EXHIBIT 10.9
LETTER OF CREDIT REIMBURSEMENT AGREEMENT
Among
PALOMINO PARK PUBLIC IMPROVEMENTS CORPORATION
and
WELLSFORD RESIDENTIAL PROPERTY TRUST
and
DRESDNER BANK AG, NEW YORK BRANCH
Relating to
Palomino Park Public Improvements Corp.
Assessment Lien Revenue Bonds
Series 1995 - $14,755,000
Dated as of December 1, 1995
(Letter of Credit No. 967-95)
LETTER OF CREDIT REIMBURSEMENT AGREEMENT
TABLE OF CONTENTS
This Table of Contents is not a part of the Letter of Credit Reimbursement
Agreement and is for convenience only. The captions herein are of no legal
effect and do not vary the meaning or legal effect of any part of the Letter of
Credit Reimbursement Agreement.
Page
PARTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
PREAMBLE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . .11
Section 1.2 Accounting Matters. . . . . . . . . . . . . . . . . . . .11
Section 1.3 Interpretation. . . . . . . . . . . . . . . . . . . . . .11
Section 1.4 Relation to Other Documents . . . . . . . . . . . . . . .11
Section 1.5 Time for Performance. . . . . . . . . . . . . . . . . . .11
ARTICLE 2 REIMBURSEMENT, FEES AND PAYMENT PROVISIONS . . . . . . . . . . . .11
Section 2.1 Same Day Reimbursement. . . . . . . . . . . . . . . . . .11
Section 2.2 Reimbursement of Liquidity Drawing Amounts and LC
Loans . . . . . . . . . . . . . . . . . . . . . . . . . .12
Section 2.3 Limitation on Interest. . . . . . . . . . . . . . . . . .12
Section 2.4 Remarketing of Pledged Bonds. . . . . . . . . . . . . . .13
Section 2.5 Transfer/Amendment Fee. . . . . . . . . . . . . . . . . .14
Section 2.6 Costs, Expenses and Taxes . . . . . . . . . . . . . . . .14
Section 2.7 Drawing Fee . . . . . . . . . . . . . . . . . . . . . . .15
Section 2.8 Letter of Credit Facing Fee . . . . . . . . . . . . . . .15
Section 2.9 Capital Adequacy. . . . . . . . . . . . . . . . . . . . .15
Section 2.10 Method of Payment . . . . . . . . . . . . . . . . . . . .16
Section 2.11 Maintenance of Accounts . . . . . . . . . . . . . . . . .16
Section 2.12 Cure. . . . . . . . . . . . . . . . . . . . . . . . . . .16
Section 2.13 Withholding . . . . . . . . . . . . . . . . . . . . . . .16
Section 2.14 Reduction and Reinstatement of the Letter of Credit . . .17
Section 2.15 Loan Documents. . . . . . . . . . . . . . . . . . . . . .17
ARTICLE 3 CONDITIONS PRECEDENT. . . . . . . . . . . . . . . . . . . . . . . .17
Section 3.1 Account Parties' Resolutions; Bylaws. . . . . . . . . . .17
Section 3.2 Highlands' Resolutions; Bylaws. . . . . . . . . . . . . .17
Section 3.3 Account Parties' Organizational Documents . . . . . . . .17
Section 3.4 Highlands' Organizational Documents . . . . . . . . . . .17
Section 3.5 Regulatory Approvals. . . . . . . . . . . . . . . . . . .18
Section 3.6 Incumbency Certificates . . . . . . . . . . . . . . . . .18
Section 3.7 Opinions of Counsel . . . . . . . . . . . . . . . . . . .18
Section 3.8 Related Documents . . . . . . . . . . . . . . . . . . . .18
Section 3.9 Amendment to the Wellsford REIT Loan Agreement. . . . . .18
Section 3.10 Compliance Certificate. . . . . . . . . . . . . . . . . .18
Section 3.11 Ratings . . . . . . . . . . . . . . . . . . . . . . . . .18
Section 3.12 Account Parties Certificate(s). . . . . . . . . . . . . .18
Section 3.13 Title . . . . . . . . . . . . . . . . . . . . . . . . . .18
Section 3.14 Payment of Fees and Expenses. . . . . . . . . . . . . . .18
Section 3.15 Financial Statements. . . . . . . . . . . . . . . . . . .19
Section 3.16 Highlands Certificate(s). . . . . . . . . . . . . . . . .19
Section 3.17 Remarketing Agent Certificate . . . . . . . . . . . . . .19
Section 3.18 Bond Trustee Certificate. . . . . . . . . . . . . . . . .19
Section 3.19 Recordings and Filings. Evidence that the Assessment
and Lien. . . . . . . . . . . . . . . . . . . . . . . . .19
Section 3.20 Other Documents . . . . . . . . . . . . . . . . . . . . .19
ARTICLE 4 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . .19
Section 4.1 Corporate Authority, Etc. . . . . . . . . . . . . . . . .19
Section 4.2 Governmental Approvals. . . . . . . . . . . . . . . . . .21
Section 4.3 Title to Properties: Leases . . . . . . . . . . . . . . .21
Section 4.4 Financial Statements. . . . . . . . . . . . . . . . . . .21
Section 4.5 No Material Changes . . . . . . . . . . . . . . . . . . .22
Section 4.6 Franchises, Patents, Copyrights, Etc. . . . . . . . . . .22
Section 4.7 Litigation. . . . . . . . . . . . . . . . . . . . . . . .22
Section 4.8 No Materially Adverse Contracts, Etc. . . . . . . . . . .22
Section 4.9 Compliance with Other Instruments, Laws, Etc. . . . . . .22
Section 4.10 Tax Status. . . . . . . . . . . . . . . . . . . . . . . .23
Section 4.11 No Event of Default . . . . . . . . . . . . . . . . . . .23
Section 4.12 Holding Company and Investment Company Acts, Etc. . . . .23
Section 4.13 Absence of UCC Financing Statements, Etc. . . . . . . . .23
Section 4.14 Noncontravention. . . . . . . . . . . . . . . . . . . . .23
Section 4.15 Certain Transactions. . . . . . . . . . . . . . . . . . .23
Section 4.16 Employee Benefit Plans. . . . . . . . . . . . . . . . . .24
Section 4.17 Regulations U and X . . . . . . . . . . . . . . . . . . .24
Section 4.18 Environmental Compliance. . . . . . . . . . . . . . . . .24
Section 4.19 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . .26
Section 4.20 Related Documents . . . . . . . . . . . . . . . . . . . .26
Section 4.21 Property. . . . . . . . . . . . . . . . . . . . . . . . .26
Section 4.22 Brokers . . . . . . . . . . . . . . . . . . . . . . . . .27
Section 4.23 Other Debt. . . . . . . . . . . . . . . . . . . . . . . .27
Section 4.24 Solvency. . . . . . . . . . . . . . . . . . . . . . . . .27
Section 4.25 Complete and Correct Information. . . . . . . . . . . . .27
Section 4.26 Public Improvements Liens . . . . . . . . . . . . . . . .27
Section 4.27 Pledge of Pledged Bonds . . . . . . . . . . . . . . . . .27
Section 4.28 Security for Pledged Bonds. . . . . . . . . . . . . . . .27
ARTICLE 5 AFFIRMATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . . .28
Section 5.1 Compliance with Bond Indenture and Related Documents. . .28
Section 5.2 Maintenance of Office . . . . . . . . . . . . . . . . . .28
Section 5.3 Records and Accounts. . . . . . . . . . . . . . . . . . .28
Section 5.4 Financial Statements, Certificates and Information. . . .28
Section 5.5 Notices . . . . . . . . . . . . . . . . . . . . . . . . .30
Section 5.6 Existence; Maintenance of Properties. . . . . . . . . . .31
Section 5.7 Insurance . . . . . . . . . . . . . . . . . . . . . . . .32
Section 5.8 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . .32
Section 5.9 Inspection of Properties and Books. . . . . . . . . . . .32
Section 5.10 Compliance with Laws, Contracts, Licenses and Permits . .33
Section 5.11 Further Assurances. . . . . . . . . . . . . . . . . . . .33
Section 5.12 Wellsford REIT Status . . . . . . . . . . . . . . . . . .33
Section 5.13 Wellsford REIT Unencumbered Operating Properties. . . . .33
Section 5.14 Wellsford REIT Limiting Agreements. . . . . . . . . . . .34
ARTICLE 6 NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . .35
Section 6.1 Amendments. . . . . . . . . . . . . . . . . . . . . . . .35
Section 6.2 Optional Redemption . . . . . . . . . . . . . . . . . . .35
Section 6.3 Restrictions on Indebtedness. . . . . . . . . . . . . . .35
Section 6.4 Restrictions on Liens, Etc. . . . . . . . . . . . . . . .37
Section 6.5 Restrictions on Investments . . . . . . . . . . . . . . .37
Section 6.6 Merger, Consolidation . . . . . . . . . . . . . . . . . .39
Section 6.7 Sale and Leaseback. . . . . . . . . . . . . . . . . . . .39
Section 6.8 Compliance with Environmental Laws. . . . . . . . . . . .39
Section 6.9 Distributions . . . . . . . . . . . . . . . . . . . . . .40
Section 6.10 Asset Sales . . . . . . . . . . . . . . . . . . . . . . .41
Section 6.11 Development Activity. . . . . . . . . . . . . . . . . . .41
Section 6.12 Sources of Capital. . . . . . . . . . . . . . . . . . . .42
Section 6.13 Restriction on Prepayment of Indebtedness . . . . . . . .42
Section 6.14 Additional Restrictions on Wellsford REIT Liens on
Real Estate and Indebtedness. . . . . . . . . . . . . . .42
Section 6.15 Restrictions Upon Rate Modes and Interest Periods for
Bonds . . . . . . . . . . . . . . . . . . . . . . . . . .42
Section 6.16 Accounting Methods and Fiscal Year. . . . . . . . . . . .43
Section 6.17 Financial Covenants of Wellsford REIT . . . . . . . . . .43
Section 6.18 Official Statement and Other Documents. . . . . . . . . .43
Section 6.19 Remarketing . . . . . . . . . . . . . . . . . . . . . . .43
Section 6.20 Substitute Credit Facility. . . . . . . . . . . . . . . .43
Section 6.21 Remarketing Agent and Bond Trustee. . . . . . . . . . . .44
ARTICLE 7 EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . .44
Section 7.1 Events of Default . . . . . . . . . . . . . . . . . . . .44
Section 7.2 Rights and Remedies . . . . . . . . . . . . . . . . . . .47
ARTICLE 8 NATURE OF OBLIGATIONS; INDEMNIFICATION . . . . . . . . . . . . . .48
Section 8.1 Obligations Absolute. . . . . . . . . . . . . . . . . . .48
Section 8.2 Continuing Obligation . . . . . . . . . . . . . . . . . .48
Section 8.3 Liability of the Bank . . . . . . . . . . . . . . . . . .48
Section 8.4 Indemnification . . . . . . . . . . . . . . . . . . . . .49
Section 8.5 Telecopied Documents. . . . . . . . . . . . . . . . . . .50
ARTICLE 9 ISSUANCE, TRANSFER, REDUCTION OR EXTENSION OF LETTER OF
CREDIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .50
Section 9.1 Issuance. . . . . . . . . . . . . . . . . . . . . . . . .50
Section 9.2 Transfer, Reduction and Reinstatement . . . . . . . . . .50
Section 9.3 Extension . . . . . . . . . . . . . . . . . . . . . . . .50
ARTICLE 10 MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . .50
Section 10.1 Right of Setoff . . . . . . . . . . . . . . . . . . . . .50
Section 10.2 Amendments and Waivers. . . . . . . . . . . . . . . . . .51
Section 10.3 No Waiver; Remedies . . . . . . . . . . . . . . . . . . .51
Section 10.4 Notices . . . . . . . . . . . . . . . . . . . . . . . . .51
Section 10.5 Severability. . . . . . . . . . . . . . . . . . . . . . .52
Section 10.6 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . .53
Section 10.7 Consent to Jurisdiction and Venue, Etc. . . . . . . . . .53
Section 10.8 Headings. . . . . . . . . . . . . . . . . . . . . . . . .53
Section 10.9 Participation . . . . . . . . . . . . . . . . . . . . . .53
Section 10.10 Issuing Branch of the Bank. . . . . . . . . . . . . . . .53
Section 10.11 Counterparts. . . . . . . . . . . . . . . . . . . . . . .54
Section 10.12 Complete and Controlling Agreement. . . . . . . . . . . .54
Section 10.13 WAIVER OF JURY TRIAL. . . . . . . . . . . . . . . . . . .54
Section 10.14 Assignability to Federal Reserve. . . . . . . . . . . . .54
SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-1
LETTER OF CREDIT REIMBURSEMENT AGREEMENT
THIS LETTER OF CREDIT REIMBURSEMENT AGREEMENT (this "Reimbursement
Agreement") is executed and entered into as of December 1, 1995, by and among
Palomino Park Public Improvements Corporation (the "Bond Issuer"), a Colorado
nonprofit corporation, Wellsford Residential Property Trust ("Wellsford REIT"),
a Maryland real estate investment trust (collectively, the Bond Issuer and
Wellsford REIT are referred to herein as "Account Parties"), and 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").
All capitalized terms used herein and not otherwise defined in connection with
such use shall have the meanings set forth in Article 1.
WHEREAS, substantially concurrently herewith (a) the Bond Issuer is
issuing pursuant to the Bond Indenture, on behalf of the District, and at the
request of Wellsford REIT and its subsidiary Park at Highlands LLC
("Highlands"), a Colorado limited liability company, its "Palomino Park Public
Improvements Corporation Assessment Lien Revenue Bonds Series 1995 -
$14,755,000" (the "Bonds"), the proceeds of which will be used primarily to
finance certain water, sewer, street and park facilities for The Park at
Highlands Ranch, Phase I of which is owned by Highlands, and (b) Highlands is
entering into the Assessment Agreement and the Assessment and Lien to support
repayment of the Bonds; and
WHEREAS, to enhance the marketability of the Bonds and to provide
additional security for the repayment of the Bonds, Account Parties have
requested that the Bank issue the Letter of Credit to secure certain payments
to be made with respect to the Bonds in the amount of $15,773,702 of which
(subject to the terms of the Letter of Credit) $14,755,000 will be available to
pay principal of the Bonds either at maturity or upon redemption or
acceleration thereof or to pay the portion of the purchase price of Bonds
representing the principal amount thereof, and of which $1,018,702
(representing 210 days interest on the initial outstanding principal amount of
Bonds, calculated at a maximum interest rate of 12% per annum computed on the
basis of a year of 365 days) will be available to pay interest on the Bonds as
interest becomes due or to pay the portion of the purchase price of the Bonds
representing the accrued interest thereon; and
WHEREAS, it is contemplated that the draws under the direct-pay Letter of
Credit to make principal or interest payments under the Bonds (other than
principal and interest payments relating to a Purchase Drawing (as defined
below)) will be reimbursed hereunder on the day such draws are made, and that
Purchase Drawings will be reimbursed upon the remarketing of the Bonds tendered
in connection with such Purchase Drawings, as more fully set forth in Article
IV of the Bond Indenture and Article 2 below; and
WHEREAS, to secure their obligations to the Bank under this Reimbursement
Agreement and the other Related Documents, Account Parties substantially
concurrently herewith are executing and delivering to the Bank the Pledge
Agreement; and
WHEREAS, in order to further evidence and secure their respective
obligations to the Bank under this Reimbursement Agreement and the other
Related Documents, Wellsford REIT and the Bond Issuer concurrently herewith are
each executing and delivering to the Bank their Promissory Notes; and
WHEREAS, Wellsford REIT has heretofore entered into a Second Amended and
Restated Revolving Credit Agreement dated as of June 30, 1995 as amended by
that certain First Amendment dated as of December 1, 1995 (as amended, modified
or restated from time to time in accordance with its terms, the "Wellsford REIT
Loan Agreement") with The First National Bank of Boston ("Bank Boston") and the
other parties listed therein (including the Bank), and Bank Boston and the
other parties listed in the Wellsford REIT Loan Agreement have entered into an
Intercreditor Agreement, dated as of June 30, 1995, as amended by that certain
First Amendment dated as of December 1, 1995 (as amended, modified and restated
in accordance with its terms from time to time, the "Intercreditor Agreement"),
which further support Account Parties' ability to honor their obligations
hereunder and under the other Related Documents.
NOW, THEREFORE, in consideration of the agreements set forth herein and in
order to induce the Bank to issue the Letter of Credit, the Bank and Account
Parties agree as follows:
ARTICLE 1
DEFINITIONS
Section 1.1 Definitions. In addition to terms defined at other places in
this Reimbursement Agreement, the following defined terms are used throughout
this Reimbursement Agreement with the following meanings:
"Account Parties" means the Bond Issuer and Wellsford REIT collectively
and jointly and severally.
"Accountant" means an independent certified public accountant or a firm of
independent certified public accountants, selected by Wellsford REIT and
satisfactory to the Bank.
"Affiliate" means a corporation, partnership, joint venture, limited
liability company, limited liability partnership, association, business trust
or similar entity organized under the laws of the United States of America or
any state thereof which is directly or indirectly controlled by any Person.
For purposes of this definition, control means the power to direct the
management and policies of a Person through the ownership directly or
indirectly of not less than a majority of its voting securities or the right to
designate or elect not less than a majority of the members of its board of
directors or other governing board or body by law, contract or otherwise.
"Agent" means the Person acting from time to time as agent for the Lenders
under the Wellsford REIT Loan Agreement which, as of the date hereof, is Bank
Boston.
"Assessment Agreement" means the Assessment Agreement of even date
herewith by and between the Bond Issuer and Highlands, including such
amendments, modifications or supplements permitted pursuant to its terms and
Section 6.1.
"Assessment and Lien" means the Public Improvements Assessment and Lien of
even date herewith by and between the Bond Issuer and Highlands. including such
amendments, modifications or supplements permitted pursuant to its terms and
Section 6.1.
"Asset Value" means the purchase price of Real Estate (including
improvements) and ordinary related purchase transaction costs, without
deduction for depreciation. If the Real Estate is purchased as a part of a
group of properties, the Asset Value shall be calculated based upon a
reasonable allocation by Wellsford REIT of the aggregate purchase price among
all Real Estate purchased in such transaction.
"Balance Sheet Date" means September 30, 1995.
"Bank" means 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.
"Bank Boston" means The First National Bank of Boston.
"Banking Arrangements" means the agreements of the Bank and Account
Parties set forth in this Reimbursement Agreement and the transactions
contemplated thereby, including, without limitation, (a) any commitment to
extend credit, to issue any letter of credit or other credit or liquidity
facility, to purchase any obligation of or for the benefit of either of the
Account Parties, or to extend any other financial accommodation, (b) any
issuance, extension or maintenance of any of the foregoing, and (c) any pledge,
purchase or carrying of any obligation of or for the benefit of either of the
Account Parties.
"Base Rate" means the higher of (i) the annual rate of interest announced
from time to time by Bank Boston at its head office in Boston, Massachusetts as
its "base rate" and (ii) 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 rate defined herein shall become effective as of the opening of
business on the day on which such change in the rate becomes effective.
"Base Rate Loans" has the meaning given such term in the Wellsford REIT
Loan Agreement.
"Bond Purchase Contract" means the Placement Agency Agreement dated
December 20, 1995 among the Bond Issuer and the Remarketing Agent, including
such amendments, modifications or supplements permitted pursuant to its terms
and Section 6.1.
"Bonds" means the Palomino Park Public Improvements Corporation Assessment
Lien Revenue Bonds Series 1995 - $14,755,000.
"Bond Indenture" means the Trust Indenture dated as of September 1, 1995
between the Bond Issuer and the Bond Trustee, including such amendments,
modifications or supplements permitted pursuant to its terms and permitted
hereunder.
"Bond Issuer" means Palomino Park Public Improvements Corporation, a
Colorado nonprofit corporation, and the issuer of the Bonds.
"Bond Trustee" means United States Trust Company of New York or its
permitted successor as trustee under the Bond Indenture and as permitted
hereunder.
"Business Day" means any day other than (i) a Saturday or Sunday, (ii) a
day on which commercial banks in Denver, Colorado, New York, New York or the
city or cities in which are located the principal corporate trust offices of
the Bond Trustee and the Remarketing Agent and the office of the Bank at which
demands for payment under the Letter of Credit are to be presented are
authorized or required by law or executive order to close, or (iii) a day on
which the New York Stock Exchange is closed.
"Closing Date" means the date on which the executed Letter of Credit is
delivered to the Bond Trustee and the Bonds are initially issued and delivered.
"CERCLA" has the meaning set forth in Section 4.18(1).
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, and all rules and regulations from time to time promulgated thereunder.
"Collateral" has the meaning set forth in Section 4.27.
"Compliance Certificate" has the meaning set forth in Section 5.4(d).
"Consolidated Operating Cash Flow" means, with respect to any period of
any Person, an amount equal to the Operating Cash Flow of such Person and its
Subsidiaries for such period consolidated in accordance with generally accepted
accounting principles.
"Consolidated Total Assets" means, with respect to any Person, all assets
of such Person and its Subsidiaries determined on a consolidated basis in
accordance with generally accepted accounting principles. In the event that
such Person or any of its Subsidiaries has entered into an agreement of the
type described in Section 6.11, the properties to be acquired under such
agreements shall be treated as assets of such Person and valued at the lesser
of fair market value or acquisition cost. All real estate assets shall be
valued on an undepreciated cost basis. The assets of such Person on the
consolidated financial statements of such Person shall be adjusted to reflect
such Person's allocable share of such asset, for the relevant period or as of
the date of determination, taking into account (a) the relative proportion of
each such item derived from assets directly owned by such Person and from
assets owned by its Subsidiaries, and (b) such Person's respective ownership
interest in its Subsidiaries.
"Consolidated Total Liabilities" means, with respect to any Person, all
liabilities of such Person determined on a consolidated basis in accordance
with generally accepted accounting principles and all Indebtedness of such
Person, whether or not so classified.
"Debt Service" means, for any period, the sum of all interest (including
capitalized interest) and scheduled principal payments due and payable during
such period, reduced by any balloon payments due upon maturity of any
Indebtedness.
"Deed of Trust" means that certain Deed of Trust, Security Agreement,
Financing Statement, and Assignment of Leases from the Bond Issuer to The
Public Trustee of ▇▇▇▇▇▇▇ County, Colorado for the use of the Bond Trustee and
the Bank dated December 1, 1995.
"Default" means the occurrence of any event which with the giving of
notice or the passage of time or both would constitute an Event of Default.
"Default Rate" means the Base Rate plus four and three-quarters percent
(4.75%) per annum. The Default Rate shall change as and when the Base Rate
changes.
"Development" means The Park at Highlands Ranch, a master-planned
residential community in ▇▇▇▇▇▇▇ County, Colorado.
Distribution" means the declaration or payment of any dividend or
distribution on or in respect of any shares of beneficial interest of Wellsford
REIT, other than dividends or distributions payable solely in equity securities
of Wellsford REIT; the purchase, redemption, exchange or other retirement of
any shares of beneficial interest of Wellsford REIT, directly or indirectly
through a Subsidiary of Wellsford REIT or otherwise; the return of capital by
Wellsford REIT to its shareholders or partners as such; or any other
distribution on or in respect of any shares of beneficial interest of Wellsford
REIT.
"District" means Highlands Ranch ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇. ▇, ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, a quasi-municipal corporation organized under the laws of the
State of Colorado.
"Drawing" means an Interest Drawing, a Principal Drawing or a Purchase
Drawing.
"Environmental Laws" has the meaning set forth in Section 4.18(1).
"EPA" has the meaning set forth in Section 4.18(2).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and all rules and regulations from time to time
promulgated thereunder.
"ERISA Affiliate" means, with respect to any Person, any Person which is
treated as a single employer with such Person under Section 414 of the Code.
"ERISA Reportable Event" means 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.
"Event of Default" means any of the events defined as such in Section 7.1.
"Expiration Date" means the date on which the Letter of Credit terminates
or expires as described under paragraph 1 of the Letter of Credit; provided,
however, that in no event shall the Expiration Date occur after the Maturity
Date of the Wellsford REIT Loan Agreement.
