SECURED PROMISSORY NOTE
$28,000,000.00 New York New York
As of October 22, 1998
FOR VALUE RECEIVED, WELLSFORD CAPITAL PROPERTIES, L.L.C., a
Delaware limited liability company having an address c/o Wellsford Real
Properties, Inc., 610 Fifth Avenue, New York, NY 10020 ("Borrower"), promises
to pay to the order of LEHMAN BROTHERS HOLDINGS INC., doing business as
Lehman Capital, a division of Lehman Brothers Holdings Inc., a Delaware
corporation having an address at 3 World Financial Center, 12th Floor, New
York, New York 10285-1200 ("Lender") the principal sum of TWENTYEIGHT MILLION
AND 00/100 DOLLARS ($28,000,000.00) or so much thereof as may be advanced or
outstanding from time to time, in lawful money of the United States of
America with interest thereon to be computed from the date of this Note at
the Interest Rate (hereinafter defined) to be paid as hereinafter provided
(the "Loan"). Whenever used, the singular number shall include the plural,
the plural the singular, and the words "Lender" and "Borrower" shall include
their respective successors, assigns, heirs, executors and administrators.
A non-refundable origination fee in an amount equal to 1% of the
face amount hereof has been paid by Borrower to Lender on the date hereof.
A. Payment Terms
Borrower shall pay to Lender at the address set forth above, or at
such other place as the Lender may from time to time designate in writing:
(i) a payment of interest only calculated at the Interest Rate
from the date hereof through October 31, 1998 shall be due
and payable on the date hereof;
(ii) interest only in arrears shall be due and payable on the
first day of December, 1998 and on the first day of each
calendar month thereafter to and including the Maturity Date
(as hereinafter defined); and
(iii) the balance of the principal sum then outstanding and all
interest thereon, and all other sums due and payable under
this Note or the Other Loan Documents (hereinafter defined)
shall be due and payable on the Maturity Date.
As used herein, the term "Maturity Date" shall mean the earlier to
occur of (i) November 1, 2001 (the "Scheduled Maturity Date"), subject to
extension for the Extended Term (hereinafter defined) as hereinafter
provided, and (ii) the date on which the entire Obligations (hereinafter
defined) have become due and payable upon the occurrence of an Event of
Default (as that term is defined in the Security Documents (hereinafter
defined)). Any payment hereunder which is stated to be due on a day which is
not a Business Day shall be made on the next succeeding Business Day (and
interest shall accrue for such extension of time) unless the result of such
extension would be to extend such payment into another calendar month in
which event such payment shall be made on the immediately preceding Business
Day. "Business Day" shall mean any day other than a Saturday or Sunday or a
day on which banks in New York, New York are authorized or required by law to
be closed.
B. Interest
Prior to the Maturity Date, provided there exists no Event of
Default (hereinafter defined), the unpaid principal balance shall bear
interest at a rate per annum (the "Interest Rate") equal to LIBOR plus 275
basis points. "LIBOR" shall mean for each calendar month, the London
Interbank Offer Rate as listed in The Wall Street Journal in the "Money
Rates" column or at Telerate (page 3750) which is published or announced on
the date which is two Business Days prior to the beginning of such calendar
month for such calendar month. If for any reason the LIBOR Rate for any
calendar month cannot be determined in accordance with the preceding
sentence, then Lender will notify Borrower and instead determine the LIBOR
Rate by using the rates offered to prime banks in the interbank eurocurrency
market by Citibank or any successor or assign (but in all other respects in
accordance with the preceding sentence). Each determination of the Interest
Rate by Lender pursuant to this Note shall be conclusive and binding on the
Borrower in the absence of manifest error. Interest on the principal sum of
this Note shall be calculated in arrears on the basis of the actual number of
days elapsed over a three hundred sixty (360) day year.
C. Events of Default
If an Event of Default occurs, or any other cause for acceleration
of the indebtedness evidenced by this Note shall occur, then, the whole of
the principal sum of this Note, together with all interest accrued and unpaid
thereon and all other sums due under the Security Documents (hereinafter
defined) and this Note (all such sums hereinafter collectively referred to as
the "Obligations") shall without notice become immediately due and payable at
the option of Lender. All of the terms, covenants and conditions contained
in the Security Documents and the Other Loan Documents (hereinafter defined)
are hereby made part of this Note to the same extent and with the same force
as if they were fully set forth herein. In the event that it should become
necessary to employ counsel to collect the Obligations or to protect or
foreclose the security hereof, Borrower also agrees to pay reasonable
attorney's fees for the services of such counsel whether or not suit is
brought.
