securities of the corporation or other entity resulting from such Other Transaction (the "Other Surviving Corporation") in substantially the same proportion as their ownership of the voting securities of the Company immediately before such Other Transaction or (b) the individuals who were members of the Company's Board of Directors immediately prior to the execution of the agreement providing for such Other Transaction constitute less than a majority of the members of the board of directors or the board of trustees, as the case may be, of the Other Surviving Corporation, or of a corporation or other entity beneficially directly or indirectly owning a majority of the outstanding voting securities of the Other Surviving Corporation, provided, however, that an Other Transaction shall not be deemed to result in a "change in control" of the Company if immediately prior thereto the circumstances in (i)(a) or (i)(b) above exist. 5. Benefits. The Executive shall be entitled to six weeks of paid vacation each year and such other medical and other benefits as are afforded from time to time to all executive employees of the Company. The Company shall indemnify the Executive in the performance of his duties pursuant to the bylaws of the Company and to the fullest extent allowed by applicable law, including, without limitation, legal fees. 6. Earlier Termination. (a) If the Executive shall fail, because of illness or incapacity, to render the services contemplated by this Agreement for six successive months or for shorter periods aggregating nine months in any calendar year, the directors of the Company may determine, on the basis of medical evidence satisfactory to the Company, in the Company's sole discretion, that the Executive has become disabled. If within thirty (30) days after the date on which written notice of such determination is given to the Executive, the Executive shall not have returned to the full-time performance of his duties hereunder, this Agreement and the employment of the Executive hereunder shall be deemed terminated in accordance with Section 8 hereof. (b) Except as otherwise provided in this Agreement, if the Executive shall die during the term of this Agreement, this Agreement shall be deemed to have been terminated as of the date of death of the Executive. (c) The Company, by notice to the Executive, may terminate this Agreement for proper cause. As used herein, "proper cause" shall mean (i) the willful and continued failure by the Executive to substantially perform his duties with the Company (other than any such failure resulting from the Executive's incapacity due to physical or mental illness or any such actual or anticipated failure resulting from termination by the Executive for Good Reason (as defined below)) after a written demand for substantial performance is delivered to the Executive by the directors of the Company, which demand specifically identifies the manner in which the directors believe that the Executive has not substantially performed his duties, or (ii) the willful engaging by the Executive in conduct which is demonstrably and materially injurious to the Company, monetarily or otherwise. For purposes of this subsection 6(c), no act, or failure to act, on the Executive's part shall be deemed "willful" unless done, or omitted to be done, by the Executive otherwise than in good faith and in a manner that the Executive reasonably believed was in or not opposed to the best interests of the Company and its shareholders. Notwithstanding the foregoing, the Executive shall not be deemed to have been terminated for proper cause unless and until there shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters (3/4) of all of the directors of the Company at a meeting of the directors called and held for such purpose (after reasonable notice to the Executive and an opportunity for the Executive, together with counsel of his choosing, to be heard before the directors not less than 10 business days after the giving of such notice), finding that in the good faith opinion of the directors, the Executive conducted himself as set forth above in clause (i) or (ii) of the first sentence of this subsection 6(c) and specifying the particulars of such conduct in detail. (d) The Executive may terminate this Agreement for "Good Reason" if any of the following events occurs: (i) the assignment to the Executive of any duties materially inconsistent with his status as a senior executive officer of the Company or a substantial alteration in the nature or status of his responsibilities; (ii) the Company's breach of any of its agreements or obligations under this Agreement; (iii) the failure by the Company to pay the Executive any annual installment of a previous award under any bonus or incentive compensation arrangement; (iv) the failure of the Company to obtain a satisfactory agreement from any successor to assume and agree to perform this Agreement, as contemplated in Section 14 hereof; (v) any purported termination of the Executive's employment which is not effected pursuant to a Notice of Termination (defined below) satisfying the requirements of Section 7 below; or (vi) any change in control of the Company. 7. Notice of Termination. Any purported termination of the Executive's employment by the Company or by the Executive shall be communicated by a written Notice of Termination to the other party hereto in accordance with Section 16 hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated. 8. Date of Termination, Etc. "Date of Termination" shall mean (a) if the Executive's employment is terminated for disability, thirty (30) days after Notice of Termination is given (provided that the Executive shall not have returned to the full-time performance of his duties during such thirty (30) day period), and (b) if the Executive's employment is terminated pursuant to subsection 6(c) or 6(d) above or for any other reason (other than disability), the date specified in the Notice of Termination (which, in the case of a termination pursuant to subsection 6(c) above shall not be less than thirty (30) days, and in the case of a termination pursuant to subsection 6(d) above shall not be less than thirty (30) nor more than sixty (60) days, respectively, from the date such Notice of Termination is given); provided, however, if within thirty (30) days after any Notice of Termination is given the party receiving such Notice of Termination notifies the other party that a dispute exists concerning the termination, the Date of Termination shall be the date on which the dispute is finally resolved, either by mutual written agreement of the parties, by a binding arbitration award, or by a final judgment, order or decree of a court of competent jurisdiction (which is not appealable or the time for appeal therefrom having expired and no appeal having been perfected), except that with respect to a termination of this Agreement by reason of expiration of its term as provided in Section 2, the Date of Termination shall be the date the term hereof expires pursuant to Section 2, regardless of whether a dispute exists with respect thereto; provided, further, that the Date of Termination shall be extended by a notice of dispute only if such notice is given in good faith and the party giving such notice pursues the resolution of such dispute with reasonable diligence. Notwithstanding the pendency of any such dispute, the Company will continue to pay the Executive his full compensation in effect when the notice giving rise to the dispute was given (including, but not limited to, base salary and installments under any bonus or incentive compensation plan) and continue the Executive as a participant in all compensation, benefit and insurance plans in which he was participating when the notice giving rise to the dispute was given, until the dispute is finally resolved in accordance with this Section. Amounts paid under this Section 8 are in addition to all other amounts due under this Agreement and shall not be offset against or reduce any other amounts due under this Agreement. If it is finally determined by a binding arbitration award, or by a final judgment, order or decree of a court of competent jurisdiction (which is not appealable or the time for appeal therefrom having expired and no appeal having been perfected), that the Executive was terminated for proper cause, the Executive shall promptly remit to the Company the amount of any cash payments and the value of any non-cash benefits paid pursuant to this Section 8 to which the Executive would not otherwise have been entitled. 9. Compensation Upon Termination or During Disability. Upon termination of the Executive's employment or during a period of disability the Executive shall be entitled to the following compensation and benefits: (a) During any period that the Executive fails to perform his duties hereunder as a result of incapacity due to physical or mental illness, the Executive shall continue to receive his base salary at the rate in effect at the commencement of any such period until his employment is terminated pursuant to subsection 6(a) hereof, together with any bonus that may be payable pursuant to subsection 3(b). Thereafter, the compensation provided in Section 3 hereof shall continue to be paid to the Executive for the longer of (i) a period of 36 months after such termination and (ii) the remaining term of this Agreement pursuant to Section 2 hereof, in either case at the annual base salary in effect at the time his employment is terminated, and the Executive shall continue to be covered by the Company's health, dental and life insurance benefits for such period. (b) If the Executive's employment shall be terminated, at any time prior to a change in control of the Company, for proper cause or by him other than for Good Reason, the Executive shall be paid the Executive's full base salary through the Date of Termination at the rate in effect at the time Notice of Termination is given and the Company shall thereafter have no further obligations to the Executive under this Agreement. (c) If the Executive's employment shall be terminated by reason of the Executive's death, the compensation provided in subsection 3(a) hereof shall be paid to the person designated from time to time in writing by the Executive and, if not so designated, to the Executive's estate for the longer of (i) a period of 36 months following such termination and (ii) the remaining term of this Agreement pursuant to Section 2 hereof, in either case at the annual base salary in effect at the time of his death. The person designated by the Executive and, if not so designated, the Executive's estate shall also receive (i) any bonus awarded pursuant to subsection 3(b) and not yet paid and (ii) with respect to the year in which the Executive dies (in the event the directors of the Company have not yet determined whether to award the Executive a bonus for such calendar year), a bonus equal to the product of (x) the annual base salary payable to the Executive pursuant to subsection 3(a) from January 1 of the year in which the Executive shall have died through the last day of the month during which the Executive shall have died and (y) the Deemed Bonus Fraction (as defined in subsection 9(d) below). (d) If the Executive's employment shall be terminated (I) by the Company other than for proper cause or disability or (II) by the Executive for Good Reason, then the Executive shall be entitled to the benefits provided below: (i) the Company shall pay as severance pay to the Executive, not later than the Date of Termination, a lump sum severance payment (the "Severance Payment") equal to (A) the aggregate of all compensation due to the Executive hereunder had his employment not been so terminated, including, without limitation, all bonus payments which would have been due to the Executive pursuant to subsection 3(b), assuming that the Executive would have received a bonus for each calendar year equal to the product of (x) the annual base salary that would be payable to the Executive pursuant to subsection 3(a) for such calendar year and (y) the greater of (i) 1/2 or (ii) the percentage of the Executive's base salary for the immediately preceding fiscal year that was paid to the Executive as a bonus for the immediately preceding fiscal year, expressed as a fraction (the greater of clauses (i) and (ii) being herein referred to as the "Deemed Bonus Fraction"), through the expiration of this Agreement, plus (B) the greater of (x) the aggregate of all compensation due to the Executive hereunder had his employment not been so terminated, including, without limitation, all bonus payments which would have been due to the Executive pursuant to subsection 3(b), assuming that the Executive would have received a bonus for each calendar year equal to the product of (i) the annual base salary that would be payable to the Executive pursuant to subsection 3(a) for such calendar year and (ii) the Deemed Bonus Fraction, through the expiration of this Agreement (assuming, solely for purposes of this subsection 9(d)(i)(B)(x), that this Agreement expires on the last day of the thirty-sixth month following the end of the calendar year in which the Date of Termination occurs), or (y) 2.99 times the "base amount" within the meaning of Sections 280G(b)(3) and 280G(d) of the Internal Revenue Code of 1986, as amended (the "Code"), and any applicable temporary or final