[EXECUTION COPY]
PROGRAM AGREEMENT
FOR
CLAIRBORNE INVESTORS
MORTGAGE INVESTMENT PROGRAM
BETWEEN
CREAMER REALTY CONSULTANTS
AND
THE PRUDENTIAL INVESTMENT CORPORATION
DATED AS OF DECEMBER 10, 1997
TABLE OF CONTENTS
Section Page
ARTICLE I
DEFINITIONS AND INTERPRETATION
1.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE II
FORMATION OF VENTURES
2.1 Formation of the Ventures. . . . . . . . . . . . . . . . . . . . . . 5
2.2 Aggregate Commitment of Creamer and PREI Investors . . . . . . . . . 7
2.3 Communication. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.4 Proposal of an Eligible Investment . . . . . . . . . . . . . . . . . 7
2.5 Response to Proposal of an Eligible Investment . . . . . . . . . . . 8
2.6 Follow-on Investments. . . . . . . . . . . . . . . . . . . . . . . . 9
2.7 Proposal for Sale or Disposition of Owned Investment . . . . . . . . 9
2.8 PREI Response to Sale or Disposition Proposal. . . . . . . . . . . .10
2.9 Right to Compel Sale or Disposition. . . . . . . . . . . . . . . . .10
2.10 ERISA Restrictions . . . . . . . . . . . . . . . . . . . . . . . . .10
2.11 Venture Entity . . . . . . . . . . . . . . . . . . . . . . . . . . .11
ARTICLE III
COVENANTS OF THE PARTIES
3.1 Limitations on the General Partner . . . . . . . . . . . . . . . . .11
3.2 Other Funds and Investments. . . . . . . . . . . . . . . . . . . . .12
3.3 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
3.4 Implementing Agreement . . . . . . . . . . . . . . . . . . . . . . .13
3.5 Access to Information and Employees. . . . . . . . . . . . . . . . .13
3.6 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . . .13
3.7 Public Announcements . . . . . . . . . . . . . . . . . . . . . . . .14
3.8 Role of PREI . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
3.9 Informational Meetings . . . . . . . . . . . . . . . . . . . . . . .14
3.10 Commitment of Principals . . . . . . . . . . . . . . . . . . . . . .14
3.11 Compliance with Applicable Law . . . . . . . . . . . . . . . . . . .14
ARTICLE IV
BUY/SELL ARRANGEMENT
4.1 Buy/Sell in Certain Circumstances. . . . . . . . . . . . . . . . . .15
ARTICLE V
CONDITIONS PRECEDENT
5.1 Conditions Precedent of PREI . . . . . . . . . . . . . . . . . . . .17
5.2 Conditions Precedent of Creamer. . . . . . . . . . . . . . . . . . .18
ARTICLE VI
CLOSING
6.1 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
6.2 Deliveries by Creamer. . . . . . . . . . . . . . . . . . . . . . . .19
6.3 Deliveries by PREI . . . . . . . . . . . . . . . . . . . . . . . . .21
6.4 Initial Capital Contributions. . . . . . . . . . . . . . . . . . . .21
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
7.1 Representations and Warranties of Creamer. . . . . . . . . . . . . .21
7.2 Representations and Warranties of PIC. . . . . . . . . . . . . . . .22
ARTICLE VIII
TERMINATION
ARTICLE IX
INDEMNIFICATION
9.1 Indemnification by Creamer . . . . . . . . . . . . . . . . . . . . .24
9.2 Indemnification by PIC . . . . . . . . . . . . . . . . . . . . . . .24
9.3 Indemnification by each Venture. . . . . . . . . . . . . . . . . . .24
9.4 Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25
9.5 Insurance or Third-Party Indemnification . . . . . . . . . . . . . .25
ARTICLE X
REPORTS
10.1 Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . .25
10.2 Reports to PREI. . . . . . . . . . . . . . . . . . . . . . . . . . .26
10.3 Reports to Current and Former Partners . . . . . . . . . . . . . . .26
10.4 Additional Information . . . . . . . . . . . . . . . . . . . . . . .26
ARTICLE XI
MISCELLANEOUS
11.1 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26
11.2 No Third-Party Beneficiaries . . . . . . . . . . . . . . . . . . . .28
11.3 No Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . . .28
11.4 Execution in Counterparts. . . . . . . . . . . . . . . . . . . . . .28
11.5 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28
11.6 Validity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28
11.7 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . .28
11.8 Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . .28
11.9 Arbitration. . . . . . . . . . . . . . . . . . . . . . . . . . . . .28
11.10 Waiver of Jury Trial. . . . . . . . . . . . . . . . . . . . . .29
11.11 Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . .29
11.12 Binding Effect. . . . . . . . . . . . . . . . . . . . . . . . .29
11.13 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . .29
11.14 Remedies Not Exclusive. . . . . . . . . . . . . . . . . . . . .30
EXHIBITS AND SCHEDULES
Exhibit A Investment Guidelines
Exhibit B Sample IRR Calculation
Exhibit C Form of Limited Liability Company Agreement
Exhibit D Capital Commitments
Schedule 3.2(a) Certain Advisory or Consulting Relationships
Schedule 7.1(a) Controlled or Controlling Entities
PROGRAM AGREEMENT
THIS PROGRAM AGREEMENT FOR CLAIRBORNE INVESTORS MORTGAGE INVESTMENT
PROGRAM is made and entered into as of December 10, 1997, by and between
The Prudential Investment Corporation, a New Jersey corporation ("PIC"),
through one of its divisions, Prudential Real Estate Investors ("PREI"),
and Creamer Realty Consultants, a New York partnership ("Creamer").
W I T N E S S E T H :
WHEREAS, PREI and Creamer intend to identify distressed, discount or
other secured mortgage debt through Creamer's efforts that satisfy the
objectives and criteria ("Investment Guidelines") set forth in Exhibit A
hereto (each an "Eligible Investment"), and if any such Eligible Investment
is approved by PREI, in its sole and absolute discretion, to establish a
Venture to acquire such Eligible Investment;
WHEREAS, each Venture shall acquire such Eligible Investment with
funds contributed by Creamer and/or a Financing Source (as defined herein)
and funds contributed by a particular account managed or advised by PREI;
and
WHEREAS, the Venture Agreement for each Venture shall provide for the
management and monitoring of such Eligible Investment by Creamer.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants of the parties hereto, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS AND INTERPRETATION
1.1 Definitions. Whenever used in this Agreement, including the
Recitals, the following terms have the meanings assigned below:
"Affiliate" means, when used with reference to a specified
Person, (i) any Person that directly or indirectly through one or more
intermediaries controls or is controlled by or is under common control with
the specified Person or (ii) any Person that is an officer, general partner
or trustee of, or serves in a similar capacity with respect to the
specified Person or of which the specified Person is an officer, general
partner or trustee, or with respect to which the specified Person serves in
a similar capacity. For the purpose of this definition, "controls," "is
controlled by" and "under common control with" mean the possession of the
power to direct or cause the direction of the management and policies of a
Person, whether through ownership of voting securities, by employment, by
contract or otherwise, which shall conclusively be deemed to exist where
one Person directly or indirectly is the beneficial owner of 10% or more of
any class of voting equity securities or other voting ownership interests
of another Person. No Venture shall be deemed to be an Affiliate of either
Creamer or PREI for the purposes of this Agreement. Neither Wellsford Real
Properties, Inc., a Maryland corporation, nor its Affiliates (excluding
Creamer and the Principals), shall be deemed to be an Affiliate of Creamer
for the purposes of Sections 3.2 or 3.7 or Section 15.9 of the Venture
Agreement.
"Agreement" means this Agreement, as amended, modified,
supplemented or restated from time to time.
"Approved Investment" means an Eligible Investment proposed by
Creamer which is approved, in its sole discretion, by PREI for acquisition
and investment by a Venture in accordance with this Agreement.
"Buy/Sell Date" is defined in Section 4.1.
"Carry" is defined in Section 2.1(b).
"Capital Commitments" means the capital commitment and obligation
of each PREI Investor and Creamer to contribute capital and invest in
Ventures in accordance with this Agreement as set forth in Exhibit D
hereto, subject to Section 2.2.
"Closing" means, with respect to a particular Venture, the
consummation of the formation of such Venture in accordance with this
Agreement
"Closing Date" is defined in Section 6.1.
"Commitment Period" means the period from and after the date
hereof through the earlier of (i) December 10, 1999, subject to Section
2.2, (ii) the date on which all Capital Commitments have been funded,
subject to Section 2.2, or (iii) an Early Termination Date.
"Creamer" is defined in the preamble and includes any controlled
Affiliate of Creamer. For the purpose of this definition "controlled"
shall mean a Person's beneficial ownership of more than 50% of all classes
of voting equity securities or other voting ownership interests of another
Person.
"Creamer Response Notice" is defined in Section 2.2.
"Defaulting Purchaser" is defined in Section 4.1.