"Federal Funds Effective Rate" means, for any day, the rate per annum,
equal to the weighted average of the rates of 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 Agent
from three (3) federal funds brokers of recognized standing selected by Agent,
as provided for in the Wellsford REIT Loan Agreement.
"Funds from Operations" means, with respect to any Person for any fiscal
period, the net income (or deficit) of such Person computed in accordance with
generally accepted accounting principles, excluding financing costs and gains
(or losses) from debt restructuring and sales of property, plus depreciation
and amortization and other non-cash items.
"Hazardous Substance" has the meaning set forth in Section 4.18(2).
"Highlands" means Park at Highlands LLC, a Colorado limited liability
company and a Subsidiary of Wellsford REIT.
"Implied Ratings" means, with respect to Wellsford REIT, the most recent
rating issued from time to time by each Rating Agency as is applicable to
senior unsecured long-term debt of Wellsford REIT, or if no such senior
unsecured long-term debt is outstanding, then the most recent rating issued
from time to time by each Rating Agency as would hypothetically be applicable
to senior unsecured long-term debt of Wellsford REIT (i.e., an implied rating).
"Indebtedness" means 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, any obligations evidenced by bonds,
debentures, notes or similar debt instruments and the obligations described in
Section 6.3(i)); (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; (c) all guarantees, endorsements and other contingent
obligations whether direct or indirect in respect of Indebtedness of others,
including 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) all obligations to purchase
under agreements to acquire, or otherwise to contribute money with respect to,
properties under "development" within the meaning of Section 6.11; (e) a
Person's pro rata share of any of the above-described obligations of its
unconsolidated affiliates; and (f) all amounts available to be drawn under
letters of credit, including but not limited to, the Letter of Credit.
"Indemnified Party" has the meaning set forth in Section 8.4.
"Intercreditor Agreement" means that certain Intercreditor Agreement dated
as of June 30, 1995 by and among Bank Boston and the other parties listed
therein, as amended by that certain First Amendment dated as of December 1,
1995, including such amendments, modifications or supplements permitted
pursuant to its terms and Section 6.1.
"Interest Drawing" means a drawing under the Letter of Credit pursuant to
an Interest Drawing, as defined in the Letter of Credit, to pay interest on the
Bonds when due.
"Investments" means, 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 interest in real property, and all other
investments; provided, however, that the term "Investments" 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) the amount of any
investment represented as a guaranty shall be taken at not less than the
principal amount of the obligations guaranteed and still outstanding; (b) there
shall be included as an Investment all interest accrued with respect to
indebtedness constituting an Investment unless and until such interest is paid;
(c) 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); (d)
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 (b)
may be deducted when paid; and (e) there shall not be deducted from the
aggregate amount of Investments any decrease in the value thereof.
"LC Loan" has the meaning set forth in Section 2.2(1).
"LC Loan Eligibility Date" has the meaning set forth in Section 2.2(1).
"Lenders" means the lending institutions party to the Wellsford REIT Loan
Agreement and any other Person who becomes an assignee of any rights of a
Lender pursuant to the Wellsford REIT Loan Agreement (but not including any
Participants).
"Letter of Credit" means the Letter of Credit No. 967-95 issued by the
Bank dated December 1, 1995, including such amendments, modifications or
supplements permitted pursuant to its terms and Section 6.1.
"Liens" has the meaning set forth in Section 6.4.
"Liquidity Drawing" means a Drawing made pursuant to a Purchase Drawing on
the Letter of Credit, but only until the amount of such Drawing is repaid as
required by Section 2.2 or becomes an LC Loan pursuant to Section 2.2(1).
"Liquidity Drawing Amount" has the meaning set forth in Section 2.2.
"Loans" has the meaning given such term in the Wellsford REIT Loan
Agreement.
"Loan Documents" has the meaning given such term in the Wellsford REIT
Loan Agreement.
"▇▇▇▇▇'▇" means ▇▇▇▇▇'▇ Investors Service, Inc. or its successors.
"Net Capital Expenditures" means, 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)" means, 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.
"Official Statement" means collectively, the Preliminary Private Placement
Memorandum and the Private Placement Memorandum used in connection with the
sale of the Bonds.
"Operating Agreement" means the Operating Agreement of even date herewith
by and between the Bond Issuer and the District, including such amendments,
modifications or supplements permitted pursuant to its terms and Section 6.1.
"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 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 extra-
ordinary or nonrecurring gains included in calculating such Net Income minus
(d) all Net Capital Expenditures incurred by such Person (or with respect to
such asset) during such period, all as determined in accordance with generally
accepted accounting principles but only to the extent such Net Capital
Expenditures are funded from Net Income and not from any capital funds,
including proceeds of (i) any debt or equity offering by such Person, (ii) any
permitted Indebtedness or (iii) any sale of an asset of such Person.
"Participant(s)" means any bank(s) or other financial institution(s) which
may purchase a participation interest from the Bank in the Letter of Credit,
this Reimbursement Agreement and certain of the other Related Documents
pursuant to a participation or similar agreement (including without limitation
the Intercreditor Agreement) among the Bank and the Participant(s).
"Permitted Liens" means liens, security interests and other encumbrances
permitted by Section 6.4.
"Person" means any natural person, corporation, partnership, association,
trust, joint venture, public body, limited liability company or other legal
entity.
"Phase I of the Development" means the first phase of the Development,
consisting of 456 units, and the Public Improvements to be constructed on the
real property described on Exhibit A of the Assessment and Lien.
"Plan" has the meaning set forth in Section 4.16.
"Pledge Agreement" means the Bond Pledge and Security Agreement attached
hereto as Exhibit B dated as of the date hereof by and among Account Parties,
the Bank and the Bond Trustee, as custodian, including such amendments,
modifications or supplements permitted pursuant to its terms and Section 6.1.
"Pledged Bonds" means Bonds which have been purchased with the proceeds of
a Purchase Drawing on the Letter of Credit and are pledged to the Bank under
the Bond Indenture and the Pledge Agreement.
"Principal Drawing" means a drawing under the Letter of Credit pursuant to
a Principal Drawing, as defined in the Letter of Credit, to pay principal of
the Bonds.
"Pro Forma Debt Service Charges" means for any period of four consecutive
fiscal quarters the sum of principal and interest which would have been payable
during such period on a loan in the original principal amount equal to the
outstanding principal balance of all unsecured Indebtedness (including, without
limitation, the Wellsford REIT Loan Obligations and the Letter of Credit,
without duplication) as of the date of such determination 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
the date of such determination plus one and three-fourths percent (1.75%) and
being payable based on a 25 year mortgage style amortization schedule. Such
determination of the Pro Forma Debt Service Charges by the Bank shall, so long
as the same shall be determined in good faith, be conclusive and binding absent
manifest error.
"Promissory Notes" means the promissory notes of even date herewith
attached hereto as Exhibit C-1 and Exhibit C-2 made by Wellsford REIT and the
Bond Issuer, respectively, in favor of the Bank, including such amendments,
modifications or supplements permitted pursuant to Section 6.1.
"Prospectus" means the 10-K of Wellsford REIT dated December, 1994 and
filed with the SEC.
"Public Improvements" has the meaning assigned in the Bond Indenture.
"Purchase Drawing" means a drawing under the Letter of Credit pursuant to
a Purchase Drawing, as defined in the Letter of Credit, to purchase Bonds that
are tendered or deemed tendered.
"Rate Mode" has the meaning assigned in the Bond Indenture.
"Rate Period" means each Weekly Rate Period or Term Rate Period, as
applicable.
"Rating Agency" means Standard & Poor's, Moody's or any successor or
additional rating agency that rates the Bonds or Wellsford REIT's senior
unsecured long-term debt (as applicable) at the written request of the Bond
Issuer or Wellsford (as applicable) with the written consent of the Bank, which
consent will not be unreasonably withheld.
"Rating Notice" has the meaning set forth in Section 5.4(h).
"RCRA" has the meaning set forth in Section 4.18(1).
"Real Estate" means all real property at any time owed or leased (as
lessee or sublessee) by Wellsford REIT or any of its Subsidiaries.
"Release" has the meaning set forth in Section 4.18(3).
"Reimbursement Agreement" means this Letter of Credit Reimbursement
Agreement, including such amendments, modifications or supplements permitted
pursuant to Section 10.2.
"REIT Status" means, with respect to Wellsford REIT, its status as a real
estate investment trust as defined in section 856(a) of the Code.
"Related Documents" means this Reimbursement Agreement, the Letter of
Credit, the Bond Indenture, the Remarketing Agreement, the Promissory Notes,
the Pledge Agreement, the Bonds, the Bond Purchase Contract, the Operating
Agreement, the Assessment Agreement, the Assessment and Lien, the Deed of
Trust, the Wellsford REIT Loan Agreement, the Intercreditor Agreement and the
Loan Documents, and, in each case, all exhibits, instruments or agreements
relating to each.
"Remarketing Agent" means the remarketing agent at the time serving as
such under the Remarketing Agreement; initially, First Interstate Bank of
Arizona, N.A.
"Remarketing Agreement" means the Remarketing Agreement dated as of
December 1, 1995 among the Bond Issuer and the Remarketing Agent, including
such amendments, modifications or supplements permitted pursuant to its terms
and Section 6.1.
"▇▇▇▇" has the meaning set forth in Section 4.18(1).
"SEC" means the federal Securities and Exchange Commission.
"Standard & Poor's" means Standard & Poor's Ratings Service, a division of
McGraw Hill, or its successors.
"Stated Amount" has the meaning given to such term in paragraph 2 of the
Letter of Credit.
"Subsidiary" means any corporation, association, partnership, trust or
other business 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.
"Test Period" has the meaning set forth in Section 6.17(2).
"Term Rate Period" has the meaning assigned in the Bond Indenture.
"Unencumbered Operating Properties" means Real Estate which is owned one
hundred percent (100%) in fee simple by Wellsford REIT which satisfies all of
the following conditions:
(a) each of the Unencumbered Operating Properties shall be free and
clear of all Liens other than the Liens permitted in subsections 6.4(b)
and (d).
(b) to the best of Wellsford REIT's knowledge and belief, none of the
Unencumbered Operating Properties shall have any material title, survey or
other defects that would give rise to a materially adverse effect as to
the value, use of or ability to sell or refinance such property; and
(c) each of the Unencumbered Operating Properties shall consist
solely of Real Estate (i) which are income-producing operating properties
utilized principally for multi-family housing, (ii) which are fully
operating, and (iii) with respect to which valid certificates of occupancy
for all buildings thereon have been issued and are in full force and
effect.
"Voting Interest" means stock, partnership 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.
"Weekly Rate Period" has the meaning assigned in the Bond Indenture.
"Wellsford Reimbursement Agreement" means that certain Reimbursement
Agreement dated as of December 1, 1995 between the Bond Issuer and Wellsford
REIT.
"Wellsford REIT" means Wellsford Residential Property Trust, a Maryland
real estate investment trust having its principal place of business in New York
City.
"Wellsford REIT Loan Agreement" means that certain Second Amended and
Restated Revolving Credit Agreement dated as of June 30, 1995 by and between
Wellsford REIT and Bank Boston and the other parties listed therein and any
exhibits, instruments or agreements relating thereto, as amended by that
certain First Amendment dated as of December 1, 1995, including such
amendments, modifications or supplements permitted pursuant to its terms and
Section 6.1.
"Wellsford REIT Loan Obligations" means all indebtedness, obligations and
liabilities of Wellsford REIT to any of the Lenders, including the Bank and
Bank Boston, individually or collectively, under the Wellsford REIT Loan
Agreement or any of the other Loan Documents or in respect of any of the Loans
or the Notes (each as defined in the Wellsford REIT Loan Agreement) thereunder,
or other instruments at any tine evidencing any of the foregoing, whether
existing on the date of hereof or thereof 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.
Section 1.2 Accounting Matters. All accounting terms used herein without
definition shall be interpreted in accordance with generally accepted
accounting principles, and except as otherwise expressly provided herein all
accounting determinations required to be made pursuant to this Reimbursement
Agreement shall be made in accordance with generally accepted accounting
principles.
Section 1.3 Interpretation. All words used herein shall be construed to
be of such gender or number as the circumstances require. Reference to any
document means such document as amended or supplemented from time to time as
permitted under Section 6.1 and in accordance with the terms of such document.
Section 1.4 Relation to Other Documents. Nothing in this Reimbursement
Agreement shall be deemed to amend, or to relieve either Account Party of any
of its obligations under, any other Related Document. To the extent any
provision of this Reimbursement Agreement conflicts with any provision of any
other Related Document to which either Account Party or the Bank are parties,
the provisions of this Reimbursement Agreement shall control.
Section 1.5 Time for Performance. Time is of the essence to this
Reimbursement Agreement and the performance of obligations hereunder.
Notwithstanding the immediately preceding sentence, whenever any obligation
hereunder shall be stated to be due on a day which is not a Business Day, such
obligation shall be due on the next succeeding Business Day (provided that if
the obligation involves the payment of money upon which interest is accruing,
then the payment made on the next succeeding Business Day shall include
interest through such next succeeding Business Day).
ARTICLE 2
REIMBURSEMENT, FEES AND PAYMENT PROVISIONS
Section 2.1 Same Day Reimbursement. The Account Parties jointly and
severally agree to pay the Bank for the following:
(1) Subject to the provisions of Section 2.2 relating to Liquidity
Drawing Amounts and LC Loans, the Bank shall be reimbursed for all amounts
advanced by the Bank in connection with a Drawing under the Letter of
Credit by 2:00 p.m., New York time, on the same day as the Drawing is made
under the Letter of Credit and honored by the Bank (a "Drawing Date"); and
(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. In addition, to the extent permitted by
law, the Account Parties shall pay a late charge equal to three percent
(3%) of any amounts payable hereunder which are not paid within ten days
of the date when due. Such amounts shall be due and payable on demand.
If the Bank actually receives in immediately available funds from either
Account Party or the Bond Trustee reimbursement in full for any Drawing by 2:00
p.m., New York time, on the Drawing Date for such Drawing, then no interest
shall accrue on such Drawing for such day. To the extent not repaid in full,
including interest thereon in accordance with clause (2) of this Section 2.1,
by the Account Parties or the Bond Trustee by 8:00 a.m. New York time on the
Business Day next succeeding the Drawing Date, the Bank shall deliver to the
Agent a notice pursuant to Section 2.9 of the Wellsford REIT Loan Agreement,
and upon payment by the Lenders pursuant to Section 2.9 of the Wellsford REIT
Loan Agreement with respect to such Drawing, the obligation of Account Parties
to Bank to repay such amounts pursuant to this Reimbursement Agreement shall be
extinguished and such obligation shall instead be evidenced by the Notes under
Wellsford REIT Loan Agreement as provided therein.
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 in accordance with the following provision of this
Section 2.2:
(1) To the extent not repaid in full, including interest thereon in
accordance with clause (2) of Section 2.1, by the Account Parties or the
Bond Trustee by 8:00 a.m. New York time on the Business Day next
succeeding the Drawing Date (the "LC Loan Eligibility Date"), (i) all
Liquidity Drawings shall immediately and without further action by the
Account Parties, the Bond Trustee or the Bank constitute a loan under this
Reimbursement Agreement (an "LC Loan") and (ii) the Bank shall deliver to
the Agent a notice pursuant to Section 2.9 of the Wellsford REIT Loan
Agreement, and upon payment by the Lenders pursuant to Section 2.9 of the
Wellsford REIT Loan Agreement with respect to such Drawing, the obligation
of Account Parties to Bank to repay such amounts pursuant to this
Reimbursement Agreement shall be extinguished and such obligation shall
instead be evidenced by the Notes under Wellsford REIT Loan Agreement as
provided therein. From and after the LC Loan Eligibility Date and until
either the LC Loans have been repaid in full or advances have been made
pursuant to Section 2.9 of the Wellsford REIT Loan Agreement, the LC Loans
shall bear interest at the Base Rate and shall be payable in arrears on
each Interest Payment Date (as defined in the Wellsford REIT Loan
Agreement). Such LC Loans may be prepaid in accordance with Section 2.4,
and shall be prepaid as and when required under Section 3.2 of the
Wellsford REIT Loan Agreement.
(2) Notwithstanding the foregoing, all unreimbursed Liquidity
Drawing Amounts and LC Loans shall be accelerated and become immediately
due and payable on the Expiration Date. To the extent permitted by law,
any unreimbursed Liquidity Drawing Amounts or LC Loans, and any interest
accruing thereon, that are not paid when due thereafter shall bear
interest at the Default Rate. In addition, to the extent permitted by
law, the Account Parties shall pay a late charge equal to three percent
(3%) of any amounts payable hereunder which are not paid within ten days
of the date when due. While held by or for the benefit of the Bank,
Pledged Bonds shall bear interest at the Base Rate.
Section 2.3 Limitation on Interest. Notwithstanding anything in this
Reimbursement Agreement to the contrary, all agreements between the Account
Parties and the Bank, 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 to the Bank
hereunder or under any other Related Document or otherwise, shall the interest
contracted for, charged or received by the Bank exceed the maximum amount
permissible under applicable law. If, from any circumstance whatsoever,
interest would otherwise be payable to the Bank in excess of the maximum lawful
amount, the interest payable to the Bank shall be reduced to the maximum amount
permitted under applicable law; and if from any circumstance the Bank 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 to the
Bank hereunder or under the other Related Documents (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 Account Parties and the Bank.
Section 2.4 Remarketing of Pledged Bonds. As security for the amounts
owed to the Bank and the Lenders and in order to reimburse the Bank and the
Lenders for amounts drawn under the Letter of Credit and interest thereon
pursuant to Sections 2.1 and 2.2, Account Parties have granted to the Bank,
pursuant to the Pledge Agreement, security interests in all of their respective
right, title and interest in and to the Pledged Bonds. Each Account Party
shall take such further steps and execute such further documents as are within
its authority as the Bank may from time to time request in order to more fully
evidence, perfect and protect such security interests. Account Parties shall
have the right to effect a release of Pledged Bonds from such pledge and
security interest by paying or prepaying portions of the unreimbursed Liquidity
Drawing Amounts and/or unpaid LC Loans (including, without limitation, with
advances under the Wellsford REIT Loan Agreement) in accordance with the
following provisions:
(1) Account Parties shall cause the Bond Trustee to provide the Bank
with at least one (1) Business Day's prior written notice or telephonic
notice (confirmed in writing) of: (a) Account Parties' intent to pay or
prepay any Liquidity Drawing Amounts or LC Loans; (b) the principal amount
of Pledged Bonds to be released and the amounts of the required payment or
prepayment as determined pursuant to clause (2) of this Section 2.4 (with
separate designation of the principal, interest and other amounts to be
included in the payment and/or prepayment); and (c) the particular
Liquidity Drawing Amounts and/or LC Loans which are to be prepaid and the
particular Pledged Bonds to be released. The written notice required by
this clause (1) shall be in the form of Exhibit I to the Letter of Credit.
(2) As a condition to release of Pledged Bonds from the Bank's
pledge and security interests, the Bank shall receive a payment
(including, if and to the extent applicable, pursuant to Section 2.9 of
the Wellsford REIT Loan Agreement) in an amount equal to the sum of:
(a) The amount of the Liquidity Drawings (irrespective of
whether such amounts then constitute Liquidity Drawing Amounts or LC
Loans) under the Letter of Credit made in connection with the
purchase of such Pledged Bonds, to the extent not previously paid;
(b) Interest pursuant to Sections 2.1 and 2.2 on the sums
described in clause (a) above to the date of such payment, to the
extent not previously paid; and
(c) Any other amounts due and payable under this Reimbursement
Agreement as of the date of such payment, to the extent not
previously paid.
(3) No amounts received by the Bank pursuant to clause (2) of this
Section 2.4 shall be applied against LC Loans until all unreimbursed
Liquidity Drawing Amounts have been reimbursed to the Bank in full,
together with any other amounts required to be paid with respect thereto
pursuant to the said clause (2). As among outstanding Liquidity Drawing
Amounts, payments received pursuant to clause (2) of this Section 2.4
shall be applied against Liquidity Drawing Amounts (and unpaid accrued
interest thereon) in order based upon the time that the Liquidity Drawing
Amounts have been outstanding, starting with those Liquidity Drawing
Amounts that have been outstanding the longest.
(4) Upon payment to the Bank of the sums described in clause (2) of
this Section 2.4, and acknowledgement by the Bank of the receipt thereof,
the Bank or designated agent shall deliver to the Bond Trustee (to the
extent that the payment is on account of the remarketing of the Bonds, or
for delivery to the Bond Issuer, to the extent that the payment is on
account of a payment or prepayment of Liquidity Drawing Amounts or LC
Loans other than in connection with a remarketing of Bonds) a principal
amount of Pledged Bonds equal to the principal amount of Liquidity
Drawings made in connection with the purchase of the Bonds, and said
Pledged Bonds shall be deemed released from the pledge and security
interests under the Pledge Agreement.
Section 2.5 Transfer/Amendment Fee. Upon each transfer of the Letter of
Credit in accordance with paragraph 8 thereof, Account Parties agree to pay to
the Bank the sum of $1,500 plus the Bank's actual costs and expenses associated
with such transfer (and interest on such costs and expenses from the date
expended by the Bank to the date reimbursed by Account Parties at the interest
rate specified in Section 2.2), payable on the date of such transfer. Upon each
amendment of the Letter of Credit, this Reimbursement Agreement or any of the
other Related Documents, the Account Parties shall pay to the Bank such
amendment fees, plus the Bank's actual costs and expenses associated with such
amendment (and interest on such costs and expenses from the date expended by
the Bank to the date reimbursed by Account Parties at the interest rate
specified in Section 2.2), payable on the effective date of such amendment, as
shall be agreed upon by the Account Parties and the Bank at such time;
provided, however, that no amendment fee shall be payable by Account Parties
solely by reason of a reduction in the Stated Amount of the Letter of Credit.
Section 2.6 Costs, Expenses and Taxes.
(1) Account Parties agree to pay on demand all reasonable costs and
expenses in connection with the preparation, execution, delivery and
administration of this Reimbursement Agreement, the other Related
Documents and any other documents which may be delivered in connection
with this Reimbursement Agreement and the other Related Documents,
including, without limitation, the fees and out-of-pocket expenses of
counsel for the Bank with respect thereto and with respect to advising the
Bank as to its rights and responsibilities under this Reimbursement
Agreement and the other Related Documents and all costs and expenses, if
any, in connection with the enforcement of this Reimbursement Agreement,
the other Related Documents and such other documents which may be
delivered in connection with this Reimbursement Agreement. The fees and
expenses of Bank's counsel in connection with the initial negotiation and
preparation of this Reimbursement Agreement and the other Related
Documents payable by Account Parties shall be as set forth in that certain
letter agreement by and between the Bank and Wellsford REIT dated October
16, 1995. In addition, Account Parties shall pay any and all stamp and
other taxes and fees payable or determined to be payable in connection
with the execution, delivery, filing and recording of this Reimbursement
Agreement, the other Related Documents and such other documents, and
agrees to save the Bank harmless from and against any and all liabilities
with respect to or resulting from any delay in paying or omission to pay
such taxes and fees.
(2) Notwithstanding anything herein to the contrary, if any future
applicable law or any amendment or modification of present applicable law
(including, without limitation, 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 administrative 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 the Bank by
any central bank or other fiscal, monetary or other authority, whether or
not having the force of law) shall: (a) subject the Bank to any tax,
levy, impost, duty, charge, fee, deduction or withholding of any nature
with respect to this Reimbursement Agreement, the other Related Documents
or the Banking Arrangements (other than taxes based upon or measured by
the income or profits of the Bank), or (b) materially change the basis of
taxation (except for changes in taxes on income or profits) of payments to
the Bank of the principal of or the interest on any Drawings or LC Loans
or any other amounts payable to the Bank under this Reimbursement
Agreement or the other Related 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 Drawings or LC Loans by, or the Letters of Credit from, or
commitments of the Bank beyond those in effect as of the date hereof, or
(d) impose on the Bank any other conditions or requirements with respect
to this Reimbursement Agreement, the other Related Documents, the LC
Loans, any Drawings, the Letter of Credit, or any class of loans or
commitments of which any of the same forms a part; and the result of any
of the foregoing is: (i) to increase the cost to the Bank of making,
funding, issuing, renewing, extending or maintaining any of the LC Loans,
any Liquidity Drawing Amounts, the Letter of Credit or any Banking
Arrangements hereunder, or (ii) to reduce the amount of principal,
interest or other amount payable to the Bank hereunder on account of any
Banking Arrangements hereunder or any of the LC Loans, Liquidity Drawing
Amounts or Letters of Credit, or (iii) to require the Bank 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
the Bank from the Account Parties hereunder, then, and in each such case,
the Account Parties will, within fifteen (15) days of demand made by the
Bank at any time and from time to time and as often as the occasion
therefor may arise, pay to the Bank such additional amounts as the Bank
shall determine in good faith to be sufficient to compensate the Bank for
such additional cost, reduction, payment or foregone interest or other
sum. The Bank, in determining such amounts, may use any reasonable
averaging and attribution methods, generally applied by the Bank.