regulations promulgated thereunder, or its equivalent as provided in any successor statute or regulation; provided, however, if the Executive's employment shall be terminated other than pursuant to subsection 6(d)(vi), the Severance Payment shall equal only the greatest of the amounts set forth in subsection 9(d)(i)(A), 9(d)(i)(B)(x) or 9(d)(i)(B)(y) above. If Section 280G of the Code (and any successor provisions thereto) shall be repealed or otherwise be inapplicable, then the Severance Payment under clause (i)(B)(y) above shall equal 2.99 times the average of the Executive's annual compensation (from the Company or from Wellsford Residential, as the case may) during the three calendar year period preceding the calendar year in which the Date of Termination occurs. For purposes of determining annual compensation in the preceding sentence, compensation payable to the Executive by the Company or by Wellsford Residential shall include every type and form of compensation includible in the Executive's gross income in respect of his employment by the Company or by Wellsford Residential (including, without limitation, all income reported on an Internal Revenue Service Form W-2), compensation income recognized as a result of the Executive's exercise of stock options or sale of the stock so acquired and including, without limitation, any annual bonus payments previously paid to such Executive. For purposes of calculating the "base amount" within the meaning of Sections 280G(b)(3) and 280G(d) of the Code and annual compensation in the second preceding sentence, any income of the Executive that constitutes a "parachute payment" within the meaning of Section 280G(b)(2) of the Code shall not be taken into account in making such calculations; and (ii) an amount equal to the Additional Amount pursuant to Section 10 below. (e) If the Executive's employment shall be terminated, at any time following a change in control of the Company, for proper cause, the Company shall pay the Executive his full base salary through the Date of Termination at the higher of the rate in effect at the time Notice of Termination is given and the rate in effect immediately prior to the change in control of the Company and the Company shall have no further obligations to the Executive under this Agreement. (f) In addition to all other amounts payable to the Executive under this Section 9, the Executive shall be entitled to receive all benefits payable to him under the Company's Pension Plans applicable to him and any other plan or agreement relating to retirement benefits as in effect upon the occurrence of a change in control. (g) The Executive shall not be required to mitigate the amount of any payment provided for in this Section 9 by seeking other employment or otherwise, nor shall the amount of any payment or benefit provided for in this Section 9 be reduced by any compensation earned by him as the result of employment by another employer or by retirement benefits after the Date of Termination, or otherwise, except as specifically provided in this Section 9. 10. Additional Amount. Whether or not Section 9 is applicable, if in the opinion of tax counsel selected by the Executive and reasonably accept- able to the Company, the Executive has or will receive any compensation or recognize any income (whether or not pursuant to this Agreement or any plan or other arrangement of the Company and whether or not the Executive's employment with the Company has terminated) which constitute an "excess parachute payment" within the meaning of Section 280G(b)(1) of the Code (or for which a tax is otherwise payable under Section 4999 of the Code), then the Company shall pay the Executive an additional amount (the "Additional Amount") equal to the sum of (i) all taxes payable by the Executive under Section 4999 of the Code with respect to (a) all such excess parachute payments (or otherwise), and (b) the Additional Amount, plus (ii) all federal, state and local income taxes payable by Executive with respect to the Additional Amount. The amounts payable pursuant to this Section 10 shall be paid by the Company to the Executive within 30 days of the written request therefor made by the Executive, but in all events (whether or not there has been a written request by the Executive) not later than the date of the "change in control of the Company", unless otherwise agreed to in writing by the Executive. 11. Income Tax Payment. Whether or not Section 9 is applicable, if (i) the Executive has or will receive any compensation or recognize any income (whether or not pursuant to this Agreement or any plan or other arrangement of the Company and whether or not the Executive's employment with the Company has terminated) in connection with a "change in control" of the Company (as that term may be interpreted in this Agreement and any plan or other arrangement of the Company), and (ii) such compensation or income represents non-cash compensation or income, then the Company shall pay the Executive in cash an amount (the "Income Tax Payment") equal to all federal, state and local income taxes payable by Executive with respect to such non-cash compensation or income. The Income Tax Payment shall be paid by the Company to the Executive not later than the date of the "change in control of the Company", unless otherwise agreed to in writing by the Executive. 12. Indemnification. The Company shall indemnify and hold harmless the Executive for and against, and shall pay to the Executive an amount (the "Indemnified Amount") equal to, the sum of (i) all taxes payable by the Executive under Section 4999 of the Code with respect to (a) any compensation received and any income recognized by the Executive in connection with the Merger and Distribution as described in the Joint Proxy Statement/ Prospectus/Information Statement, dated April 25, 1997, of Wellsford Residential and EQR and (b) the Indemnified Amount, plus (ii) all federal, state and local income taxes payable by Executive with respect to the Indemnified Amount; provided, however, that the Company shall have no obligations under this Section 12 with respect to items comprising the Indemnified Amount to the extent already paid on behalf of the Executive by Wellsford Residential or the surviving trust in the Merger. 13. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES. 14. Entire Agreement. This Agreement sets forth the entire agreement of the parties and is intended to supersede all prior employment negotiations, understandings and agreements. No provision of this Agreement may be waived or changed, except by a writing signed by the party to be charged with such waiver or change. 15. Successors; Binding Agreement. (a) This Agreement shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive should die while any amount would still be payable to him hereunder if he had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the Executive's devisee, legatee or other designee or, if there is no such designee, to the Executive's estate. (b) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree in writing to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain and deliver to Executive such assumption and agreement prior to (but effective only upon) such succession shall be a breach of this Agreement, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement, expressly, by operation of law, or otherwise. 16. Notices. All notices provided for in this Agreement shall be in writing, and shall be deemed to have been duly given when delivered personally to the party to receive the same, when given by telex, telegram or mailgram, or when mailed first class postage prepaid, by registered or certified mail, return receipt requested, addressed to the party to receive the same at his or its address above set forth, or such other address as the party to receive the same shall have specified by written notice given in the manner provided for in this Section 16. All notices shall be deemed to have been given as of the date of personal delivery, transmittal or mailing thereof. 17. Severability. If any provision in this Agreement is determined to be invalid, it shall not affect the validity or enforceability of any of the other remaining provisions hereof. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. WELLSFORD REAL PROPERTIES, INC. By: /s/ Edward Lowenthal ----------------------------- Name: Edward Lowenthal Title: President EXECUTIVE: /s/ Jeffrey H. Lynford --------------------------------- Jeffrey H. Lynford EX-10.49 33 EMPLOYMENT AGREEMENT -------------------- AGREEMENT, dated as of May 30, 1997, between WELLSFORD REAL PROPERTIES, INC., a Maryland corporation with offices at 610 Fifth Avenue, New York, New York 10020 (the "Company"), and EDWARD LOWENTHAL, an individual residing at 201 Hamilton Road, Ridgewood, New Jersey 07450 (the "Executive"). WHEREAS, the Executive is an executive of Wellsford Residential Property Trust, a Maryland real estate investment trust ("Wellsford Residential"); WHEREAS, Equity Residential Properties Trust, a Maryland real estate investment trust ("EQR"), is merging with and into Wellsford Residential as of the date hereof (the "Merger"); WHEREAS, immediately prior to the Merger, Wellsford Residential is distributing to its common shareholders, pro rata, all of the shares of common stock that it owns in the Company (the "Distribution"); and WHEREAS, the Company desires to employ the Executive, and the Executive desires to be employed by the Company. IT IS AGREED: 1. Duties. (a) During the term of the Executive's employment hereunder the Executive shall serve and the Company shall employ the Executive as Chairman of the Board to perform such executive or administrative services for the Company consistent with those of a Chairman of the Board as may be assigned to the Executive by the directors of the Company. The Executive hereby accepts such employment and agrees to perform such ser- vices. (b) The Executive shall devote such time, attention and energies during business hours to the performance of his duties hereunder as is necessary to properly carry out the responsibilities of his office. (c) The Executive shall cooperate with the Company, including taking such medical examinations as the Company reasonably shall deem necessary, if the Company shall desire to obtain medical, disability or life insurance with respect to the Executive. Where reasonably possible, the Company shall cooperate with the Executive's request to have such examinations performed by the Executive's personal physician or another physician reasonably acceptable to the Executive. (d) The Executive shall not be required to relocate or conduct the Company's business outside the New York, New York area in order to perform his duties under this Agreement but shall undertake such reasonable business travel as may be necessary to perform said duties (for which the Executive shall be reimbursed pursuant to Section 4 below for costs and expenses incurred in connection therewith). 2. Employment Term. This Agreement shall commence on May 30, 1997 and shall continue in effect through December 31, 2002; provided, however, that, on January 1, 2003 and on each January 1 thereafter, the term of this Agreement shall automatically be extended for one additional year beyond such January 1 unless, not later than June 30 of the preceding year, either the Executive or the Company shall have given notice to the other not to extend this Agreement. 3. Compensation. For all services rendered by the Executive pursuant to this Agreement: (a) The Company shall pay to the Executive an annual base salary at the following rates: (i) for the period from May 30, 1997 through December 31, 1997 - $275,000; (ii) for the period from January 1, 1998 through December 31, 1998 - $283,250; (iii) for the period from January 1, 1999 through December 31, 1999 - $291,748; (iv) for the period from January 1, 2000 through December 31, 2000 - $300,500; (v) for the period from January 1, 2001 through December 31, 2001 - $309,515; (vi) for the period from January 1, 2002 through December 31, 2002 - $318,800; and (vii) for each additional year thereafter, the annual base salary for the immediately preceding year plus 3% of such annual base salary. All such compensation shall be paid bi-weekly or at such other regular intervals, not less frequently than monthly, as the Company may establish from time to time for executive employees of the Company. (b) In addition to the compensation set forth in subsection 3(a) above, the Executive shall be awarded such bonus for each calendar year or partial calendar year of his employment hereunder as the directors of the Company shall determine in their sole discretion. In determining such bonus, the Executive understands that the directors will consider, without limitation, the following factors with respect to the applicable calendar year or partial calendar year: the Company's financial performance, business performance and growth during such period; Executive's responsibilities as an officer of the Company (including his participation in transactions of particular financial or business significance to the Company) during such period; the total compensation package paid to executive officers having similar responsibilities as the Executive who are employed by entities which are similar to the Company; and such other factors as the directors may deem appropriate in their sole discretion. Such bonus may consist of cash; grants of shares ("Shares") of Common Stock of the Company; options to purchase Shares; loans to purchase Shares; share appreciation rights (whether independent of or in conjunction with awards of options); and such other awards as the directors in their sole discretion may deem appropriate and which they believe are in furtherance of the growth of long-term stockholder value of the Company. 