D. Prepayment
Except as specifically provided herein or in the Security
Documents, no prepayment of the principal indebtedness of this Note shall be
allowed at anytime during the first eighteen (18) full calendar months of the
term of this Note (the "Closed Period"). After the Closed Period, Borrower,
whether or not a debtor in a proceeding under Title 11, United States Code,
may prepay the principal balance of this Note in whole, but not in part,
without penalty or premium, on the first day of any calendar month but only
upon (i) not less than thirty (30) days' but not more than sixty (60) days'
irrevocable prior written notice to Lender specifying the date on which
prepayment is to be made, (ii) the payment of all accrued and unpaid interest
on the outstanding principal balance of this Note to and including the date
of such prepayment, and (iii) the payment of all other sums then due under
this Note, the Security Documents and the Other Loan Documents.
Lender shall not be obligated to accept any prepayment of the
principal balance of this Note unless it is accompanied by all sums due in
connection therewith. If a Default Prepayment (hereinafter defined) occurs,
Borrower shall pay to Lender the entire Obligations including, without
limitation, the Prepayment Fee (hereinafter defined), provided, however, that
Borrower shall have no obligation to pay the Prepayment Fee unless the
obligation to make the Default Prepayment occurs during the Closed Period.
For purposes hereof, the term "Default Prepayment" shall mean a prepayment of
the principal amount of the Note made after the occurrence of any Event of
Default or an acceleration of the Maturity Date under any circumstances,
including, without limitation, a prepayment occurring in connection with the
reinstatement of the Security Documents provided by statute under foreclosure
proceedings or exercise of a power of sale, any statutory right of redemption
exercised by Borrower or any other party having a statutory right to redeem
or prevent foreclosure, any sale in foreclosure or under exercise of a power
of sale or otherwise. For purposes hereof, the term "Prepayment Fee" shall
mean one percent (1%) of the outstanding principal indebtedness of this Note.
The aforementioned Prepayment Fee does not constitute a penalty,
but rather represents the reasonable estimate, agreed to between Borrower and
Lender, of a fair compensation for the loss that may be sustained by Lender
due to prepayment of the principal indebtedness. Any prepayment fee required
pursuant to the preceding paragraphs shall be paid without prejudice to the
right of Lender to collect any of the amounts owing under this Note or the
Security Documents or otherwise, to enforce any of its rights or remedies
arising out of an Event of Default hereunder.
Notwithstanding anything contained herein to the contrary, provided
no Event of Default shall have occurred and be continuing, no prepayment fee
shall be payable upon any prepayment of the Principal Indebtedness resulting
solely from the application by Lender of any casualty insurance proceeds or
condemnation awards.
E. Default Interest and Late Charges
Upon the occurrence of any Event of Default, or upon maturity
hereof (by acceleration or otherwise), the outstanding principal balance of
the indebtedness evidenced by this Note shall, at the option of Lender, bear
interest from the date of occurrence of such Event of Default or such
maturity until collection (including any period of time occurring after
judgment), at the "Default Rate", being the lower of (a) the highest rate
allowed by applicable law, or (b) a rate per annum equal to five percent (5%)
above the Interest Rate in effect on the Maturity Date.
If any monthly installment of principal and interest is not paid
prior to the tenth (10th) day after the due date of such payment, then
Borrower shall pay to Lender, upon demand, a late charge equal to the lesser
of five percent (5%) of such unpaid sum or the maximum amount permitted by
applicable law to defray the expenses incurred by Lender in handling and
processing such delinquent payment and to compensate Lender for the loss of
the use of such delinquent payment.
All default interest and late charges (i) shall be in addition to,
and not in lieu of, any other remedy Lender may have and shall be in addition
to, and not in lieu of, Borrower's obligation to pay any reasonable fees and
charges of any agents or attorneys employed in the event of any default
hereunder; (ii) shall be added to the Obligations, and shall be deemed
secured by the Security Documents and Other Loan Documents; and (iii) shall
not be construed as an agreement or privilege to extend the date of the
payment of the Obligations, nor as a waiver of any other right or remedy
accruing to Lender by reason of the occurrence of any Event of Default.
