WELLSFORD REAL PROPERTIES, INC.
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ARTICLES SUPPLEMENTARY
350,000 SHARES
CLASS A-1 COMMON STOCK
Wellsford Real Properties, Inc., a Maryland corporation (the
"Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: Under a power contained in Section 6.2 of the charter of the
Corporation (the "Charter"), the Board of Directors of the Corporation (the
"Board of Directors"), by resolutions adopted by the Board of Directors at a
meeting held on April 20, 2000, reclassified and designated 350,000 shares (the
"Shares") of unissued Common Stock (as defined in the Charter) as shares of
Class A-1 Common Stock, $.01 par value per share (the "Class A-1 Common Stock"),
with the preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends and other distributions, qualifications and terms
and conditions of redemption as set forth as follows, which, upon any
restatement of the Charter shall be made part of Article VI, with any necessary
or appropriate changes to the enumeration or lettering of sections or
subsections hereof.
CLASS A-1 COMMON STOCK
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Section 1. CERTAIN DEFINITIONS. For purposes of the terms of the Class A-1
Common Stock the following terms have the following meanings:
"Affiliate" shall mean, when used with respect to a specified Person,
another Person that directly, or indirectly through one or more intermediaries,
Controls or is Controlled by or is under common Control with the Person
specified.
"Beneficial Ownership" shall mean ownership of stock by a REIT who would be
treated as an owner of such shares of stock under Section 856(c)(5) of the Code.
The terms "Beneficial Owner", "Beneficially Owns" and "Beneficially Owned" shall
have correlative meanings.
"Business Day" shall mean any day, other than a Saturday or Sunday, that is
neither a legal holiday nor a day on which banking institutions in New York City
are authorized or required by law, regulation or executive order to close.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time.
"Common Stock" shall mean the common stock, $.01 par value per share, of
the Corporation.
"Class A-1 Common Stock" shall mean the Class A-1 common stock, $.01 par
value per share, of the Corporation.
"Control" including the terms "Controlling", "Controlled by" and "under
common Control with", shall mean the possession, direct or indirect, of the
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise.
"Convertible Preferred Securities" shall mean the convertible preferred
securities issued by the Trust, representing undivided beneficial interests in
the assets of the Trust, having the terms set forth in Annex I to the
Declaration of Trust of the Trust, dated as of May 5, 2000.
"Corporation" shall mean Wellsford Real Properties, Inc.
"Debentures" shall mean the 8.25% Convertible Junior Subordinated
Debentures issued by the Corporation pursuant to an Indenture, dated as of May
5, 2000, between the Corporation and Wilmington Trust Company, as Trustee.
"Liquidation Value", when used in connection with the Convertible Preferred
Securities or the Debentures, shall mean $25.00 per share of Convertible
Preferred Securities or $25.00 per Debenture, as the case may be.
"Person" shall mean any natural person, corporation, business or real
estate investment trust, joint venture, association, company, partnership, or
government, or any agency or political subdivision thereof.
"REIT" shall mean a real estate investment trust under Section 856 of the
Code.
"REIT Ownership Limit" shall initially mean nine and nine-tenths percent
(9.9%) of the value of the outstanding Voting Stock of the Corporation.
"Responsible Officer" of any corporation shall mean any executive officer
of such corporation, and any other officer or similar official thereof
responsible for the administration of the obligations of such corporation in
respect of the terms of the Class A-1 Common Stock.
"Transfer" shall mean any sale, transfer, redemption, gift, hypothecation,
pledge, assignment, devise or other
disposition of Voting Stock, whether voluntary or involuntary, whether of
record, constructively or beneficially and whether by operation of law or
otherwise.
"Triggering Event" shall mean any event undertaken or caused by the
Corporation, which would result in ERP Operating Partnership, Equity Residential
Properties Trust or any Affiliate of either of them collectively to Beneficially
Own outstanding shares of Class A-1 Common Stock in excess of the REIT Ownership
Limit.