"Disabling Conduct" means conduct that constitutes fraud, willful
misfeasance, bad faith, gross negligence, breach of fiduciary duty or
reckless disregard of duty in connection with the Program or any Venture,
or such Person has pleaded nolo contendere to, or been convicted of a
felony or of violating federal or state securities laws.
"Early Termination Date" means the earlier to occur of (a) the
breach in any material respect by Creamer or any Principal of this
Agreement or any Venture Agreement related to a Venture and the failure of
such breach to be cured in full within 10 days after notice thereof from
PREI or any PREI Investor, (b) the bankruptcy or insolvency of Creamer or
any Principal, (c) the failure of Creamer to submit at least $50 million of
Eligible Investments during any consecutive six months during the
Commitment Period as determined by PREI in its sole and absolute
discretion, provided, that, should Creamer submit in excess of $50 million
of Eligible Investments during any such six month period, up to $25 million
of such excess may be credited to the next six month period for purposes of
determining whether or not an Early Termination Date has occurred, (d)
either of the Principals ceasing to be a full-time director and officer of
Creamer, whether due to death, disability, termination or any other reason
or circumstance, or (e) any of Creamer or the Principals engaging in
Disabling Conduct.
"Eligible Investment" is defined in the Recital.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Financing Source" means (i) Wellsford Real Properties, Inc., a
Maryland corporation, and (ii) any controlled Affiliate thereof. For the
purpose of this definition "controlled" shall mean a Person's beneficial
ownership of more than 50% of all classes of voting equity securities or
other voting ownership interests of another Person.
"Fixed Reimbursement Amount" is defined in Section 2.1(d).
"Increase Notice" is defined in Section 2.2.
"Investment Documentation" is defined in Section 2.5.
"Investment Guidelines" means the guidelines and criteria for
Eligible Investments set forth in Exhibit A.
"Investment Proposal" is defined in Section 2.4(a).
"Limited Liability Company Agreement" means, with respect to a
particular Venture in connection with an Approved Investment which Creamer
and PREI have agreed to form as a limited liability company, an agreement
of limited liability company between Creamer, a Financing Source and the
participating PREI Investor in substantially the form of Exhibit C
implementing the terms of a particular Venture, together with such
amendments thereto as may be necessary to reflect any additional terms of a
particular Venture to which Creamer and PREI have agreed.
"Limited Partnership Agreement" means, with respect to a
particular Venture in connection with an Approved Investment which Creamer
and PREI have agreed to form as a limited partnership, a limited
partnership agreement between Creamer, a Financing Source and the
participating PREI Investor containing the substantive provisions contained
in the form of Limited Liability Company Agreement attached hereto as
Exhibit C, together with such amendments thereto as may be necessary to
reflect (i) any additional terms of a particular Venture to which Creamer
and PREI have mutually agreed and (ii) the status of the Venture as a
limited partnership rather than a limited liability company.
"Loan Documents" means all loan and financing agreements and
instruments relating to an Eligible Investment, including all notes,
mortgages, assignments and other collateral or security agreements,
instruments and documents, and all exhibits and schedules thereto, each as
amended, supplemented or modified.
"Loss" or "Losses" means all liabilities, losses, costs, damages
(including punitive, consequential and treble damages), penalties or
expenses (including, without limitation, reasonable attorneys' fees and
expenses and costs of investigation and litigation), and also including any
expenditures or expenses incurred to cover, remedy or rectify any such
Losses.
"Offeree" is defined in Section 4.1.
"Offering Notice" is defined in Section 4.1.
"Offeror" is defined in Section 4.1.
"Option Period" is defined in Section 4.1.
"Other Assets" is defined in Section 4.1.
"Owned Investment" means an Approved Investment that has been
acquired by a Venture and is owned by the Venture at the time in question.
"Person" means an individual, partnership, corporation (including
a business trust), limited liability company, joint stock company, trust,
unincorporated association, joint venture, governmental authority or other
entity.
"Principal" means Frank G. Creamer, Jr. and Michael J. Vitale.
"PREI Investor" means any account managed or advised by PREI,
without being limited to those that previously invested in any particular
Venture.
"Program" is defined in Section 2.1.
"Purchaser" is defined in Section 4.1.
"Restricted Party" is defined in Section 2.10.
"Sale Documentation" is defined in Section 2.8.
"Sale Notice" is defined in Section 2.9.
"Substituted Purchaser" is defined in Section 4.1.
"Transaction Documents" means with respect to a particular
Venture this Agreement and the Venture Agreement for such Venture and such
other agreements between the Venture and Creamer or its Affiliates and any
Financing Source as shall be identified in the opinion given with respect
to such Venture by counsel to Creamer at the Closing for such Venture.
"Venture" means a limited liability company or limited
partnership, as the case may be, formed by Creamer, the participating PREI
Investor and any Financing Source pursuant to this Agreement for the
purpose of acquiring Approved Investments, which limited liability company
or limited partnership shall be governed by a Venture Agreement.
"Venture Agreement" means, in the case of a Venture which is
formed as a limited partnership, a Limited Partnership Agreement or, in the
case of a Venture which is formed as a limited liability company, a Limited
Liability Company Agreement.
1.2 Interpretation. The headings preceding the text of Articles and
Sections included in this Agreement and the headings to the Schedules
attached to this Agreement are for convenience of reference only and shall
not be deemed a part of this Agreement or be given any effect in
interpreting this Agreement. The use of the masculine, feminine or neuter
gender or the singular or plural form of words herein shall not limit the
applicability of any provision of this Agreement to such gender or form.
The use of the term "including" or "include" shall in all cases herein mean
"including, without limitation," or "include, without limitation,"
respectively. Underscored references to Articles, Sections, clauses,
Exhibits or Schedules shall refer to those portions of this Agreement, and
any underscored reference to a clause shall, unless otherwise identified,
refer to the appropriate clause within the same Section in which such
reference occurs. The use of the terms "hereunder," "hereof," "hereto" and
words of similar import shall refer to this Agreement as a whole and not to
any particular Article, Section or clause of, or Exhibit or Schedule to,
this Agreement.
ARTICLE II
FORMATION OF VENTURES
2.1 Formation of the Ventures.
(a) Creamer and PREI may from time to time form Ventures for the
purposes of acquiring, owning, managing, selling and disposing of
Approved Investments that are consistent with the Investment
Guidelines and the provisions of this Agreement (unless otherwise
agreed in a writing signed by Creamer and PREI) and with the goal of
providing unleveraged internal rates of return of 16-26% to the PREI
Investors. This Agreement and its exhibits and the transactions
contemplated hereby and thereby are referred to as the "Program".
(b) Each Venture which Creamer and PREI agree to form will be
implemented by the execution by Creamer, a Financing Source (if any)
and the PREI Investor participating in such Venture of a Venture
Agreement pursuant to which (i) Creamer and a Financing Source (if
any) will agree to contribute 10% and the PREI Investor participating
in such Venture will agree to contribute 90% of the capital necessary
for such Venture to acquire the Approved Investment, subject to
Section 2.2; (ii) distributions and profit and loss allocations in
respect of such Venture will be distributed (A) first, to such
participating PREI Investor, a 10% quarterly compounded return in
respect of capital invested by such participating PREI Investor in
such Venture will be paid or allocated to such participating PREI
Investor, (B) second, to Creamer and a Financing Source (if any), a
10% quarterly compounded return in respect of capital invested by
Creamer and a Financing Source (if any) in such Venture will be paid
or allocated to Creamer and a Financing Source (if any), (C) third, to
such participating PREI Investor and Creamer and a Financing Source
(if any), the return and repayment of their capital invested in the
Venture, (D) fourth, to such participating PREI Investor and Creamer
and a Financing Source (if any), allocated 80% to such participating
PREI Investor and 20% to Creamer and a Financing Source (if any) until
such participating PREI Investor has received a 16% quarterly
compounded return in respect of the capital invested by such
participating PREI Investor in the Venture, determined by PREI on a
quarterly compounded basis and in accordance with the sample set forth
on Exhibit B attached hereto, and (E) fifth, 70% to such participating
PREI Investor and 30% to Creamer and a Financing Source (if any) (the
Creamer and any Financing Source participations described in clauses
(D) and (E) are referred to as the "Carry", and are subject to
adjustment as described in Section 2.2); and (iii) the other terms of
such Venture shall be substantially similar to those set forth in the
form of Limited Liability Company Agreement attached hereto as
Exhibit C. Except as otherwise permitted by the applicable Venture
Agreement, Creamer, a Financing Source (if any) and the PREI Investor
shall be the only partners of each Venture, if a partnership, or its
only members, if a limited liability company.
:\E Unless otherwise agreed, (i) Creamer shall be the general
partner of each Venture, if a limited partnership, or its managing
member, if a limited liability company and (ii) a single PREI Investor
and a Financing Source (if any) shall be the sole limited partners of
each Venture, if a limited partnership, or its members, if a limited
liability company.