Section 2.7 Drawing Fee. Account Parties agree to pay a drawing fee (the
"Drawing Fee") to the Bank on each Drawing Date in the amount of $200 for each
Drawing made on such Drawing Date.
Section 2.8 Letter of Credit Facing Fee. Account Parties agree to pay to
the Bank a nonrefundable letter of credit facing fee, payable without any
requirement of notice or demand by the Bank, with the first such payment due on
January 1, 1996 for the period from the Closing Date through December 31, 1995,
and payable quarterly in arrears thereafter on or before each Wellsford REIT
Loan Agreement Interest Payment Date in an amount equal to 0.50% per annum of
the Stated Amount (without regard to reductions of the Stated Amount subject to
reinstatement, it being understood that reductions effected by submission of a
Certificate in the form of Exhibit "D" attached to the Letter of Credit are not
subject to reinstatement) (said quarterly payment to be computed on the basis
of a year of 360 days and the actual number of days elapsed during the
quarter).
Section 2.9 Capital Adequacy. If after the date hereof the 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 the 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 the Bank's or such holding company's
capital as a consequence of the Banking Arrangements hereunder to a level below
that which the Bank or holding company could have achieved but for such
adoption, change or compliance (taking into consideration the 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
the Bank to be material, then the Bank may notify the Account Parties thereof.
The Account Parties agree to pay to the Bank the amount of such reduction in
the return on capital as and when such reduction is determined, upon
presentation by the Bank of a statement of the amount setting for the Bank's
calculation thereof. In determining such amount, the Bank may use any
reasonable averaging and attribution methods, generally applied by the Bank.
Section 2.10 Method of Payment. All payments by Account Parties to the
Bank hereunder or under any of the other Related Documents (other than the Loan
Documents) shall be fully earned when due and nonrefundable when paid and made
in lawful currency of the United States and in immediately available funds.
Amounts payable to the Bank hereunder shall be transferred to the Bank's
account at The Chase Manhattan Bank, N.A., ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇, ABA ▇▇▇-▇▇▇-▇▇▇, for credit to the account of Dresdner Bank AG, New York
and Cayman Islands Branches, Account No. 920-1-059-07, Reference: Palomino
Park Bonds (or to such other account of the Bank as the Bank may specify by
written notice to Account Parties) not later than 2:00 p.m. New York, New York
time, on the date payment is due. Any payment received by the Bank after 2:00
p.m., New York, New York time, shall be deemed to have been received by the
Bank on the next Business Day. If any payment hereunder is due on a day that
is not a Business Day, then such payment shall be due on the immediately
succeeding Business Day.
Section 2.11 Maintenance of Accounts. The Bank shall maintain in
accordance with its usual practice an account or accounts evidencing the
indebtedness of Account Parties and the amounts payable and paid from time to
time hereunder. In any legal action or proceeding in respect of this
Reimbursement Agreement, the entries made in such account or accounts shall be
presumptive evidence of the existence and amounts of the obligations of Account
Parties therein recorded. The failure to record any such amount shall not,
however, limit or otherwise affect the obligations of Account Parties hereunder
to repay all amounts owed hereunder, together with all interest accrued thereon
as provided in this Article 2.
Section 2.12 Cure. Account Parties agree to pay to the Bank on demand any
amounts advanced by or on behalf of the Bank to the extent required to cure any
default, event of default or event of nonperformance under this Reimbursement
Agreement or any other Related Document. The Bank shall give Account Parties
reasonably prompt notice of any such advances. The Bank shall have the right,
but not the obligation, to cure any such default, event of default or event of
nonperformance.
Section 2.13 Withholding. All payments of principal, interest and any
other sums due hereunder shall be made in the amounts required hereunder
without any reduction or setoff, notwithstanding the assertion of any right of
recoupment or setoff or of any counterclaim by Account Parties, and without any
withholding on account of taxes, levies, duties or any other deduction
whatsoever. If Account Parties are required by law to withhold or deduct any
sum from payments required under this Reimbursement Agreement. Account Parties
shall, to the extent permitted by applicable law, increase the amount paid by
them to the Bank so that, after all withholdings and deductions, the amount
received by the Bank shall equal the amount the Bank would have received
without any such withholding or deduction.
Section 2.14 Reduction and Reinstatement of the Letter of Credit. The
Stated Amount shall be reduced and reinstated as specified in the Letter of
Credit.
Section 2.15 Loan Documents. Each Account Party acknowledges and agrees
that the terms and conditions of the Wellsford REIT Loan Agreement and the
other Loan Documents are independent of the terms and provisions of this
Agreement and the other Related Documents and shall not diminish, restrict or
otherwise limit the terms of this Agreement or any of the other Related
Documents. The Wellsford REIT Loan Agreement and the other Loan Documents are
not, and shall not be deemed to be, a novation, cancellation, satisfaction or
substitution of this Agreement or any of the other Related Documents or the
obligations arising hereunder or thereunder.
ARTICLE 3
CONDITIONS PRECEDENT
As a condition precedent to the issuance of the Letter of Credit, the Bank
shall have received the following items on or before the Closing Date, each in
form and substance satisfactory to the Bank and its counsel:
Section 3.1 Account Parties' Resolutions; Bylaws. Copies of resolutions
of the Board of Trustees of Wellsford REIT and the Bond Issuer approving this
Reimbursement Agreement, the other Related Documents to which Wellsford REIT or
the Bond Issuer (as applicable) is a party, the form and content of the Letter
of Credit and the other matters contemplated hereby and copies of all other
documents evidencing any other necessary organizational action and copies of
Wellsford REIT's Bylaws and the Bond Issuer's Bylaws, all certified by the
Secretary of Wellsford REIT and the Secretary of the Bond Issuer, as applicable
(which certificate shall state that such resolutions and Bylaws are true,
complete and in full force and effect on the Closing Date).
Section 3.2 Highlands' Resolutions; Bylaws. Copies of resolutions of the
Members of Highlands approving the Assessment Agreement, the Assessment and
Lien and the other Related Documents to which Highlands is a party and the
other matters contemplated hereby, copies of all other documents evidencing any
other necessary corporate action and copies of Highlands' Bylaws, all certified
by a duly authorized Member of Highlands (which certificate shall state that
such resolutions and Bylaws are true, complete and in full force and effect on
the Closing Date).
Section 3.3 Account Parties' Organizational Documents. Copies certified as
of recent date by the appropriate officer of each State in which Wellsford REIT
and the Bond Issuer each are organized or authorized to do business, and by a
duly authorized officer of Wellsford REIT or the Bond Issuer (as applicable) to
be true and complete, of the declaration of trust of Wellsford REIT and the
Articles of Incorporation of the Bond Issuer, as applicable, or its
qualifications to do business, as applicable, as in effect on such date of
certification.
Section 3.4 Highlands' Organizational Documents. Copies certified as of
recent date by the appropriate officer of the State of Colorado and any other
State in which Highlands is authorized to do business, and by a duly authorized
Member of Highlands to be true and complete, of the Operating Agreement or its
qualifications to do business, as applicable, as in effect on such date of
certification.
Section 3.5 Regulatory Approvals. Certified copies of all approvals or
authorizations by, or consents of, or notices to or registrations with, any
governmental body or agency required for Wellsford REIT, the Bond Issuer,
Highlands or the District to enter into this Reimbursement Agreement or the
other Related Documents to which each of them is a party, and copies of all
such approvals, authorizations, consents, notices or registrations required to
be obtained or made prior to the Closing Date in connection with the
transactions contemplated by the Related Documents.
Section 3.6 Incumbency Certificates. Certificates from the Secretaries of
Wellsford REIT and the Bond Issuer, and from a duly authorized Member of
Highlands, certifying the names and true signatures of the officers of
Wellsford REIT, the Bond Issuer and Highlands, respectively, authorized to sign
this Reimbursement Agreement and/or the other Related Documents to which
Wellsford REIT, the Bond Issuer and/or Highlands is a party.
Section 3.7 Opinions of Counsel. Opinions, in form and substance
acceptable to the Bank and upon which the Bank may rely, of (a) counsel to
Wellsford REIT, (b) counsel to Highlands, (c) Bond counsel and counsel to the
Bond Issuer, (d) special counsel to the Bank and (e) German in-house counsel to
the Bank.
Section 3.8 Related Documents. An executed copy of each of the Related
Documents.
Section 3.9 Amendment to the Wellsford REIT Loan Agreement. The Wellsford
REIT Loan Agreement and the Intercreditor Agreement shall have been amended in
form and substance acceptable to the Bank and its counsel.
Section 3.10 Compliance Certificate. A Compliance Certificate in the form
of Exhibit D hereto dated as of the Closing Date demonstrating compliance with
each of the covenants calculated therein as of the most recent fiscal quarter
end of Wellsford REIT shall have been delivered to the Bank.
Section 3.11 Ratings. A rating letter from ▇▇▇▇▇'▇ which confirms that the
Bonds have received long- and short-term ratings at least equal to the long-
and short-term ratings of the Bank.
Section 3.12 Account Parties Certificate(s). Certificates signed by duly
authorized officers of Wellsford REIT and the Bond Issuer, respectively, dated
the Closing Date, stating that: (a) the representations and warranties of
Wellsford REIT and/or the Bond Issuer, respectively, contained in Article 4 and
in the other Related Documents are correct on and as of the Closing Date as
though made on and as of such date; (b) Wellsford REIT and/or the Bond Issuer,
respectively, are in compliance with all of the covenants set forth in Articles
5 and 6; (c) no petition by or against Wellsford REIT and/or the Bond Issuer
has at any time been filed under the United States Bankruptcy Code or under any
similar act; (d) no Event of Default or Default has occurred and is continuing,
or would result from the issuance of the Letter of Credit and execution,
delivery or performance of this Reimbursement Agreement or the other Related
Documents; and (e) such other matters as the Bank or its counsel may request.
Section 3.13 Title. Title reports in form and substance satisfactory to
the Bank on all property securing payment of the assessments to be paid to pay
debt service on the Bonds.
Section 3.14 Payment of Fees and Expenses. Payment of all amounts
(including attorney's fees and expenses) payable at the Closing Date pursuant
to Section 2.6.
Section 3.15 Financial Statements. The most recent annual audited
financial statements of Wellsford REIT, and the unaudited financial statements
as of the Balance Sheet Date of Wellsford REIT and, to the extent available,
Highlands. The most recent unaudited financial statements of the Bond Issuer.
All of such statements shall be accompanied with a certificate from an officer
of Wellsford REIT, Highlands or the Bond Issuer, as applicable, stating that no
material adverse change in the consolidated assets, liabilities, operations or
financial condition of Wellsford REIT, Highlands or the Bond Issuer, as
applicable, has occurred since the date of the most recent financial
statements.
Section 3.16 Highlands Certificate(s). Certificates signed by duly
authorized officers of Highlands, dated the Closing Date, stating that: (a) no
petition by or against Highlands has at any time been filed under the United
States Bankruptcy Code or under any similar act; (b) no event of default nor
any occurrence, circumstance or event or any combination thereof which with the
lapse of time and/or giving of notice would constitute an event of default
under any of the Related Documents to which Highlands is a party has occurred
and is continuing, or would result from the execution, delivery or performance
of any of the Related Documents; (c) the representations and warranties of
Highlands contained in the Assessment Agreement are correct on and as of the
Closing Date; and (d) such other matters as the Bank or its counsel may
request.
Section 3.17 Remarketing Agent Certificate. A certificate from the
Remarketing Agent in form and substance satisfactory to the Bank and its
counsel.
Section 3.18 Bond Trustee Certificate. A certificate of the Bond Trustee
in form and substance satisfactory to the Bank and its counsel.
Section 3.19 Recordings and Filings. Evidence that the Assessment and
Lien and the Deed of Trust have been recorded in the appropriate county
recorder's office and that all appropriate UCC-1 financing statements have been
filed in the appropriate filing office(s).
Section 3.20 Other Documents. 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.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
Each Account Party represents and warrants to the Bank, for itself and not
with respect to the other Account Party, as follows:
Section 4.1 Corporate Authority, Etc.
(1) Incorporation; Good Standing. (a) Wellsford REIT: (i) is a
Maryland real estate investment trust 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 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, (iii) is in good
standing as a foreign entity and is duly authorized to do business in
Denver, Colorado and in any jurisdictions where the Unencumbered Operating
Properties are 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 Wellsford REIT,
and (iv) is a real estate investment trust in full compliance with and
entitled to the benefits of Section 856 of the Code. (b) Bond Issuer:
(i) is a Colorado non-profit corporation, duly organized, incorporated,
validly existing and in good standing under the laws of the State of
Colorado, (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 the Reimbursement Agreement and the
other Related Documents to which it is a party, and (iii) is in good
standing and authorized to do business in Colorado and in such other
jurisdictions where a failure to be so qualified could have a material
adverse effect on the business, assets on financial condition of Bond
Issuer. (c) Highlands: (i) is a limited liability company duly
organized, incorporated, validly existing and in good standing under the
laws of the State of Colorado, (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 the
Related Documents to which it is a party, and (iii) is in good standing
and authorized to do business in Denver, Colorado and in such other
jurisdictions where a failure to be so qualified could have a material
adverse effect on the business, assets or financial condition of
Highlands. (d) Each of the Subsidiaries of Wellsford REIT: (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 a failure to
be so qualified could have a materially adverse effect on the business,
assets or financial condition of Wellsford REIT, Highlands or such
Subsidiary.
(2) Authorization. The execution, delivery and performance of this
Reimbursement Agreement and the other Related Documents and the
transactions contemplated hereby and thereby (a) are within the authority
of Wellsford REIT, the Bond Issuer and Highlands, respectively, (b) have
been duly authorized by all necessary proceedings on the part of Wellsford
REIT, the Bond Issuer and Highlands, respectively, (c) 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 Wellsford REIT, the Bond Issuer
or Highlands is subject or any judgment, order, writ, injunction, license
or permit applicable to Wellsford REIT, the Bond Issuer or Highlands or
any of their respective properties, (d) 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 charter documents, partnership
agreement, declaration of trust or other charter documents or bylaws of,
or any agreement or other instrument binding upon, Wellsford REIT, the
Bond Issuer, Highlands or any of their respective properties, and (e) 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 Wellsford REIT,
the Bond Issuer or Highlands or any of their respective properties other
than the liens for the benefit of the holders of the Bonds created by the
Bond Indenture and the lien of the Assessment and Lien.
(3) Enforceability. The execution and delivery of this Reimbursement
Agreement and the other Related Documents to which each of them are
parties are valid and legally binding obligations of Wellsford REIT, the
Bond Issuer and Highlands, enforceable against each of them 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 4.2 Governmental Approvals. The execution, delivery and
performance by Wellsford REIT and the Bond Issuer of this Reimbursement
Agreement and the execution, delivery and performance by Wellsford REIT, the
Bond Issuer and Highlands of the Related Documents to which each of them are
parties 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.
Section 4.3 Title to Properties; Leases. Except as indicated on
Schedule A hereto, Wellsford REIT and its Subsidiaries, the Bond Issuer and its
Subsidiaries, and Highlands and its Subsidiaries own all of the assets
reflected in their respective consolidated balance sheets 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. Except as set forth in the title report delivered in
accordance with Section 3.13, Highlands holds fee title to all of the property
securing payment of the assessments to be paid to pay debt service on the
Bonds, subject to no rights of others, including any mortgages, leases,
conditional sales agreements, title retention agreements, liens or other
encumbrances and Permitted Liens described in Sections 6.4(b) and 6.4(d).
Without limiting the foregoing, Wellsford REIT and its Subsidiaries and
Highlands and its Subsidiaries each have good and marketable fee simple title
to, or a valid and subsisting leasehold interest in, all real property
reasonably necessary for the operation of their respective businesses, free
from all liens or encumbrances of any nature whatsoever, except for Permitted
Liens. Wellsford REIT or its Subsidiary, and Highlands or its Subsidiary, as
the case may be, is the insured under owner's policies of title insurance
covering all real property owned by it, in each case in an amount not less than
the purchase price for such real property.
Section 4.4 Financial Statements. Wellsford REIT and Highlands have
furnished to the Bank: (a) the consolidated balance sheet of Wellsford REIT as
of December 31, 1994 and its 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 each of
them for each of the fiscal quarters of each of them ended since December 31,
1994 certified by their respective chief financial or chief accounting officers
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 Wellsford REIT and its Subsidiaries and Highlands and
its Subsidiaries as at the close of business on the dates thereof and the
results of operations for the fiscal quarters then ended (subject to year-end
adjustments); and (c) an unaudited consolidated statement of operating income
for each of them and, with respect to Wellsford REIT and its Subsidiaries, an
unaudited statement of operating income for each of the properties within the
Unencumbered Operating Properties for the fiscal quarter ended the Balance
Sheet Date satisfactory in form and substance to the Bank and certified by
Wellsford REIT's chief financial 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, are complete, true and correct
and fairly present the financial condition of Wellsford REIT 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 Wellsford REIT or Highlands or any of their
respective Subsidiaries involving material amounts not disclosed in said
financial statements and the related notes thereto.
Section 4.5 No Material Changes. Since the Balance Sheet Date, there
has occurred no materially adverse change in the financial condition or
business of Wellsford REIT and its Subsidiaries taken as a whole or Highlands
and its Subsidiaries taken as a whole from that shown on or reflected in the
consolidated balance sheet of each of them as of the Balance Sheet Date, or
their respective 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 Wellsford REIT or
Highlands.
Section 4.6 Franchises, Patents, Copyrights, Etc. Wellsford REIT and
its Subsidiaries, the Bond Issuer and its Subsidiaries and Highlands and its
Subsidiaries, respectively, each possess all franchises, parents, copyrights,
trademarks, trade names, servicemarks, 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. Highlands possesses all franchises, patents, copyrights, trade names,
servicemarks, licenses and permits, and rights in respect of the foregoing,
including without limitation land use approvals, adequate for the construction
and completion of Phase I of the Development.
Section 4.7 Litigation. Except as stated on Schedule B there are no
actions, suits, proceedings or investigations of any kind pending or threatened
against Wellsford REIT or any of its Subsidiaries, the Bond Issuer or any of
its Subsidiaries or Highlands or any of its Subsidiaries 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 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
sheet of such Person, or which question the validity of this Reimbursement
Agreement or any of the other Related Documents, any action taken or to be
taken pursuant hereto or thereof or any lien or security interest created or
intended to be created pursuant hereto or thereto, or which will adversely
affect the ability of Wellsford REIT, the Bond Issuer and/or the Highlands to
pay and perform their respective obligations in the manner contemplated by this
Reimbursement Agreement and the other Related Documents, 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.
Section 4.8 No Material, Adverse Contracts, Etc. None of Wellsford
REIT, the Bond Issuer, Highlands or any of their respective Subsidiaries 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
such Person. None of Wellsford REIT, the Bond Issuer, Highlands or any of
their respective Subsidiaries 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 any of them.
Section 4.9 Compliance with Other Instruments, Laws, Etc. None of
Wellsford REIT, the Bond Issuer, Highlands or any of their respective
Subsidiaries 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 such Person.
Section 4.10 Tax Status. Wellsford REIT, the Bond Issuer, Highlands
and each of their respective Subsidiaries (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 Wellsford REIT, the Bond Issuer and
Highlands know of no basis for any such claim.
Section 4.11 No Event of Default. No Default or Event of Default has
occurred and is continuing.
Section 4.12 Holding Company and Investment Company Acts, Etc. None
of Wellsford REIT, the Bond Issuer, Highlands or any of their respective
Subsidiaries 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. Neither Account Party is subject to regulation under the Federal
Power Act, the Interstate Commerce Act or to its knowledge any federal or state
statute or regulation which regulates the issuance of securities and/or debt of
companies limiting its ability to incur indebtedness for money borrowed, except
federal and state securities laws.
Section 4.13 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 Wellsford REIT,
the Bond Issuer, Highlands or any of their respective Subsidiaries.
Section 4.14 Noncontravention. The execution and delivery by
Wellsford REIT, the Bond Issuer and Highlands of this Reimbursement Agreement
and the other Related Documents to which each of them is a party, and the
performance of their respective obligations hereunder and thereunder, will not
violate any existing law or regulation or result in a breach of any of the
terms of, or constitute a default under, any indenture, mortgage, deed of
trust, lease or other agreement or instrument to which either of them is a
party or by which either of them or any of their respective property is bound
or their respective articles of incorporation, declarations of trust (as
applicable), bylaws or any of the rules or regulations applicable to either of
them or to their respective property or decree or order of any court or other
governmental body.
Section 4.15 Certain Transactions. Except as set forth in the
Prospectus with respect to Wellsford REIT, none of the officers, trustees,
directors or employees of Wellsford REIT, the Bond Issuer, Highlands or any of
their respective Subsidiaries is a party to any transaction with Wellsford
REIT, the Bond Issuer, Highlands or any of their respective Subsidiaries
requiring or permitting the payment of annual consideration in excess of
$100,000.00 (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 Wellsford REIT, the
Bond Issuer and Highlands, 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 4.16 Employee Benefit Plans. Wellsford REIT, the Bond
Issuer, Highlands and each ERISA Affiliate of each of them have fulfilled their
obligations under the minimum funding standards of ERISA and the Code with
respect to each Employee Benefit Plan, Multi-employer Plan or Guaranteed
Pension Plan (referred to each individually as a "Plan" and collectively as
"Plans") and is in compliance in all material respects with the presently
applicable provisions of ERISA and the Code with respect to each Plan. None of
Wellsford REIT, the Bond Issuer, Highlands or any ERISA Affiliate of either of
them has (a) sought a waiver of the minimum funding standard under Section 412
of the Code in respect of any Plan, (b) failed to make any contribution or
payment to any Plan, or made any amendment to any Plan. which has resulted or
could result in the imposition of a Lien or the posting of a bond or other
security under ERISA or the Code, or (c) incurred any liability under Title IV
of ERISA other than a liability to the PBGC for premiums under Section 4007 of
ERISA.
Section 4.17 Regulations U and X. No portion of any Drawing,
Liquidity Drawing Amount, LC Loan or any Loan (as that term is defined in the
Wellsford REIT Loan Agreement) under this Reimbursement Agreement, the Letter
of Credit or the Wellsford REIT Loan Agreement is intended 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 4.18 Environmental Compliance. Account Parties have
conducted or caused to be conducted Phase I environmental site assessments with
respect to the past usage and condition of the Real Estate (including Phase I
of the Development) and the Development and, in each case, the operations
conducted thereon, and are familiar with the present condition and usage of the
Real Estate (including Phase I of the Development) and the Development and the
operations conducted thereon and, based upon such reports and knowledge, makes
the following representations and warranties.
(1) To the best of Account Parties' knowledge, none of Wellsford
REIT, the Bond Issuer, Highlands and their respective Subsidiaries or any
operator of the Real Estate (including Phase I of the Development) or the
Development, 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 ("▇▇▇▇"), 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 Real Estate (including Phase I of the Development) or the Development
and would have a material adverse effect on the environment or the
business, assets or financial condition of Wellsford REIT, the Bond Issuer
or Highlands or the development of Phase I of the Development or the
Development as a whole.
(2) None of Wellsford REIT, the Bond Issuer, Highlands or their
respective Subsidiaries has received notice from any third party
including, without limitation, any federal, state or local governmental
authority, (a) 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 ▇▇▇ ▇▇▇▇▇▇▇▇ ▇ (1986); (b) 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 any such Person conduct a remedial investigation, removal or other
response action pursuant to any Environmental Law; or (c) 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.