F. Security
This Note is secured by the Security Documents and the Other Loan
Documents. The term "Security Documents" as used in this Note shall mean,
collectively, the Mortgage and Security Agreement given by Borrower to Lender
covering the Canton Property (as defined herein) (the "Canton Security
Instrument"), the Assignment of Leases and Rents given by Borrower to Lender
covering the Canton Property (the "Canton Assignment"), the Mortgage and
Security Agreement given by Borrower to Lender covering the Philadelphia
Property (as defined herein) (the "Philadelphia Security Instrument"), the
Assignment of Leases and Rents given by Borrower to Lender covering the
Philadelphia Property (the "Philadelphia Assignment"), the Mortgage and
Security Agreement given by Borrower to Lender covering the West Chester
Property (as defined herein) (the "West Chester Security Instrument"), the
Assignment of Leases and Rents given by Borrower to Lender covering the West
Chester Property (the "West Chester Assignment") the Mortgage and Security
Agreement given by Borrower to Lender covering the Salem Property (as defined
herein) (the "Salem Security Instrument"), the Assignment of Leases and Rents
given by Borrower to Lender covering the Salem Property (the "Salem
Assignment"), the Mortgage and Security Agreement given by Borrower to Lender
covering the Piscataway Property (as defined herein) (the "Piscataway
Security Instrument"), the Assignment of Leases and Rents given by Borrower
to Lender covering the Piscataway Property (the "Piscataway Assignment") the
Mortgage and Security Agreement given by Borrower to Lender covering the
Cherry Hill Property (as defined herein) (the "Cherry Hill Security
Instrument"), the Assignment of Leases and Rents given by Borrower to Lender
covering the Cherry Hill Property (the "Cherry Hill Assignment"), the
Leasehold Deed of Trust, Assignment of Rents, Security Agreement and Fixture
Filing For Commercial Purposes given by Borrower Fidelity National Title
Insurance Company, as trustee, for the use and benefit of Lender, covering
the Santa Monica Property (as defined herein) (the "Santa Monica Security
Instrument") (the Canton Security Instrument, the Philadelphia Security
Instrument, the West Chester Security Instrument, the Salem Security
Instrument, the Piscataway Security Instrument, the Cherry Hill Security
Instrument and the Santa Monica Security Instrument are sometimes
collectively referred to herein as the "Security Instruments"), the
Assignment of Leases and Rents given by Borrower to Lender covering the Santa
Monica Property (the "Santa Monica Assignment") (the Canton Assignment, the
Philadelphia Assignment, the West Chester Assignment, the Salem Assignment,
the Piscataway Assignment, the Cherry Hill Assignment and the Santa Monica
Assignment are sometimes collectively referred to herein as the
"Assignments"), the respective security documents, and certain pledge and
security agreements dated the date hereof given by Borrower to Lender
covering, respectively, (A) the fee simple estate in certain real property
located in (i) Canton, Massachusetts (the "Canton Property"), (ii)
Philadelphia, Pennsylvania (the "Philadelphia Property"), (iii) West Chester,
Pennsylvania (the "West Chester Property"), (iv) Salem, New Hampshire (the
"Salem Property"), (v) Piscataway, New Jersey (the "Piscataway Property"),
and (vi) Cherry Hill, New Jersey (the "Cherry Hill Property"), and (B) the
leasehold estate in certain real property located in Santa Monica, California
(the "Santa Monica Property"), and the Borrower's interest in certain
accounts established pursuant to the Other Loan Documents (such interest
together with the Canton Property, the Philadelphia Property, the West
Chester Property, the Salem Property, the Piscataway Property, the Cherry
Hill Property and the Santa Monica Property are sometimes collectively
referred to herein as the "Property") and other property, as more
particularly described therein which (i) Canton Security Instrument and
Canton Assignment are intended to be duly recorded in the land records where
the Canton Property is located, (ii) Philadelphia Security Instrument and
Philadelphia Assignment are intended to be duly recorded in the land records
where the Philadelphia Property is located,(iii) West Chester Security
Instrument and West Chester Assignment are intended to be duly recorded in
the land records where the West Chester Property is located, (iv) Salem
Security Instrument and Salem Assignment are intended to be duly recorded in
the land records where the Salem Property is located, (v) Piscataway Security
Instrument and Piscataway Assignment are intended to be duly recorded in the