(d) Each Venture, in consideration of Creamer's management
duties under the applicable Venture Agreement, will pay to Creamer (i)
a contribution fee equal to 50 basis points (or one-half of 1%) of the
capital contributed by the PREI Investors participating in such
Venture to such Venture payable upon funding of such Venture, and (ii)
an annual fixed amount (the "Fixed Reimbursement Amount") as
reimbursement for the expenses of Creamer in managing such Venture
equal to 25 basis points (or one-quarter of 1%) of the gross
acquisition cost of the Approved Investment acquired by such Venture,
payable quarterly in arrears at the end of each fiscal quarter.
2.2 Aggregate Commitment of Creamer and PREI Investors. Except as
otherwise agreed by Creamer and PREI, the aggregate Capital Commitment of
Creamer and any Financing Sources to all Ventures shall not exceed
$15,000,000, and the aggregate Capital Commitment of the PREI Investors to
all Ventures shall not exceed $135,000,000 and the individual Capital
Commitment of any one PREI Investor shall not exceed the amount set forth
opposite such PREI Investor's name on Exhibit D; provided, that, at any
time and from time to time during the Commitment Period, PREI may, in its
sole and absolute discretion and on behalf of the PREI Investors, increase
their aggregate Capital Commitments by an amount up to an additional
$75,000,000, for aggregate PREI Investor Capital Commitments of
$210,000,000, by notifying ("Increase Notice") Creamer thereof in which
case, (a) the Commitment Period will be extended from and after December
10, 1999 to a date which reflects the same number of elapsed days as from
the date hereof to the date of the Increase Notice, (b) Creamer may, in its
sole and absolute discretion and at any time within 30 days following such
Increase Notice, increase the Creamer Capital Commitment by an amount up to
the percentage increase in PREI Investor Capital Commitments reflected in
the Increase Notice by notifying ("Creamer Response Notice") PREI of its
determination thereof, and (c) the Carry allocable to Creamer and any
Financing Source with respect to all Ventures funded from and after the
30th day following the date of the Increase Notice will be proportionately
reduced by a percentage which equals the percentage decline, if any, in the
ratio of the aggregate Creamer and any Financing Source Capital Commitment
to total Capital Commitments of all parties prior to the Increase Notice as
compared to the ratio of the aggregate Creamer and any Financing Source
Capital Commitment to total Capital Commitments of all parties after the
Increase Notice and Creamer Response Notice, if any, and such reduction in
the Carry will be reallocated to the PREI Investors participating in such
Ventures. No PREI Investor shall be liable for the Capital Commitments of
any other PREI Investor, and PREI will not be obligated or liable for the
Capital Commitments of any of them. Subject to the terms and conditions of
this Agreement, each of Creamer, any Financing Source and the PREI
Investors shall fund their Capital Commitment with respect to each Venture
in such amounts and at such times as shall be specified in the Venture
Agreement applicable to such Venture.
2.3 Communication. Creamer and PREI shall orally communicate as to
potential Investment Proposals, the Ventures, and Owned Investments on a
reasonably frequent basis. Creamer shall inform PREI of any significant
activity in respect of any Venture or Owned Investment. Creamer shall
afford PREI the opportunity to visit the collateral underlying a Proposed
Investment whenever possible. PREI shall name a single contact person for
purposes of this Section.
2.4 Proposal of an Eligible Investment. In furtherance of this
Agreement, Creamer, if it desires PREI to consider an Eligible Investment
for a Venture, shall submit to PREI a copy of each of the following
documents:
(a) an investment proposal describing the Eligible Investment
and its eligibility under the Investment Guidelines, summarizing the
investment opportunity and expected returns, describing the underlying
property, a market summary, a borrower summary and financial
information, loan summary, disposition strategy, pro forma and
sensitivity analyses, and such other information, and in such manner
of presentation, as PREI shall, from time to time, request
("Investment Proposal");
(b) all available Loan Documents, including collateral and
security documents, relating to the Eligible Investment;
(c) the most recently available appraisal or valuation of the
underlying property;
(d) the most recently available environmental, structural and
other reports relating to the underlying property;
(e) other documentation prepared or obtained by Creamer relating
to the Eligible Investment which Creamer reasonably believes is
material to an investment decision with respect to such Eligible
Investment; and
(f) such other information and documentation reasonably
available to Creamer as PREI shall reasonably request.
2.5 Response to Proposal of an Eligible Investment.
(a) PREI shall promptly review the documents referred to in
Section 2.4 with respect to an Eligible Investment (collectively, the
"Investment Documentation"). After review of such Investment
Documentation, but in no event later than 10 business days after
receipt thereof, PREI shall notify Creamer in writing that (i) it has
elected to proceed with Creamer to form a Venture with respect to such
Eligible Investment based on the facts, circumstances, terms and
conditions set forth in the Investment Documentation and the form of
Venture Agreement attached hereto, (ii) it has amendments or
objections to the Investment Documentation, and will negotiate with
Creamer to implement such amendments and/or resolve such objections
and form a Venture with respect to such Eligible Investment based on
the facts, circumstances, terms and conditions set forth in the
amended Investment Documentation, or (iii) it does not wish to form a
Venture with respect to the Eligible Investment. PREI may determine,
in its sole and absolute discretion, for any reason or no reason at
all, to pursue any of the alternatives set forth above.
(b) If PREI has notified Creamer that it has amendments to the
Investment Documentation or Venture Documents, objections to the
Investment Documentation or Venture Documents and/or desires to form a
Venture with respect to such Eligible Investment, then PREI and
Creamer shall proceed to negotiate to implement such amendments and/or
resolve such objections within thirty days of such notification from
PREI, and if they are able to accomplish the foregoing within such
thirty days, they shall negotiate to promptly form such Venture.
Notwithstanding any other provision of this Agreement, neither PREI
nor Creamer shall have any obligation to form a Venture unless and
until definitive documentation, including a Venture Agreement, setting
forth their complete and final understanding with respect to the
formation of the Venture, and the acquisition of the Eligible
Investment by the Venture, shall have been executed and delivered by
the PREI Investor and Creamer.
(c) Under no circumstances shall Creamer, PIC, PREI or any PREI
Investors be required to pursue the formation of Ventures which
individually or in the aggregate require Capital Commitments greater
than those set forth in Section 2.2.
2.6 Follow-on Investments. In furtherance of this Agreement,
Creamer, if it desires PREI to consider an Eligible Investment that
increases the amount of or is substantially related to an Owned Investment
(a "Follow-on Investment"), then Creamer shall submit to PREI the
Investment Documentation described in Section 2.4 as to such Follow-on
Investment. After review of such Investment Documentation, but in no event
later than 10 business days after receipt thereof, PREI shall notify
Creamer in writing that (i) it has elected to proceed with Creamer with
respect to such Follow-on Investment based on the facts, circumstances,
terms and conditions set forth in the Investment Documentation, (ii) it has
amendments or objections to the Investment Documentation, and will
negotiate with Creamer to implement such amendments and/or resolve such
objections and proceed with such Follow-on Investment based on the facts,
circumstances, terms and conditions set forth in the amended Investment
Documentation, or (iii) it does not wish to proceed with the Follow-on
Investment. PREI may determine, in its sole and absolute discretion, for
any reason or no reason at all, to pursue any of the alternatives set forth
above. If PREI elects the alternative described in clause (i) above, then
PREI and Creamer shall amend the Venture Agreement with respect to the
Owned Investment related to such Follow-on Investment to allow for such
Follow-on Investment. If PREI elects the alternative described in clause
(ii) above, then PREI shall proceed to negotiate to implement such
amendments and/or resolve such objections within thirty days of
notification from PREI, and if they are able to accomplish the foregoing
within such thirty days, they shall negotiate to promptly amend the Venture
Agreement with respect to the Owned Investment related to such Follow-on
Investment to allow for such Follow-on Investment. If PREI elects the
alternative described in clause (iii) above, then Creamer may exercise its
rights pursuant to Section 4.1 as to the particular Venture that owns the
Owned Investment related to the Follow-on Investment.
2.7 Proposal for Sale or Disposition of Owned Investment. In
furtherance of this Agreement, Creamer, if it desires PREI to consider the
sale or other disposition of an Owned Investment or an interest therein by
the Venture owning such Owned Investment or any or all of the interests in
such Venture that are held by Creamer and the PREI Investor participating
in such Venture, shall submit to PREI one copy of the following:
(a) an updated rent roll and other information relating to the
property or loans underlying such Venture and arising since the
delivery of the Investment Documentation relating thereto;
(b) a sale and disposition proposal summarizing the sale or
disposition opportunity, strategy and limitation, and expected
unleveraged internal rate of return for the PREI Investor
participating in such Venture;
(c) such other documentation prepared or obtained by Creamer
relating to the Owned Investment which Creamer reasonably believes is
material to a sale or disposition decision with respect to such Owned
Investment; and
(d) such other information and documentation reasonably
available to Creamer as may be reasonably requested by PREI.