(3) To the best of Account Parties' knowledge, except as set forth in
Schedule C or, in the case of Real Estate (including any portion of the
Development other than Phase I of the Development) acquired after the date
hereof, except as may be disclosed in writing to the Bank upon the
acquisition of the same: (i) no portion of the Real Estate or the
Development 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 Real
Estate or the Development; (ii) in the course of any activities conducted
by Wellsford REIT, the Bond Issuer, Highlands and their respective
Subsidiaries, the District or the operators of any properties of any of
them, no Hazardous Substances have been generated or are being used on the
Real Estate or the Development 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 Real Estate or the Development, or, to the best of Account
Parties' knowledge, on, upon, into or from the other properties of
Wellsford REIT, the Bond Issuer, Highlands or their respective
Subsidiaries, which Release would have a material adverse effect on the
value of any of the Real Estate, Phase I of the Development, the
Development as a whole or adjacent properties of either of them or the
environment; (iv) to the best of Account Parties' knowledge, there have
been no Releases on, upon, from or into any real property in the vicinity
of any of the Real Estate, Phase I of the Development or the Development
as a whole 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, Phase I of the Development or the Development
as a whole; and (v) any Hazardous Substances that have been generated on
any of the Real Estate, Phase I of the Development or the Development as a
whole 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 Account
Parties 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 Account Parties' knowledge without
independent investigation, operating in compliance with such permits and
applicable Environmental Laws.
(4) None of Wellsford REIT, the Bond Issuer, Highlands and their
respective Subsidiaries, any Real Estate, Phase I of the Development or
any other portion of the Development 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 effectiveness of any other transactions contemplated
hereby.
Section 4.19 Subsidiaries. Schedule D sets forth all of the
Subsidiaries of Wellsford REIT, the Bond Issuer and Highlands, respectively.
The form and jurisdiction of organization of each of such Subsidiaries, and
Wellsford REIT's, the Bond Issuer's and Highlands' ownership interest therein,
is set forth in said Schedule D.
Section 4.20 Related Documents. All of the representations and
warranties of Wellsford REIT, the Bond Issuer and Highlands made in this
Reimbursement Agreement and the other Related Documents or any document or
instrument delivered to the Bank pursuant to or in connection with any of such
Related Documents are true and correct in all material respects, and none of
Wellsford REIT, the Bond Issuer or Highlands has failed to disclose such
information as is necessary to make such representations and warranties not
misleading.
Section 4.21 Property. All of Wellsford REIT's, the Bond Issuer's
Highlands' and their respective Subsidiaries' properties (including without
limitation Phase I of the Development) are in good repair and condition,
subject to ordinary wear and tear, other than with respect to deferred
maintenance existing as of the date of acquisition of such property as
permitted in this Section 4.21. Without limiting the foregoing, Wellsford REIT
has completed an appropriate investigation of the physical condition of each
such property as of the later of the date of Wellsford REIT's or such other
Person's purchase thereof or the date upon which such property was last
security for Indebtedness of Wellsford REIT or such Person, including without
limitation an analysis of the structural condition and existence of any
material deferred maintenance, and such property is in good condition, order
and repair, and any material deferred maintenance existing as of the date of
acquisition of such property has been corrected or satisfactory remediation
actions are being taken. Wellsford REIT further has completed an appropriate
investigation of the environmental condition of each such property as of the
later of the date of Wellsford REIT's or such other Person's purchase thereof
or the date upon which such property was last security for Indebtedness of
Wellsford REIT or such Person, including preparation of a "Phase I" report and,
if appropriate, a "Phase II" report, in each case prepared by a recognized
environmental engineer in accordance with customary standards which discloses
that such property is not in violation of the representations and covenants set
forth in this Reimbursement Agreement, unless satisfactory remediation actions
are being taken. There are no unpaid or outstanding real estate or other taxes
or assessments on or against any property of Wellsford REIT, the Bond Issuer,
Highlands or any of their respective Subsidiaries (including without limitation
Phase I of the Development) which are payable by Wellsford REIT, the Bond
Issuer, Highlands or their respective Subsidiaries (except only real estate or
other taxes or assessments, that are not yet due and payable). There are no
pending eminent domain proceedings against the Development or any property of
Wellsford REIT, the Bond Issuer, Highlands or their respective Subsidiaries or
any part thereof, and, to the knowledge of Account Parties, no such proceedings
are presently threatened or contemplated by any taking authority which may
individually or in the aggregate have any materially adverse effect on the
business or financial condition of Wellsford REIT, the Bond Issuer or
Highlands. None of the Development, Phase I of the Development or any other
property of Wellsford REIT, the Bond Issuer, Highlands or their respective
Subsidiaries is now damaged or injured as a result of any fire, explosion,
accident, flood or other casualty in any manner which individually or in the
aggregate would have any materially adverse effect on the business or financial
condition of Wellsford REIT, the Bond Issuer or Highlands.
Section 4.22 Brokers. None of Wellsford REIT, the Bond Issuer,
Highlands or any of their respective Subsidiaries has engaged or otherwise
dealt with any broker, finder or similar entity in connection with this
Reimbursement Agreement, the Letter of Credit contemplated hereunder or any
other Related Document.
Section 4.23 Other Debt. None of Wellsford REIT, the Bond Issuer,
Highlands and 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. None of Wellsford REIT, the Bond Issuer or Highlands is 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 of any of
them under this Reimbursement Agreement or any of the other Related Documents
to which they are a party or the Wellsford REIT Loan Obligations to any other
indebtedness or obligation of Wellsford REIT, the Bond Issuer or Highlands.
Section 4.24 Solvency. As of the Closing Date and after giving
effect to the transactions contemplated by this Reimbursement Agreement and the
other Related Documents, none of Wellsford REIT, the Bond Issuer or Highlands
is insolvent on a balance sheet basis such that the sum of such Person's assets
exceeds the sum of such Person's liabilities. Each of Wellsford REIT, the Bond
Issuer and Highlands is able to pay its debts as they become due, and has
sufficient capital to carry on its business.
Section 4.25 Complete and Correct Information. All information,
reports and other papers and data with respect to Wellsford REIT, the Bond
Issuer, Highlands and their respective Subsidiaries furnished to the Bank were,
at the time the same were so furnished, complete and correct in all material
respects, to the extent necessary to give the Bank a true and accurate
knowledge of the subject matter. No fact is known to Wellsford REIT, the Bond
Issuer or Highlands which adversely affects or in the future may (so far as it
can foresee) adversely affect its business, assets or liabilities, financial
condition, results of operations, or its business prospects or the development
of Phase I of the Development or any other portion of the Development which has
not been set forth in the financial statements referred to in Section 4.4 above
or in such information, reports, papers and data or otherwise disclosed in
writing to the Bank. No document furnished or statement made by Wellsford
REIT, the Bond Issuer or Highlands in connection with the negotiation,
preparation or execution of this Reimbursement Agreement, any other Related
Document, the Wellsford REIT Loan Agreement or the Loan Documents related
thereto contains any untrue statement of a fact material to its credit
worthiness or omits to state a material fact necessary in order to make the
statements contained therein not misleading.
Section 4.26 Public Improvements Liens. There are no liens or
encumbrances of any kind on the Public Improvements or Phase I of the
Development other than Permitted Liens.
Section 4.27 Pledge of Pledged Bonds. The security interests granted
to the Bank pursuant to the Pledge Agreement (a) constitute a perfected
security interest in the collateral pledged pursuant to the Pledge Agreement
(the "Collateral") under the Uniform Commercial Code of the State of New York
and (b) are superior and prior to the rights of all third Persons now existing
or hereafter arising whether by way of mortgage, lien, security interests,
encumbrances, assignments or otherwise. All such actions as are necessary have
been taken to establish and perfect the Bank's rights in and to the Collateral.
Section 4.28 Security for Pledged Bonds. The Bond Indenture creates,
for the benefit and security of the Bonds, the legally valid and binding Lien
on and pledge of the Revenues and the funds ("Funds") in which they are from
time to time on deposit which the Bond Indenture purports to create. There are
no Liens on the Revenues or the Funds other than the Lien created by the Bond
Indenture. No filing, registering, recording or publication of the Bond
Indenture or any other document or instrument is required (or, if required, has
been completed) to establish the pledge under the Bond Indenture or to perfect,
protect or maintain the Lien created thereby on the Revenues and the Funds.
ARTICLE 5
AFFIRMATIVE COVENANTS
Each Account Party covenants and agrees that, so long as the
Expiration Date has not occurred or any amount is due or owing to the Bank with
respect to the Letter of Credit under this Reimbursement Agreement or any other
Related Document, such Account Party will comply with each of the covenants
contained in this Article 5, unless the Bank shall otherwise consent in
writing:
Section 5.1 Compliance with Bond Indenture and Related Docents.
Wellsford REIT, the Bond Issuer and Highlands shall comply with each of the
covenants of each of them set forth in the Bond Indenture and all other Related
Documents.
Section 5.2 Maintenance of Office. Wellsford REIT will maintain its
chief executive office at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, and the Bond
Issuer will maintain its chief executive office at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or, in each case, at such other place in the United
States of America as Wellsford REIT or the Bond Issuer shall designate upon
prior written notice to the Bank, where notices, presentations and demands to
or upon each of them in respect of this Reimbursement Agreement and the other
Related Documents to which they are parties may be given or made.
Section 5.3 Records and Accounts. Wellsford REIT and Bond Issuer
will (a) keep, and cause each of their respective Subsidiaries (including but
not limited to Highlands) to keep, true and accurate records and books of
account in which full, true and correct entries will be made of all dealings or
transactions of or in relation to the business and affairs of such Person 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 their
respective Subsidiaries, contingencies and other reserves.
Section 5.4 Financial Statements, Certificates and Information.
Wellsford REIT and the Bond Issuer will each deliver to the Bank:
(a) as soon as practicable, but in any event not later than 90
days after the end of their respective fiscal years, the audited consolidated
balance sheet of each of them and their respective Subsidiaries (including, if
available, Highlands) at the end of such year, and the related audited
consolidated statements of income, changes in shareholder's 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 filed with the
SEC for Wellsford REIT (unless the SEC has approved an extension, in which
event Wellsford REIT will deliver to the Bank a copy of the Form 10-K
simultaneously with delivery to the SEC), and any other information the Bank
may need to complete a financial analysis of Wellsford REIT, the Bond Issuer
and Highlands;
(b) as soon as practicable, but in any event not later than 60
days after the end of each of the first three fiscal quarters of each of
Wellsford REIT and the Bond Issuer, copies of the unaudited consolidated
balance sheet of Wellsford REIT and the Bond Issuer, respectively, and their
respective Subsidiaries (including but not limited to Highlands) as at the end
of such quarter, and the related unaudited consolidated statements of income,
changes in shareholder's equity and cash flows for the portion of Account
Parties' fiscal year then elapsed, 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 Wellsford REIT for such period provided
pursuant to subsection (c) below), together with a certification by the
principal financial officer of Wellsford REIT and the Bond Issuer,
respectively, that the information contained in such financial statements
fairly presents the financial position of Wellsford REIT and the Bond Issuer,
respectively, and their respective Subsidiaries on the date thereof (subject to
year-end adjustments);
(c) as soon as practicable, but in any event not later than 60
days after the end of the first three fiscal quarters of Wellsford REIT in each
year, copies of Form 10-Q filed with the SEC for Wellsford REIT (unless the SEC
has approved an extension in which event Wellsford REIT will deliver such
copies of the Form 10-Q to the Bank simultaneously with delivery to the SEC);
(d) simultaneously with the delivery of the financial
statements referred to in Sections 5.4(a) and 5.4(b) above, and within 30 days
of the filing by Wellsford REIT of a Form 8-K with the SEC or the filing with
the SEC of any other document amending any other filing previously made by
Wellsford REIT, a statement (a "Compliance Certificate") certified by the
principal financial officer of Wellsford REIT in the form of Exhibit D hereto
setting forth in reasonable detail computations evidencing compliance with the
covenants contained in Section 6, and (if applicable) reconciliations to
reflect changes in generally accepted accounting principles since the Balance
Sheet Date;
(e) 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 Wellsford REIT and the Bond Issuer (as
applicable) to the effect that, having read this Reimbursement 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, nature and
status with respect thereto; and any remedial steps taken or proposed to
correct each such default;
(f) contemporaneously with the filing or mailing thereof,
copies of all material of a financial nature filed with the SEC or sent to the
stockholders of Wellsford REIT;
(g) simultaneously with the delivery of the financial statement
referred to in subsection (a) above, a statement (i) listing the Real Estate
owned by Wellsford REIT, the Bond Issuer and their respective Subsidiaries
(including but not limited to Highlands) (or in which any such Person owns an
interest) and stating the location thereof, the date acquired and the
acquisition cost, (ii) listing the Indebtedness of Wellsford REIT, the Bond
Issuer and their respective Subsidiaries (including but not limited to
Highlands) (excluding Indebtedness of the type described in Sections 6.3(a) -
6.3(e)), which statement shall include, without limitation, a statement of the
original principal amount of such Indebtedness and the current amount outstand-
ing, the holder thereof, the maturity date and any extension options, the
interest rate, the collateral provided for such Indebtedness and whether such
Indebtedness is recourse or nonrecourse, and (iii) listing the properties of
Wellsford REIT, the Bond Issuer and their respective Subsidiaries (including
but not limited to Highlands) which are under "development" (as used in Section
6.13) and providing a brief summary of the status of such development;
(h) not later than two (2) Business Days after Wellsford REIT
receives notice of the same from a Rating Agency or otherwise learns of the
same, notice of the issuance of or any change in the rating by the Rating
Agency in respect of any debt of Wellsford REIT (including any change in an
implied Rating), together with the details thereof, and of any announcement by
the Rating Agency that any such rating is "under review" or that any such
rating has been placed on a watch list or that any similar action has been
taken by the Rating Agency (collectively a "Rating Notice"); and (i) from time
to time such other financial data and information in the possession of
Wellsford REIT, the Bond Issuer or Highlands (including without limitation
auditors' management letters, property inspection and environmental reports and
information as to zoning and other legal and regulatory changes affecting
Wellsford REIT, the Bond Issuer, Highlands, the Public Improvements, Phase I of
the Development or the Development) as the Bank may reasonably request.
Section 5.5 Notices
(1) Defaults. Each Account Party will promptly notify the Bank
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 Reimbursement
Agreement, any other Related Document or under any note, evidence of
indebtedness, indenture or other obligation to which or with respect to which
Wellsford REIT, the Bond Issuer or any of their respective Subsidiaries
(including but not limited to Highlands) 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 Wellsford
REIT, the Bond Issuer or Highlands, or the existence of which claimed default
might become an Event of Default under Sections 7.1(f) or 7.1(g), Account
Parties shall forthwith give written notice thereof to the Bank, describing the
notice or action and the nature of the claimed default.
(2) Environmental Events. Each Account Party will promptly
give notice to the Bank (i) upon Wellsford REIT, Highlands or the Bond Issuer
obtaining knowledge of any potential or known Release, or threat of Release, of
any Hazardous Substances at or from any portion of Phase I of the Development
or any other portion of the Development or any Real Estate of Wellsford REIT,
the Bond Issuer or their respective Subsidiaries (including without limitation
Highlands); (ii) of any violation of any Environmental Law that Wellsford REIT,
the Bond Issuer or any of their respective Subsidiaries (including without
limitation Highlands) 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 any portion of Phase I of the Development or any other
portion of the Development or Real Estate of Wellsford REIT, the Bond Issuer or
their respective Subsidiaries (including without limitation Highlands) or has
the potential to materially affect the assets, liabilities, financial
conditions or operations of Wellsford REIT, the Bond Issuer or their respective
Subsidiaries (including without limitation Highlands).
(3) Notice of Litigation and Judgments. Each Account Party will
give notice to the Bank in writing within 15 days of becoming aware of any
litigation or proceedings threatened in writing or any pending litigation and
proceedings affecting Phase I of the Development, the balance of the
Development or the Public Improvements or Wellsford REIT, the Bond Issuer or
any of their respective Subsidiaries (including but not limited to Highlands)
or to which Wellsford REIT, the Bond Issuer or any of their respective
Subsidiaries (including but not limited to Highlands) is or is to become a
party involving an uninsured claim against any such Person that could
reasonably be expected to have a materially adverse effect on Wellsford REIT,
the Bond Issuer or Highlands and stating the nature and status of such
litigation or proceedings. Such Account Parry will give notice to the Bank, in
writing, in form and detail satisfactory to the Bank within ten days of any
judgment not covered by insurance, whether final or otherwise, against
Wellsford REIT, the Bond Issuer or any of their respective Subsidiaries
(including but not limited to Highlands) in an amount in excess of $250,000.
(4) Notice of Proposed Sales, Encumbrances, Refinance or
Transfer. Wellsford REIT will give notice to the Bank of any proposed or
completed sale, encumbrance, refinance or transfer of any Real Estate or other
Investment described in Section 6.5(j) of Wellsford REIT or its Subsidiaries
within any fiscal quarter of Wellsford REIT, such notice to be submitted
together with the Compliance Certificate provided or required to be provided to
the Bank under Section 5.4 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 Wellsford
REIT 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 6.5(j) of Wellsford REIT or its Subsidiaries involving an
amount in excess of $30,000,000.00, Wellsford REIT shall promptly give notice
to the Bank of such transaction, which notice shall be accompanied by a
certification of the chief financial officer of Wellsford REIT that no Default
or Event of Default shall exist after giving affect to such event.
(5) Location, Name and Business. Account Parties shall
promptly provide the Bank with notice of (a) any change of the location of
their respective Executive Offices or the Executive Office of Highlands, (b)
any change in their respective names or the name of Highlands or any intention
of either of them or Highlands to alter the nature of its business.
(6) Highlands Indebtedness. Account Parties will promptly give
notice to the Bank of the incurrence of any Indebtedness secured in whole or in
part by any real property owned by Highlands and securing any portion of the
assessments to be paid under the Assessment Agreement, including a description
of such Indebtedness and the terms and provisions thereof.
Section 5.6 Existence; Maintenance of Properties
(1) Wellsford REIT will do or cause to be done all things
necessary to preserve and keep in full force and effect its existence as a
Maryland real estate investment trust and Highlands' existence as a Colorado
limited liability company. The Bond Issuer will do or cause to be done all
things necessary to preserve and keep in full force and effect its existence as
a Colorado nonprofit corporation. Wellsford REIT and the Bond Issuer will cause
each of their respective Subsidiaries to do or cause to be done all things
necessary to preserve and keep in full force and effect its legal existence.
Wellsford REIT and the Bond Issuer 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 (including but not limited to Highlands).
Wellsford REIT and the Bond Issuer will, and will cause each of their
respective Subsidiaries (including but not limited to Highlands) to, continue
to engage primarily in the businesses now conducted by it and in related
businesses.
(2) Account Parties (i) will cause all of their properties and
those of their respective Subsidiaries (including but not limited to Highlands)
used or useful in the conduct of its business or the business of such
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, betterment and improvements thereof in all cases in which the
failure so to do would have a material adverse effect on the condition of its
properties or on the financial condition, assets or operations of Wellsford
REIT and its Subsidiaries (including but not limited to Highlands) or the Bond
Issuer and its Subsidiaries, respectively.
Section 5.7 Insurance. Wellsford REIT and the Bond Issuer will, at
their expense, procure and maintain or cause to be procured and maintained
insurance covering them, their respective Subsidiaries (including but not
limited to Highlands) and their respective properties 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.
Section 5.8 Taxes. Wellsford REIT, the Bond Issuer and each
Subsidiary of each of them 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 Phase I of the Development
or 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 their
respective 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 Wellsford REIT, the
Bond Issuer 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, Wellsford REIT, the Bond Issuer and each of their respective
Subsidiaries either (i) will provide a bond issued by a surety reasonably
acceptable to the Bank 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. Wellsford REIT shall certify annually to the Bank that Wellsford REIT is
in compliance with this Section 5.8 with respect to the Unencumbered Operating
Properties.
Section 5.9 Inspection of Properties and Books. Wellsford REIT and
the Bond Issuer shall, and shall cause Highlands to, permit the Bank, or any
representative designated by the Bank, at Account Parties' expense, to visit
and inspect the Public Improvements. Phase I of the Development, the balance of
the Development or any of the other properties of any of them, to examine the
books of account of each of them and their Subsidiaries (and to make copies
thereof and extracts therefrom) and to discuss the affairs, finances and
accounts of each of them and their Subsidiaries with, and to be advised as to
the same by, its officers, all at such reasonable times and intervals as the
Bank may reasonably request. The Bank shall use good faith efforts to
coordinate such visits and inspections so as to minimize the interference with
and disruption to Wellsford REIT's, the Bond Issuer's and/or Highland's normal
business operations.
Section 5.10 Compliance with Laws, Contracts, Licenses and Permits.
Wellsford REIT and the Bond Issuer will each comply with, and will cause each
of its Subsidiaries (including but not limited to Highlands) 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, partnership agreement or
declaration of trust, as the case may be, 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 before the Expiration Date has occurred or
any amount is due or owing to the Bank under this Reimbursement Agreement or
any other Related Document, any authorization, consent, approval, permit or
license from any officer, agency or instrumentality of any government shall
become necessary or required in order that either Account Party may fulfill any
of its obligations hereunder, such Account Party will immediately take or cause
to be taken all steps necessary to obtain such authorization, consent,
approval, permit or license and furnish the Bank with evidence thereof.
Section 5.11 Further Assurances. Each Account Party shall, and
Wellsford REIT shall cause Highlands to, upon the request of the Bank, from
time to time, execute and deliver and, if necessary, file, register and record
such further financing statements, amendments, confirmation statements and
other documents and instruments and take such further action as may be
reasonably necessary to effectuate the provisions of this Reimbursement
Agreement and the other Related Documents. Except to the extent it is exempt
therefrom, each Account Party will pay or cause to be paid all filing,
registration and recording fees incident to such filing, registration and
recording, and all expenses incident to the preparation, execution and
acknowledgement of such instruments or further assurance, and all federal or
state fees and other similar fees, duties, imposts, assessments and charges
arising out of or in connection with the execution and delivery of this
Reimbursement Agreement, the other Related Documents and such instruments of
further assurance.
Section 5.12 Wellsford REIT Status. Subject to the terms of Section
6.9, Wellsford REIT shall at all times comply with all requirements of
applicable laws and regulations necessary to maintain REIT Status and shall
operate its business as described in the Prospectus and in compliance with the
terms and conditions of this Reimbursement Agreement and the other Related
Documents.
Section 5.13 Wellsford REIT Unencumbered Operating Properties
(1) Wellsford REIT shall at all times own Unencumbered
Operating Properties which satisfy all of the following conditions:
(a) the Unencumbered Operating Properties shall have an
aggregate Asset Value of at least one hundred eighty percent (180%) of the
principal balance of all unsecured Indebtedness outstanding from time to time
of Wellsford REIT and its Subsidiaries (including without limitation the Letter
of Credit, all LC Loans, all Liquidity Drawing Amounts and any loans or
Indebtedness under the Wellsford REIT Loan Agreement);
(b) the difference of (I) the combined Operating Cash Flow
of the Unencumbered Operating Properties for the four preceding consecutive
fiscal quarters less (II) an amount equal to $100 multiplied by the number of
units within the Unencumbered Operating Properties, shall not be less than 1.5
times the Pro Forma Debt Service Charges for such period. In the event that
Wellsford REIT shall have owned a property within the Unencumbered Operating
Properties for less than four consecutive fiscal quarters, then for the
purposes of performing the calculation in this Section 5.13(1)(b), the
Operating Cash Flow with respect to such property shall include the Operating
Cash Flow from such property for such period of time prior to the acquisition
thereof by Wellsford REIT so as to allow such calculation to be performed with
respect to four consecutive fiscal quarters; and
(c) the Unencumbered Operating Properties shall consist
solely of Real Estate which has an aggregate occupancy level based on bona fide
arm's-length tenant leases requiring current rental payments at market rents of
at least ninety percent (90%) for the previous two (2) fiscal quarters of
Wellsford REIT, with each individual property comprising the Unencumbered
Operating Properties having such an occupancy level of at least eighty percent
(80%) for the previous two (2) operating fiscal quarters of Wellsford REIT.