4. Expenses. (a) The Company shall pay for all legal and accounting fees and expenses incurred by the Executive in connection with the structuring, negotiation and preparation of this Agreement. The Company shall reimburse the Executive for all out-of-pocket expenses actually and necessarily incurred by him in the conduct of the business of the Company against reasonable substantiation submitted with respect thereto. (b) Unless the provisions of subsection 4(c) below shall apply, the Company shall reimburse the Executive for all legal fees and related expenses (including the costs of experts, evidence and counsel) paid by the Executive as a result of (i) the termination of Executive's employment (including all such fees and expenses, if any, incurred in contesting or disputing any such termination of employment), (ii) the Executive seeking to obtain or enforce any right or benefit provided by this Agreement or by any other plan or arrangement maintained by the Company under which the Executive is or may be entitled to receive benefits, (iii) the Executive's hearing before the directors as contemplated in subsection 6(c) of this Agreement or (iv) any action taken by the Company against the Executive; provided, however, that the Company shall reimburse the legal fees and related expenses described in this subsection 4(b) only if and when a final judgement has been rendered in favor of the Executive and all appeals related to any such action have been exhausted. (c) The Company shall pay all legal fees and related expenses (including the costs of experts, evidence and counsel) incurred by the Executive as they become due as a result of (i) the termination of Executive's employment (including all such fees and expenses, if any, incurred in contesting or disputing any such termination of employment), (ii) the Executive seeking to obtain or enforce any right or benefit provided by this Agreement or by any other plan or arrangement maintained by the Company under which the Executive is or may be entitled to receive benefits, (iii) the Executive's hearing before the directors as contemplated in subsection 6(c) of this Agreement or (iv) any action taken by the Company against the Executive, unless and until such time that a final judgement has been rendered in favor of the Company and all appeals related to any such action have been exhausted; provided, however, that the circumstances set forth above occurred on or after a change in control of the Company. (d) For purposes of this Agreement, a "change in control of the Company" shall be deemed to occur if: (i) there shall have occurred a change in control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as in effect on the date hereof, whether or not the Company is then subject to such reporting requirement, provided, however, that there shall not be deemed to be a "change in control" of the Company if immediately prior to the occurrence of what would otherwise be a "change in control" of the Company (a) the Executive is the other party to the transaction (a "Control Event") that would otherwise result in a "change in control" of the Company or (b) the Executive is an executive officer, trustee, director or more than 5% equity holder of the other party to the Control Event or of any entity, directly or indirectly, controlling such other party, (ii) the Company merges or consolidates with, or sells all or substantially all of its assets to, another company (each, a "Transaction"), provided, however, that a Transaction shall not be deemed to result in a "change in control" of the Company if (a) immediately prior thereto the circumstances in (i)(a) or (i)(b) above exist, or (b) (1) the shareholders of the Company, immediately before such Transaction own, directly or indirectly, immediately following such Transaction in excess of fifty percent (50%) of the combined voting power of the outstanding voting securities of the corporation or other entity resulting from such Transaction (the "Surviving Corporation") in substantially the same proportion as their ownership of the voting securities of the Company immediately before such Transaction and (2) the individuals who were members of the Company's Board of Directors immediately prior to the execution of the agreement providing for such Transaction constitute at least a majority of the members of the board of directors or the board of trustees, as the case may be, of the Surviving Corporation, or of a corporation or other entity beneficially directly or indirectly owning a majority of the outstanding voting securities of the Surviving Corporation, or (iii) the Company acquires assets of another company or a subsidiary of the Company merges or consolidates with another company (each, an "Other Transaction") and (a) the shareholders of the Company, immediately before such Other Transaction own, directly or indirectly, immediately following such Other Transaction 50% or less of the combined voting power of the outstanding voting securities of the corporation or other entity resulting from such Other Transaction (the "Other Surviving Corporation") in substantially the same proportion as their ownership of the voting securities of the Company immediately before such Other Transaction or (b) the individuals who were members of the Company's Board of Directors immediately prior to the execution of the agreement providing for such Other Transaction constitute less than a majority of the members of the board of directors or the board of trustees, as the case may be, of the Other Surviving Corporation, or of a corporation or other entity beneficially directly or indirectly owning a majority of the outstanding voting securities of the Other Surviving Corporation, provided, however, that an Other Transaction shall not be deemed to result in a "change in control" of the Company if immediately prior thereto the circumstances in (i)(a) or (i)(b) above exist. 5. Benefits. The Executive shall be entitled to six weeks of paid vacation each year and such other medical and other benefits as are afforded from time to time to all executive employees of the Company. The Company shall indemnify the Executive in the performance of his duties pursuant to the bylaws of the Company and to the fullest extent allowed by applicable law, including, without limitation, legal fees. 6. Earlier Termination. (a) If the Executive shall fail, because of illness or incapacity, to render the services contemplated by this Agreement for six successive months or for shorter periods aggregating nine months in any calendar year, the directors of the Company may determine, on the basis of medical evidence satisfactory to the Company, in the Company's sole discretion, that the Executive has become disabled. If within thirty (30) days after the date on which written notice of such determination is given to the Executive, the Executive shall not have returned to the full-time performance of his duties hereunder, this Agreement and the employment of the Executive hereunder shall be deemed terminated in accordance with Section 8 hereof. (b) Except as otherwise provided in this Agreement, if the Executive shall die during the term of this Agreement, this Agreement shall be deemed to have been terminated as of the date of death of the Executive. (c) The Company, by notice to the Executive, may terminate this Agreement for proper cause. As used herein, "proper cause" shall mean (i) the willful and continued failure by the Executive to substantially perform his duties with the Company (other than any such failure resulting from the Executive's incapacity due to physical or mental illness or any such actual or anticipated failure resulting from termination by the Executive for Good Reason (as defined below)) after a written demand for substantial performance is delivered to the Executive by the directors of the Company, which demand specifically identifies the manner in which the directors believe that the Executive has not substantially performed his duties, or (ii) the willful engaging by the Executive in conduct which is demonstrably and materially injurious to the Company, monetarily or otherwise. For purposes of this subsection 6(c), no act, or failure to act, on the Executive's part shall be deemed "willful" unless done, or omitted to be done, by the Executive otherwise than in good faith and in a manner that the Executive reasonably believed was in or not opposed to the best interests of the Company and its shareholders. Notwithstanding the foregoing, the Executive shall not be deemed to have been terminated for proper cause unless and until there shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters (3/4) of all of the directors of the Company at a meeting of the directors called and held for such purpose (after reasonable notice to the Executive and an opportunity for the Executive, together with counsel of his choosing, to be heard before the directors not less than 10 business days after the giving of such notice), finding that in the good faith opinion of the directors, the Executive conducted himself as set forth above in clause (i) or (ii) of the first sentence of this subsection 6(c) and specifying the particulars of such conduct in detail. (d) The Executive may terminate this Agreement for "Good Reason" if any of the following events occurs: (i) the assignment to the Executive of any duties materially inconsistent with his status as a senior executive officer of the Company or a substantial alteration in the nature or status of his responsibilities; (ii) the Company's breach of any of its agreements or obligations under this Agreement; (iii) the failure by the Company to pay the Executive any annual installment of a previous award under any bonus or incentive compensation arrangement; (iv) the failure of the Company to obtain a satisfactory agreement from any successor to assume and agree to perform this Agreement, as contemplated in Section 14 hereof; (v) any purported termination of the Executive's employment which is not effected pursuant to a Notice of Termination (defined below) satisfying the requirements of Section 7 below; or (vi) any change in control of the Company. 7. Notice of Termination. Any purported termination of the Executive's employment by the Company or by the Executive shall be communicated by a written Notice of Termination to the other party hereto in accordance with Section 16 hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated. 8. Date of Termination, Etc. "Date of Termination" shall mean (a) if the Executive's employment is terminated for disability, thirty (30) days after Notice of Termination is given (provided that the Executive shall not have returned to the full-time performance of his duties during such thirty (30) day period), and (b) if the Executive's employment is terminated pursuant to subsection 6(c) or 6(d) above or for any other reason (other than disability), the date specified in the Notice of Termination (which, in the case of a termination pursuant to subsection 6(c) above shall not be less than thirty (30) days, and in the case of a termination pursuant to subsection 6(d) above shall not be less than thirty (30) nor more than sixty (60) days, respectively, from the date such Notice of Termination is given); provided, however, if within thirty (30) days after any Notice of Termination is given the party receiving such Notice of Termination notifies the other party that a dispute exists concerning the termination, the Date of Termination shall be the date on which the dispute is finally resolved, either by mutual written agreement of the parties, by a binding arbitration award, or by a final judgment, order or decree of a court of competent jurisdiction (which is not appealable or the time for appeal therefrom having expired and no appeal having been perfected), except that with respect to a termination of this Agreement by reason of expiration of its term as provided in Section 2, the Date of Termination shall be the date the term hereof expires pursuant to Section 2, regardless of whether a dispute exists with respect thereto; provided, further, that the Date of Termination shall be extended by a notice of dispute only if such notice is given in good faith and the party giving such notice pursues the resolution of such dispute with reasonable diligence. Notwithstanding the pendency of any such dispute, the Company will continue to pay the Executive his full compensation in effect when the notice giving rise to the dispute was given (including, but not limited to, base salary and installments under any bonus or incentive compensation plan) and continue the Executive as a participant in all compensation, benefit and insurance plans in which he was participating when the notice giving rise to the dispute was given, until the dispute is finally resolved in accordance with this Section. Amounts paid under this Section 8 are in addition to all other amounts due under this Agreement and shall not be offset against or reduce any other amounts due under this Agreement. If it is finally determined by a binding arbitration award, or by a final judgment, order or decree of a court of competent jurisdiction (which is not appealable or the time for appeal therefrom having expired and no appeal having been perfected), that the Executive was terminated for proper cause, the Executive shall promptly remit to the Company the amount of any cash payments and the value of any non-cash benefits paid pursuant to this Section 8 to which the Executive would not otherwise have been entitled. 