2.8 PREI Response to Sale or Disposition Proposal. PREI shall review
the documents referred to in Section 2.7 with respect to an Owned
Investment (collectively, the "Sale Documentation"). After review of all
of the Sale Documentation, but in no event later than ten business days
after receipt of the Sale Documentation, PREI shall notify Creamer in
writing that (i) it has elected to proceed with the sale or disposition of
the Owned Investment based on the facts, circumstances, terms and
conditions set forth in the Sale Documentation, or (ii) it does not wish to
proceed with the sale or disposition of the Approved Investment. PREI may
determine, in its sole and absolute discretion, for any reason or no reason
at all, to pursue any of the alternatives set forth above. If PREI
notifies Creamer that it does not wish to proceed with the sale or
disposition of the Owned Investment, Creamer may, within forty-five days of
such notification, initiate an Offering Notice pursuant to Section 4.1.
2.9 Right to Compel Sale or Disposition. PREI may, at any time after
the first anniversary of organizing and funding any Venture, direct Creamer
and such Venture to sell or dispose of the Owned Investment owned by such
Venture or all of the interests in such Venture that are held by Creamer
and the PREI Investors participating in such Venture, by notifying ("Sale
Notice") Creamer thereof, in which case, Creamer will use it best efforts
to realize the highest available cash purchase price therefor in accordance
with and within the time period set forth in the Sale Notice, subject to
Section 3.1. After the delivery of a Sale Notice, Creamer may, within 10
business days of such notification, initiate an Offering Notice pursuant to
Section 4.1.
2.10 ERISA Restrictions. Without limiting Creamer's fiduciary
obligations under ERISA, in no event shall any Venture enter into any
transaction with or acquire or hold any security in or obligation of a
Restricted Party unless, prior thereto, PREI has advised Creamer in writing
that such transaction, acquisition or holding does not constitute a
prohibited transaction within the meaning of Section 406 of ERISA. For
purposes of this Section, no such writing shall be required in respect of
the fees payable to the managing member or general partner, as the case may
be, pursuant to a Venture Agreement. The term "Restricted Party" includes
PREI and its Affiliates, Creamer and its Affiliates and such other persons
as PREI shall advise Creamer in writing are Restricted Parties, including
persons with respect to whom PREI determines that a transaction may
constitute a prohibited transaction under ERISA for which the prohibited
transaction exemptions referred to in Section 7.2(e) would not be
applicable.
2.11 Venture Entity. In organizing any Venture, the parties thereto
may elect for such Venture to take the legal form of a Delaware limited
liability company or a Delaware limited partnership. Such election shall,
if applicable, be made on the basis of which legal entity is anticipated to
result in the lowest aggregate state and local tax burden to such Venture
and its owners.
ARTICLE III
COVENANTS OF THE PARTIES
3.1 Limitations on the General Partner. Creamer, as general partner
or managing member of any Venture, shall not, without the prior approval of
PREI:
(a) act in contravention of any applicable law or regulation, or
provision of this Agreement (including the Investment Guidelines);
(b) intentionally act in a manner which would make it impossible
to carry out the purposes of any Venture;
(c) confess a judgment against any Venture;
(d) possess any Venture property or assign its rights in any
specific Venture property for other than a Venture purpose;
(e) admit any Person in addition to the PREI Investor
participating in a Venture as a partner or member of such Venture,
except for the successors and assignees of such PREI Investor;
(f) incur indebtedness (including guarantees of indebtedness) of
or on behalf of any Venture;
(g) call or require any capital contributions to any Venture;
(h) commence litigation or other proceedings by, on behalf of or
in respect of any Venture or Approved Investment, including
foreclosure or bankruptcy proceedings, or other similar judicial
enforcement of rights or remedies;
(i) release, waive or substitute any collateral, security or
other credit support in respect of any Venture or Approved Investment;
(j) engage in any or enter into any agreements or commitments
relating to any restructuring, rescheduling or other "work-out" in
respect of any Approved Investment in a Venture, including receipt of
any additional notes, securities or rights in connection therewith;
(k) engage in any or enter into any agreements or commitments
relating to any amendments, supplements, waivers or other
modifications in respect of any Loan Documents;
(l) engage in any or enter into any agreements or commitments
relating to any sale, transfer or disposition of any Approved
Investment or Venture or any interest therein; and
(m) make additional equity or debt investments in or on behalf
of any Venture.
3.2 Other Funds and Investments.
(a) Until such time as the Commitment Period expires, neither
Creamer nor the Principals, nor any of their respective Affiliates,
shall act as general partner, managing member, executive, manager,
advisor or consultant, nor otherwise sponsor or participate, directly
or indirectly, in any program, investment fund or investment venture
with a primary investment objective, strategy or focus of or on
purchasing distressed, discount or other secured mortgage debt that
satisfies the Investment Guidelines, other than advisory or consulting
relationships (but not any program or investment fund) which may exist
from time to time between Creamer and the entities listed on Schedule
3.2(a).
(b) If, at any time within two years after the Commitment Period
expires, any of Creamer or the Principals or their respective
Affiliates becomes a general partner, managing member, executive,
manager, or advisor as to any program, investment fund or venture
described in clause (a) that is controlled by Creamer or the
Principals or their respective Affiliates, they will promptly notify
PREI, and PREI and any PREI Investors will be provided with a right of
first refusal or priority participation therein on the same terms
offered to other third-party participants in such program, investment
fund or venture.
(c) Until 100% of the Capital Commitments have been committed,
neither Creamer nor the Principals, nor any of their respective
Affiliates, shall as principal purchase or acquire, directly or
indirectly, any interest in any Eligible Investment, whether or not it
becomes an Approved Investment.
(d) Any agreement or transaction of any kind whatsoever
between Creamer and any Person listed or to be listed on Schedule
7.1(b) that is directly or indirectly at the expense of a Venture or
directly or indirectly on behalf of a Venture shall be subject to the
prior written approval of PREI, and at PREI's sole discretion approval
may be withheld.
3.3 Expenses.
(a) Each party hereto shall bear its own expenses with respect
to this Agreement and the Program; provided, that, each Venture will
bear all fees and expenses related to its organization and closing and
the closing of any Owned Investment. Notwithstanding the foregoing,
Creamer shall bear any commission, finder's fee, or similar amount
payable to any broker, finder, agent or other intermediary as the
result of any engagement of such party by Creamer.
(b) No Venture will have any overhead or employees. Creamer
will bear all expenses of its personnel, office, overhead and out-of-
pocket expenses incurred in connection with the Program and each
Venture, including the cost of complying with the reporting
requirements contained herein or in any Venture Document, provided
that, pursuant to each Venture Agreement, each Venture will bear the
reasonable and documented costs of any third party consultants,
advisors, accountants and attorneys engaged by such Venture that have
been approved by PREI. Unless so approved by PREI, payment of the
Fixed Reimbursement Amount shall be in lieu of any other reimbursement
to Creamer for costs and expenses incurred in operating any Venture.
WEL Implementing Agreement. Each of Creamer and PREI shall take all
reasonable actions required to fulfill their respective obligations to one
another hereunder and shall otherwise use their respective reasonable
efforts to facilitate the consummation of the transactions contemplated
hereby. Each of Creamer and PREI agrees that it will not take any action
that would have the effect of preventing or impairing its ability to
perform its obligations hereunder. Notwithstanding the foregoing or any
other provision of this Agreement, neither PREI nor Creamer shall have any
obligation to form a Venture unless and until definitive documentation,
including a Venture Agreement, setting forth their complete and final
understanding with respect to the formation of the Venture and the
acquisition of the Approved Investment have been executed and delivered by
PREI and Creamer.
3.5 Access to Information and Employees. Creamer shall give PREI and
its representatives access to any and all information in its possession
relating to each of the Eligible Investments or Ventures that are the
subject matter of this Agreement and shall, in furtherance thereof, make
available to PREI and its representatives those of its officers, employees
and representatives as PREI and its representatives shall reasonably
request.
3.6 Confidentiality. Except as otherwise provided below, each party
hereto shall, and shall use its reasonable best efforts to cause its
Affiliates, employees and, with respect to PREI, the PREI Investors, to
maintain all information furnished to it by its counterparty hereto with
respect to the subject matter of this Agreement in strict confidence in
accordance with the procedures it uses to protect its own information of a
similar nature, provided that PREI may disclose such information to the
PREI Investors and each party and such PREI Investors may disclose such
information to its officers, directors, employees, accountants, financial
advisors, attorneys and appraisers. Notwithstanding the foregoing, no
party shall be required to maintain in confidence information which (i)
such party is compelled to disclose by judicial or administrative
requirements of law, provided that if permitted by law, such party shall
promptly inform its counterparty hereto of the request to disclose, and as
such counterparty may reasonably request, such party shall assist such
counterparty, at the expense of such counterparty, in any effort by such
counterparty to obtain a protective order with respect to such information,
(ii) becomes generally available to the public other than through a
disclosure by such party, (iii) is lawfully known to such party prior to
its disclosure by such counterparty to such party or (iv) becomes available
to such party on a non-confidential basis from a source which was not known
by such party to be bound by any legal or contractual obligation of
confidentiality with respect to such information.