(2) Wellsford REIT shall provide to the Bank as of the Closing
Date and concurrently with the delivery of the financial statements described
in Section 5.4(a): (i) a list of the Unencumbered Operating Properties, (ii)
the certification of the chief financial officer of Wellsford REIT of the Asset
Values and that such properties are in compliance with Section 5.13(a) and
(iii) operating statements setting forth the Operating Cash Flow and capital
expenditures for each of the Unencumbered Operating Properties for the previous
four (4) fiscal quarters certified as true and correct by the chief financial
officer of Wellsford REIT. In the event that all or any material portion of a
property within the Unencumbered Operating Properties shall be damaged or taken
by condemnation, then such property shall no longer be a part of the
Unencumbered Operating Properties unless and until any damage to such Real
Estate is repaired or restored, such Real Estate becomes fully operational and
the Bank shall receive evidence satisfactory to the Bank of the value and
Operating Cash Flow of such Real Estate following such repair or restoration.
(3) Nothing herein shall be construed as an obligation of
Wellsford REIT to grant any mortgage, pledge or security interest to the Bank
in any of the Unencumbered Operating Properties, nor as an obligation of
Wellsford REIT to reserve any particular Unencumbered Operating Property as
potential collateral for the Bank.
Section 5.14 Wellsford REIT Limiting Agreements
(1) Neither Wellsford REIT nor any of its Subsidiaries shall
enter into any agreement, instrument or transaction which has or may have the
effect of prohibiting or limiting Wellsford REIT's ability to pledge to the
bank group under the Wellsford REIT Loan Agreement Real Estate which is owned
one hundred percent (100%) in fee simple by Wellsford REIT which is free and
clear of all Liens other than the Liens permitted in Section 6.4(a) and 6.4(d)
and which has an aggregate Asset Value equal to one hundred eighty percent
(180%) of the loans under the Wellsford REIT Loan Agreement as security for
such loans. Wellsford REIT shall take, and shall cause its Subsidiaries to
take, such actions as are necessary to preserve the right and ability of
Wellsford REIT to pledge those Real Estate assets subject to the one hundred
eighty percent (180%) limitation described above, as security for the loans
under the Wellsford REIT Loan Agreement without any such pledge after the date
hereof causing or permitting the acceleration (after the giving of notice or
the passage of time, or otherwise) of any other Indebtedness of Wellsford REIT
or any of its Subsidiaries.
(2) Wellsford REIT shall, upon demand, provide to the Bank such
evidence as the Bank may reasonably require to evidence Wellsford REIT's
compliance with this Section 5.14, which evidence shall include, without
limitation, copies of any agreements or instruments which would in any way
restrict or limit Wellsford REIT's ability to pledge assets as security for
Indebtedness, or which provide for the occurrence of a default (after the
giving of notice or the passage of time, or otherwise) if assets are pledged in
the future as security for Indebtedness of Wellsford REIT or any of its
Subsidiaries.
ARTICLE 6
NEGATIVE COVENANTS
Account Parties covenant and agree that, so long as the Expiration
Date has not occurred or any amount is due or owing to the Bank under this
Reimbursement Agreement or any other Related Document, each of them shall
comply with each of the negative covenants contained in this Article 6 unless
the Bank shall have given its prior written consent:
Section 6.1 Amendments. Each Account Party shall not, and Wellsford
REIT shall not permit Highlands to, 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, other than with respect to the Loan Documents
pursuant to the terms thereof.
Section 6.2 Optional Redemption. Account Parties shall not cause or
permit an optional redemption of the Bonds pursuant to the Bond Indenture
unless such optional redemption (a) will be funded without a drawing on the
Letter of Credit or (b) the Bank has consented thereto in writing (which
consent may be granted or withheld by the Bank in its sole discretion).
Section 6.3 Restrictions on Indebtedness. Account Parties will not,
and will not permit any of their respective Subsidiaries to, create, incur,
assume, guarantee or be or remain liable, contingently or otherwise, with
respect to any Indebtedness other than:
(a) Indebtedness to the Bank and the holders of the Bonds
arising under any of the Reimbursement Agreement and the other Related
Documents, Indebtedness to the bank group under the Wellsford REIT Loan
Agreement and the Loan Documents related thereto, and Indebtedness of Highlands
in a principal amount not to exceed $45,000,000, the proceeds of which will be
used to construct Phase I of the Development;
(b) current liabilities of Account Parties or their respective
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 5.8;
(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 affected
Account Parties 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) subject to the provisions of Section 6.17, Indebtedness of
Wellsford REIT or any Subsidiary of Wellsford REIT which is permitted by
Section 6.14;
(g) Indebtedness in respect of reverse repurchase agreements
having a term of not more than 180 days with respect to Investments described
in Section 6.5(d) or 6.5(e);
(h) subject to the provisions of Section 6.17, other secured or
unsecured recourse Indebtedness of Wellsford REIT and its Subsidiaries (other
than Highlands) in an aggregate outstanding principal amount (excluding the
Indebtedness permitted pursuant to Section 6.3(i) and the Wellsford REIT Loan
Obligations but including LC Loans, Liquidity Drawing Amounts and amounts
available to be drawn under the Letter of Credit) not exceeding $25,000,000.00;
(i) subject to the provisions of Section 6.17, unsecured
subordinated debt or senior unsecured long-term debt of Wellsford REIT and its
Subsidiaries, provided that (x) at the time such Indebtedness is issued the
scheduled maturity date of such Indebtedness is not sooner than 270 days after
the Maturity Date (after giving effect to any extension of the Maturity Date
which may have been requested by Wellsford REIT prior to the issuance of such
Indebtedness and approved by the Bank, whether or not the same has become
effective), and (y) any covenants or restrictions imposed upon Wellsford REIT
or its Subsidiaries in connection with such Indebtedness shall not individually
or in the aggregate be more restrictive against Wellsford REIT and its
Subsidiaries than the covenants and restrictions imposed pursuant to this
Reimbursement Agreement or the other Related Documents, and provided, further,
that neither Wellsford REIT nor any of its Subsidiaries shall incur any of the
Indebtedness described in this Section 6.3(i) unless it shall have provided to
the Bank (A) prior written notice of the proposed issuance of such
Indebtedness, a statement that no Default or Event of Default exists and a
certificate that Wellsford REIT will be in compliance with its covenants
referred to therein after giving effect to such incurrence, (B) evidence
reasonably satisfactory to the Bank that each Rating Agency has been advised of
the issuance of such Indebtedness within five (5) days of such issuance, and
(C) upon the request of the Bank. evidence that the annual rating maintenance
fee has been paid to each Rating Agency;
(j) subject to the provisions of this Article 6, Indebtedness
of Wellsford REIT or its Subsidiaries under agreements to purchase property or
any interest therein; and
(k) Indebtedness of the Bond Issuer to Wellsford REIT under the
Wellsford Reimbursement Agreement.
Section 6.4 Restrictions on Liens, Etc. Account Parties will not, and
will not permit any of their respective Subsidiaries (including but not limited
to Highlands) to, (i) create or incur or suffer to be created or incurred or to
exist any lien, encumbrance, mortgage, 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; (ii) 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; (iii) 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; (iv) 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; (v) sell, assign, pledge or otherwise transfer any
accounts, contract rights, general intangibles, chattel paper or instruments,
with or without recourse; or (vi) incur or maintain any obligation to any
holder of Indebtedness of either Account Party or such Subsidiary which
prohibits the creation or maintenance of any lien securing the obligations
thereof (collectively "Liens"); provided that, subject to Section 6.14, the
Account Parties and any Subsidiary thereof may create or incur or suffer to be
created or incurred or to exist:
(a) liens in favor of Wellsford REIT or its Subsidiaries on all
or part of the assets of Subsidiaries securing Indebtedness owing by such
Subsidiaries to their parent;
(b) liens on properties to secure taxes, assessments and other
governmental charges or claims for labor, material or supplies in respect of
obligations not overdue;
(c) liens on properties in respect of judgments, awards or
indebtedness, the Indebtedness with respect to which is permitted by Section
6.3(d), Section 6.3(f) or Section 4.5;
(d) encumbrances on properties 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 either Account Party or a Subsidiary thereof is a party,
and other minor liens or encumbrances none of which interferes materially with
the use of the property affected in the ordinary conduct of the business of the
Account Parties and their Subsidiaries, which defects do not individually or in
the aggregate have a materially adverse effect on the business of either
Account Party individually or of each Account Party and its Subsidiaries on a
consolidated basis;
(e) liens on Real Estate and Short-term Investments securing
Indebtedness permitted by Section 6.3;
(f) liens in favor of the Bank, liens in favor of the Lenders
under the Wellsford REIT Loan Agreement and the Loan Documents. and liens
in favor of the lender to Highlands securing Indebtedness of Highlands
permitted under Section 6.3(a); and
(g) liens arising under the Assessment and Lien.
Section 6.5 Restrictions on Investments. Account Parties will not,
and will not permit any of their respective Subsidiaries (including but not
limited to Highlands) 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
such Account Party or such Subsidiaries;
(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 or by
Standard & Poor's at not less than "P 1" if then rated by Moody's, and not less
than "A 1", if then rated by Standard & Poor's;
(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 or by Standard & Poor's at not less
than "Aa" if then rated by Moody's and not less than "AA" if then rated by
Standard & Poor's;
(f) repurchase agreements having a term not greater than 90
days and fully secured by securities described in the foregoing Sections
6.5.(a), 6.5(b) or 6.5(e) with banks described in the foregoing Section 6.5(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
Sections 6.5(a) through 6.5(f) and have total assets in excess of $50,000,000;
(h) with respect to Wellsford REIT and its Subsidiaries,
Investments in fee interests in Real Estate utilized principally for
multifamily housing, including ▇▇▇▇▇▇▇ money deposits relating thereto and
transaction costs;
(i) Investments of Wellsford REIT in its Subsidiaries;
(j) with respect to Wellsford REIT and its Subsidiaries, loans
secured principally by mortgages or deeds of trust on real property upon which
are located completed improvements which are principally used for multifamily
housing (provided that Wellsford REIT shall not originate any loans described
in this Section 6.5(j)). Leasehold interests in properties which are used
principally for multifamily housing under ground leases having not less than
fifty (50) years of the leasehold term remaining at the time of acquisition
thereof by Wellsford REIT, or interests in partnerships, corporations or other
entities which own real property or an interest therein which is used
principally for multifamily housing, provided that in no event shall the
aggregate cost of all Investments pursuant to this Section 6.5(j) exceed the
lesser of (A) ten percent (10%) of the Consolidated Total Assets of Wellsford
REIT and its Subsidiaries, and (B) $35,000,000.00; and
(k) with respect to Wellsford REIT, Investments in shares of
beneficial interest in Wellsford REIT, provided that Wellsford REIT shall give
notice to the Bank concurrently with the financial statements provided in
Section 5.4(b) of any such Investments that have occurred during the preceding
fiscal quarter of Wellsford REIT.
Section 6.6 Merger, Consolidation. Account Parties will not, and
will not permit any of their respective Subsidiaries (including without
limitation Highlands) to, become a party to any merger or consolidation without
the prior written consent of the Bank except (i) the merger or consolidation of
one or more of the Subsidiaries of Wellsford REIT with and into Wellsford REIT;
and (ii) the merger or consolidation of two or more Subsidiaries of Wellsford
REIT.
Section 6.7 Sale and Leaseback. Account Parties will not, and will
not permit any of their respective Subsidiaries (including without limitation
Highlands) to, enter into any arrangement, directly or indirectly, whereby
either Account Party or any Subsidiary thereof shall sell or transfer any Real
Estate owned by it in order that then or thereafter either Account Party or any
Subsidiary of either of them shall lease back such Real Estate.
Section 6.8 Compliance with Environmental Laws
(1) Account Parties will not, and will not permit any of their
Subsidiaries (including without limitation Highlands) to, do any of the
following: (a) use any portion of Phase I of the Development or 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 portion of Phase I of the Development or 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 portion of Phase I of the Development or any of the
Real Estate except in full compliance with Environmental Laws, (d) conduct any
activity at any portion of Phase I of the Development or any Real Estate or use
any portion of Phase I of the Development or any Real Estate in any manner so
as to cause a Release of Hazardous Substances on, upon or into Phase I of the
Development or 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).
(2) Account Parties shall:
(a) 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 Account
Parties) to confirm that no Hazardous Substances are or ever were Released or
disposed of on Phase I of the Development or the Real Estate; and
(b) if any Release or disposal of Hazardous Substances shall
occur or shall have occurred on Phase I of the Development or the Real Estate
(including without limitation any such Release or disposal occurring prior to
the acquisition of such Development or Real Estate by either Account Party),
cause the prompt Containment and removal of such Hazardous Substances and
remediation of Phase I of the Development or the Real Estate in full compliance
with all applicable laws and regulations and to the satisfaction of the Bank:
provided, that Account Parties shall be deemed to be in compliance with
Environmental Laws for the purpose of this subsection (b) 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 Bank and no action shall have been commenced by any
enforcement agency. The Bank may engage its own Environmental Engineer to
review the environmental assessments and Account Parties' 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 Bank shall have reasonable grounds to believe that a Release or threatened
Release of Hazardous Substances may have occurred, relating to Phase I of the
Development or any Real Estate, or that any of Phase I of the Development or
the Real Estate is not in compliance with the Environmental Laws, the Bank may
at its election (and will at the request of the Bank) obtain such environmental
assessments of Phase I of the Development or such Real Estate 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 Phase I of the Development or such Real
Estate and (ii) whether the use and operation of Phase I of the Development or
such Real Estate comply with all Environmental Laws. Environmental assessments
may include detailed visual inspections of Phase I of the Development or such
Real Estate including, without limitation, any and all storage areas, storage
tanks, drains, dry ▇▇▇▇▇ 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 Real Estate and the use
and operation thereof with all applicable Environmental Laws. All such
environmental assessments shall be at the sole cost and expense of Account
Parties.
Section 6.9 Distributions. Wellsford REIT will not make any
Distributions which would cause it to violate any of the following covenants:
(a) Wellsford REIT shall not pay any Distribution to the
shareholders of Wellsford REIT if such Distribution is in excess of the greater
of (i) the minimum Distributions required under the Code to maintain the REIT
status of Wellsford REIT and (ii) the amount which, when added to the amount of
all other Distributions paid in the same fiscal quarter and the preceding three
(3) fiscal quarters would exceed ninety percent (90%) of its Funds from
Operations for the four consecutive fiscal quarters ending prior to the quarter
in which such Distribution is paid;
(b) In the event that an Event of Default shall have occurred
and be continuing, Wellsford REIT shall make no Distributions other than the
minimum Distributions required under the Code to maintain the REIT Status of
Wellsford REIT, as evidenced by a certification of the principal financial or
accounting officer of Wellsford REIT containing calculations in reasonable
detail satisfactory in form and substance to the Bank; and
(c) Notwithstanding the foregoing, at any time when an Event of
Default shall have occurred and the maturity of the Bonds, the Promissory
Notes, Liquidity Drawing Amounts, LC Loans or the Wellsford REIT Loan
Obligations has been accelerated, Wellsford REIT shall not make any
Distributions whatsoever, directly or indirectly.
Section 6.10 Asset Sales
(1) Neither Wellsford REIT nor any of its Subsidiaries shall
sell, transfer or otherwise dispose of any Real Estate or other Investment
described in Section 6.5(j) or any of the Unencumbered Operating Properties in
excess of $30,000,000.00 (except as the result of a condemnation or casualty
and except for the granting of Permitted Liens, as applicable) unless there
shall have been delivered to the Banks a statement that no Default or Event of
Default exists and a certification that Wellsford REIT will be in compliance
with its covenants referred to therein after giving effect to such sale,
transfer or other disposition.
(2) Wellsford REIT shall not sell, transfer or otherwise
dispose of any of its interest in Highlands or any of its interest in any
portion of the Development without the Bank's prior written consent.
(3) Highlands shall not sell, transfer or otherwise dispose of
Phase I of the Development or any portion thereof or any of its interest in any
other portion of the Development without the Bank's prior written consent.
Section 6.11 Development Activity. Neither Wellsford REIT nor any
Subsidiary thereof shall engage, directly or indirectly, in the development of
properties to be used principally for multifamily housing or otherwise, except
that Wellsford REIT or a Subsidiary thereof may develop for its own account
during a fiscal year of Wellsford REIT properties to be used principally for
multifamily housing provided that in any fiscal year such development shall be
limited to the lesser of (i) any number of projects with respect to which the
aggregate cost of acquiring the Real Estate and developing the improvements
thereon is not reasonably anticipated to exceed $100,000,000.00 (including
development of the Development) and (ii) any number of projects with respect to
which the aggregate number of multifamily units to be developed (including
development of the Development) does not exceed ten percent (10%) of the total
number of multifamily units located on Real Estate owned in fee by Wellsford
REIT and its Subsidiaries for the preceding four fiscal quarters (excluding
such units under development). For purposes of this Section 6.11, the term
"development" shall include the new construction of an apartment complex or the
substantial renovation of improvements to real property, but shall not include
the addition of amenities or other related facilities to existing Real Estate
which is already used principally for multifamily housing. A project shall be
considered to be under development until final certificates of occupancy or the
equivalent have been issued for the entire project and the project is 80%
occupied and such project has had a positive Net Income for at least one (1)
month. Without limiting the generality of the foregoing, Wellsford REIT
acknowledges that for the purposes of this Reimbursement Agreement, (i) any
interest by either Account Party or any Subsidiary thereof in a property which
is proposed to be developed, or any other agreement or arrangement by such
party to purchase a property or any interest therein pursuant to which either
Account Party or any Subsidiary thereof has the right to approve site plans or
other plans and specifications or pursuant to which such party's obligations
are conditioned upon the achievement of certain initial lease-up levels, or
(ii) any agreement by either Account Party or any Subsidiary thereof which
obligates such party to contribute or otherwise advance funds in connection
with or upon completion of the development of a property, or (iii) any
agreement by either Account Party or any Subsidiary thereof to acquire a
property to be used principally for multifamily housing or any interest therein
which is proposed to be developed or which is under development and initial
lease-up at the time such agreement is entered into, shall be considered a
"development" for the purposes of this Section 6.11; provided, however, that
nothing in this Section 6.11 shall prohibit Wellsford REIT or any Subsidiary
from entering into an agreement to acquire Real Estate at a time when such Real
Estate has been developed and initially leased by another Person.
Section 6.12 Sources of Capital. Wellsford REIT shall, at all times
that either Account Party or any of its Subsidiaries is engaging in any
development as provided in Section 6.11 or has entered into any agreement to
acquire properties under purchase agreements, maintain available sources of
capital equal to the total cost to acquire and complete such developments and
to purchase such properties, which sources of capital shall be acceptable to
the Bank in its reasonable discretion. Amounts available to be disbursed for
such purposes pursuant to this Reimbursement Agreement may be considered as a
source of capital for the purposes of this Section 6.12.
Section 6.13 Restriction on Prepayment of Indebtedness. After the
occurrence of any Event of Default, no Account Party shall prepay the principal
amount, in whole or in part, of any Indebtedness other than the obligations (i)
to the Bank under the Reimbursement Agreement and the other Related Documents
and (ii) to the Agent and the Lenders under the Wellsford REIT Loan Agreement
and the other Loan Documents; provided, however, that after the occurrence of
an Event of Default, each Account Party may prepay the Indebtedness described
in Section 6.3(b) in the ordinary course of business.
Section 6.14 Additional Restrictions on Wellsford REIT Liens on Real
Estate and Indebtedness
(1) Wellsford REIT shall not at any time permit the number of
Real Estate projects owned in fee simple by Wellsford REIT which are subject to
any Liens (other than the Liens permitted in Section 6.4(b) and 6.4(e) to
exceed 40% of the total number of Real Estate projects owned in fee simple by
Wellsford REIT. For purposes of this Section 6.14, a Real Estate project shall
be considered a separate project only if it is functionally and operationally
distinct from other Real Estate projects owned by Wellsford REIT.
(2) Except as permitted in Section 6.3, Wellsford REIT will
not, and will not permit any of its Subsidiaries to, create, incur, assume,
guaranty or be or remain liable, contingently or otherwise, with respect to any
Indebtedness other than, subject to the provisions of Section 6.17, secured (in
whole or in part) Indebtedness of Wellsford REIT or such Subsidiary in an
aggregate outstanding principal amount not exceeding an amount equal to forty
percent (40%) of the value of the Real Estate owned in fee simple by Wellsford
REIT and its Subsidiaries, with such value being determined based on
undepreciated cost basis.
Section 6.15 Restrictions Upon Rate Modes and Interest Periods for
Bonds. Each Account Party covenants that, until after the Expiration Date: (a)
the Account Parties will not permit any Rate Period to be in effect which has a
duration of longer than two hundred and ten (210) days or which ends after the
Expiration Date; (b) the Account Parties will nor permit a particular Rate
Period to be in effect with respect to a particular Rate Mode if the initial
principal amount of the Bonds covered by such Rate Period and Rate Mode is less
than $3,000,000; and (c) the Account Parties will not permit the Bonds to bear
interest at a rate other than the Weekly Rate without the prior written consent
of the Bank.
Section 6.16 Accounting Methods and Fiscal Year. Account Parties will
not and will not permit any of their Subsidiaries to adopt, permit or consent
to any change in accounting practices other than as required by generally
accepted accounting principles.
Section 6.17 Financial Covenants of Wellsford REIT
(1) Liabilities to Assets Ratio. Wellsford REIT will not, at
the end of any fiscal quarter, permit the ratio of Consolidated Total
Liabilities to Consolidated Total Assets of Wellsford REIT to exceed 0.55 to 1.
(2) Consolidated Operating Cash Flow Coverage. Wellsford REIT
will not, at the end of any fiscal quarter, permit the Consolidated Operating
Cash Flow of Wellsford REIT and its Subsidiaries for any period of four
consecutive fiscal quarters (treated as a single accounting period) (the "Test
Period") to be less than 2 times the Debt Service for the Test Period. In the
event that Wellsford REIT or any of its Subsidiaries shall have issued any
Indebtedness of the type described in Section 6.3(i), then for the purposes of
this Section 6.17(2), the Debt Service applicable to such Indebtedness for the
Test Period shall, commencing one year prior to the maturity of such
Indebtedness and continuing each quarter thereafter, be calculated at the
greater of (a) the Debt Service due with respect to such Indebtedness and (b)
the Debt Service which would be payable with respect to such Indebtedness in
the event that the principal balance thereof was bearing interest at a rate per
annum equal to the sum of the then-current annual yield on five (5) year
obligations issued by the United States Treasury most recently prior to such
determination date plus one and one-half percent (1.5%). The determination of
such imputed amount and the components thereof by the Bank shall, so long as
the same shall be determined in good faith, be conclusive and binding absent
manifest error.
Section 6.18 Official Statement and Other Documents. Other than the
sections of the Official Statement entitled "THE LETTER OF CREDIT" and
"APPENDIX B - Dresdner Bank AG, New York Branch" on pages B-1 to B-3 inclusive,
thereof, and the references to and summaries of such Sections throughout the
Official Statement, Account Parties shall not include or permit to be included
any material or reference relating to the Bank or the Letter of Credit in any
offering circular or any other document or any tombstone, unless such material
or reference is approved in writing by the Bank prior to its inclusion therein,
provided that Account Parties may disclose the existence of the Letter of
Credit to the extent required in connection with their reporting or disclosure
requirements; or distribute, or permit to be distributed or used, any offering
circular unless a copy of such offering circular has been furnished to the
Bank.
Section 6.19 Remarketing. Account Parties shall not permit the
Remarketing Agent for the Bonds to remarket any Bonds, (i) if an Event of
Default shall have occurred and be continuing and the Bank shall have
instructed Account Parties not to permit the remarketing of such Bonds, or (ii)
at a price less than the principal amount thereof plus accrued interest, if
any, thereon to the respective dates of remarketing.
Section 6.20 Substitute Credit Facility. Account Parties shall not
authorize, permit or consent to any substitution of another credit or liquidity
facility for the Letter of Credit unless (a) there shall be paid to the Bank,
prior to or simultaneously with such substitution, any and all amounts due and
owing and to become due and owing to the Bank (including without limitation all
unpaid Drawings, Liquidity Drawing Amounts, LC Loans and the pro rata portion
of all accrued and unpaid fees) under this Reimbursement Agreement and the
other Related Documents, and (ii) a substitution occurs for the Letter of
Credit.