land records where the Piscataway Property is located, (vi) Cherry Hill
Security Instrument and Cherry Hill Assignment are intended to be duly
recorded in the land records where the Cherry Hill Property is located, and
(vii) Santa Monica Security Instrument and Santa Monica Assignment are
intended to be duly recorded in the land records where the Santa Monica
Property is located. Lender may resort for the payment of the Obligations to
any such security held by Lender in such order and manner as Lender, in its
discretion, may elect. Lender may take any action to recover the Obligations
or any portion thereof, or to enforce any covenant hereof or of the Security
Documents or Other Loan Documents without prejudice to the right of Lender
thereafter to foreclose under any of the Security Documents. The rights of
Lender under this Note and the Security Documents and the Other Loan
Documents shall be separate, distinct and cumulative and none shall be given
effect to the exclusion of the others. No act of Lender shall be construed
as an election to proceed under any one provision herein or of any of the
Security Documents and the Other Loan Documents to the exclusion of any other
provision. Lender shall not be limited exclusively to the rights and
remedies herein or therein stated but shall be entitled to every right and
remedy now or hereafter afforded at law or in equity. The term "Other Loan
Documents" as used in this Note shall mean all and any of the documents other
than this Note or the Security Documents now, hereinbefore or hereafter
executed by Borrower and/or others and by or in favor of Lender, which wholly
or partially secure, guarantee or relate to payment of this Note. With
reference to the Security Documents, and solely for the purposes expressly
contained therein, the amount of the Loan allocated to each Property is set
forth on Exhibit A attached hereto and by this reference made a Part hereof.
G. Savings Clause
This Note is subject to the express condition that at no time shall
Borrower be obligated or required to pay interest on the principal balance
due hereunder at a rate which could subject Lender to either civil or
criminal liability as a result of being in excess of the maximum interest
rate which Borrower is permitted by applicable law to contract or agree to
pay. If by the terms of this Note, Borrower is at any time required or
obligated to pay interest on the principal balance due hereunder. at a rate
in excess of such maximum rate the Interest Rate shall be deemed to be
immediately reduced to such maximum rate and all previous payments in excess
of the maximum rate shall be deemed to have been payments in reduction of
principal and not on account of the interest due hereunder.
H. Miscellaneous
This Note may not be modified, amended, waived, extended, changed,
discharged or terminated orally or by any act or failure to act on the part
of Borrower or Lender, but only by an agreement in writing signed by the
party against whom enforcement of any modification, amendment, waiver,
extension, change, discharge or termination is sought.
If Borrower consists of more than one person or party, the
obligations and liabilities of each such person or party shall be joint and
several.
Borrower and all others who may become liable for the payment of
all or any part of the Obligations do hereby severally waive presentment and
demand for payment, notice of dishonor, protest and notice of protest and
non-payment. No release of any security for the Obligations or extension of
time for payment of this Note or any installment hereof, and no alteration,
amendment or waiver of any provision of this Note, the Security Documents or
the Other Loan Documents made by agreement between Lender and any other
person or party shall release, modify, amend, waive, extend, change,
discharge, terminate or affect the liability of Borrower, and any other who
may become liable for the payment of all or any part of the Obligations,
under this Note, the Security Documents or the Other Loan Documents.
Borrower (and the undersigned representative of Borrower, if any)
represents that Borrower has full power, authority and legal right to execute
and deliver this Note, the Security Documents and the Other Loan Documents,
to perform its obligations hereunder and thereunder, and that this Note, the
Security Documents and the Other Loan Documents constitute valid and binding
obligations of Borrower enforceable against Borrower in accordance with their
respective terms.
THIS NOTE SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK AND THE APPLICABLE LAWS OF THE UNITED STATES OF
AMERICA.