3.7 Public Announcements. No party hereto (or any of its Affiliates)
shall make any public statement, including, without limitation, any press
release, with respect to this Agreement and the transactions contemplated
hereby, without the prior written consent of PREI and Creamer (which
consent may not be unreasonably withheld), except as may be required by
law. If a disclosure is required by law, the disclosing party shall make
reasonable efforts to afford PREI and Creamer an opportunity to review and
comment on the proposed disclosure prior to the making of such disclosure.
3.8 Role of PREI. PREI's obligation and role will be to review
Investment Proposals and Sale Proposals, but in no event will PREI be
obligated with regard to the Capital Commitments of each of the PREI
Investors.
EDG Informational Meetings. Creamer agrees to hold meetings with
PREI at reasonable times and upon reasonable notice to review and discuss
the status of Eligible Investments. Such meetings shall be held at the
corporate headquarters of PREI unless the PREI otherwise agrees. PREI may
designate any one or more representatives to attend such meetings.
3.10 Commitment of Principals. During the Commitment Period, each of
Creamer and the Principals shall devote sufficient business time and
activity to the activities of the Program.
3.11 Compliance with Applicable Law. Each of Creamer and the
Principals agrees, and agrees to cause their respective Affiliates,
shareholders, controlling persons, officers, directors, partners, members,
employees, representatives or agents, to comply in all material respects
with all applicable laws, rules and regulations in connection with any and
all matters relating to the Program or the performance of their obligations
hereunder.
ARTICLE IV
BUY/SELL ARRANGEMENT
4.1 Buy/Sell in Certain Circumstances.
(a) At any time after the occurrence of (i) the first
anniversary of the organization and funding of any Venture, (ii) any
other party being in default of any material obligation under this
Agreement or the Program, (iii) an Early Termination Date, (iv) the
events described in Sections 2.6, 2.8(ii) or 2.9, or (v) the events
described in Sections 3.1(a) or (c) of the Venture Agreement for any
Venture, then either PREI or Creamer (but, in the case of Creamer,
only under the circumstances referenced in clauses (i), (ii), (iv) or
(v)) shall be entitled to initiate the buy/sell rights set forth in
this Section 4.1 as to (x) in the case of clauses (i), (iv) or (v),
the particular Venture(s) relevant to such clause or (y) in the case
of clauses (ii) or (iii), any particular Venture(s) or all of the
Ventures.
(b) Either PREI or Creamer (an "Offeror") may serve upon the
other (an "Offeree") a notice (an "Offering Notice") which shall
contain the following terms:
(i) a statement of intent to rely on this Section 4.1 and
the particular clause in Section 4.1(a) relied on; and
(ii) a valuation stating the aggregate dollar amount (the
"Specified Valuation Amount") which the Offeror as a third party
would be willing to pay in cash for all of the ownership of the
Venture(s), exclusive of all prepaid expenses, notes and accounts
receivable (net of reserves and adjustments), marketable
securities, cash and cash equivalents (the "Other Assets").
(c) Within 15 business days after receipt of the Offering Notice
by the Offeree (the "Option Period"), the Offeree shall notify the
Offeror whether the Offeree elects:
(i) to sell its interest in the Venture(s) to the Offeror
for an amount equal to (A) the amount the Offeree would have been
entitled to receive if the Venture(s) had been sold on the
Buy/Sell Closing Date (as hereinafter defined) for a purchase
price equal to the Specified Valuation Amount and (B) the book
value of the Other Assets adjusted to the Buy/Sell Closing Date
(determined in accordance with GAAP), and the Venture had been
wound up and terminated in accordance with its Venture Agreement;
or
(ii) to purchase the Offeror's interest in the Venture(s)
for an amount equal to the amount the Offeror would have been
entitled to receive if the Venture(s) had been sold on the
Buy/Sell Closing Date for a purchase price equal to the sum of
(A) the Specified Valuation Amount and (B) the book value of the
Other Assets adjusted to the Buy/Sell Closing Date (determined in
accordance with GAAP), and the Partnership had been wound up and
terminated in accordance with its Venture Agreement.
(d) If the Offeree does not notify the Offeror of its election
prior to expiration of the Option Period, the Offeree shall for all
purposes be conclusively deemed to have elected to sell its interest
in the Venture(s) to the Offeror.
(e) Within five business days after the date of the exercise of
the election by the Offeree or five business days after the expiration
of the Option Period, whichever is earlier, the party obligated to
purchase under this Section 4.1 (the "Purchaser") shall deposit in
cash an amount equal to 10% of the Specified Valuation Amount (the
"earnest money") with an independent and neutral party reasonably
satisfactory to the party obligated to sell under this Section 4.1
(the "Seller"). The earnest money shall be applied against the
purchase price at the closing referenced below, or shall be paid to
the Seller as liquidated damages in the event of default by the
Purchaser. In the event Purchaser fails to deposit timely such
earnest money as provided above (such Purchaser being then referred to
as a "Defaulting Purchaser"), Seller shall have the option (i) within
fifteen days thereafter, unless the Defaulting Purchaser has earlier
cured such default by depositing the required earnest money as
provided above, of substituting itself as Purchaser under this Section
4.1 to purchase the Defaulting Purchaser's interest in the Venture(s)
at a 10% discount from the Specified Valuation Amount (such Seller
being then referred to as a "Substituted Purchaser") by giving notice
to the Defaulting Purchaser of its intention to do so and by
depositing, within five days after such notice, earnest money equal to
10% of the Specified Valuation Amount (after giving effect to such 10%
discount) with an independent and neutral party reasonably selected by
the Substituted Purchaser, whereupon, for purposes of Section 4.1(f)
and (g), the Substituted Purchaser shall become the Purchaser and the
Defaulting Purchaser shall become the Seller; or (ii) at any time
after default by the Defaulting Purchaser in depositing the earnest
money, of seeking from the Defaulting Purchaser by judicial
proceedings or as otherwise permitted by law, as liquidated damages
for its default in its obligations under this Section 4.1, an amount
of money equal to the amount of earnest money the Defaulting Purchaser
was required to deposit pursuant to this Section 4.1.
(f) On or before the date on which the Purchaser is required to
make the earnest money deposit referenced in Section 4.1(e) (or, with
respect to a Substituted Purchaser, within five business days after
making such earnest money deposit), the Purchaser shall fix a closing
date (the "Buy/Sell Closing Date") not later than 30 days following
(i) the date of the election by the Offeree, or (ii) if no election
was made, the date of the expiration of the Option Period. The
closing shall take place on the Buy/Sell Closing Date at a location
reasonably designated by the Purchaser.
(g) At the closing on the Buy/Sell Closing Date, the Purchaser
shall pay Seller, in cash, the amount determined in Section 4.1(c)
(any earnest money actually deposited being credited against such
amount) and the Seller shall execute and deliver to the Purchaser or
its designee assignments of interest, bills of sale, instruments of
conveyance, and other instruments as the Purchaser may reasonably
require, to give it or its designee good and indefeasible title to all
of the Seller's right, title and interest in and to its interest in
and to the Venture(s). Purchaser shall pay all closing costs,
including without limitation, escrow costs and transfer taxes;
provided, however, that the Purchaser and the Seller shall pay their
own respective legal costs and expenses in connection with the
preparation of the closing documentation.
(h) The sale of an interest in any Venture pursuant to this
Section 4.1 shall be deemed to be a sale of the assets of such Venture
by such Venture for the Specified Valuation Amount plus the book value
of the Other Assets and shall be accounted for in each party's capital
account under the applicable Venture Agreement in the same manner as
such sale would be accounted.
(i) The Purchaser (or Substituted Purchaser), if PREI, shall,
upon deposit of 250% of the earnest money required by this Section
4.1, and upon written notice thereof to the other Partner, have the
option to immediately become the general partner or managing member of
the Venture(s) and irrevocably remain so unless the Purchaser (or
Substituted Purchaser) shall default in its obligations under this
Section 4.1.
ARTICLE V
CONDITIONS PRECEDENT
5.1 Conditions Precedent of PREI. Without limiting the scope of all
conditions to be satisfied prior to PREI agreeing to cause a PREI Investor
to enter into a particular Venture Agreement and to make the initial
capital contribution contemplated thereby, it is contemplated that the
following matters shall have been completed to the satisfaction of or
waived by PREI prior thereto:
(a) Fulfillment of Obligations. Creamer shall have complied in
all material respects with all of its obligations and covenants under
this Agreement with respect to the Venture required to be performed by
it on or before the applicable Closing Date, including funding its
Capital Commitment;
(b) Representations and Warranties. All of the representations
and warranties of Creamer hereunder shall be true, correct and
complete in all material respects on and as of the applicable Closing
Date as if made on the applicable Closing Date;
(c) Delivery of Documents. Creamer shall have delivered all of
the documents contemplated to be delivered by it pursuant to this
Agreement, all in form and substance reasonably satisfactory to PREI;
(d) Legal Proceedings. No order of any court or administrative
agency shall be in effect that restrains or prohibits any of the
transactions contemplated by the applicable Venture Agreement, and no
suit, action, inquiry, investigation or proceeding in which it will
be, or it is sought to restrain, prohibit or change the terms of or
obtain damages or other relief in connection with the applicable
Venture Agreement, which in the judgment of PREI makes it inadvisable
to proceed with the consummation of such transactions, shall have been
instituted by any Person; and
(e) ERISA. PREI shall have satisfied itself that the
transactions contemplated to be taken on the applicable Closing Date
will not result in a prohibited transaction under ERISA.