9. Compensation Upon Termination or During Disability. Upon termination of the Executive's employment or during a period of disability the Executive shall be entitled to the following compensation and benefits: (a) During any period that the Executive fails to perform his duties hereunder as a result of incapacity due to physical or mental illness, the Executive shall continue to receive his base salary at the rate in effect at the commencement of any such period until his employment is terminated pursuant to subsection 6(a) hereof, together with any bonus that may be payable pursuant to subsection 3(b). Thereafter, the compensation provided in Section 3 hereof shall continue to be paid to the Executive for the longer of (i) a period of 36 months after such termination and (ii) the remaining term of this Agreement pursuant to Section 2 hereof, in either case at the annual base salary in effect at the time his employment is terminated, and the Executive shall continue to be covered by the Company's health, dental and life insurance benefits for such period. (b) If the Executive's employment shall be terminated, at any time prior to a change in control of the Company, for proper cause or by him other than for Good Reason, the Executive shall be paid the Executive's full base salary through the Date of Termination at the rate in effect at the time Notice of Termination is given and the Company shall thereafter have no further obligations to the Executive under this Agreement. (c) If the Executive's employment shall be terminated by reason of the Executive's death, the compensation provided in subsection 3(a) hereof shall be paid to the person designated from time to time in writing by the Executive and, if not so designated, to the Executive's estate for the longer of (i) a period of 36 months following such termination and (ii) the remaining term of this Agreement pursuant to Section 2 hereof, in either case at the annual base salary in effect at the time of his death. The person designated by the Executive and, if not so designated, the Executive's estate shall also receive (i) any bonus awarded pursuant to subsection 3(b) and not yet paid and (ii) with respect to the year in which the Executive dies (in the event the directors of the Company have not yet determined whether to award the Executive a bonus for such calendar year), a bonus equal to the product of (x) the annual base salary payable to the Executive pursuant to subsection 3(a) from January 1 of the year in which the Executive shall have died through the last day of the month during which the Executive shall have died and (y) the Deemed Bonus Fraction (as defined in subsection 9(d) below). (d) If the Executive's employment shall be terminated (I) by the Company other than for proper cause or disability or (II) by the Executive for Good Reason, then the Executive shall be entitled to the benefits provided below: (i) the Company shall pay as severance pay to the Executive, not later than the Date of Termination, a lump sum severance payment (the "Severance Payment") equal to (A) the aggregate of all compensation due to the Executive hereunder had his employment not been so terminated, including, without limitation, all bonus payments which would have been due to the Executive pursuant to subsection 3(b), assuming that the Executive would have received a bonus for each calendar year equal to the product of (x) the annual base salary that would be payable to the Executive pursuant to subsection 3(a) for such calendar year and (y) the greater of (i) 1/2 or (ii) the percentage of the Executive's base salary for the immediately preceding fiscal year that was paid to the Executive as a bonus for the immediately preceding fiscal year, expressed as a fraction (the greater of clauses (i) and (ii) being herein referred to as the "Deemed Bonus Fraction"), through the expiration of this Agreement, plus (B) the greater of (x) the aggregate of all compensation due to the Executive hereunder had his employment not been so terminated, including, without limitation, all bonus payments which would have been due to the Executive pursuant to subsection 3(b), assuming that the Executive would have received a bonus for each calendar year equal to the product of (i) the annual base salary that would be payable to the Executive pursuant to subsection 3(a) for such calendar year and (ii) the Deemed Bonus Fraction, through the expiration of this Agreement (assuming, solely for purposes of this subsection 9(d)(i)(B)(x), that this Agreement expires on the last day of the thirty-sixth month following the end of the calendar year in which the Date of Termination occurs), or (y) 2.99 times the "base amount" within the meaning of Sections 280G(b)(3) and 280G(d) of the Internal Revenue Code of 1986, as amended (the "Code"), and any applicable temporary or final regulations promulgated thereunder, or its equivalent as provided in any successor statute or regulation; provided, however, if the Executive's employment shall be terminated other than pursuant to subsection 6(d)(vi), the Severance Payment shall equal only the greatest of the amounts set forth in subsection 9(d)(i)(A), 9(d)(i)(B)(x) or 9(d)(i)(B)(y) above. If Section 280G of the Code (and any successor provisions thereto) shall be repealed or otherwise be inapplicable, then the Severance Payment under clause (i)(B)(y) above shall equal 2.99 times the average of the Executive's annual compensation (from the Company or from Wellsford Residential, as the case may) during the three calendar year period preceding the calendar year in which the Date of Termination occurs. For purposes of determining annual compensation in the preceding sentence, compensation payable to the Executive by the Company or by Wellsford Residential shall include every type and form of compensation includible in the Executive's gross income in respect of his employment by the Company or by Wellsford Residential (including, without limitation, all income reported on an Internal Revenue Service Form W-2), compensation income recognized as a result of the Executive's exercise of stock options or sale of the stock so acquired and including, without limitation, any annual bonus payments previously paid to such Executive. For purposes of calculating the "base amount" within the meaning of Sections 280G(b)(3) and 280G(d) of the Code and annual compensation in the second preceding sentence, any income of the Executive that constitutes a "parachute payment" within the meaning of Section 280G(b)(2) of the Code shall not be taken into account in making such calculations; and (ii) an amount equal to the Additional Amount pursuant to Section 10 below. (e) If the Executive's employment shall be terminated, at any time following a change in control of the Company, for proper cause, the Company shall pay the Executive his full base salary through the Date of Termination at the higher of the rate in effect at the time Notice of Termination is given and the rate in effect immediately prior to the change in control of the Company and the Company shall have no further obligations to the Executive under this Agreement. (f) In addition to all other amounts payable to the Executive under this Section 9, the Executive shall be entitled to receive all benefits payable to him under the Company's Pension Plans applicable to him and any other plan or agreement relating to retirement benefits as in effect upon the occurrence of a change in control. (g) The Executive shall not be required to mitigate the amount of any payment provided for in this Section 9 by seeking other employment or otherwise, nor shall the amount of any payment or benefit provided for in this Section 9 be reduced by any compensation earned by him as the result of employment by another employer or by retirement benefits after the Date of Termination, or otherwise, except as specifically provided in this Section 9. 10. Additional Amount. Whether or not Section 9 is applicable, if in the opinion of tax counsel selected by the Executive and reasonably accept- able to the Company, the Executive has or will receive any compensation or recognize any income (whether or not pursuant to this Agreement or any plan or other arrangement of the Company and whether or not the Executive's employment with the Company has terminated) which constitute an "excess parachute payment" within the meaning of Section 280G(b)(1) of the Code (or for which a tax is otherwise payable under Section 4999 of the Code), then the Company shall pay the Executive an additional amount (the "Additional Amount") equal to the sum of (i) all taxes payable by the Executive under Section 4999 of the Code with respect to (a) all such excess parachute payments (or otherwise), and (b) the Additional Amount, plus (ii) all federal, state and local income taxes payable by Executive with respect to the Additional Amount. The amounts payable pursuant to this Section 10 shall be paid by the Company to the Executive within 30 days of the written request therefor made by the Executive, but in all events (whether or not there has been a written request by the Executive) not later than the date of the "change in control of the Company", unless otherwise agreed to in writing by the Executive. 11. Income Tax Payment. Whether or not Section 9 is applicable, if (i) the Executive has or will receive any compensation or recognize any income (whether or not pursuant to this Agreement or any plan or other arrangement of the Company and whether or not the Executive's employment with the Company has terminated) in connection with a "change in control" of the Company (as that term may be interpreted in this Agreement and any plan or other arrangement of the Company), and (ii) such compensation or income represents non-cash compensation or income, then the Company shall pay the Executive in cash an amount (the "Income Tax Payment") equal to all federal, state and local income taxes payable by Executive with respect to such non-cash compensation or income. The Income Tax Payment shall be paid by the Company to the Executive not later than the date of the "change in control of the Company", unless otherwise agreed to in writing by the Executive. 12. Indemnification. The Company shall indemnify and hold harmless the Executive for and against, and shall pay to the Executive an amount (the "Indemnified Amount") equal to, the sum of (i) all taxes payable by the Executive under Section 4999 of the Code with respect to (a) any compensation received and any income recognized by the Executive in connection with the Merger and Distribution as described in the Joint Proxy Statement/ Prospectus/Information Statement, dated April 25, 1997, of Wellsford Residential and EQR and (b) the Indemnified Amount, plus (ii) all federal, state and local income taxes payable by Executive with respect to the Indemnified Amount; provided, however, that the Company shall have no obligations under this Section 12 with respect to items comprising the Indemnified Amount to the extent already paid on behalf of the Executive by Wellsford Residential or the surviving trust in the Merger. 13. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES. 14. Entire Agreement. This Agreement sets forth the entire agreement of the parties and is intended to supersede all prior employment negotiations, understandings and agreements. No provision of this Agreement may be waived or changed, except by a writing signed by the party to be charged with such waiver or change. 15. Successors; Binding Agreement. (a) This Agreement shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive should die while any amount would still be payable to him hereunder if he had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the Executive's devisee, legatee or other designee or, if there is no such designee, to the Executive's estate. (b) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree in writing to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain and deliver to Executive such assumption and agreement prior to (but effective only upon) such succession shall be a breach of this Agreement, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement, expressly, by operation of law, or otherwise. 16. Notices. All notices provided for in this Agreement shall be in writing, and shall be deemed to have been duly given when delivered personally to the party to receive the same, when given by telex, telegram or mailgram, or when mailed first class postage prepaid, by registered or certified mail, return receipt requested, addressed to the party to receive the same at his or its address above set forth, or such other address as the party to receive the same shall have specified by written notice given in the manner provided for in this Section 16. All notices shall be deemed to have been given as of the date of personal delivery, transmittal or mailing thereof. 