Section 6.21 Remarketing Agent and Bond Trustee. Account Parties
shall not appoint or permit or suffer to be appointed any successor Remarketing
Agent or successor Bond Trustee without the prior written approval of the Bank
(which approval shall not be unreasonably withheld); or enter into any
successor Remarketing Agreement without the prior written approval of the Bank
(which approval shall not be withheld if and so long as such successor
Remarketing Agreement contains provisions that are substantially the same as
those contained in, and affords protection to the rights and interests of the
Bank that is substantially the same as that afforded by, the predecessor
Remarketing Agreement, as the case may be). Any approvals required from the
Bank hereunder shall be given or denied within 10 days of the request therefor,
accompanied, in the case of a successor Remarketing Agreement, by a draft of
such proposed Remarketing Agreement in final form, and the failure of the Bank
to respond to such request by the close of business on the tenth day shall be
deemed, on the eleventh day, to constitute consent by the Bank hereunder. Prior
to its appointment. any substitute Bond Trustee must sign an agreement assuming
the obligations of its predecessor under the Pledge Agreement.
ARTICLE 7
EVENTS OF DEFAULT
Section 7.1 Events of Default. The occurrence of any of the
following events (including the expiration of any specified time) shall
constitute an "Event of Default," unless waived by the Bank in writing:
(a) failure of the Account Parties to pay when due any amount
due under this Reimbursement Agreement or under any of the other Related
Documents (other than amounts drawn under the Letter of Credit pursuant to a
Liquidity Drawing or an LC Loan), and to remedy such failure within five days
thereof, provided that no cure period shall apply to principal payments due
hereunder or under any of the other Related Documents;
(b) failure of the Account Parties to pay when due and payable,
whether at the stated date of maturity or any accelerated date of maturity or
at any other date fixed for payment, any amount drawn under the Letter of
Credit pursuant to a Liquidity Drawing or an LC Loan, except as permitted by
Section 2.2;
(c) failure of the Account Parties to observe or perform any of
the covenants, conditions or provisions set forth in Sections 5.4, 5.13, 5.14,
6.1, 6.2, 6.10(2), 6.10(3), 6.15 or 6.19 of this Reimbursement Agreement; or
failure of the Account Parties to observe or perform any of the covenants set
forth in Section 6.17 and to remedy such failure within 45 days of such
failure, 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;
(d) failure of the Account Partes to observe or perform any of
the covenants, conditions or provisions of this Reimbursement Agreement (other
than as specified in Sections 7.1(a), (b) and (c), above), and to remedy such
failure within 30 days of such failure;
(e) any representation or warranty made by either Account Party
or its Subsidiaries (including without limitation Highlands) herein or in any
other Related Documents, certificate, financial or other statement furnished
pursuant to this Reimbursement Agreement or other Related Documents shall prove
to have been untrue or incomplete in any material respect when made;
(f) the occurrence and continuation of a default or an event of
default under the Bond Indenture or any of the other Related Documents (except
the Loan Documents); or the occurrence and continuation of an event of default
under any of the Loan Documents;
(g) default by either Account Party in the payment of the
principal of or interest on any obligation or Indebtedness owed to the Bank or
the default by either Account Party in the payment of the principal of or
interest on any other obligation, for borrowed money, credit received or other
indebtedness, as and when the same shall become due, or failure 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 or other Indebtedness for each 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 failure of either Account Party to pay an amount
which is timely paid by the other Account Party shall not be a Default
hereunder;
(h) entry or filing of any judgment, writ or warrant of
attachment or of any similar process against either Account Party or any of
their respective Subsidiaries or against any property of either Account Party
or any such Subsidiary, in an amount in excess of the sum of (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, $1.000.000, and failure of
either Account Party or by its Subsidiaries to vacate, bond. stay or contest in
good faith such judgment, writ, warrant of attachment or other process for a
period of 30 days or failure to pay or satisfy such judgment within 60 days;
(i) admission by either Account Party or any of their
respective Subsidiaries of insolvency or bankruptcy or its inability or failure
generally to pay its debts as they become due, or either Account Party or any
of their respective Subsidiaries 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;
(j) filing of a petition or application for the appointment of
a trustee or other custodian, liquidator or receiver in bankruptcy, custodian
or receiver for either Account Party or any of their respective Subsidiaries or
all or part of their respective assets and property or any thereof or a case or
other proceeding shall be commenced against either Account Party or any of
their respective Subsidiaries under any bankruptcy, reorganization,
arrangement, insolvency, readjustment of debt, dissolution of liquidation or
similar law of any jurisdiction, now or hereafter in effect, and such Account
Party or any of its Subsidiaries 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;
(k) 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
either Account Party or any of their respective Subsidiaries (other than
bankruptcy proceedings instituted by either Account Party against third
parties), and, if instituted against either Account Party or any of their
respective Subsidiaries, allowance or consent by such Person to such
proceedings or failure to obtain dismissal, stay or other nullification within
thirty (30) days after such institution;
(l) entrance of a decree or order appointing any such trustee,
custodian, liquidator or receiver or adjudicating either Account Party or any
of their respective Subsidiaries 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 either Account Party or any of their respective
Subsidiaries, in each case of the foregoing in an involuntary case under
federal bankruptcy laws as now or hereafter constituted;
(m) remaining in force, undischarged, unsatisfied and unstayed,
for more than 60 days, whether or nor consecutive, any uninsured final judgment
against either Account Party or any of their respective Subsidiaries that, with
other outstanding uninsured final judgments, undischarged, against either
Account Party or any of their respective Subsidiaries exceeds in the aggregate
$1,000,000;
(n) cancellation, termination, revocation or rescission of this
Reimbursement Agreement or any of the other Related Documents 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 any of this Reimbursement
Agreement or the other Related Documents shall be commenced by or on behalf of
either Account Party or any of its holders of Voting Interests, Highlands, the
Bond Trustee or the Remarketing Agent or any Bond holder 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 this Reimbursement Agreement or the
other Related Documents is illegal, invalid or unenforceable in accordance with
the terms thereof in any material respect as determined by the Bank;
(o) any dissolution, termination, partial or complete
liquidation, merger or consolidation of either Account Party or Highlands or
any sale, transfer or other disposition of the assets of either Account Party
or its Subsidiaries (including Highlands), other than as permitted under the
terms of this Reimbursement Agreement or the other Related Documents;
(p) any suit or proceeding shall be filed against either
Account Party or Highlands, or any of their respective assets, which in the
good faith business judgment of the Bank 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 such Account Party or Highlands to perform
each and every one of its obligations under and by virtue of this Reimbursement
Agreement and the other Related Documents;
(q) either Account Party shall be indicted for a federal crime,
a punishment for which could include the forfeiture of any assets of any of
them;
(r) ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ shall cease to be the Chairman of the
Board of, or ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ shall cease to be the President of, Wellsford
REIT, and a competent and experienced successor for such Person shall not be
approved by the Bank within six (6) months of such event;
(s) this Reimbursement Agreement or any of the other Related
Documents ceases to be valid and binding on either Account Party or Highlands
(as applicable); or this Reimbursement Agreement or any of the other Related
Documents is declared null and void, or the validity or enforceability thereof
is contested by either Account Party or Highlands (as applicable); or either
Account Party or Highlands (as applicable) denies it has any or further
liability under this Reimbursement Agreement or any of the other Related
Documents; or
(t) the substitution or replacement of the Letter of Credit
with an Alternate Letter of Credit (as defined in the Bond Indenture) while any
amounts are owed to the Bank hereunder or under the Letter of Credit; and
(u) failure of any Lender to honor its obligations pursuant to
Section 2.1 and 2.2 hereof and Section 2.9 of the Wellsford REIT Loan
Agreement, if such failure results in the Bank not receiving the entire amount
payable to the Bank thereunder;
then, and in any such event, the Bank may, by notice in writing to the Account
Parties, declare all amounts owing with respect to this Reimbursement Agreement
and the other Related 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 each
Account Party; provided that in the event of any Event of Default specified in
Section 7.1(j), or 7.1(k) or 7.1(l), all such amounts shall become immediately
due and payable automatically and without any requirement of notice from the
Bank.
Section 7.2 Rights and Remedies. Upon the occurrence and
continuation of an Event of Default, the Bank, in its sole discretion, (a) may
by notice to the Account Parties and the Bond Trustee, declare the obligations
of the Account Parties hereunder and under the Promissory Notes to be
immediately due and payable, and the same shall thereupon become immediately
due and payable (provided that the obligations of the Account Parties hereunder
shall be and become automatically and immediately due and payable without such
notice upon the occurrence of an Event of Default described in Section 7.1(j),
7.1(k) or 7.1(l) above), without demand, presentment, protest or further notice
of any kind, all of which are hereby expressly waived by each Account Party,
(b) may deliver to the Bond Trustee written notice that an Event of Default has
been declared under this 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 Reimbursement Agreement or
under any of the other Related Documents (in which event the Account Parties
shall reimburse the Bank therefor pursuant to Section 2.12 hereof), (d) may
direct the Bond Trustee to cause a mandatory tender of the Bonds pursuant to
Section 4.02(c) of the Bond Indenture, (e) may direct the Account Parties not
to permit or the Remarketing Agent to cease remarketing the Bonds, or (f) may
exercise any other rights or remedies available under this Reimbursement
Agreement, any other 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 either Account Party, the
Bond Trustee, the Bondholders or otherwise, (i) to exercise or to refrain from
exercising any right or remedy reserved to the Bank hereunder, or (ii) to cause
the Bond Trustee or any other party to exercise or to refrain from exercising
any right or remedy available to it under any of the Related Documents.
ARTICLE 8
NATURE OF OBLIGATIONS; INDEMNIFICATION
Section 8.1 Obligations Absolute. The obligations of each Account
Party under this Reimbursement Agreement shall be absolute, unconditional and
irrevocable, and shall not be subject to any right of setoff or counterclaim
against the Bank, any Lender or any Participant, and shall be paid or performed
strictly in accordance with the terms of this Reimbursement Agreement and the
other Related Documents under all circumstances whatsoever, including without
limitation the following circumstances: (a) any lack of validity or
enforceability of this Reimbursement Agreement or any other Related Document;
(b) any amendment or waiver of, or any consent to departure from, all or any of
the Related Documents, other than, with respect to any particular obligation,
the specific waiver by the Bank of such particular obligation under such
Related Document; (c) the existence of any claim, set-off, defense or other
right which either Account Party may have at any time against the Bond Trustee,
any beneficiary or any transferee of the Letter of Credit (or any Persons for
whom the Bond Trustee, any such beneficiary or any such transferee may be
acting), the Bank or any other Person, whether in connection with this
Reimbursement Agreement, any other Related Document, the transactions
contemplated herein or therein or any unrelated transaction; (d) any breach of
contract or dispute among or between either Account Party, Highlands, the Bond
Trustee, the Remarketing Agent, the Bank or any other Person; (e) any
certificate, statement or any other document presented under the Letter of
Credit proving to be forged, fraudulent, invalid or insufficient in any respect
or any statement therein being untrue or inaccurate in any respect (unless the
Account Parties prove that any Bank action taken in reliance on such
certificate, statement or other document constituted gross negligence or
willful misconduct); (f) any nonapplication or misapplication by the Bond
Trustee of the proceeds of any Drawing under the Letter of Credit or any other
act or omission of the Bond Trustee, the Remarketing Agent or any other Person
in connection with the Letter of Credit; (g) payment by the Bank under the
Letter of Credit against presentation of a certificate which does not comply
with the terms of the Letter of Credit; provided that such payment by the Bank
shall not have constituted gross negligence or willful misconduct of the Bank;
(h) any extension of time for or delay, renewal or compromise of or other
indulgence or modification granted or agreed to by the Bank with or without
notice to or approval by the Account Parties with respect to the Banking
Arrangements other than, with respect to any particular obligation or cost, the
specific modification to the Account Parties by the Bank of such particular
obligation or cost; or (i) any other circumstance or happening whatsoever,
whether or not similar to any of the foregoing, provided that such circumstance
or happening shall not have constituted gross negligence or willful misconduct
of the Bank.
Section 8.2 Continuing Obligation. This Reimbursement Agreement is a
continuing obligation, shall survive the expiration of the Letter of Credit and
shall (a) be binding upon the Bank, the Account Parties and their respective
successors and assigns, and (b) inure to the benefit of and be enforceable by
the Bank and its successors, transferees and assigns; provided that neither
Wellsford REIT nor the Bond Issuer may assign all or any part of this
Reimbursement Agreement without the prior written consent of the Bank.
Section 8.3 Liability of the Bank. Account Parties assume all risks
of the acts or omissions of the Bond Trustee and any transferee of the Letter
of Credit with respect to its use of the Letter of Credit. Neither the Bank nor
any of its officers or directors shall be liable or responsible for: (a) the
use which may be made of the Letter of Credit or for any acts or omissions of
the Bond Trustee and any beneficiary or transferee in connection therewith; (b)
any reference which may be made to this Reimbursement Agreement or the Letter
of Credit in any agreements, instruments or other documents; (c) the validity,
sufficiency or genuineness of documents, or of any endorsement(s) thereon, even
if such documents should in fact prove to be in any or all respects invalid,
insufficient, fraudulent or forged; (d) payment by the Bank against
presentation of documents which do not comply with the terms of the Letter of
Credit, including failure of any documents to bear any reference or adequate
reference to the Letter of Credit; or (e) any other circumstances whatsoever in
making or failing to make payment under the Letter of Credit. Without limiting
the foregoing, the Bank may accept any document that appears on its face to be
in order, without responsibility for further investigation. The determination
of whether a drawing has been made under the Letter of Credit prior to the
Expiration Date or whether a drawing made under the Letter of Credit is in
proper and sufficient form shall be made by the Bank in its sole discretion,
which determination shall be conclusive and binding upon Account Parties to the
extent permitted by law except to the extent Account Parties proves that such
determination constituted gross negligence or willful misconduct of the Ban;
Account Parties hereby waive any right to object to any payment made under the
Letter of Credit with regard to a drawing that is in the form provided in the
Letter of Credit, but which varies with respect to punctuation, capitalization,
spelling or similar matters of form. Notwithstanding the foregoing, the Bank
shall be liable to Account Parties for acts or events described in subsections
(a) through (e) above to the extent, but only to the extent, of any direct, as
opposed to indirect or special or consequential, damages, suffered by Account
Parties which Account Parties proves were caused by: (i) the gross negligence
or willful misconduct of the Bank, in determining whether a drawing made under
the Letter of Credit complies with the terms and conditions therefor stated in
the Letter of Credit, or (ii) the gross negligence or willful failure of the
Bank to pay under the Letter of Credit after a drawing by the Bond Trustee
strictly complying with the terms and conditions of the Letter of Credit;
provided, however, that the maximum amount of damages recoverable by Account
Parties as provided above is expressly limited to the Stated Amount of the
Letter of Credit.
Section 8.4 Indemnification. In addition to any and all rights of
reimbursement, indemnification, subrogation or any other rights pursuant hereto
or under law or equity, Wellsford REIT and the Bond Issuer, jointly and
severally, hereby agree to indemnify and hold harmless the Bank and its
officers, directors and agents (each an "Indemnified Party") from and against
any and all claims, damages, losses, liabilities, reasonable costs or expenses
whatsoever (including attorneys' fees) which the Indemnified Party may incur
(or which may be claimed against the Indemnified Party by any person or entity
whatsoever) by reason of or in connection with the execution, delivery and
performance of this Reimbursement Agreement or any of the other Related
Documents or any other matter arising therefrom, including, without limitation,
any of the following: (a) any untrue statement or alleged untrue statement of
any material fact contained or incorporated by reference in the Official
Statement (other than information relating to the Bank and provided by the Bank
for inclusion therein) or the omission or alleged omission to state in the
Official Statement of a material fact (other than an omission by the Bank with
respect to the Bank) necessary to make such statements, in the light of the
circumstances under which they are or were made, not misleading; (b) the
execution and delivery or transfer of, or payment or failure to pay under, the
Letter of Credit; (c) the issuance and sale of the Bonds; or (d) the use of the
proceeds of the Bonds; provided that no Account Party shall be required to
indemnify the Indemnified Party for any claims, damages, losses, liabilities,
costs or expenses to the extent, but only to the extent caused by (A) the
willful misconduct of the Indemnified Party or (B) gross negligence of the
Indemnified Party. If any proceeding shall be brought or threatened against an
Indemnified Party by reason of or in connection with the events described above
(except as otherwise provided in (A) or (B) above), the Indemnified Party shall
promptly notify the Account Parties in writing and the Account Parties shall
assume the defense thereof, including the employment of counsel and the payment
of all costs of litigation. Notwithstanding the preceding sentence, the
Indemnified Party shall have the right to employ its own counsel and to
determine its own defense of such action in any such case, but the fees and
expenses of such counsel shall be at the expense of the Indemnified Party
unless (i) the employment of such counsel shall have been authorized in writing
by an Account Party or (ii) no Account Party, after due notice of the action,
shall not have employed counsel to have charge of such defense, in either of
which events the reasonable fees and expenses of counsel for the Indemnified
Party shall be borne by the Account Party. The Account Party shall not be
liable for any settlement of any such action effected without its consent.
Nothing under this Section 8.4 is intended to limit payment obligations of
Wellsford REIT or the Bond Issuer.
Section 8.5 Telecopied Documents. At the request of Account Parties,
the Letter of Credit provides that demands for payment thereunder may be
presented to the Bank by, among other methods, telecopy. The Account Parties
acknowledge and assume all risks relating to the use of such telecopied demands
for payment and agrees that its obligations under this Reimbursement Agreement
and the other Related Documents shall remain absolute, unconditional and
irrevocable as provided in Section 8.1 above if the Bank honors such telecopied
demands for payment.
ARTICLE 9
ISSUANCE, TRANSFER, REDUCTION OR
EXTENSION OF LETTER OF CREDIT
Section 9.1 Issuance. Subject to the terms and conditions of this
Reimbursement Agreement, the Bank agrees to issue the Letter of Credit to the
Bond Trustee in substantially the form of Exhibit A hereto, having a term
beginning on the Closing Date and ending on the Expiration Date and having a
Stated Amount as set forth therein, as such Stated Amount may be reduced and
reinstated in accordance with the terms of the Letter of Credit.
Section 9.2 Transfer, Reduction and Reinstatement. The Letter of
Credit may be transferred, reduced and reinstated in accordance with the
provisions set forth therein.
Section 9.3 Extension. Subject to the terms of the Wellsford REIT
Loan Agreement, the Expiration Date of the Letter of Credit may be extended by
the Bank upon the written request of Wellsford REIT given to the Bank at least
120 days prior to, but no earlier than 180 days prior to the Expiration Date.
Within 60 days of receipt of a request for extension, the Bank shall, at its
sole option, either notify Wellsford REIT, the Bond Issuer and the Bond Trustee
that the Letter of Credit will be extended to the new expiration date set forth
in such notice in accordance with the terms of the Letter of Credit or notify
Wellsford REIT and the Bond Issuer 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.
ARTICLE 10
MISCELLANEOUS
Section 10.1 Right of Setoff. Upon the occurrence of an Event of
Default, the Bank may, at any time and from time to time, without notice to
either Account Party or any other person (any such notice being expressly
waived), set off and appropriate and apply, against and on account of, any
obligations and liabilities of either Account Party to the Bank arising under
or connected with this Reimbursement Agreement and the other Related Documents,
without regard to whether or not the Bank shall have made any demand therefor,
and although such obligations and liabilities may be contingent or unmatured,
any and all deposits (general or special, including but not limited to
indebtedness evidenced by certificates of deposit, whether matured or
unmatured, but not including trust accounts) and any other indebtedness at any
time held or owing by the Bank to or for the credit or the account of either
Account Party.
Section 10.2 Amendments and Waivers. No amendment or waiver of any
provision of this Reimbursement Agreement nor consent to any departure by
either Account Party from any such provision shall in any event be effective
unless the same shall be in writing and signed by the Bank. Any such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given. In the event any agreement contained in this
Reimbursement Agreement should be breached by either Account Party and
thereafter waived by the Bank, such waiver shall be limited to the particular
breach so waived for the specific period set out in such waiver and such waiver
shall not constitute a waiver of such breach for any other period and shall not
waive any other or similar breach hereunder.
Section 10.3 No Waiver; Remedies. No failure on the part of the Bank
to exercise, and no delay in exercising, any right under this Reimbursement
Agreement shall operate as a waiver of such right; nor shall any single or
partial exercise of any right under this Reimbursement Agreement preclude any
other further exercise of such right or the exercise of any other right. The
remedies herein provided are cumulative and not exclusive of any remedies
provided by law.
Section 10.4 Notices. Unless specifically indicated otherwise
herein, all notices and other communications provided for hereunder shall be in
writing and, if to either Account Party, addressed to it at:
Wellsford Residential Property Trust
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Palomino Park Public
Improvements Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇▇▇▇ Hyatt ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
and:
Robinson, Silverman, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
or if to the Bank, addressed to it at:
Dresdner Bank AG
New York Branch
▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇. ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
or if to the Bond Trustee, addressed to it at:
United States Trust Company of New York
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
or if to the Remarketing Agent addressed to it at:
First Interstate Bank of Arizona, N.A.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. Fair
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
or as to each party at such other address as shall be designated by such party
in a written notice to the other parties.
Any notice or other communication shall be sufficiently given and
shall be deemed given when delivered to the addressee in writing or when given
by telephone immediately confirmed in writing by tested telex, telecopier or
other telecommunication device.
Section 10.5 Severability. Any provision of this Reimbursement
Agreement which is prohibited, unenforceable or not authorized in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition, unenforceability or nonauthorization without invalidating the
remaining provisions hereof or affecting the validity, enforceability or
legality of such provision in any other jurisdiction.
Section 10.6 GOVERNING LAW. THIS REIMBURSEMENT AGREEMENT SHALL BE
GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK AND
APPLICABLE FEDERAL LAW WITHOUT REGARD TO CHOICE OF LAW RULES.
Section 10.7 Consent to Jurisdiction and Venue, Etc. Each Account
Party 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 (other than the Loan Documents) may be brought in a court of
record in the State of New York or in the Courts of the United States of
America 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. Each Account Party 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.
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 the right of
the Bank to bring any suit, action or proceeding against either Account Party
or their respective property or any property encumbered by the Assignment and
Lien in the courts of any other jurisdiction.
Section 10.8 Headings. Section headings in this Reimbursement
Agreement are included herein for convenience of reference only and shall not
have any effect for purposes of interpretation or construction of the terms of
this Reimbursement Agreement.
Section 10.9 Participation. Each Account Party each acknowledges and
agrees that the Bank may participate portions of its obligations under the
Letter of Credit and the obligations of the Account Parties under the Pledged
Bonds, the Promissory Notes, this Reimbursement Agreement and any other Related
Documents (collectively, the "Participated Obligations") to other financial
institutions. The Account Parties waive any right to receive notice of such
participation. The Account Parties agree to reasonably cooperate to the extent
required by the Bank in effecting such participation, provided that neither
Account Party shall be required to incur any additional expense as a
consequence of such participation. Each Account Party further acknowledges and
agrees that upon any such participation the Participants will become owners of
a pro rata portion of the Participated Obligations and each waives any right of
setoff it may at any time have against the Bank or any Participant with regard
to the Participated Obligations.
Section 10.10 Issuing Branch of the Bank. The Letter of Credit will
be issued on the Closing Date by the New York Branch of the Bank but the Bank
may, at its sole option, transfer such Letter of Credit obligation on its books
to any other United States branch or agency of the Bank authorized to issue
such Letter of Credit. The Bond Trustee shall accept such replacement letter of
credit and return the prior Letter of Credit to the Bank upon receipt by the
Bond Trustee of (a) notice of such replacement, (b) the replacement letter of
credit issued by such other branch or agency of the Bank, which replacement
letter of credit is identical in all material respects to the Letter of Credit
but for any revisions to the addresses to which demand for payment must be
delivered, (c) opinions from counsel to the Bank with respect to such
replacement letter of credit restating and confirming the opinions delivered by
such counsel at the Closing Date and (d) if the Bonds are then rated by a
Rating Agency, evidence that such replacement letter of credit would not, in
and of itself, result in the lowering of the rating on the Bonds by such Rating
Agency. No amendments to this Reimbursement Agreement or any of the other
Related Documents shall be required to effect such transfer.