5.2 Conditions Precedent of Creamer. Without limiting the scope of
all conditions to be satisfied prior to Creamer agreeing to enter into a
particular Venture Agreement and to make the initial capital contribution
contemplated thereby, it is contemplated that the following matters shall
have been completed to the satisfaction of or waived by Creamer prior
thereto:
(a) Fulfillment of Obligations. PREI shall have complied in all
material respects with all of its obligations and covenants under this
Agreement with respect to the Venture required to be performed by it
on or before the applicable Closing Date, including the PREI Investors
funding their applicable Capital Commitments;
(b) Representations and Warranties. All of the representations
and warranties of PREI and the applicable PREI Investor hereunder
shall be true, correct and complete in all material respects on and as
of the applicable Closing Date as if made on the applicable Closing
Date;
(c) Delivery of Documents. PREI shall have delivered all of the
documents contemplated to be delivered by it pursuant to this
Agreement all in form and substance reasonably satisfactory to
Creamer; and
(d) Legal Proceedings. No order of any court or administrative
agency shall be in effect that restrains or prohibits any of the
transactions contemplated by the applicable Venture Agreement, and no
suit, action, inquiry, investigation or proceeding in which it will
be, or it is sought to restrain, prohibit or change the terms of or
obtain damages or other relief in connection with the applicable
Venture Agreement, which in the judgment of Creamer makes it
inadvisable to proceed with the consummation of such transactions,
shall have been instituted by any Person.
ARTICLE VI
CLOSING
6.1 Closing. Each Closing shall take place at the offices of PREI,
at 10:00 a.m. on the fifth business day after the satisfaction or waiver of
each of the conditions precedent with respect to such Venture (which shall
include without limitation all of the conditions precedent set forth in
Sections 6.1 and 6.2 hereof) or on such other day as Creamer and PREI shall
agree or at such other place as Creamer and PREI shall agree (each such
date being hereinafter referred to as a "Closing Date").
6.2 Deliveries by Creamer. Without limiting the scope of the
documents and agreements to be delivered by Creamer at each Closing, it is
anticipated that Creamer will deliver such of the following as PREI shall
deem necessary for the Closing:
1. All Loan Documents relating to the Eligible Investment.
2. Any updates, supplements or modifications of the Investment
Documentation, including any such modifications that are
necessary to correct any materially misleading statements or
material omissions in respect of the Investment
Documentation.
3. Opinion(s) of counsel of Creamer, subject to such
assumptions, exceptions and matters as are customarily
contained in similar opinions and are in form and substance
satisfactory to PREI, including, without limitation,
opinion(s) addressing the following matters:
(a) The Venture (i) is a limited partnership or limited
liability company, as applicable, duly formed, validly
existing and in good standing under the laws of the
State of Delaware and has qualified to do business in,
and is in good standing under the laws of each
jurisdiction in which the nature of the business
conducted or proposed to be conducted requires such
qualification (except where the failure to do so would
not have a material adverse effect thereon), (ii) has
all requisite power and authority to carry on its
business as now being conducted and (iii) has all
requisite power to execute, deliver and perform the
Transaction Documents to which it is a party;
(b) Creamer (i) is a partnership or limited liability
company, as applicable, duly formed, validly existing
and in good standing under the laws of the jurisdiction
of its formation and has qualified to do business in,
and is in good standing under the laws of each
jurisdiction in which the nature of the business
conducted or proposed to be conducted requires such
qualification (except where the failure to do so would
not have a material adverse effect thereon), (ii) has
all requisite power and authority to own, lease and
operate its properties and to carry on its business as
now being conducted and (iii) has all requisite power
to execute, deliver and perform the Transaction
Documents to which it is a party;
(c) The execution, delivery and performance of the
Transaction Documents to which each of the Venture,
Creamer and any Affiliates is a party have been duly
authorized by all necessary action;
(d) Each of the Transaction Documents to which the Venture,
Creamer and any Affiliate is a party has been (i) duly
executed and delivered by the Venture, Creamer or such
Affiliate, as applicable, and (ii) constitutes the
legal, valid and binding obligation of the Venture,
Creamer or such Affiliate, as applicable, and is
enforceable against such party in accordance with its
terms, subject, in each case, to (x) the effect of any
applicable bankruptcy, insolvency, reorganization,
moratorium or similar law affecting creditors' rights
generally and (y) the effect of general principles of
equity (regardless of whether considered in a
proceeding in equity or at law);
(e) The execution, delivery and performance of each
Transaction Document to which the Venture, Creamer or
any Affiliates is a party does not (i) to such
counsel's knowledge, violate any decree, order, rule or
judgment of any court or governmental authority which
may be applicable to the Venture, Creamer or such
Affiliate, as applicable, or their respective
properties; (ii) violate any law (or regulation
promulgated under any law) applicable to the Venture,
Creamer or such Affiliate, as applicable, or their
respective properties; (iii) to such counsel's
knowledge, violate or conflict with, or result in a
breach of, or constitute a default under (or an event
with or without notice or lapse of time or both would
constitute a default) any material contract or
agreement to which the Venture, Creamer or such
Affiliate is a party or is bound or by which any of
their respective properties is bound; or (iv) violate
or conflict with any provision of the organizational
documents of the Venture, Creamer or such Affiliate;
(f) No consent of, notice to, approval of, or authorization
of, or declaration or filing with, any governmental
authority, is required in connection with each of the
Venture's, Creamer's and the Affiliates' execution and
delivery of each of the Transaction Documents to which
it is a party;
(g) To such counsel's knowledge there is no pending action,
suit, proceeding, or counterclaim by any Person, or
investigation by any governmental authority or any
basis for any of the foregoing, (a) with respect to any
Transaction Document, or (b) which, if adversely
determined, is reasonably likely to have a material
adverse effect on the Venture or the Program; and
(h) That the Venture will be classified as a partnership
for United States federal income tax purposes and not
as an association taxable as a corporation.
4. A counterpart of the Venture Agreement duly executed by or
on behalf of Creamer.
6.3 Deliveries by PREI. Without limiting the scope of the documents
and agreements to be delivered by PREI at each Closing, it is anticipated
that the participating PREI Investor will deliver to Creamer the following:
1. A counterpart of the Venture Agreement duly executed by or
on behalf of the participating PREI Investor.
6.4 Initial Capital Contributions. At each Closing, each of Creamer
and the applicable PREI Investor shall make their respective initial
capital contributions to the Venture as provided in the applicable Venture
Agreement. Except as otherwise agreed by PREI, the amount of such initial
capital contribution shall be agreed by Creamer and PREI at least 10
business days prior to the applicable Closing Date and, to the extent such
initial capital contribution constitutes cash, shall be wire transferred to
the account of the applicable Venture, the details of which shall be
notified to PREI by Creamer at least 5 business days prior to the
applicable Closing Date.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
7.1 Representations and Warranties of Creamer. Creamer hereby
represents and warrants to PREI as follows:
(a) Creamer is a general partnership duly formed and validly
existing under the laws of the State of New York, with all requisite
partnership power and authority to own, lease and operate its
properties and to carry on its business as now being conducted.
Creamer has all requisite power and authority to enter into this
Agreement and the other agreements contemplated to be entered into by
it in connection herewith and to carry out the transactions
contemplated hereby and thereby.
(b) On Schedule 7.1(b) Creamer has set forth all of its
subsidiaries, if any, and all persons, corporations or other entities,
if any, owning or controlling Creamer and all persons, corporations or
other entities, if any, owned or controlled by such persons,
corporations or other persons, if any, which control Creamer. During
the continuance of this Agreement, Creamer shall promptly notify PREI
of any changes or additions to the information required to be set
forth on Schedule 7.1(b).
(c) The execution and delivery of this Agreement and the other
agreements to be entered into by it in connection herewith and the
consummation of the transactions contemplated hereby and thereby have
been duly authorized by all necessary action on the part of Creamer.
This Agreement and such other agreements have been executed and
delivered by a duly authorized officer of the general partner of
Creamer and constitute the valid and binding obligations of Creamer,
enforceable against Creamer in accordance with the terms hereof and
thereof, subject as to enforcement to bankruptcy, insolvency,
reorganization and other laws of general applicability relating to or
affecting creditors' rights and to general principles of equity.