17. Severability. If any provision in this Agreement is determined to be invalid, it shall not affect the validity or enforceability of any of the other remaining provisions hereof. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. WELLSFORD REAL PROPERTIES, INC. By: /s/ Jeffrey H. Lynford ------------------------------- Name: Jeffrey H. Lynford Title: Chairman of the Board EXECUTIVE: /s/ Edward Lowenthal --------------------------------- Edward Lowenthal EX-10.50 34 EMPLOYMENT AGREEMENT -------------------- AGREEMENT, dated as of May 30, 1997, between WELLSFORD REAL PROPERTIES, INC., a Maryland corporation with offices at 610 Fifth Avenue, New York, New York 10020 (the "Company"), and Gregory F. Hughes, an individual residing at 5 Somerset Avenue, Garden City, New York 11530 ("Executive"). WHEREAS, the Executive is an executive of Wellsford Residential Property Trust, a Maryland real estate investment trust ("Wellsford Residential"); WHEREAS, Equity Residential Properties Trust, a Maryland real estate investment trust, is merging with and into Wellsford Residential as of the date hereof (the "Merger"); WHEREAS, immediately prior to the Merger, Wellsford Residential is distributing to its common shareholders, pro rata, all of the shares of common stock that it owns in the Company; and WHEREAS, the Company desires to employ the Executive, and the Executive desires to be employed by the Company. IT IS AGREED: 1. Duties. (a) During the term of the Executive's employment hereunder the Executive shall serve and the Company shall employ the Executive as Chief Financial Officer to perform such executive or administrative services for the Company consistent with those of a Chief Financial Officer as may be assigned to the Executive by the directors, Chairman of the Board or President of the Company. The Executive hereby accepts such employment and agrees to perform such services. (b) The Executive shall devote substantially all of his time, attention and energies during business hours to the performance of his duties hereunder. The Executive shall give advance written notice to the Chairman of the Board and President of any intended active involvement in any other business enterprise. (c) The Executive shall cooperate with the Company, including taking such medical examinations as the Company reasonably shall deem necessary, if the Company shall desire to obtain medical, disability or life insurance with respect to the Executive. (d) The Executive shall not be required to relocate or conduct the Company's business outside the New York, New York area in order to perform his duties under this Agreement but shall undertake such reasonable business travel as may be necessary to perform said duties (for which the Executive shall be reimbursed pursuant to Section 4 below for costs and expenses incurred in connection therewith). 2. Employment Term. This Agreement shall commence on May 30, 1997 and shall continue in effect through May 29, 1999; provided, however, that, on May 30, 1999 and on each May 30 thereafter, the term of this Agreement shall automatically be extended for one additional year beyond such May 30 unless, not later than the immediately preceding February 28, either the Executive or the Company shall have given notice to the other not to extend this Agreement. 3. Compensation. For all services rendered by the Executive pursuant to this Agreement: (a) The Company shall pay to the Executive an annual base salary at the following rates: (i) for the period from May 30, 1997 through May 29, 1998 - $200,000; (ii) for the period from May 30, 1998 through May 29, 1999 - $206,000; and (iii) for each additional year thereafter, the annual base salary for the immediately preceding year plus three percent (3%) of such annual base salary. All such compensation shall be paid bi-weekly or at such other regular intervals, not less frequently than monthly, as the Company may establish from time to time for executive officers of the Company. (b) In addition to the compensation set forth in subsection 3(a) above, during the term of this Agreement, the Executive shall be entitled to a cash bonus after the end of each calendar year (and after the end of any partial calendar year in which this Agreement shall expire pursuant to Section 2) equal to at least 50% of the base salary paid to the Executive for such calendar year (including, in the case of calendar year 1997, the base salary paid to the Executive by Wellsford Residential) or partial calendar year pursuant to subsection 3(a). The determination of the amount of the bonus shall be made by the Compensation Committee based upon the Executive's and the Company's performance during such calendar year or partial calendar year, as the case may be. The Company shall announce to the Executive the amount of his bonus for each year during December of such year (or during the month in which this Agreement shall expire, if applicable) and pay such bonus during the following January (or during the month following expiration of this Agreement, as the case may be), unless otherwise agreed to by the Executive and the Company. 4. Expenses. (a) The Company shall reimburse the Executive for all out-of-pocket expenses actually and necessarily incurred by him in the conduct of the business of the Company against reasonable substantiation submitted with respect thereto. (b) Unless the provisions of subsection 4(c) below shall apply, the Company shall reimburse the Executive for all legal fees and related expenses (including the costs of experts, evidence and counsel) paid by the Executive as a result of (i) the termination of Executive's employment (including all such fees and expenses, if any, incurred in contesting or disputing any such termination of employment), (ii) the Executive seeking to obtain or enforce any right or benefit provided by this Agreement or by any other plan or arrangement maintained by the Company under which the Executive is or may be entitled to receive benefits or (iii) any action taken by the Company against the Executive; provided, however, that the Company shall reimburse the legal fees and related expenses described in this subsection 4(b) only if and when a final judgement has been rendered in favor of the Executive and all appeals related to any such action have been exhausted. (c) The Company shall pay all legal fees and related expenses (including the costs of experts, evidence and counsel) incurred by the Executive as they become due as a result of (i) the termination of Executive's employment (including all such fees and expenses, if any, incurred in contesting or disputing any such termination of employment), (ii) the Executive seeking to obtain or enforce any right or benefit provided by this Agreement or by any other plan or arrangement maintained by the Company under which the Executive is or may be entitled to receive benefits or (iii) any action taken by the Company against the Executive, unless and until such time that a final judgement has been rendered in favor of the Company and all appeals related to any such action have been exhausted; provided, however, that the circumstances set forth above occurred on or after a change in control of the Company. (d) For purposes of this Agreement, a "change in control of the Company" shall be deemed to occur if: (i) there shall have occurred a change in control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as in effect on the date hereof, whether or not the Company is then subject to such reporting requirement, provided, however, that there shall not be deemed to be a "change in control" of the Company if immediately prior to the occurrence of what would otherwise be a "change in control" of the Company (a) the Executive is the other party to the transaction (a "Control Event") that would otherwise result in a "change in control" of the Company or (b) the Executive is an executive officer, trustee, director or more than 5% equity holder of the other party to the Control Event or of any entity, directly or indirectly, controlling such other party, (ii) the Company merges or consolidates with, or sells all or substantially all of its assets to, another company (each, a "Transaction"), provided, however, that a Transaction shall not be deemed to result in a "change in control" of the Company if (a) immediately prior thereto the circumstances in (i)(a) or (i)(b) above exist, or (b) (1) the shareholders of the Company, immediately before such Transaction own, directly or indirectly, immediately following such Transaction in excess of fifty percent (50%) of the combined voting power of the outstanding voting securities of the corporation or other entity resulting from such Transaction (the "Surviving Corporation") in substantially the same proportion as their ownership of the voting securities of the Company immediately before such Transaction and (2) the individuals who were members of the Company's Board of Trustees immediately prior to the execution of the agreement providing for such Transaction constitute at least a majority of the members of the board of directors or the board of trustees, as the case may be, of the Surviving Corporation, or of a corporation or other entity beneficially directly or indirectly owning a majority of the outstanding voting securities of the Surviving Corporation, or (iii) the Company acquires assets of another company or a subsidiary of the Company merges or consolidates with another company (each, an "Other Transaction") and (a) the shareholders of the Company, immediately before such Other Transaction own, directly or indirectly, immediately following such Other Transaction 50% or less of the combined voting power of the outstanding voting securities of the corporation or other entity resulting from such Other Transaction (the "Other Surviving Corporation") in substantially the same proportion as their ownership of the voting securities of the Company immediately before such Other Transaction or (b) the individuals who were members of the Company's Board of Trustees immediately prior to the execution of the agreement providing for such Other Transaction constitute less than a majority of the members of the board of directors or the board of trustees, as the case may be, of the Other Surviving Corporation, or of a corporation or other entity beneficially directly or indirectly owning a majority of the outstanding voting securities of the Other Surviving Corporation, provided, however, that an Other Transaction shall not be deemed to result in a "change in control" of the Company if immediately prior thereto the circumstances in (i)(a) or (i)(b) above exist. 5. Benefits. The Executive shall be entitled to such paid vacation time each year and such other medical benefits as are afforded from time to time to all executive officers of the Company (other than the Chairman of the Board and the President). The Company shall indemnify the Executive in the performance of his duties pursuant to the bylaws of the Company and to the fullest extent allowed by applicable law, including, without limitation, legal fees. 6. Earlier Termination. (a) If the Executive shall die during the term of this Agreement, this Agreement shall be deemed to have been terminated as of the date of the Executive's death, and the Company shall pay to the legal representative of the Executive's estate all monies due hereunder prorated through the last day of the month during which the Executive shall have died, as well as a bonus equal to the product of (x) the base salary payable to the Executive pursuant to subsection 3(a) from January 1 of the year in which the Executive shall have died through the last day of the month during which the Executive shall have died and (y) the greater of (i) 1/2 or (ii) the percentage of the Executive's base salary for the immediately preceding fiscal year that was paid to the Executive as a bonus for the immediately preceding fiscal year, expressed as a fraction (the greater of clauses (i) and (ii) being herein referred to as the "Deemed Bonus Fraction"). (b) If the Executive shall fail, because of illness or incapacity, to render the services contemplated by this Agreement for six consecutive months or for shorter periods aggregating nine months in any calendar year, the Company may determine (as set forth in subsection (d) below) that the Executive has become disabled. If within thirty (30) days after the date on which written notice of such determination is given to the Executive, the Executive shall not have returned to the continuing full-time performance of his duties hereunder, this Agreement and the employment of the Executive hereunder shall be deemed terminated and the Company shall pay to the Executive all monies due hereunder prorated through the last day of the month during which such termination shall occur, as well as a bonus equal to the product of (x) the base salary payable to the Executive pursuant to subsection 3(a) from January 1 of the year in which this Agreement is terminated through the last day of the month during which this Agreement is terminated and (y) the Deemed Bonus Fraction. (c) The Company, by written notice to the Executive specifying the reason therefor, may terminate this Agreement for Cause as determined pursuant to subsection (d) below. As used herein, "Cause" shall be defined as actions by the Executive which constitute malfeasance. Malfeasance includes, but is not limited to, the Executive engaging in fraud, dishonest conduct or other criminal conduct. (d) A determination of disability or Cause shall be made in the reasonable and sole discretion of the Company's Chairman of the Board of the Company. The Company's Board of Directors shall, upon request of the Executive, review the decision of whether the Executive has become disabled or has been discharged, released or terminated for Cause and the Board of Directors shall confirm, modify or reverse such determination in its sole discretion. (e) The Executive may terminate this Agreement if any change in control of the Company occurs. 