Section 10.11 Counterparts. This Reimbursement Agreement may be
signed in any number of counterpart copies, but all such copies shall
constitute one and the same instrument.
Section 10.12 Complete and Controlling Agreement. This Reimbursement
Agreement and the other Related Documents completely set forth the agreements
between the Bank and the Account Parties with respect to matters herein and
fully supersede all prior agreements, both written and oral, between the Bank
and the Account Parties relating to the issuance of the Letter of Credit and
all matters set forth herein and in the other Related Documents.
Section 10.13 WAIVER OF JURY TRIAL. WELLSFORD REIT 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. WELLSFORD REIT 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.
Section 10.14 Assignability to Federal Reserve. The Bank may assign
and pledge all or any portion of the obligations owing to it hereunder or under
any of the other Related Documents 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 either Account Party to the Bank in accordance
with the terms of this Reimbursement Agreement or such Related Documents shall
satisfy such Account Party's obligations hereunder or thereunder in respect of
such assigned obligation to the extent of such payment. No such assignment
shall release the Bank from its obligations hereunder or under any other
Related Document.
[Remainder of page intentionally left blank]
IN WITNESS WHEREOF, the parties hereto have caused this Letter of
Credit Reimbursement Agreement to be duly executed and delivered by their
respective officers "hereunto duly authorized as of the date first above
written.
PALOMINO PARK PUBLIC IMPROVEMENTS
CORPORATION, a Colorado nonprofit
corporation
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
________________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: President
WELLSFORD RESIDENTIAL PROPERTY
TRUST, a Maryland real estate
investment trust
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
________________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Vice President
DRESDNER BANK AG, New York Branch
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
________________________________
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President
By:/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
________________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President
EXHIBIT A
FORM OF
LETTER OF CREDIT
December 1, 1995
Irrevocable Letter of Credit ▇▇. ▇▇▇-▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Palomino Park Public Improvements Corporation
Assessment Lien Revenue Bonds
Series 1995 - $14,755,000
Ladies and Gentlemen:
At the request and for the account of Palomino Park Public Improvements
Corporation (the "Bond Issuer") and Wellsford Residential Property Trust
("Wellsford REIT") (collectively Wellsford REIT and the Bond Issuer are
referred to as the "Account Parties") pursuant to the Letter of Credit
Reimbursement Agreement among us and the Account Parties dated as of December
1, 1995 (as amended or supplemented from time to time pursuant to its terms,
the "Reimbursement Agreement"), we hereby establish this Irrevocable Letter of
Credit (the "Letter of Credit") in your favor as Bond Trustee under the Trust
Indenture, dated as of December 1, 1995, between Bond Issuer and you, as
trustee (as amended or supplemented from time to time pursuant to its terms,
the "Bond Indenture"), for the benefit of the holders of the Bond Issuer's
above-referenced series of bonds issued under the Bond Indenture (the "Bonds")
in accordance with the following terms and conditions.
1. Expiration. This Letter of Credit automatically shall expire at
5:00 p.m., New York time, on the earliest of:
(a) June 20, 1998; provided that, if on or before the 45th day
prior to the Interest Payment Date (as defined in the Bond Indenture) next
preceding the then-stated expiration date of this Letter of Credit, we provide
you as Bond Trustee with a written notice in the of Exhibit H hereto that this
Letter of Credit shall be extended, then the term of this Letter of Credit
shall be extended to the date provided in such notice (it being understood that
we shall have the right in our sole discretion to determine whether to extend
the term of this Letter of Credit);
(b) our receipt of your certificate in the form of Exhibit E or
Exhibit F hereto appropriately completed, together with this Letter of Credit;
(c) 10 days after you have received notice from us, pursuant to
Section 7.2(b) of the Reimbursement Agreement, stating that an Event of Default
has occurred under the Reimbursement Agreement and requesting the acceleration
of the Bonds;
(d) immediately following our payment of a Drawing in order to
pay the Purchase Price (as defined below) of Bonds tendered pursuant to clause
(b) or clause (c) of Section 4.02 of the Bond Indenture; and
(e) the date of payment of an Interest Drawing (as defined
below) and a Principal Drawing (as defined below) which when added to all other
Interest Drawings and Principal Drawings honored hereunder and not subject to
reinstatement in the aggregate equals the initial amount of the Stated Amount
(as defined below), as the same previously may have been reduced pursuant to
the Bank's receipt of a certificate in the form of Exhibit D.
In the event such expiration date shall not be a Business Day (as
hereinafter defined), then this Letter of Credit shall expire at the opening of
business on the next succeeding Business Day.
2. Stated Amount. The maximum aggregate amount available under
this Letter of Credit shall be $15,773,702, which amount as from time to time
reduced and reinstated as provided in paragraphs 3 and 4 is hereinafter
referred to as the "Stated Amount." Of the Stated Amount, up to $14,755,000 is
available for the payment of the unpaid principal of, or the portion of the
purchase price of Bonds tendered or deemed tendered for purchase under Sections
4.01 or 4.02 of the Bond Indenture corresponding to principal of, the Bonds
(the "Principal Portion"), and up to $1,018,702 is available for the payment of
the unpaid interest accrued on, or the portion of the purchase price of Bonds
tendered for purchase under said Sections of the Bond Indenture corresponding
to interest accrued on, the Bonds (the "Interest Portion"), which amount
represents 210 days of interest on the Principal Portion at 12% per annum based
on a year of 365 days. The amount paid to purchase Bonds tendered for purchase
pursuant to the Bond Indenture is herein referred to as the "Purchase Price"
for such Bonds.
3. Reductions in the Stated Amount. The Stated Amount, the
Principal Portion and the Interest Portion, as applicable, shall be reduced
automatically from time to time as follows:
(a) Upon our honoring of a demand for payment hereunder, the
Stated Amount, the Principal Portion and the Interest Portion, as applicable,
shall be reduced by an amount equal to the amount of such demand for payment.
More specifically:
(i) In connection with each Interest Drawing, the Interest
Portion shall be reduced by the amount requested for payment on the submitted
Drawing Certificate;
(ii) In connection with each Principal Drawing, the
Principal Portion shall be reduced by the amount requested for payment on the
submitted Drawing Certificate;
(iii) In connection with each Purchase Drawing, the
Principal Portion shall be reduced by the amount referenced in paragraph 3(a)
of the submitted Drawing Certificate and the Interest Portion shall be reduced
by the amount referenced in paragraph 3(b) of the submitted Drawing
Certificate.
(b) Upon our receipt of your certificate in the form of Exhibit
D hereto appropriately completed, the Stated Amount, the Principal Portion and
the Interest Portion, as applicable, shall be reduced by an amount equal to the
amount specified in such certificate, provided that no reduction under this
clause (b) shall duplicate any reduction under clause (a) above.
Upon such a reduction, we may require you to return this Letter of Credit and
to accept in substitution hereof a substitute Letter of Credit for a Stated
Amount reflecting such reduction, but otherwise identical in form and substance
to this Letter of Credit.
4. Automatic Reinstatement.
(a) Reductions under paragraph 3(a) with respect to any demand
for payment of interest on the Bonds (except for that portion of the Purchase
Price corresponding to unpaid interest, if any, on such Bonds) shall be
reinstated automatically unless you receive notice in writing from us (which
may include delivery by prepaid telecopier, telex, telegram or other
telecommunication) on or before the close of business on the tenth day after
such demand for payment was honored by us stating that an Event of Default
under the Reimbursement Agreement has occurred and requesting acceleration of
the Bonds, as permitted by Section 7.2(b) of the Reimbursement Agreement, or
mandatory tender of the Bonds, as permitted by Section 7.2(d) of the
Reimbursement Agreement.
(b) Reductions under paragraph 3(a) with respect to any demand
for payment of the Purchase Price of Bonds tendered or deemed to have been
tendered pursuant to Section 4.01 or upon the occurrence of a Conversion Date
and a mandatory tender under and in accordance with Section 4.02 of the Bond
Indenture shall be reinstated automatically upon the receipt by the Bank of (i)
a certificate from you in the form of Exhibit I attached hereto, (ii) monies in
the amount drawn under such Drawing for the reimbursement to the Bank of such
amounts in accordance with Section 2.4 of the Reimbursement Agreement and (iii)
such additional monies as are required pursuant to Section 2.4 of the
Reimbursement Agreement in order to effect a release from the Bank's security
interest in the Bonds ("Pledged Bonds") purchased with said drawing and pledged
to the Bank under that certain Bond Pledge and Security Agreement dated as of
December 1, 1995 by and among us, the Account Parties and you, as custodian
(the "Pledge Agreement").
(c) Reductions under paragraph 3(b) shall not be subject to
reinstatement. Reductions under paragraph 3(a) with respect to (i) any demand
for payment of the principal of the Bonds or (ii) the Purchase Price of Bonds
tendered or deemed to have been tendered pursuant to any section of the Bond
Indenture other than pursuant to Section 4.01 or upon the occurrence of a
Conversion Date and a mandatory tender under and in accordance with Section
4.02 of the Bond Indenture shall not be subject to reinstatement.
5. Documents To Be Presented. Funds under this Letter of Credit
are available to you, against presentment to us of the following drawings
(collectively, a "Drawing") in accordance with Section 6 below:
(a) in the case of a demand for payment of the unpaid interest
accrued on the Bonds, a certificate signed by you in the form of Exhibit A
hereto appropriately completed (an "Interest Drawing");
(b) in the case of a demand for payment of the unpaid principal
of the Bonds, a Certificate signed by you in the form of Exhibit B hereto
appropriately completed (a "Principal Drawing"); and
(c) in the case of a demand for payment of the Purchase Price
of the Bonds pursuant to Article IV of the Bond Indenture, a certificate signed
by you in the form of Exhibit C hereto appropriately completed (a "Purchase
Drawing").
6. Method and Notice of Presentment.
(a) The certificates referenced in paragraph 5 (a "demand for
payment") may be delivered to us in person, by mail, by an express delivery
service, by telecopy or by tested telex, answerback received, at such number or
numbers as we shall notify you from time to time in writing. A demand for
payment shall be presented during our business hours on a Business Day prior to
the expiration hereof at our office at Dresdner Bank AG, New York Branch, ▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, Telecopy Number: (▇▇▇) ▇▇▇-▇▇▇▇, Attn: Lora
Lan, or at such other address as we may notify you in writing from time to
time. As used herein, "Business Day" means any day other than (i) a Saturday or
Sunday or (ii) a day on which commercial banks in Denver, Colorado, New York,
New York or the city or cities in which are located the principal corporate
trust offices of the Bond Trustee under the Bond Indenture and our office at
which demands for payment under this Letter of Credit are required to be made
are authorized or required by law or executive order to close, or (iii) a day
on which the New York Stock Exchange is closed.
(b) Prior to the delivery of any demand for payment, you shall
endeavor in good faith to give us telephonic notice of your intention to
deliver such demand for payment, stating the method of presentment and the type
and amount of such demand for payment; provided, that your failure to give such
telephonic notice will not affect our obligation to honor demands for payment
in strict conformity with the terms hereof. The telephonic notice required
hereunder shall be given to Dresdner Bank AG, New York Branch, Attention: Lora
Lan, at (▇▇▇) ▇▇▇-▇▇▇▇, or such other person or persons as we shall notify you
in writing from time to time. Such telephonic notice may be waived at our sole
discretion.
7. Time and Method for Payment.
(a) If demand for payment is made on a Business Day in strict
conformity with the terms and conditions hereof, payment shall be made to you
(i) in the case of a Principal Drawing or an Interest Drawing, if a demand for
payment is received by us prior to 4:00 p.m. New York time, not later than
10:00 a.m. New York time on the next succeeding Business Day or such later date
as you may specify in such demand for payment; and (ii) in the case of a
Purchase Drawing for, if a demand for payment is received by us prior to 4:00
p.m. New York time, not later than 10:00 a.m. New York time on the next
succeeding Business Day or such later date as you may specify in such demand
for payment. If such demand for payment is received by us after the applicable
times, such demand shall be deemed to have been received on the next Business
Day. All times referenced herein are as of New York, New York time.
(b) Unless otherwise agreed, payment under this Letter of
Credit pursuant to an Interest Drawing, a Principal Drawing or a Purchase
Drawing shall be made by Fedwire in immediately available funds to the Bond
Trustee's account at The Chase Manhattan Bank, N.A., ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ABA ▇▇▇-▇▇▇-▇▇▇, for credit to the account of United States
Trust Company of New York, Account No. _________________. For the purposes of
determining compliance with the times for payment specified in (a) above,
payment shall be deemed to have been made by us when we have delivered
appropriate wire transfer instructions to an appropriate Federal Reserve Bank.
(c) All payments made by the Bank under this Letter of Credit
shall be made with the Bank's own funds.
8. Transferability. This Letter of Credit is transferable in its
entirety, but not in part, to any transferee who has succeeded you as Bond
Trustee under the Bond Indenture and may be successively transferred. Transfer
of the available balance under this Letter of Credit to such transferee shall
be effected by the presentation to us of this Letter of Credit accompanied by a
certificate substantially in the form of Exhibit G hereto.
9. GOVERNING LAW AND CUSTOMS. TO THE EXTENT CONSISTENT WITH THE
EXPRESS PROVISIONS HEREOF, THIS LETTER OF CREDIT SHALL BE GOVERNED BY THE
UNIFORM CUSTOMS AND PRACTICE FOR DOCUMENTARY CREDITS (1993 REVISION),
INTERNATIONAL CHAMBER OF COMMERCE PUBLICATION NO. 500 (THE "UCP"), AND, TO THE
EXTENT CONSISTENT WITH THE UCP AND THE EXPRESS PROVISIONS HEREOF, THE LAWS OF
THE STATE OF NEW YORK.
10. Irrevocability. This Letter of Credit shall be irrevocable.
11. No Negotiation. A demand for payment under this Letter of
Credit shall be presented directly to us and shall not be negotiated to or by
any third party.
12. Excluded Bonds. No demand for payment under this Letter of
Credit may be made with respect to any Corporation Bond or any Pledged Bond (as
each such term is defined in the Bond Indenture) (each an "Excluded Bond").
13. Address for Communications. Communications with respect to this
Letter of Credit, other than demands for payment pursuant to paragraph 6, shall
be in writing and shall be addressed to us at Dresdner Bank AG, New York
Branch, ▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Telecopy No.
(▇▇▇) ▇▇▇-▇▇▇▇, specifically referring thereon to our Irrevocable Letter of
Credit No. 967-95. In addition, copies of any demand for payment shall be sent
to us at Dresdner Bank AG, New York Branch, ▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇,
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Telecopy No. (▇▇▇) ▇▇▇-▇▇▇▇; provided, however, that the
failure to send such copies shall not affect our obligations hereunder.
14. Complete Agreement. This Letter of Credit, including Exhibits A
through I hereto, sets forth in full the terms of our undertaking. Reference
in this Letter of Credit to other documents or instruments is for
identification purposes only and such reference shall not modify or affect the
terms hereof or cause such documents or instruments to be deemed incorporated
herein.
We hereby agree with you to honor your demand for payment presented
in strict compliance with the terms and conditions of this Letter of Credit.
Very truly yours,
DRESDNER BANK AG, New York Branch
By:________________________________
Name:
Title:
By:________________________________
Name:
Title:
EXHIBIT A
CERTIFICATE FOR INTEREST DRAWING
Palomino Park Public Improvements Corporation
Assessment Lien Revenue Bonds
Series 1995
Irrevocable Letter of Credit No. 967-95
The undersigned, a duly authorized officer of United States Trust
Company of New York (the "Bond Trustee"), hereby certifies to Dresdner Bank AG,
New York Branch (the "Bank"), with reference to Irrevocable Letter of Credit
No. 967-95 (the "Letter of Credit"; any capitalized term used herein and not
defined shall have its respective meaning as set forth in the Letter of Credit)
issued by the Bank in favor of the Bond Trustee, that:
(1) The Bond Trustee is the Bond Trustee under the Bond Indenture
and is making this demand for payment of interest accrued through ___________
(the "Payment Date") on the Bonds in accordance with the Bond Indenture. Said
interest consists of $___________ of interest accrued on Bonds bearing interest
at a [Weekly Rate/Term Rate] (as such term is defined in the Bond Indenture),
which amount of interest is payable on such Bonds on the Payment Date.
(2) Demand is hereby made under the Letter of Credit for
$___________, which amount does not exceed (i) the amount in paragraph (1) of
this Certificate or (ii) the Interest Portion of the Stated Amount.
(3) The amount demanded hereunder does not include any amount
payable with respect to any Excluded Bond.
(4) The proceeds of this demand for payment equal to the amount set
forth in paragraph (1) of this Certificate shall be deposited in the Letter of
Credit Debt Service Account (as defined in the Bond Indenture) and shall be
applied solely to the payment of unpaid interest on Bonds bearing interest at a
[Weekly Rate Term Rate] in accordance with the Bond Indenture.
(5) (a) Payment of this demand for payment is requested on or
before 10:00 a.m. New York time, on the later of (i) the Payment Date (or if
the Payment Date is not a Business Day, the next succeeding Business Day) and
(ii) the Business Day next succeeding the Business Day on which this
Certificate is received or deemed to have been received by the Bank in
accordance with paragraph 7(a) of the Letter of Credit.
(b) Payment of this demand for payment shall be made in
accordance with the payment instructions provided in paragraph 7(b) of the
Letter of Credit.
IN WITNESS WHEREOF, the Bond Trustee has executed and delivered this
Certificate as of the ____ day of ________, ____.
UNITED STATES TRUST OF NEW
YORK, as Bond Trustee
By:________________________________
Name:
Title:
EXHIBIT B
FORM OF
BOND PLEDGE AND SECURITY AGREEMENT
THIS BOND PLEDGE AND SECURITY AGREEMENT (the "Pledge Agreement"), dated as
of December 1, 1995, is made by and 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" and, collectively with the Bond Issuer, the "Pledgors"), Dresdner Bank
AG, a banking corporation organized and existing under the laws of The Federal
Republic of Germany, acting by and through its ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ (▇▇▇ "▇▇▇▇"),
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ Trust Company of New York, as custodian for the Bank (the
"Bond Trustee"), pursuant to the Letter of Credit Reimbursement Agreement dated
as of December 1, 1995, between the Pledgors and the Bank (hereinafter, as the
same may from time to time be amended or supplemented, called the
"Reimbursement Agreement ").
W I T N E S S E T H:
WHEREAS, the Bond Issuer is issuing at the request of and for the benefit
of Wellsford REIT and its Subsidiary, Park at Highlands LLC, a Colorado limited
liability company ("Highlands"), its "Palomino Park Public Improvements
Corporation Assessment Lien Revenue Bonds Series 1995 - $14,755,000" (the
"Bonds") pursuant to a Trust Indenture dated as of December 1, 1995 (the "Bond
Indenture") between the Bond Issuer and the Bond Trustee;
WHEREAS, the Bond Indenture requires the purchase of Bonds under certain
circumstances as set forth in Section 4.04 of the Bond Indenture from the
holders thereof:
WHEREAS, the Pledgors have entered into the Reimbursement Agreement in
order to cause the Bank to issue its Letter of Credit No. 967-95 dated December
1, 1995, which may be used, inter alia, to pay the purchase price of certain
Bonds (to the extent moneys drawn under the Letter of Credit are used to
purchase such Bonds, and until such Bonds have been released from the security
interest therein created hereby, such Bonds are referred to herein as "Pledged
Bonds"); and
WHEREAS, it is a condition precedent to the obligation of the Bank to
issue the Letter of Credit that the Pledgors shall have executed and delivered
this Pledge Agreement to the Bank;
NOW, THEREFORE, in consideration of the premises and in order to induce
the Bank to enter into the Reimbursement Agreement and issue the Letter of
Credit thereunder and for other good and valuable consideration, receipt of
which is hereby acknowledged, each Pledgor hereby agrees with the Bank as
follows:
1. Defined Terms. Unless otherwise defined herein, terms defined in the
Reimbursement Agreement shall have such defined meanings when used herein.
2. Pledge. Each Pledgor hereby pledges, assigns, hypothecates, transfers
and delivers to the Bank all of its right, title and interest in and to the
Pledged Bonds as the same may be from time to time delivered to the Bond
Trustee by the holders thereof and each Pledgor hereby grants to the Bank a
first lien on, and security interest in, its right, title and interest in and
to the Pledged Bonds, all interest or other income thereon and all proceeds
thereof (the "Collateral"), as collateral security for the prompt and complete
payment when due of all amounts due in respect of the obligations of the
Pledgors under the Reimbursement Agreement and interest on such amounts (all
the foregoing being hereinafter called the "Obligations"). Each Pledgor hereby
consents to the Bond Trustee acting as the agent and bailee of the Bank for
purposes of perfecting the Lien of this Pledge Agreement and of holding the
Collateral for the benefit of the Bank.
Payments on the Pledged Bonds. If, while this Pledge Agreement is in
effect either Pledgor shall become entitled to receive or shall receive any
principal or interest payment in respect of the Pledged Bonds, such Pledgor
agrees to accept the same as the Bank's agent and to hold the same in trust on
behalf of the Bank and to deliver the same forthwith to the Bank. The Pledgors
instruct and authorize the Bond Trustee to deliver forthwith to the Bank any
payment to be made on Pledged Bonds and instruct and authorize the Bond Trustee
to hold and receive on behalf of the Bank and deliver forthwith to the Bank any
payments to be made or received in respect of Pledged Bonds (including all
proceeds of any remarketing of the Pledged Bonds). All sums of money so paid in
respect of the Pledged Bonds which are received by either Pledgor and paid to
the Bank shall be credited against the obligations of the Pledgors to the Bank
first to any fees, costs, charges or expenses payable to the Bank under the
Reimbursement Agreement or the Letter of Credit, next to any accrued but unpaid
interest under Sections 2.1 or 2.2 of the Reimbursement Agreement, next to any
current interest due, and then to outstanding principal.
4. Release of Pledged Bonds. Subject to and in accordance with the terms
and conditions of Section 2.4 of the Reimbursement Agreement, the Pledgors
shall have the right to effect releases of Pledged Bonds from the security
interest created by this Pledge Agreement.
5. Rights of the Bank. The Bank shall not be liable for failure to
collect or realize upon the Obligations or any collateral security or guarantee
therefor, or any part thereof, or for any delay in so doing, and shall be under
no obligation to take any action whatsoever with regard thereto. If an Event of
Default has occurred and is continuing, the Bank may thereafter, without
notice, exercise all rights, privileges or options pertaining to any Pledged
Bonds as if it were the absolute owner thereof, upon such terms and conditions
as it may determine, all without liability except to account for property
actually received by it, but the Bank shall have no duty to exercise any of the
aforesaid rights, privileges or options and shall not be responsible for any
failure to do so or delay in so doing.