(d) The execution, delivery and performance of this Agreement
and all other agreements contemplated hereby by Creamer do not: (i)
violate any decree or judgment of any court or governmental authority
that may be applicable to Creamer; (ii) violate any law (or regulation
promulgated under any law); (iii) violate or conflict with, or result
in a breach of, or constitute a default under (or an event with or
without notice or lapse of time or both would constitute a default)
under, any contract or agreement to which Creamer is a party; or (iv)
violate or conflict with any provision of the organizational documents
of Creamer.
(e) No broker, finder, agent or other intermediary has been
employed by or on behalf of Creamer in connection with the negotiation
or consummation of this Agreement, and no such party has any claim for
any commission, finder's fee or similar amount payable as a result of
any engagement of such party by Creamer.
(f) None of Creamer nor any officer, director, employee or agent
of Creamer exercising any authority or conduct with respect to this
Agreement or any Venture or the assets thereof, have prior to the date
hereof or the term of this Agreement or of any Venture, been convicted
of a crime described in Section 411 of ERISA.
7.2 Representations and Warranties of PIC. PIC hereby represents and
warrants to Creamer as follows:
(a) PIC is a corporation duly formed and validly existing under
the laws of the State of New Jersey, with all requisite power and
authority to carry on its business as now being conducted. PIC has
all requisite power and authority to enter into this Agreement, and to
carry out the transactions contemplated hereby, and, subject to and in
accordance with the terms and limitations set forth in this Agreement,
to bind and commit the PREI Investors (other than Strategic
Performance Fund - II, Inc.) as set forth herein.
(b) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly
authorized by all necessary action on the part of PIC. This Agreement
has been executed and delivered by a duly authorized representative of
PIC and constitutes the valid and binding obligation of PIC,
enforceable against PIC in accordance with the terms hereof, subject
as to enforcement to bankruptcy, insolvency, reorganization and other
laws of general applicability relating to or affecting creditors'
rights and to general principles of equity.
(c) The execution, delivery and performance of this Agreement by
PIC do not: (i) violate any decree or judgment of any court or
governmental authority that may be applicable to PIC; (ii) violate any
law (or regulation promulgated under any law); (iii) violate or
conflict with, or result in a breach of, or constitute a default under
(or an event with or without notice or lapse of time or both would
constitute a default) under, any contract or agreement to which PIC is
a party; or (iv) violate or conflict with any provision of the
organizational documents of PIC.
(d) No broker, finder, agent or other intermediary has been
employed by or on behalf of PIC in connection with the negotiation or
consummation of this Agreement, and no such party has any claim for
any commission, finder's fee or similar amount payable as a result of
any engagement of such party by PIC.
(e) Each PREI Investor which is deemed to hold ERISA plan assets
within the meaning of 29 CFR Section 2510.101-3 shall either (i) be
an insurance company pooled separate account within the meaning of
Prohibited Transaction Exemption 90-1, 55 Fed. Reg. 2891 (Jan. 29,
1990) or (ii) be an investment fund with respect to which PREI serves
as a qualified professional asset manager as defined in Prohibited
Transaction Exemption 84-14, 49 Fed. Reg. 9494 (Mar. 13, 1984) and 50
Fed. Reg. 41430 (Oct. 10, 1985).
ARTICLE VIII
TERMINATION
Except for the provisions of Sections 3.3, 3.6 and 3.7 as well as
Articles VIII, IX and XI, this Agreement will terminate on the earlier of
December 31, 2002 or the fifth anniversary of the formation and funding of
the initial Venture under this Agreement, provided, that such termination
will not terminate or otherwise effect any Ventures, which will terminate
in accordance with their governing Venture Agreement.
ARTICLE IX
INDEMNIFICATION
9.1 Indemnification by Creamer. Creamer agrees to indemnify each of
PIC, PREI and the PREI Investors against, and agrees to hold harmless each
of PIC, PREI and the PREI Investors from, any and all Losses incurred or
suffered by any of PIC, PREI or any PREI Investor relating to or arising
out of or in connection with any of the following:
(a) any breach of or any inaccuracy in any representation or
warranty made by Creamer in this Agreement; provided that a notice of
their claim shall have been given to Creamer not later than the close
of business on the third anniversary of the last Closing Date to occur
pursuant to this Agreement; and
(b) any breach of or failure by Creamer to perform any covenant
or obligation of Creamer set out or contemplated in this Agreement;
provided that a notice of their claim shall have been given to Creamer
prior to the expiration of the statute of limitations with respect to
claims of the nature of the claim being asserted by any of PIC, PREI
or any PREI Investor.
9.2 Indemnification by PIC. PIC agrees to indemnify Creamer against,
and agrees to hold Creamer harmless from, any and all Losses incurred or
suffered by Creamer relating to or arising out of or in connection with any
of the following:
(a) any breach of or any inaccuracy in any representation or
warranty made by PREI in this Agreement; provided that a notice of
Creamer's claim shall have been given to PREI not later than the close
of business on the third anniversary of the last Closing Date to occur
pursuant to this Agreement; or
(b) any breach of or failure by PREI to perform any covenant or
obligation of PREI set out or contemplated in this Agreement; provided
that a notice of Creamer's claim shall have been given to PREI prior
to the expiration of the statute of limitations with respect to claims
of the nature of the claim being asserted by Creamer.
9.3 Indemnification by each Venture. Creamer, its Principals, PREI,
PIC, their respective employees, officers, directors, agents, stockholders,
members, partners and other Affiliates (including any Financing Source),
and any other person who serves at the request of Creamer or PREI on behalf
of a Venture as an officer, director, partner, member, employee or agent of
any other entity (in each case, an "Indemnitee") will not be liable to a
Venture or any member or partner of such Venture for any act performed or
omission made by it in the absence of its own conduct that constitutes a
breach of fiduciary duty under ERISA, fraud, willful misfeasance, bad
faith, gross negligence, negligence in the handling of funds, or reckless
disregard of duty in connection with the Program or any Venture, or such
Person has pleaded nolo contendere to, or been convicted of a felony or of
violating federal or state securities laws (collectively, "Improper
Conduct"). Subject to Section 3.3(b) and the provisions of ERISA and other
applicable law, each Venture will indemnify each Indemnitee for any loss or
damage incurred by such Indemnitee arising out of or in connection with the
Venture, except for any loss or damage arising from such Indemnitee's own
Improper Conduct or the Improper Conduct of any of its Affiliates,
employees, officers, directors, agents, stockholders or members. No partner
or member of a Venture will be individually obligated with respect to such
indemnification beyond the capital such partner or member has contributed
to such Venture.
9.4 Claims. As soon as is reasonably practicable after becoming
aware of a claim for indemnification under this Agreement, the party
seeking indemnification hereunder (the "Indemnified Person") shall promptly
give notice to the person from whom indemnification is sought (the
"Indemnifying Person") of such claim and the amount the Indemnified Person
will be entitled to receive hereunder from the Indemnifying Person;
provided that the failure of the Indemnified Person to give notice shall
not relieve the Indemnifying Person of its obligations under this Article
IX, except to the extent (if any) that the Indemnifying Person shall have
been prejudiced thereby. If the Indemnifying Person does not object in
writing to such indemnification claim within 30 days of receiving notice
thereof, the Indemnified Person shall be entitled to recover promptly from
the Indemnifying Person the amount of such claim, and no later objection by
the Indemnifying Person shall be permitted. If the Indemnifying Person
agrees that it has an indemnification obligation but objects that it is
obligated to pay only a lesser amount, the Indemnified Person shall
nevertheless be entitled to recover promptly from the Indemnifying Person
the lesser amount, without prejudice to the Indemnified Person's claim for
the difference.
9.5 Insurance or Third-Party Indemnification. Notwithstanding
anything to the contrary herein, an Indemnifying Person shall not be liable
for a Loss arising out of or in connection with any matter described in
this Article IX if and to the extent such Loss is covered by a policy of
insurance or benefits from a right to indemnification from a Person not
party to this Agreement and payment is made under such policy to the
Indemnified Person by the insurer or under such right to indemnification by
such Person, as applicable. Notwithstanding anything to the contrary
herein, PREI and Creamer may acquire insurance against Losses arising in
connection with this Agreement.
ARTICLE X
REPORTS
10.1 Independent Auditors. The books of account and records of each
Venture shall be subject to a general accounting as of the end of each
fiscal year by Creamer, or, at the election and expense of the PREI
Investor participating in such Venture, a general accounting and audit by
Price Waterhouse LLP or such other nationally recognized accounting firm
with experience in similar investment partnerships as shall be selected by
such PREI Investor.