7. Compensation Upon Termination Upon a Change in Control. (a)If after a change in control of the Company the Executive's employment shall be terminated (I) by the Company other than for Cause or (II) by the Executive, then the Executive shall be entitled to the benefits provided below: (i) the Company shall pay the Executive, not later than the date of termination, (x) his full base salary through the date of termination, (y) compensation for accrued vacation time, plus (z) a pro rata portion of the Executive's annual bonus for the calendar year in which the termination occurs, assuming that the Executive would have received a bonus for such full calendar year equal to the product of (A) the base salary that would be payable to the Executive pursuant to subsection 3(a) for such full calendar year and (B) the Deemed Bonus Fraction; (ii) the Company shall pay as severance pay to the Executive, not later than the date of termination, a lump sum severance payment (the "Severance Payment") equal to the greater of (x) the aggregate of all compensation due to the Executive hereunder had his employment not been so terminated (without duplication of subsection 7(a)(i) above), including, without limitation, all bonus payments which would have been due to the Executive pursuant to subsection 3(b), through the expiration of this Agreement assuming that the Executive would have received a bonus for each calendar year through the expiration of this Agreement equal to the product of (A) the base salary payable to the Executive pursuant to subsection 3(a) for each such calendar year and (B) the Deemed Bonus Fraction, or (y) 2 times the "base amount" within the meaning of Sections 280G(b)(3) and 280G(d) of the Internal Revenue Code of 1986, as amended (the "Code"), and any applicable temporary or final regulations promulgated thereunder, or its equivalent as provided in any successor statute or regulation. If Section 280G of the Code (and any successor provisions thereto) shall be repealed or otherwise be inapplicable, then the Severance Payment under clause (ii)(y) above shall equal 2 times the average of the Executive's annual compensation during the three calendar year period preceding the calendar year in which the date of termination occurs. For purposes of determining annual compensation in the preceding sentence, compensation payable to the Executive by the Company (including Wellsford Residential) shall include every type and form of compensation includible in the Executive's gross income in respect of his employment by the Company (including Wellsford Residential) (including, without limitation, all income reported on an Internal Revenue Service Form W-2), compensation income recognized as a result of the Executive's exercise of stock options or sale of the stock so acquired and including, without limitation, any annual bonus payments previously paid to such Executive. For purposes of calculating the "base amount" within the meaning of Sections 280G(b)(3) and 280G(d) of the Code and annual compensation in the second preceding sentence, any income of the Executive that constitutes a "parachute payment" within the meaning of Section 280G(b)(2) of the Code shall not be taken into account in making such calculations; and (iii) an amount equal to the Additional Amount pursuant to Section 8 below. (b) The Executive shall not be required to mitigate the amount of any payment provided for in this Section 7 by seeking other employment or otherwise, nor shall the amount of any payment or benefit provided for in this Section 7 be reduced by any compensation earned by him as the result of employment by another employer or by retirement benefits after the date of termination, or otherwise, except as specifically provided in this Section 7. 8. Additional Amount. Whether or not Section 7 is applicable, if in the opinion of tax counsel selected by the Executive and reasonably accept- able to the Company, the Executive has or will receive any compensation or recognize any income (whether or not pursuant to this Agreement or any plan or other arrangement of the Company and whether or not the Executive's employment with the Company has terminated) which constitute an "excess parachute payment" within the meaning of Section 280G(b)(1) of the Code (or for which a tax is otherwise payable under Section 4999 of the Code), then the Company shall pay the Executive an additional amount (the "Additional Amount") equal to the sum of (i) all taxes payable by the Executive under Section 4999 of the Code with respect to all such excess parachute payments (or otherwise) and the Additional Amount, plus (ii) all federal, state and local income taxes payable by Executive with respect to the Additional Amount. The amounts payable pursuant to this Section 8 shall be paid by the Company to the Executive within 30 days of the written request therefor made by the Executive. 9. Protection of Confidential Information; Non-Competition. (a) The Executive acknowledges that (i) the Company will suffer substantial damage which will be difficult to compute if the Executive violates any of the provisions of this Section 9, and (ii) the provisions of this Agreement are reasonable and necessary for the protection of the business of the Company. (b) The Executive agrees that he will not at any time, either during the term of this Agreement or thereafter, divulge to any person, firm or corporation any material information obtained or learned by him during the course of his employment with the Company, with regard to the operational, financial, business or other affairs of the Company, its officers or directors, except (i) in the course of performing his duties hereunder, (ii) with the Chairman of the Board's or President's express written consent; (iii) to the extent that any such information is in the public domain other than as a result of the Executive's breach of any of his obligations hereunder; or (iv) where required to be disclosed by court order, subpoena or other government process. (c) Upon termination of his employment with the Company, or any time the Company may so request, the Executive will promptly deliver to the Company all memoranda, notes, records, reports, manuals, drawings, blueprints, software and other documents (and all copies thereof) relating to the business of the Company and all property associated therewith, which he may then possess or have under his control. (d) During the term of this Agreement and any renewal hereof (including any remaining portion of the stated term of this Agreement or any renewal term hereof following the termination of the Executive's employment by the Executive unless such termination occurs after a change in control of the Company), and provided the Executive's employment has not been terminated by the Company with or without Cause, the Executive without the prior written permission of the Chairman of the Board or President shall not in the United States, its territories or possessions, directly or indirectly, (i) enter into the employ of or render any services to any person, firm or corporation engaged in any competitive business; (ii) engage in any competitive business for his own account; (iii) become associated with or interested in any competitive business as an individual, partner, shareholder, creditor, director, officer, principal, agent, employee, director, consultant, advisor or in any other relationship or capacity; (iv) employ or retain, or have or cause any other person or entity to employ or retain, any person who was employed or retained by the Company while the Executive was employed by the Company; or (v) solicit, interfere with, or endeavor to entice away from the Company any of its customers or sources of supply. However, nothing in this Agreement shall preclude the Executive from investing his personal assets in the securities of any corporation or other business entity which is engaged in a competitive business if such securities are traded on a national stock exchange or in the over-the-counter market and if such investment does not result in his beneficially owning, at any time, more than 1% of the publicly- traded equity securities of such competitor. A competitive business shall not include (i) any privately owned enterprise or (ii) any publicly owned enterprise engaged in such a business outside of the geographic regions and states in which the Company operates at the time of the termination of this Agreement. (e) If the Executive commits a breach of any of the provisions of subsection (b) or (d) above, the Company shall have the right and remedy to have the provisions of this Agreement specifically enforced by any court having equity jurisdiction, it being acknowledged and agreed by the Executive that the services being rendered hereunder to the Company are of a special, unique and extraordinary character and that any such breach or threatened breach will cause irreparable injury to the Company and that money damages will not provide an adequate remedy to the Company. Each of the rights and remedies enumerated in this subsection (e) shall be independent of the other, and shall be severally enforceable, and such rights and remedies shall be in addition to, and not in lieu of, any other rights and remedies available to the Company under law or equity. (f) If any provision of subsection (b) or (d) is held to be unenforceable because of the scope, duration or area of its applicability, the tribunal making such determination shall have the power to modify such scope, duration, or area, or all of them, and such provision or provisions shall then be applicable in such modified form. 10. Governing Law; Arbitration. This Agreement shall be governed by, and construed in accordance with, the internal laws of the State of New York, without regard to New York's conflicts of law principles. Any dispute or controversy arising under this Agreement, or out of the interpretation hereof, or based upon the breach hereof, shall be resolved by arbitration held at the offices of the American Arbitration Association in the City of New York in accordance with the rules and regulations of such association prevailing at the time of the demand for arbitration by either party hereto, and the decision of the arbitrator or arbitrators shall be final and binding upon both parties hereto, provided, however, that the arbitrator or arbitrators shall only have the power and authority to interpret, and not to modify or amend, the terms and provisions hereof. Judgment upon an award rendered by the arbitrator or arbitrators may be entered in any court having jurisdiction thereof. Notwithstanding anything contained in this Section 10, either party shall have the right to seek preliminary injunctive relief in any court in the City of New York in aid of, and pending the final decision in, the arbitration proceeding. 11. Entire Agreement. This Agreement sets forth the entire agreement of the parties and is intended to supersede all prior employment negotiations, understandings and agreements. No provision of this Agreement may be waived or changed, except by a writing signed by the party to be charged with such waiver or change. 12. Successors; Binding Agreement. This Agreement shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. 13. Notices. All notices provided for in this Agreement shall be in writing, and shall be deemed to have been duly given when delivered personally to the party to receive the same, when given by telex, telegram or mailgram, or when mailed first class postage prepaid, by registered or certified mail, return receipt requested, addressed to the party to receive the same at his or its address above set forth, or such other address as the party to receive the same shall have specified by written notice given in the manner provided for in this Section 13. All notices shall be deemed to have been given as of the date of personal delivery, transmittal or mailing thereof. 14. Severability. If any provision in this Agreement is determined to be invalid, it shall not affect the validity or enforceability of any of the other remaining provisions hereof. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. WELLSFORD REAL PROPERTIES, INC. By: /s/ Edward Lowenthal ------------------------------- Edward Lowenthal President EXECUTIVE: /s/ Gregory F. Hughes - ------------------------ Gregory F. Hughes EX-10.51 35 EMPLOYMENT AGREEMENT -------------------- AGREEMENT, dated as of May 30, 1997, between WELLSFORD REAL PROPERTIES, INC., a Maryland corporation with offices at 610 Fifth Avenue, New York, New York 10020 (the "Company"), and David M. Strong, an individual residing at 1450 Wynkoop, Apt. 5B, Denver, Colorado 80202 ("Executive"). WHEREAS, the Executive is an executive of Wellsford Residential Property Trust, a Maryland real estate investment trust ("Wellsford Residential"); WHEREAS, Equity Residential Properties Trust, a Maryland real estate investment trust, is merging with and into Wellsford Residential as of the date hereof (the "Merger"); WHEREAS, immediately prior to the Merger, Wellsford Residential is distributing to its common shareholders, pro rata, all of the shares of common stock that it owns in the Company; and WHEREAS, the Company desires to employ the Executive, and the Executive desires to be employed by the Company. IT IS AGREED: 1. Duties. (a) During the term of the Executive's employment hereunder the Executive shall serve and the Company shall employ the Executive as Vice President for Development to perform such executive or administrative services for the Company consistent with those of a Vice President as may be assigned to the Executive by the directors, Chairman of the Board or President of the Company. The Executive hereby accepts such employment and agrees to perform such services. (b) The Executive shall devote substantially all of his time, attention and energies during business hours to the performance of his duties hereunder. The Executive shall give advance written notice to the Chairman of the Board and President of any intended active involvement in any other business enterprise. (c) The Executive shall cooperate with the Company, including taking such medical examinations as the Company reasonably shall deem necessary, if the Company shall desire to obtain medical, disability or life insurance with respect to the Executive. (d) The Executive shall not be required to relocate or conduct the Company's business outside the Denver, Colorado area in order to perform his duties under this Agreement but shall undertake such reasonable business travel as may be necessary to perform said duties (for which the Executive shall be reimbursed pursuant to Section 4 below for costs and expenses incurred in connection therewith). 2. Employment Term. This Agreement shall commence on May 30, 1997 and shall continue in effect through May 29, 1999; provided, however, that, on May 30, 1999 and on each May 30 thereafter, the term of this Agreement shall automatically be extended for one additional year beyond such May 30 unless, not later than the immediately preceding February 28, either the Executive or the Company shall have given notice to the other not to extend this Agreement. 3. Compensation. For all services rendered by the Executive pursuant to this Agreement: (a) The Company shall pay to the Executive an annual base salary at the following rates: (i) for the period from May 30, 1997 through May 29, 1998 - $125,000; (ii) for the period from May 30, 1998 through May 29, 1999 - $145,000; and (iii) for each additional year thereafter, the annual base salary for the immediately preceding year plus three percent (3%) of such annual base salary. All such compensation shall be paid bi-weekly or at such other regular intervals, not less frequently than monthly, as the Company may establish from time to time for executive officers of the Company. (b) In addition to the compensation set forth in subsection 3(a) above, during the term of this Agreement, the Executive may be entitled to a cash bonus after the end of each calendar year based upon the Executive's and the Company's performance during such calendar year, as may be determined by the Compensation Committee. The Company shall announce to the Executive the amount of his bonus for each year during December of such year (or during the month in which this Agreement shall expire, if applicable) and pay such bonus during the following January (or during the month following expiration of this Agreement, as the case may be), unless otherwise agreed to by the Executive and the Company. 4. Expenses. (a) The Company shall reimburse the Executive for all out-of-pocket expenses actually and necessarily incurred by him in the conduct of the business of the Company against reasonable substantiation submitted with respect thereto. (b) Unless the provisions of subsection 4(c) below shall apply, the Company shall reimburse the Executive for all legal fees and related expenses (including the costs of experts, evidence and counsel) paid by the Executive as a result of (i) the termination of Executive's employment (including all such fees and expenses, if any, incurred in contesting or disputing any such termination of employment), (ii) the Executive seeking to obtain or enforce any right or benefit provided by this Agreement or by any other plan or arrangement maintained by the Company under which the Executive is or may be entitled to receive benefits or (iii) any action taken by the Company against the Executive; provided, however, that the Company shall reimburse the legal fees and related expenses described in this subsection 4(b) only if and when a final judgement has been rendered in favor of the Executive and all appeals related to any such action have been exhausted. (c) The Company shall pay all legal fees and related expenses (including the costs of experts, evidence and counsel) incurred by the Executive as they become due as a result of (i) the termination of Executive's employment (including all such fees and expenses, if any, incurred in contesting or disputing any such termination of employment), (ii) the Executive seeking to obtain or enforce any right or benefit provided by this Agreement or by any other plan or arrangement maintained by the Company under which the Executive is or may be entitled to receive benefits or (iii) any action taken by the Company against the Executive, unless and until such time that a final judgement has been rendered in favor of the Company and all appeals related to any such action have been exhausted; provided, however, that the circumstances set forth above occurred on or after a change in control of the Company. (d) For purposes of this Agreement, a "change in control of the Company" shall be deemed to occur if: (i) there shall have occurred a change in control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as in effect on the date hereof, whether or not the Company is then subject to such reporting requirement, provided, however, that there shall not be deemed to be a "change in control" of the Company if immediately prior to the occurrence of what would otherwise be a "change in control" of the Company (a) the Executive is the other party to the transaction (a "Control Event") that would otherwise result in a "change in control" of the Company or (b) the Executive is an executive officer, trustee, director or more than 5% equity holder of the other party to the Control Event or of any entity, directly or indirectly, controlling such other party, (ii) the Company merges or consolidates with, or sells all or substantially all of its assets to, another company (each, a "Transaction"), provided, however, that a Transaction shall not be deemed to result in a "change in control" of the Company if (a) immediately prior thereto the circumstances in (i)(a) or (i)(b) above exist, or (b) (1) the shareholders of the Company, immediately before such Transaction own, directly or indirectly, immediately following such Transaction in excess of fifty percent (50%) of the combined voting power of the outstanding voting securities of the corporation or other entity resulting from such Transaction (the "Surviving Corporation") in substantially the same proportion as their ownership of the voting securities of the Company immediately before such Transaction and (2) the individuals who were members of the Company's Board of Trustees immediately prior to the execution of the agreement providing for such Transaction constitute at least a majority of the members of the board of directors or the board of trustees, as the case may be, of the Surviving Corporation, or of a corporation or other entity beneficially directly or indirectly owning a majority of the outstanding voting securities of the Surviving Corporation, or (iii) the Company acquires assets of another company or a subsidiary of the Company merges or consolidates with another company (each, an "Other Transaction") and (a) the shareholders of the Company, immediately before such Other Transaction own, directly or indirectly, immediately following such Other Transaction 50% or less of the combined voting power of the outstanding voting securities of the corporation or other entity resulting from such Other Transaction (the "Other Surviving Corporation") in substantially the same proportion as their ownership of the voting securities of the Company immediately before such Other Transaction or (b) the individuals who were members of the Company's Board of Trustees immediately prior to the execution of the agreement providing for such Other Transaction constitute less than a majority of the members of the board of directors or the board of trustees, as the case may be, of the Other Surviving Corporation, or of a corporation or other entity beneficially directly or indirectly owning a majority of the outstanding voting securities of the Other Surviving Corporation, provided, however, that an Other Transaction shall not be deemed to result in a "change in control" of the Company if immediately prior thereto the circumstances in (i)(a) or (i)(b) above exist. 5. Benefits. The Executive shall be entitled to such paid vacation time each year and such other medical benefits as are afforded from time to time to all executive officers of the Company (other than the Chairman of the Board and the President). The Company shall indemnify the Executive in the performance of his duties pursuant to the bylaws of the Company and to the fullest extent allowed by applicable law, including, without limitation, legal fees. 6. Earlier Termination. (a) If the Executive shall die during the term of this Agreement, this Agreement shall be deemed to have been terminated as of the date of the Executive's death, and the Company shall pay to the legal representative of the Executive's estate all monies due hereunder prorated through the last day of the month during which the Executive shall have died, as well as a bonus equal to the product of (x) the base salary payable to the Executive pursuant to subsection 3(a) from January 1 of the year in which the Executive shall have died through the last day of the month during which the Executive shall have died and (y) the greater of (i) 1/2 or (ii) the percentage of the Executive's base salary for the immediately preceding fiscal year that was paid to the Executive as a bonus for the immediately preceding fiscal year, expressed as a fraction (the greater of clauses (i) and (ii) being herein referred to as the "Deemed Bonus Fraction"). (b) If the Executive shall fail, because of illness or incapacity, to render the services contemplated by this Agreement for six consecutive months or for shorter periods aggregating nine months in any calendar year, the Company may determine (as set forth in subsection (d) below) that the Executive has become disabled. If within thirty (30) days after the date on which written notice of such determination is given to the Executive, the Executive shall not have returned to the continuing full-time performance of his duties hereunder, this Agreement and the employment of the Executive hereunder shall be deemed terminated and the Company shall pay to the Executive all monies due hereunder prorated through the last day of the month during which such termination shall occur, as well as a bonus equal to the product of (x) the base salary payable to the Executive pursuant to subsection 3(a) from January 1 of the year in which this Agreement is terminated through the last day of the month during which this Agreement is terminated and (y) the Deemed Bonus Fraction. (c) The Company, by written notice to the Executive specifying the reason therefor, may terminate this Agreement for Cause as determined pursuant to subsection (d) below. As used herein, "Cause" shall be defined as actions by the Executive which constitute malfeasance. Malfeasance includes, but is not limited to, the Executive engaging in fraud, dishonest conduct or other criminal conduct. (d) A determination of disability or Cause shall be made in the reasonable and sole discretion of the Company's Chairman of the Board of the Company. The Company's Board of Directors shall, upon request of the Executive, review the decision of whether the Executive has become disabled or has been discharged, released or terminated for Cause and the Board of Directors shall confirm, modify or reverse such determination in its sole discretion. (e) The Executive may terminate this Agreement if any change in control of the Company occurs. 