6. Remedies. In the event of any Event of Default under the
Reimbursement Agreement, the Bank, without demand of performance or other
demand, advertisement or notice of any kind (except the notice specified below
of time and place of public or private sale) to or upon the Pledgors or any
other Person (all and each of which demands, advertisements and/or notices are
hereby expressly waived) in its sole discretion (a) may exercise any or all of
its rights and remedies under any or all of the Related Documents or any other
instrument or agreement securing, evidencing or relating to the Obligations or
under applicable law (including all of the rights and remedies of a secured
creditor under the Uniform Commercial Code of the State of New York (the "UCC")
or any other applicable law), (b) may forthwith collect, receive, appropriate
and realize upon the Collateral, or any part thereof, and/or (c) may forthwith
sell, assign, give option or options to purchase, contract to sell or otherwise
dispose of and deliver said Collateral, or any part thereof, in one or more
parcels at public or private sale or sales, at any exchange, broker's board or
at any of the Bank's offices or elsewhere upon such terms and conditions as it
may deem advisable and at such prices as it may deem best, for cash or on
credit or for future delivery without assumption of any credit risk, with the
right to the Bank upon any such sale or sales, public or private, to purchase
the whole or any part of said Collateral so sold, free of any right or equity
of redemption in the Pledgors, which right or equity is hereby expressly waived
or released. The Bank shall apply the net proceeds of any such collection,
recovery, receipt, appropriation, realization or sale, after deducting all
reasonable costs and expenses of every kind incurred therein or incidental to
the care, safekeeping or otherwise of any and all of the Collateral or in any
way relating to the rights of the Bank hereunder, including reasonable
attorney's fees and legal expenses, to the payment, in whole or in part, of the
Obligations in such order as the Bank may elect, the Pledgors remaining liable
for any deficiency remaining unpaid after such application, and only after so
applying such net proceeds and after the payment by the Bank of any other
amount required to be paid by any provision of law, including, without
limitation, Section 9-504(1)(c) of the UCC, need the Bank account for the
surplus, if any, to the Pledgors. Each Pledgor agrees that the Bank need not
give more than ten days' notice of the time and place of any public sale or of
the time after which a private sale or other intended disposition is to take
place and that such notice is reasonable notification of such matters. No
notification need be given to the Pledgors if they have signed after default a
statement renouncing or modifying any right to notification of sale or other
intended disposition. In addition to the rights and remedies granted to it in
this Pledge Agreement and in any other instrument or agreement securing,
evidencing or relating to any of the Obligations, the Bank shall have all the
rights and remedies of a secured party under the UCC. Each Pledgor further
agrees to waive and agrees not to assert any rights or privileges which it may
acquire under Section 9-112 of the UCC and the Pledgors shall be liable for the
deficiency if the proceeds of any sale or other disposition of the Collateral
are insufficient to pay all amounts to which the Bank is entitled, and the fees
and costs of any attorneys employed by the Bank to collect such deficiency. The
Bond Trustee, in its capacity as custodian for the Bank, agrees to take such
steps as Bank reasonably requests in order to effect or implement any of the
foregoing remedies.
7. Representations, Warranties and Covenants of the Pledgors. Each
Pledgor represents and warrants that: (a) on the date that any Bonds become
Pledged Bonds, none of the Bond Issuer, Wellsford REIT nor the Bond Trustee
(except in its capacity as the Bank's designated custodian to hold the Pledged
Bonds) will have any right, title or interest in and to the Pledged Bonds; (b)
each Pledgor has, and on the date that such Bonds become Pledged Bonds will
have, full power, authority and legal right to pledge all of its right, title
and interest in and to the Pledged Bonds pursuant to this Pledge Agreement; (c)
this Pledge Agreement has been duly authorized, executed and delivered by each
Pledgor and constitutes a legal, valid and binding obligation of such Pledgor
enforceable in accordance with its terms; (d) no consent of any other party
(including, without limitation, creditors of either Pledgor) and no consent,
license, permit, approval or authorization of, exemption by, notice or report
to, or registration, filing or declaration with, any governmental authority,
domestic or foreign, is required to be obtained by either Pledgor in connection
with the execution, delivery or performance of this Pledge Agreement; (e) the
execution, delivery and performance of this Pledge Agreement will not violate,
in any material respect, any provision of any applicable law or regulation or
of any order, judgment, writ, award or decree of any court, arbitrator or
governmental authority, domestic or foreign, or of any mortgage, indenture,
lease, contract, or other agreement, instrument or undertaking to which either
Pledgor is a party or which purports to be binding upon either Pledgor or upon
its assets and will not result in the creation or imposition of any lien,
charge or encumbrance on or security interest in any of the assets of such
Pledgor except as contemplated by this Pledge Agreement; and (f) the pledge,
assignment and delivery of such Pledged Bonds pursuant to this Pledge Agreement
will create a valid first lien on and a first perfected security interest in,
all right, title or interest of the Pledgors in or to such Pledged Bonds, and
the proceeds thereof, subject to no prior pledge, lien, mortgage,
hypothecation, security interest, charge, option or encumbrance or to any
agreement purporting to grant to any third party a security interest in the
property or assets of either Pledgor which would include the Pledged Bonds.
Each Pledgor covenants and agrees that it will defend the Bank's right, title
and security interest in and to the Pledged Bonds and the proceeds thereof
against the claims and demands of all persons whomsoever; and covenants and
agrees that it will have like title to and right to pledge any other property
at any time hereafter pledged to the Bank as Collateral hereunder and will
likewise defend the Bank's right thereto and security interest therein.
8. No Disposition, etc. Without the prior written consent of the Bank,
the Pledgors and the Bond Trustee each agree that they will not sell, assign,
transfer, exchange, or otherwise dispose of, or grant any option with respect
to, the Collateral, nor will they create, incur or permit to exist any pledge,
lien, mortgage, hypothecation, security interest, charge, option or any other
encumbrance with respect to any of the Collateral, or any interest therein, or
any proceeds thereof, except for the lien and security interest provided for by
this Pledge Agreement and sale of the Pledged Bonds pursuant to Section 4.05 of
the Bond Indenture, subject to Section 4 of this Pledge Agreement.
9. Sale of Collateral.
(a) Each Pledgor recognizes that the Bank may be unable to effect a
public sale of any or all of the Pledged Bonds by reason of certain
prohibitions contained in the Securities Act of 1933, as amended (the
"Securities Act"), and applicable state securities laws, but may be compelled
to resort to one or more private sales thereof to a restricted group of
purchasers who will be obliged to agree, among other things, to acquire such
securities for its own account for investment and not with a view to the
distribution or resale thereof. Each Pledgor acknowledges and agrees that any
such private sale may result in prices and other terms less favorable to the
seller than if such sale were a public sale and, notwithstanding such
circumstances, agrees that any such private sale shall be deemed to have been
made in a commercially reasonable manner. The Bank shall be under no obligation
to delay a sale of any of the Pledged Bonds for the period of time necessary to
permit the issuer of such securities to register such securities for public
sale under the Securities Act, or under applicable state securities laws, even
if the issuer would agree to do so.
(b) Each Pledgor further agrees to do or cause to be done all such
other acts and things as may be necessary to make such sale or sales of any
portion or all of the Pledged Bonds valid and binding and in compliance with
any and all applicable laws, regulations, orders, writs, injunctions, decrees
or awards of any and all courts, arbitrators or governmental instrumentalities,
domestic or foreign, having jurisdiction over any such sale or sales, all at
the Pledgors' expense. Each Pledgor further agrees that a breach of any of the
covenants contained in this Pledge Agreement will cause irreparable injury to
the Bank, that the Bank has no adequate remedy at law in respect of such breach
and, as a consequence, agrees that each and every covenant contained in this
Pledge Agreement shall be specifically enforceable against the Pledgors and
each Pledgor hereby waives and agrees not to assert any defenses against an
action for specific performance of such covenants except for a defense that no
Event of Default has occurred under the Reimbursement Agreement. Each Pledgor
further acknowledges the impossibility of ascertaining the amount of damages
which would be suffered by the Bank by reason of a breach of any of such
covenants and, consequently, agrees that, if the Bank shall ▇▇▇ for damages for
breach, the Pledgors shall pay, as liquidated damages and not as a penalty, an
amount equal to the outstanding principal amount of, accrued premium, if any,
and accrued interest on the Pledged Bonds and all other amounts payable
pursuant to Article 2 of the Reimbursement Agreement on the date the Bank shall
demand compliance with this Paragraph.
(c) The Bond Trustee, as custodian for the Bank, agrees to cooperate
with the Bank and the Pledgors and to do or cause to be done all such acts and
things as may be necessary to permit the Pledgors to make such sale or sales of
any portion or all of the Pledged Bonds valid and binding and in compliance
with any and all applicable laws, regulations, orders, writs, injunctions,
decrees or awards of any and all courts, arbitrators or governmental
instrumentalities, domestic or foreign, having jurisdiction over any such sale
or sales.
10. Bond Trustee.
(i) If a book-entry depository administered by the Depository
Trust Company or any successor or nominee thereto (the "Depository") is in use
pursuant to the Bond Indenture, the Bond Trustee shall notify the Depository
(in a form acceptable to the Depository for such notice) of the principal
amount(s) of the Bonds which are to become Pledged Bonds prior to or
concurrently with its receipt from the Bank of a federal funds tracking number
for a wire transfer in payment of a drawing under the Letter of Credit to
purchase such Bonds. Said notice shall further instruct the Depository to
record in its system a corresponding increase in the principal amount of the
Bonds credited to the account of the Bond Trustee as the agent and bailee of
the Bank or such other Person identified by the Bank (through notice to the
Bond Trustee and the Pledgors) as the entity which should hold Pledged Bonds in
a book-entry system (the Bond Trustee or such other Person, the "Bank's DTC
Participant"). Concurrently with the delivery of such notice to the Depository,
the Bond Trustee shall provide a copy of such notice to the Bank and the
Pledgors. The Bond Trustee and the Pledgors shall provide the Bank with any
confirmation or like notice received by any of them from the Depository
evidencing the Depository's compliance with the instructions.
(ii) Whenever a book-entry depository is in use pursuant to the
Bond Indenture and Pledged Bonds are held on behalf of the Bank by the Bank's
DTC Participant, the Bank shall have the right to obtain a separate bond
certificate to evidence the Pledged Bonds, and upon request by the Bank, the
Pledgors will cause the Bond Trustee to authenticate and deliver such
certificate, and such certificate shall be deposited with the Depository or
delivered to the Bank or a Person designated by the Bank, as the Bank shall
direct.
(iii) If a book-entry depository ever ceases to be in use with
respect to the Bonds, the Bond Trustee and the Pledgors each hereby agree to
hold any Pledged Bonds received by any of them as the Bank's agent and bailee
and to make a notation in its respective records with respect to the Pledged
Bonds. Upon request of the Bank, each of the Bond Trustee and the Pledgors will
deliver all or a portion of such Pledged Bonds to the Bank or to such Person as
the Bank may direct without termination of this Pledge Agreement.
(iv) Except at the written direction of the Bank, the Bond
Trustee shall not enter into any agreement other than this Pledge Agreement
regarding possession of the Pledged Bonds or any other Collateral without prior
written consent of the Bank. The Bond Trustee will not release any Pledged
Bonds for remarketing unless the Bank has delivered to the Bond Trustee written
notice (which may be by telecopy) pursuant to Section 2.4 of the Reimbursement
Agreement and Section 4.05(a) of the Bond Indenture.
(v) Upon appointment of a successor Bond Trustee under and in
accordance with the terms of the Bond Indenture, release and delivery to the
Bank or its designee of any Collateral then held by the Bond Trustee pursuant
to this Pledge Agreement, and the assumption in writing by its successor of its
obligations hereunder, the Bond Trustee shall have the right to terminate its
position as Bond Trustee for the Bonds and its obligations under this Pledge
Agreement.
(vi) In acting under this Pledge Agreement, the Bond Trustee
shall not be liable to the Bank except for negligence or willful misconduct in
the performance of its obligations hereunder.
11. Further Assurances. Each Pledgor agrees that at any time and from
time to time upon the written request of the Bank, such Pledgor will execute
and deliver such further documents and do such further acts and things as the
Bank may reasonably request in order to effect the purposes of this Pledge
Agreement.
12. Severability. Any provision of this Pledge 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, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
13. No Waiver: Remedies Cumulative. The Bank shall not by any act, delay,
omission or otherwise be deemed to have waived any of its rights or remedies
hereunder and no waiver shall be valid unless in writing, signed by the Bank,
and then only to the extent therein set forth. A waiver by the Bank of any
right or remedy hereunder on any one occasion shall not be construed as a bar
to any right or remedy which the Bank would otherwise have on any future
occasion. No failure to exercise nor any delay in exercising on the part of the
Bank, any right, power or privilege hereunder, shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided are cumulative and may be exercised singly or concurrently, and are
not exclusive of any rights or remedies provided by law.
14. Waivers; Amendments; Applicable Law. None of the terms or provisions
of this Pledge Agreement may be waived, altered, modified or amended except by
an instrument in writing, duly executed by the Bank. This Pledge Agreement and
all obligations of the Pledgors and the Bond Trustee hereunder shall be binding
upon the successors and assigns of their respective successor and assigns, and
shall, together with the rights and remedies of the Bank hereunder, inure to
the benefit of the Bank and its successors and assigns. This Pledge Agreement
shall be governed by, and be construed and interpreted in accordance with, the
laws of the State of New York.
15. Designation of Custodian. The Bank hereby designates the Bond Trustee
as the Bank's custodian and agent for the purpose of holding the Pledged Bonds
on behalf of the Bank and with such authority for taking actions with respect
to the Pledged Bonds as set forth herein and as may be directed by, and on
behalf of, the Bank. The parties hereto acknowledge that the Bank may designate
any successor Bond Trustee under the Bond Indenture, or any substitute Person
that the Bank may elect to designate, as the Bank's custodian and agent for the
purpose of holding the Pledged Bonds on behalf of the Bank and with such
authority for taking actions with respect to the Pledged Bonds as set forth
herein and as may be directed by, and on behalf of, the Bank.
IN WITNESS WHEREOF, the Pledgors, the Bank and the Bond Trustee have
caused this Bond Pledge and Security Agreement to be duly executed and
delivered on the day and year first above written.
PLEDGORS:
PALOMINO PARK PUBLIC IMPROVEMENTS
CORPORATION, a Colorado nonprofit
corporation
By:_____________________________
Name:
Title:
WELLSFORD RESIDENTIAL PROPERTY
TRUST, a
Maryland real estate investment
trust
By:_____________________________
Name:
Title:
BANK:
DRESDNER BANK AG, New York Branch
By:_____________________________
Name:
Title:
By:_____________________________
Name:
Title:
BOND TRUSTEE:
UNITED STATES TRUST COMPANY OF NEW
YORK
By:_____________________________
Name:
Title:
EXHIBIT C-1
FORM OF
WELLSFORD REIT PROMISSORY NOTE
Dated: December 13, 1995
FOR VALUE RECEIVED, the undersigned, Wellsford Residential Property Trust
("Wellsford REIT"), a Maryland real estate investment trust, 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 Wellsford REIT to the Bank pursuant to that
certain Letter of Credit Reimbursement Agreement among Wellsford REIT, Palomino
Park Public Improvements Corporation and the Bank dated as of December 1, 1995
(the "Reimbursement Agreement") and the other Related Documents. Wellsford REIT
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 of 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.
Wellsford REIT waives presentment, demand, protest or notice of any kind
in connection with this Promissory Note. Wellsford REIT 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 RESIDENTIAL PROPERTY TRUST
By:_____________________________
Name:
Title:
EXHIBIT C-2
FORM OF
PALOMINO PARK PROMISSORY NOTE
Dated: December 13, 1995
FOR VALUE RECEIVED, the undersigned, Palomino Park Public Improvements
Corporation (the "Bond Issuer"), a Colorado nonprofit corporation, 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 the Bond Issuer to the Bank pursuant to
that certain Letter of Credit Reimbursement Agreement among the Bond Issuer,
the Bank and Wellsford Residential Property Trust dated as of December 1, 1995
(the "Reimbursement Agreement") and the other Related Documents. The Bond
Issuer 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 of 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.
The Bond Issuer waives presentment, demand, protest or notice of any kind
in connection with this Promissory Note. The Bond Issuer 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.
PALOMINO PARK PUBLIC
IMPROVEMENTS CORPORATION
By:____________________________
Name:
Title:
EXHIBIT D
FORM OF
COMPLIANCE CERTIFICATE
Dresdner Bank AG
New York Branch
▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Letter of Credit Reimbursement Agreement
Ladies and Gentlemen:
Reference is made to the Letter of Credit Reimbursement Agreement dated as
of December 1, 1995 (the "Reimbursement Agreement") by and among Wellsford
Residential Property Trust ("Wellsford REIT"), Palomino Park Public
Improvements Corporation and Dresdner Bank AG, New York Branch ("Bank"). Terms
defined in the Reimbursement Agreement and not otherwise defined herein are
used herein as defined in the Credit Agreement.
Pursuant to the Reimbursement Agreement, Wellsford REIT is furnishing to
you herewith (or has recently furnished to you) the financial statements of
Wellsford REIT 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 Wellsford REIT 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
5.4(d), Section 5.5(4) and Section 3.10 of the Reimbursement Agreement. If this
certificate is provided under a provision other than Section 5.4(d), the
calculations provided below are made using the financial statements of
Wellsford REIT and its Subsidiaries as of the Balance Sheet Date adjusted in
the best good faith estimate of Wellsford REIT to give effect to the
transactions on the Closing Date, 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 Wellsford REIT's estimate of
its effects are set forth in reasonable detail in an attachment hereto. The
undersigned officer of Wellsford REIT is its chief financial officer.
The undersigned officer has caused the provisions of the Reimbursement
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 Wellsford REIT with respect thereto.)
Wellsford REIT is providing the following information to demonstrate
compliance as of the date hereof with the following covenants:
1. Implied Rating.
Wellsford REIT's Implied Rating is:
A. S&P __________
Date Rating Issued: __________
Date Rating Last Reaffirmed __________
▇. ▇▇▇▇▇'▇ __________
Date Rating Issued: __________
Date Rating Last Reaffirmed: __________
2. Section 5.13. Unencumbered Operating Properties __________
A. Value of Unencumbered Operating Properties __________
1. Total unsecured Indebtedness of
Wellsford REIT and its Subsidiaries __________
Loans $__________
Letters of Credit Outstanding $__________
Other Unsecured Indebtedness $__________
(Attach schedule and specifically
identify facilities)
Total Unsecured Indebtedness $__________
2. Asset Value of Unencumbered Operating
Properties $__________
Ratio of A.2 to A. 1 __________
Ratio of A.2 to A. 1 must be equal to
or greater than 1.8 to 1
The Ratio of A.2 to A. 1
for the previous three quarters ________, ________, _______
B. Cash Flow of Unencumbered Operating Properties
1. Consolidated Operating Cash Flow
from Unencumbered Operating Properties
for most recent quarter $__________
Consolidated Operating Cash Flow
for three prior quarters: $__________
Quarter ended_______ $__________
Quarter ended_______ $__________
Quarter ended_______ $__________
Total
(Attach Schedule satisfactory to Bank)
2. $100 multiplied by number of units within Unencumbered Operating
Properties $__________
3. Total of 1 minus 2 $__________
4. Pro Forma Debt Service Charge $__________
Total outstanding principal balance of
unsecured Indebtedness $__________
Interest Rate (7 year Treasuries plus
1.75%) $__________
Amortization (25-year schedule) $__________
Aggregate principal and interest
payments payable over 12 months
on such balance at such rate $__________
Ratio of B.3 to B.4
B.3 must not be less than 1.5 times B.4.
Coverage for previous
three quarters ________,_________,_________
C. 1. Average Occupancy of
Unencumbered Operating
Properties for current quarter $__________
2. Average Occupancy of prior quarter $__________
3. Quarter ended $__________
4. Average Occupancy for two prior $__________
quarters
Average Occupancy may not be less than 90%
4. Average Occupancy for each Unencumbered
Operating Property for two prior quarters
Average Occupancy may not be less than 80%
for any Unencumbered Operating Property
(Attach Schedule)
3. Section 6.3(h). Recourse Indebtedness.
A. Amount of recourse Indebtedness
pursuant to Section 6.3(h) $__________
Amount may not exceed $25,000,000
The amount for the previous
three quarters
4. Section 6.3(i). Subordinated Debt and Senior
Unsecured Long-Term Debt.
Attach description of any such Indebtedness, including principal
amount, maturity and key covenants and restrictions.
5. Section 6.5(j). Other Investments.
A. Consolidated Total Assets $__________
B. Other Investments $__________
Aggregate book value of other
Investments referred to in
Section 6.5(j) $__________
C. A + B $__________
B may not exceed the lesser of
(i) 10% of A and (ii) $35,000,000
The amount of B for the previous
three quarters ________,__________,_________
6. Section 6.9. Distributions.
A. Amount of Distributions for
Quarter most recently ended $__________
For Prior Quarters:
Quarter ended ________ $__________
Quarter ended ________ $__________
Quarter ended ________ $__________
Total
B. Funds from Operations
Funds from Operations for
Quarter most recently ended $__________
Funds from Operations for Prior Quarters:
Quarter ended ________ $__________
Quarter ended ________ $__________
Quarter ended ________ $__________
Total
C. Minimum Distributions required
to maintain REIT status of the
Wellsford REIT $__________
D. A is % of B
A may be at least equal to C, but may
not exceed 90% of B.
7. Section 6.14(1). Additional Restrictions
on Liens on Real Estate.
A. Number of Real Estate projects owned
in fee simple by Wellsford REIT __________
B. Number of such Real Estate projects
which are subject to Liens (other
than the Liens permitted by
Section 6.4(b) and (d)) __________
C. B is % of A
B may not exceed 60% of A.
(At such time as Wellsford REIT's $115,000,000 non-recourse
structured real estate mortgage loan described in the Prospectus is
repaid, B may not exceed 40% of A)
8. Section 6.14(2). Additional Restrictions on Indebtedness.
A. Amount of Indebtedness
pursuant to Section 6.14(2) $__________
B. Undepreciated Cost of Fee Simple
Real Estate $__________
________ A is ________ % of B
A may not exceed 40% of B
Percentage for the previous
three quarters ________,__________,_________
9. Section 6.17(1). Liabilities to Assets Ratio.
A. Consolidated Total Liabilities
per balance sheet $__________
B. Consolidated Total Assets $__________
Ratio of A to B __________
Ratio of A to B may not exceed 0.55 to 1.
The ratio of A to B for the
previous three quarters ________,__________,_________
10. Section 6.17(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 $__________
Minus Net Capital Expenditures $__________
Subtotal for most recent quarter $__________
Consolidated Operating Cash
Flow for three prior quarters:
Quarter ended ________ $__________
Quarter ended ________ $__________
Quarter ended ________ $__________
Total $__________
B. Debt Service for four prior
quarters $__________
A divided by B (expressed as
a percentage) __________
A must equal or exceed 200% of B. __________
Coverage for previous ________,__________,_________
three quarters
11. Section 5.5(4). Transfers and Encumbrances.
Describe sales, encumbrances, refinances
and other transfers referred to in Section 7.5(e).
12. Section 6.11. Development Activity.
A. Number of multifamily units owned by
Wellsford REIT and its
Subsidiaries __________
B. Number of multifamily units under
development pursuant to
Section 8.9 __________
C. B divided by A __________
D. Aggregate Cost of acquiring or
completing projects under
development pursuant to
Section 8.9 $__________
E. Attach schedule describing the projects under development or
to be acquired, the name of the seller (if applicable), the
status of development, the targeted completion or closing
date, the sources of capital to complete development or
acquire projects under development, the name of the lender or
other party providing such capital, the amount of the
facility, the nature of the facility and material funding
restrictions.
F. Development may not exceed the lesser of (1) any number of
projects whose cost does not exceed $100,000,000 and (2) 10%
of A.
IN WITNESS WHEREOF, I have hereunto set my hand this___ day of
____________, 199_.
WELLSFORD RESIDENTIAL PROPERTY TRUST
By:_____________________________________
Chief Financial Officer
SCHEDULE A
TO
LETTER OF CREDIT REIMBURSEMENT AGREEMENT
None.
SCHEDULE B
TO
LETTER OF CREDIT REIMBURSEMENT AGREEMENT
None.
SCHEDULE C
None.
SCHEDULE D
SUBSIDIARIES
NAME FORM & JURISDICTION OWNERSHIP
INTEREST
Wellsford Ironwood Corp. Delaware corporation 100%
Wellsford Marks B Corp. Colorado corporation 100%
Wellsford Warwick Corp. Colorado corporation 100%
Wellsford San Tropez Corp. Arizona corporation 100%
Wellsford Property Management
Corp. Colorado corporation 100%
Wellsford Oklahoma, Inc. Oklahoma corporation 100%
WOP Limited Partnership Oklahoma limited partnership 100%
Wellsford ▇▇▇▇▇ Residential
Properties, Inc. Maryland corporation 100%
▇▇▇▇▇ Property Holdings, Inc. Washington corporation 100%
Wellsford Park Highlands Corp. Colorado corporation 100%
Wellsford ▇▇▇▇▇ Management,
Inc. Washington corporation 100%
Wellsford Development Corp. Colorado corporation 100%
Village at Bear Creek, LLC Colorado limited liability 99%
company
Park at Highlands LLC Colorado limited liability 99%
company
▇▇▇ Street Associates Washington general partnership 50%
Upland North Associates Washington general partnership 50%