Pursuant to New York General Obligations Law Section 5-1402,
Borrower hereby irrevocably submits to the jurisdiction of any court of the
State of New York or federal court sitting in the State of New York in any
action or proceeding arising out of or relating to this Note, the Security
Documents or the Other Loan Documents. Borrower hereby irrevocably agrees
that all claims in respect of such action or proceeding may be heard and
determined in such court of the State of New York or, to the extent permitted
by law, in such federal court. Borrower hereby irrevocably waives, to the
fullest extent it may effectively do so, the defense of an inconvenient forum
to the maintenance of such action or proceeding. To the extent permitted by
law, Borrower also irrevocably consents to the service of any and all process
in any such action or proceeding arising out of or in connection with this
Note, the Security Documents or Other Loan Documents by the mailing (postage
prepaid) of copies of such process to the undersigned at the address set
forth above. Borrower agrees that a final and non-appealable judgment (or a
judgment whose time to appeal has expired) in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law.
BORROWER AND LENDER HEREBY WAIVE TRIAL BY JURY IN ANY ACTION,
PROCEEDING, CLAIM OR COUNTERCLAIM WHETHER IN CONTRACT OR TORT, AT LAW OR IN
EQUITY, WITH RESPECT TO, IN CONNECTION WITH OR ARISING OUT OF OR IN ANY WAY
RELATED TO THIS NOTE OR THE SECURITY DOCUMENTS OR THE OTHER LOAN DOCUMENTS OR
THE VALIDITY, PROTECTION, INTERPRETATION, ADMINISTRATION, COLLECTION OR
ENFORCEMENT HEREOF OR THEREOF, OR ANY CLAIM OR DISPUTE HEREUNDER OR
THEREUNDER.
Wherever pursuant to this Note (i) Lender exercises any right given
to it to approve or disapprove, (ii) any arrangement or term is to be
satisfactory to Lender, or (iii) any other decision or determination is to be
made by Lender, the decision of Lender to approve or disapprove, all
decisions that arrangements or terms are satisfactory or not satisfactory and
all other decisions and determinations made by Lender, shall be in the sole
and absolute discretion of Lender and shall be final and conclusive, except
as may be otherwise expressly and specifically provided herein.
Wherever pursuant to this Note it is provided that Borrower pay any
costs and expenses, such costs and expenses shall include, without
limitation, the reasonable legal fees and disbursements of Lender.
I. Limited Recourse
(1) Subject to the provisions of Paragraph (2) below, Lender shall
not enforce the liability and obligation of Borrower to perform and observe
the obligations contained in this Note, the Security Documents or the Other
Loan Documents by any action or proceeding wherein a money judgment (or
equitable remedy having the effect of a money judgment) shall be sought
against Borrower, except that Lender may bring a foreclosure action, action
for specific performance or other appropriate action or proceeding to enable
Lender to enforce and realize upon this Note, the Security Documents, the
Other Loan Documents, and the interest in the Property, the Rents (as defined
in the Security Instruments) and any other collateral given to Lender created
by this Note, the Security Documents and the Other Loan Documents; provided,
however, that any judgment in any such action or proceeding shall be
enforceable against the Borrower only to the extent of Borrower's interest in
the Property, the Rents and any other collateral given to Lender. Lender, by
accepting this Note and the Security Documents, agrees that, except as
provided in Article 15 of the Security Instruments, it shall not sue for,
seek or demand any deficiency judgment against the Borrower in any such
action or proceeding, under or by reason of or under or in connection with
the Security Documents, the Other Loan Documents or this Note. The
provisions of this paragraph shall not, however, (i) constitute a waiver,
release or impairment of any obligation evidenced or secured by the Security
Documents, the Other Loan Documents or this Note; (ii) impair the right of
Lender to name Borrower as a party defendant in any action or suit for
judicial foreclosure and sale under the Security Documents; (iii) affect the
validity or enforceability of any guaranty, indemnity or similar instrument
made in connection with the Security Documents, this Note, or the Other Loan
Documents; (iv) impair the right of Lender to obtain the appointment of a
receiver; (v) impair the enforcement of the Assignments executed in
connection herewith; (vi) impair the right of Lender to obtain a deficiency
judgment or judgment on the Note against Borrower if necessary to obtain any
insurance proceeds or condemnation awards to which Lender would otherwise be
entitled under the Security Instruments provided, however Lender shall only
enforce such judgment against the insurance proceeds and/or condemnation
awards; or (vii) impair the right of Lender to enforce the provisions of the
Security Instruments.