7. Compensation Upon Termination Upon a Change in Control. (a)If after a change in control of the Company the Executive's employment shall be terminated (I) by the Company other than for Cause or (II) by the Executive, then the Executive shall be entitled to the benefits provided below: (i) the Company shall pay the Executive, not later than the date of termination, (x) his full base salary through the date of termination, (y) compensation for accrued vacation time, plus (z) a pro rata portion of the Executive's annual bonus for the calendar year in which the termination occurs, assuming that the Executive would have received a bonus for such full calendar year equal to the product of (A) the base salary that would be payable to the Executive pursuant to subsection 3(a) for such full calendar year and (B) the Deemed Bonus Fraction; (ii) the Company shall pay as severance pay to the Executive, not later than the date of termination, a lump sum severance payment (the "Severance Payment") equal to the greater of (x) the aggregate of all compensation due to the Executive hereunder had his employment not been so terminated (without duplication of subsection 7(a)(i) above), including, without limitation, all bonus payments which would have been due to the Executive pursuant to subsection 3(b), through the expiration of this Agreement assuming that the Executive would have received a bonus for each calendar year through the expiration of this Agreement equal to the product of (A) the base salary payable to the Executive pursuant to subsection 3(a) for each such calendar year and (B) the Deemed Bonus Fraction, or (y) 2 times the "base amount" within the meaning of Sections 280G(b)(3) and 280G(d) of the Internal Revenue Code of 1986, as amended (the "Code"), and any applicable temporary or final regulations promulgated thereunder, or its equivalent as provided in any successor statute or regulation. If Section 280G of the Code (and any successor provisions thereto) shall be repealed or otherwise be inapplicable, then the Severance Payment under clause (ii)(y) above shall equal 2 times the average of the Executive's annual compensation during the three calendar year period preceding the calendar year in which the date of termination occurs. For purposes of determining annual compensation in the preceding sentence, compensation payable to the Executive by the Company (including Wellsford Residential) shall include every type and form of compensation includible in the Executive's gross income in respect of his employment by the Company (including Wellsford Residential) (including, without limitation, all income reported on an Internal Revenue Service Form W-2), compensation income recognized as a result of the Executive's exercise of stock options or sale of the stock so acquired and including, without limitation, any annual bonus payments previously paid to such Executive. For purposes of calculating the "base amount" within the meaning of Sections 280G(b)(3) and 280G(d) of the Code and annual compensation in the second preceding sentence, any income of the Executive that constitutes a "parachute payment" within the meaning of Section 280G(b)(2) of the Code shall not be taken into account in making such calculations; and (iii) an amount equal to the Additional Amount pursuant to Section 8 below. (b) The Executive shall not be required to mitigate the amount of any payment provided for in this Section 7 by seeking other employment or otherwise, nor shall the amount of any payment or benefit provided for in this Section 7 be reduced by any compensation earned by him as the result of employment by another employer or by retirement benefits after the date of termination, or otherwise, except as specifically provided in this Section 7. 8. Additional Amount. Whether or not Section 7 is applicable, if in the opinion of tax counsel selected by the Executive and reasonably accept- able to the Company, the Executive has or will receive any compensation or recognize any income (whether or not pursuant to this Agreement or any plan or other arrangement of the Company and whether or not the Executive's employment with the Company has terminated) which constitute an "excess parachute payment" within the meaning of Section 280G(b)(1) of the Code (or for which a tax is otherwise payable under Section 4999 of the Code), then the Company shall pay the Executive an additional amount (the "Additional Amount") equal to the sum of (i) all taxes payable by the Executive under Section 4999 of the Code with respect to all such excess parachute payments (or otherwise) and the Additional Amount, plus (ii) all federal, state and local income taxes payable by Executive with respect to the Additional Amount. The amounts payable pursuant to this Section 8 shall be paid by the Company to the Executive within 30 days of the written request therefor made by the Executive. 9. Protection of Confidential Information; Non-Competition. (a) The Executive acknowledges that (i) the Company will suffer substantial damage which will be difficult to compute if the Executive violates any of the provisions of this Section 9, and (ii) the provisions of this Agreement are reasonable and necessary for the protection of the business of the Company. (b) The Executive agrees that he will not at any time, either during the term of this Agreement or thereafter, divulge to any person, firm or corporation any material information obtained or learned by him during the course of his employment with the Company, with regard to the operational, financial, business or other affairs of the Company, its officers or directors, except (i) in the course of performing his duties hereunder, (ii) with the Chairman of the Board's or President's express written consent; (iii) to the extent that any such information is in the public domain other than as a result of the Executive's breach of any of his obligations hereunder; or (iv) where required to be disclosed by court order, subpoena or other government process. (c) Upon termination of his employment with the Company, or any time the Company may so request, the Executive will promptly deliver to the Company all memoranda, notes, records, reports, manuals, drawings, blueprints, software and other documents (and all copies thereof) relating to the business of the Company and all property associated therewith, which he may then possess or have under his control. (d) During the term of this Agreement and any renewal hereof (including any remaining portion of the stated term of this Agreement or any renewal term hereof following the termination of the Executive's employment by the Executive unless such termination occurs after a change in control of the Company), and provided the Executive's employment has not been terminated by the Company with or without Cause, the Executive without the prior written permission of the Chairman of the Board or President shall not in the United States, its territories or possessions, directly or indirectly, (i) enter into the employ of or render any services to any person, firm or corporation engaged in any competitive business; (ii) engage in any competitive business for his own account; (iii) become associated with or interested in any competitive business as an individual, partner, shareholder, creditor, director, officer, principal, agent, employee, director, consultant, advisor or in any other relationship or capacity; (iv) employ or retain, or have or cause any other person or entity to employ or retain, any person who was employed or retained by the Company while the Executive was employed by the Company; or (v) solicit, interfere with, or endeavor to entice away from the Company any of its customers or sources of supply. However, nothing in this Agreement shall preclude the Executive from investing his personal assets in the securities of any corporation or other business entity which is engaged in a competitive business if such securities are traded on a national stock exchange or in the over-the-counter market and if such investment does not result in his beneficially owning, at any time, more than 1% of the publicly- traded equity securities of such competitor. A competitive business shall not include (i) any privately owned enterprise or (ii) any publicly owned enterprise engaged in such a business outside of the geographic regions and states in which the Company operates at the time of the termination of this Agreement. (e) If the Executive commits a breach of any of the provisions of subsection (b) or (d) above, the Company shall have the right and remedy to have the provisions of this Agreement specifically enforced by any court having equity jurisdiction, it being acknowledged and agreed by the Executive that the services being rendered hereunder to the Company are of a special, unique and extraordinary character and that any such breach or threatened breach will cause irreparable injury to the Company and that money damages will not provide an adequate remedy to the Company. Each of the rights and remedies enumerated in this subsection (e) shall be independent of the other, and shall be severally enforceable, and such rights and remedies shall be in addition to, and not in lieu of, any other rights and remedies available to the Company under law or equity. (f) If any provision of subsection (b) or (d) is held to be unenforceable because of the scope, duration or area of its applicability, the tribunal making such determination shall have the power to modify such scope, duration, or area, or all of them, and such provision or provisions shall then be applicable in such modified form. 10. Governing Law; Arbitration. This Agreement shall be governed by, and construed in accordance with, the internal laws of the State of New York, without regard to New York's conflicts of law principles. Any dispute or controversy arising under this Agreement, or out of the interpretation hereof, or based upon the breach hereof, shall be resolved by arbitration held at the offices of the American Arbitration Association in the City of New York in accordance with the rules and regulations of such association prevailing at the time of the demand for arbitration by either party hereto, and the decision of the arbitrator or arbitrators shall be final and binding upon both parties hereto, provided, however, that the arbitrator or arbitrators shall only have the power and authority to interpret, and not to modify or amend, the terms and provisions hereof. Judgment upon an award rendered by the arbitrator or arbitrators may be entered in any court having jurisdiction thereof. Notwithstanding anything contained in this Section 10, either party shall have the right to seek preliminary injunctive relief in any court in the City of New York in aid of, and pending the final decision in, the arbitration proceeding. 11. Entire Agreement. This Agreement sets forth the entire agreement of the parties and is intended to supersede all prior employment negotiations, understandings and agreements. No provision of this Agreement may be waived or changed, except by a writing signed by the party to be charged with such waiver or change. 12. Successors; Binding Agreement. This Agreement shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. 13. Notices. All notices provided for in this Agreement shall be in writing, and shall be deemed to have been duly given when delivered personally to the party to receive the same, when given by telex, telegram or mailgram, or when mailed first class postage prepaid, by registered or certified mail, return receipt requested, addressed to the party to receive the same at his or its address above set forth, or such other address as the party to receive the same shall have specified by written notice given in the manner provided for in this Section 13. All notices shall be deemed to have been given as of the date of personal delivery, transmittal or mailing thereof. 14. Severability. If any provision in this Agreement is determined to be invalid, it shall not affect the validity or enforceability of any of the other remaining provisions hereof. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. WELLSFORD REAL PROPERTIES, INC. By: /s/ Edward Lowenthal ------------------------------- Edward Lowenthal President EXECUTIVE: /s/ David M. Strong - ----------------------------- David M. Strong EX-21.1 36 SUBSIDIARIES OF THE REGISTRANT Name of Subsidiary* State of Organization - ------------------ --------------------- Wellsford Greenbrook Corp. New Jersey Wellsford Wayne Corp. New Jersey Wellsford Chatham Corp. New Jersey North American Medical Research Corp. New Jersey Wellsford Park Highlands Corp. Colorado Park at Highlands LLC Colorado Red Canyon at Palomino Park LLC Colorado Wellsford Ventures, Inc. Maryland ___________________________ * Each subsidiary does business under the name indicated below. EX-23.2 37 July 29, 1997 Wellsford Real Properties, Inc. 610 Fifth Avenue New York, New York 10020 Dear Sirs: We hereby consent to the inclusion of our opinion in the Registration Statement (the "Registration Statement") on Form S-11 of Wellsford Real Properties, Inc. (the "Company") relating to the sale of 12,242,719 shares of common stock, $.01 par value per share, of the Company, under the caption "Certain United States Federal Income Tax Considerations" and to the reference to this firm under the caption "Legal Matters". In giving such consent, we do not hereby admit that we are in the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended. Very truly yours, ROBINSON SILVERMAN PEARCE ARONSOHN & BERMAN LLP EX-23.3 38 Consent of Independent Auditors We consent to the reference to our firm under the caption "Experts" and to the use of our report dated February 28, 1997, with respect to the combined financial statements of The Predecessor to Wellsford Real Properties, Inc., in the Registration Statement (Form S-11) and related Prospectus of Wellsford Real Properties, Inc. for the registration of 12,242,719 shares of its common stock. Ernst & Young LLP New York, New York July 25, 1997 -----END PRIVACY-ENHANCED MESSAGE-----