10.2 Reports to PREI. As to any Venture and within 60 days after the
end of each fiscal year of such Venture and 20 days after the end of each
quarter other than the last quarter thereof, Creamer shall prepare and mail
to PREI a financial report (and, if requested by the PREI Investor
participating in such Venture, audited in the case of a report sent at the
end of a fiscal year), which shall be prepared in accordance with generally
accepted accounting principles, consistently applied, setting forth or
containing as of the end of such fiscal year or quarter:
(a) a balance sheet of the Venture;
(b) a statement of income or loss and a statement of cash flows
of the Venture;
(c) a statement of changes in Investors' capital accounts of the
Venture;
(d) a summary of the investments made by such Venture; and
\ED an unaudited report of Creamer setting forth the cost and
good faith estimate of the value as of the end of such fiscal year of
the Venture and its Approved Investment and a good faith estimate of
the value of each Investor's capital account, together with reasonable
explanation or support therefor.
10.3 Reports to Current and Former Partners. As to any Venture and
within 60 days after the end of each fiscal year of such Venture, Creamer
shall use its best efforts to prepare and mail to PREI, to the extent
reasonably necessary, a financial report (which shall include, at a
minimum, a Form K-1 for each PREI Investor and former PREI Investor setting
forth in sufficient detail such transactions effected by the applicable
Venture during such fiscal year as shall enable such PREI Investor or
former PREI Investor (or its legal representatives) to prepare their
respective income tax returns in accordance with the laws, rules and
regulations then prevailing.
10.4 Additional Information. Upon the request of any PREI Investor
participating in any Venture, Creamer shall furnish such additional
information about such Venture, distributions from such Venture as may be
reasonably related to such PREI Investor's interest in such Venture.
ARTICLE XI
MISCELLANEOUS
11.1 Notices. All notices and demands under this Agreement shall be
in writing and may be either delivered personally (which shall include
deliveries by courier), by telefax or other wire transmission (with request
for assurance of receipt in a manner appropriate with respect to
communications of that type, provided that a confirmation copy is
concurrently sent by a nationally recognized express courier for overnight
delivery) or mailed, postage prepaid, by certified or registered mail,
return receipt requested:
If to PREI, addressed as follows:
Prudential Real Estate Investors
8 Campus Drive
Parsippany, NJ 07054
Attention: Joseph D. Margolis
Fax: 973-683-1752
with a copy to:
Mayer, Brown & Platt
1675 Broadway
New York, New York 10019
Attention: James B. Carlson
Fax: 212-262-1910
If to Creamer, addressed as follows:
Creamer Realty Consultants
40 West 57th Street, Suite 1515
New York, New York 10019
Attention: Michael J. Vitale
Fax: 212-399-6150
with a copy to:
Battle Fowler LLP
75 East 55th Street
New York, NY 10022
Attention: David M. Warburg
Fax: 212-339-9150
and a copy to any Financing Source subsequently identified by reason of
being a party to a Venture Agreement.
Unless delivered personally or by telefax or other wire transmission as
above (which shall be deemed delivered on the next business day following
the date of such personal delivery or transmission), any notice shall be
deemed to have been made three (3) days following the date so mailed. Any
party hereto may designate a different address to which notices and demands
shall thereafter be directed by written notice given in the same manner and
directed to the Partnership at its office hereinabove set forth.
11.2 No Third-Party Beneficiaries. The parties do not intend to
confer any benefit hereunder on any Person other than the parties hereto
and any Ventures that are formed as a result of the terms hereof.
11.3 No Assignment. No party hereto shall have the right to assign
any right or obligation under this Agreement to any other Person, except
that each of Creamer and PREI shall be entitled to assign all or any
portion of its interest in any Venture to the extent permitted by the
applicable Venture Agreement and Creamer shall be entitled to assign all of
its rights and obligations hereunder to a limited partnership or limited
liability company that is a controlled Affiliate of the Principals. For
the purpose of this definition "controlled" shall mean a Person's
beneficial ownership of more than 50% of all classes of voting equity
securities or other voting ownership interests of another Person.
11.4 Execution in Counterparts. This Agreement may be executed in
several counterparts, each of which shall be deemed an original but all of
which shall constitute one and the same instrument.
11.5 Amendments. This Agreement may be amended, modified or
supplemented but only in a writing signed by all of the parties.
11.6 Validity. If any provision of this Agreement or the application
of such provision to any Person or circumstance shall be held invalid, the
remainder of this Agreement or the application of such provision to Persons
or circumstances other than those with respect to which it is held invalid
shall not be affected thereby and shall continue to be binding and in
force.
11.7 Governing Law. This Agreement and the rights of the parties
hereunder shall be governed by and interpreted in accordance with the
internal laws of the State of New York, without giving effect to the
principles of conflicts of law thereof.
11.8 Jurisdiction. Except as provided by Section 11.9, the parties
hereto consent to personal jurisdiction in the State of New York and agree
that the exclusive venue and place of trial for their solution of any
disputes arising in connection with the interpretation or enforcement of
this Agreement shall be the Federal District Court in the Southern District
of New York.
11.9 Arbitration. The parties hereby agree to submit all
controversies, claims and matters in dispute in respect of this Agreement
to arbitration in New York, New York according to the commercial
arbitration rules of the American Arbitration Association from time to time
in force. This submission and agreement to arbitrate shall be specifically
enforceable. The parties may agree on a retired judge as sole arbitrator.
In the absence of such agreement, there shall be three (3) arbitrators,
selected in accordance with the commercial arbitration rules of the
American Arbitration Association: one (1) attorney and/or retired judge,
one (1) expert in real estate investment; and one (1) certified public
accountant. A decision agreed on by two (2) of the arbitrators shall be
the decision of the arbitration panel; provided, however, that in the case
of monetary damages, if there is no agreement of two arbitrators as to the
amount of the award, then the average of the two amounts that are closest
to each other shall be the final award of the arbitration panel for the
purpose of this Agreement. The arbitration panel may elect to specifically
enforce this Agreement. The parties agree to abide by all awards rendered
in such proceedings. Any award shall include costs and reasonable
attorneys' fees to the successful party. Such awards shall be final and
binding on all parties. There shall be no appeal therefrom other than for
fraud or willful misconduct. All awards may be filed with the clerk of one
or more courts, State or Federal, having jurisdiction over the party
against whom such an award is rendered or its property as a basis of
judgment and of the issuance of execution for its collection. Nothing in
this Agreement and/or the exhibits hereto shall be deemed to prevent the
arbitration panel from exercising authority to permit the exercise by a
party of its legal and/or equitable remedies including right of offset and
specific performance. The parties agree that this Section shall be valid,
binding and enforceable and shall survive the termination of this
Agreement.
11.10 Waiver of Jury Trial. THE PARTIES HERETO HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY
JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER,
OR IN CONNECTION WITH, THIS AGREEMENT OR ANY RELATED DOCUMENT, OR ANY
COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR
WRITTEN) OR ACTIONS OF THE PARTIES HERETO. EACH PARTY HERETO ACKNOWLEDGES
AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS
PROVISION (AND EACH OTHER PROVISION OF EACH RELATED DOCUMENT TO WHICH IT IS
A PARTY) AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR EACH OF THE
PARTIES ENTERING INTO THIS AGREEMENT AND EACH SUCH OTHER RELATED DOCUMENT.
11.11 Waiver. The waiver by any party hereto of the breach of any
term, covenant, agreement or condition herein contained shall not be deemed
a waiver of any subsequent breach of the same or any other term, covenant,
agreement or condition herein, nor shall any custom, practice or course of
dealings arising among the parties hereto in the administration hereof be
construed as a waiver or diminution of the right of any party hereto to
insist upon the strict performance by any other party hereto of the terms,
covenants, agreements and conditions herein contained.
11.12 Binding Effect. Except as herein otherwise provided, this
Agreement shall be binding upon and inure to the benefit of the parties,
their legal representatives, heirs, administrators, executors, successors
and permitted assigns.
11.13 Entire Agreement. This Agreement, including the Schedules
and Exhibits hereto, constitutes the entire understanding and agreement of
the parties hereto with respect to the subject matter hereof and supersedes
all other prior agreements and understandings, written or oral, between the
parties with respect to the subject matter hereof. In the event of any
conflict between this Agreement and a Venture Agreement, the Venture
Agreement shall control.
11.14 Remedies Not Exclusive. Any remedies herein contained for
breaches of obligations hereunder shall not be deemed to be exclusive and
shall not impair the right of any party to exercise any other right or
remedy, whether for damages, injunction or otherwise.
IN WITNESS WHEREOF, this Agreement has been executed by each of the
parties hereto as of the date of this Agreement set forth above.
THE PRUDENTIAL INVESTMENT CORPORATION
By:/s/ Joseph D. Margolis
---------------------------------
Name: Joseph D. Margolis
Title: Vice President
CREAMER REALTY CONSULTANTS
By:/s/ Frank G. Creamer, Jr.
---------------------------------
Name: Frank G. Creamer, Jr.
Title: President, FGC Realty Consultant, Inc.
Managing Partner
For purposes of Sections 3.2, 3.10 and 3.11 only:
/s/ Frank G. Creamer, Jr.
__________________________________________
Frank G. Creamer, Jr.
For purposes of Sections 3.2, 3.10 and 3.11 only:
/s/ Michael J. Vitale
__________________________________________
Michael J. Vitale