(2) Notwithstanding anything to the contrary contained in Paragraph
(1) above Borrower shall be fully and personally liable to Lender upon the
occurrence of certain events as described in Article 15 of the Security
Instruments and Wellsford Capital a Maryland real estate investment trust
("Wellsford Capital" or "Guarantor"), shall be fully and personally liable to
the extent set forth in and upon the occurrence of certain events as
described in that certain Conditional Guarantee of even date herewith given
by Guarantor in favor of Lender (the "Guarantee") and Borrower and Wellsford
Capital (the "Indemnitors") shall be fully and personally liable to the
extent set forth in and upon the occurrence of certain events as described in
that certain Environmental Indemnity Agreement of even date herewith given by
Indemnitors in favor of Lender and other Indemnified Parties (as defined
therein).
I. Extended Term
Provided no Event of Default shall have occurred and be continuing
either on the date notice to extend is given to Lender or on the commencement
date of the Extended Term, Borrower shall have the option to extend the
Scheduled Maturity Date of this Note to November 1, 2002 (the "Extended
Term"). Borrower shall exercise such option by providing written notice to
Lender not later than September 15, 2001. Lender shall so extend the
Scheduled Maturity Date provided Borrower provides the following (and agrees
to pay all costs and expenses in connection therewith): (i) proof
satisfactory to Lender in all respects that (A) the Debt Service Coverage
Ratio (as defined in the Security Instruments) for the Property is at least
1.30 to 1.0 and (B) the outstanding principal balance of this Note is less
than seventy-five (75%) of the then current aggregate appraised value of the
Property determined by appraisals conducted by an independent appraiser or
appraisers selected or approved by Lender, (ii) payment of Lender's
attorneys' fees and expenses, (iii) title reports satisfactory to Lender and
its counsel showing no exceptions to title other than those contained in the
mortgagee title insurance policies originally insuring the Security
Documents, (iv) an affidavit from Borrower that no alterations have been made
with respect to the Property which would render inaccurate those certain
surveys delivered to Lender with respect to the Property in connection with
the initial closing of the Loan (except for such alterations made in
compliance with the applicable terms and provisions of the Security Documents
and for which survey recertifications have been delivered to the Lender) and
(v) at the time that the written option notice is sent to Lender, Borrower
shall pay a non-refundable extension fee equal to one-half of one percent
(1/2%) of the outstanding principal balance of this Note, and further
provided that Borrower submits and executes such additional documents as
Lender may reasonably require. Notwithstanding anything to the contrary
contained herein, the foregoing extension option shall not be deemed
effective until all requirements of this paragraph are fully complied with to
the complete satisfaction of Lender.
IN WITNESS WHEREOF, Borrower has duly executed this Note under seal
the day and year first above written.
WELLSFORD CAPITAL PROPERTIES, L.L.C.,
a Delaware limited liability company
By: Wellsford Capital, a Maryland real estate
investment trust, its Managing Member
By: /s/ Gregory F. Hughes
--------------------------------
Name: Gregory F. Hughes
Title: Vice President and
Assistant Treasurer
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 21st day of October, 1998, before me personally came Gregory
F. Hughes, to me known to be the individual who executed the foregoing
instrument, and who, being duly sworn by me, did depose and say that he is
the Vice President and Assistant Treasurer of Wellsford Capital, a Maryland
real estate investment trust, which trust is the managing member of Wellsford
Capital Properties, L.L.C., a Delaware limited liability company; and that he
had authority to sign the same; and that he acknowledged to me that he
executed the same in such capacity as the act the deed of said limited
liability company for the uses and purposes therein mentioned.
/s/ Frantz Michaud
-------------------------
Notary Public
EXHIBIT A
(Allocated Loan Amounts)
1. Canton Property: $1,940,000
2. Philadelphia Property: $2,000,000
3. West Chester Property: $8,400,000
4. Salem Property: $2,420,000
5. Piscataway Property: $1,340,000
6. Cherry Hill Property: $2,300,000
7. Santa Monica Property: $9,600,000