"Trust" shall mean WRP Convertible Trust I, a trust formed under the
Delaware Business Trust Act pursuant to a Certificate of Trust filed with the
Secretary of State of Delaware on May 5, 2000.
"Voting Stock" shall mean the Class A-1 Common Stock, the Common Stock and
any other outstanding shares of stock of the Corporation entitled to vote
generally in the election of directors.
Section 2. RIGHTS. The holders of Class A-1 Common Stock shall have all
rights, including, but not limited to, voting, dividend, distribution,
liquidation and other rights of holders of shares of Common Stock; provided,
however, holders of Class A-1 Common Stock shall have such additional rights as
provided herein.
Section 3.
(a) NOMINATION RIGHTS. The holders of the Class A-1 Common Stock, as a
class, shall be entitled to nominate one (1) nominee for election to the Board
of Directors of the Corporation at each annual meeting of shareholders of the
Corporation at which the Class II Directors are to be elected so long as (i) ERP
Operating Partnership has obligations pursuant to that certain Agreement
Regarding Palomino Park dated as of May 30, 1997 between ERP Operating
Partnership and the Corporation; (ii) ERP Operating Partnership has obligations
pursuant to that certain Credit Enhancement Agreement dated as of May 30, 1997
between ERP Operating Partnership and the Corporation, or any agreement executed
by the parties to the aforesaid agreement which states that it is in
substitution for the aforesaid agreement; or (iii) the aggregate Liquidation
Value of the shares of Convertible Preferred Securities of the Trust and the
Debentures of the Corporation owned by ERP Operating Partnership is greater than
$10,000,000.
(b) APPOINTMENT RIGHTS. Upon the receipt by Equity Residential Properties
Trust ("EQR") of a ruling from the Internal Revenue Service or an opinion of
counsel satisfactory to EQR that the rights in this Section 3(b) will not cause
EQR to lose its status as a REIT under the Code, and in the event a person
nominated by the holders of the Class A-1 Common Stock is not a member of the
Board of Directors of the Corporation at such time, the holders of the Class A-1
Common Stock, as a class, shall be entitled to elect one (1) member (the "Class
A-1 Director") of the Board of Directors of the Corporation so long as (i) ERP
Operating Partnership has obligations pursuant to that certain Agreement
Regarding Palomino Park dated as of May 30, 1997 between ERP Operating
Partnership and the Corporation; (ii) ERP Operating Partnership has obligations
pursuant to that certain Credit Enhancement Agreement dated as of May 30, 1997
between ERP Operating Partnership and the Corporation, or any agreement executed
by the parties to the aforesaid agreement which states that it is in
substitution for the aforesaid agreement; or (iii) the aggregate Liquidation
Value of the shares of Convertible Preferred Securities of the Trust and the
Debentures of the Corporation owned by ERP Operating Partnership is greater than
$10,000,000; provided, however, a Class A-1 Director may not hold office as such
a director at the same time as a person nominated by the holders of the Class
A-1 Common Stock pursuant to Section 3(a). The Class A-1 Director may be removed
without cause, only by the affirmative vote of a majority of the Class A-1
Common Stock.
Section 4. OPTIONAL CONVERSION.
(a) Holders of Class A-1 Common Stock shall have the right, exercisable at
any time and from time to time to convert all or any shares of Class A-1 Common
Stock into shares of Common Stock at a conversion rate of one share of Common
Stock for each share of Class A-1 Common Stock, subject to adjustment (the
"Conversion Rate"). Upon conversion, no adjustment or payment will be made for
distributions, but if any holder surrenders Class A-1 Common Stock for
conversion after the close of business on the record date for the payment of a
dividend or distribution and prior to the opening of business on the related
payment date of such dividend or distribution then, notwithstanding such
conversion, the dividend or distribution payable on such payment date will be
paid to the registered holder of such shares on such record date.
(b) Any holder of one or more shares of Class A-1 Common Stock electing to
convert such share or shares shall deliver the certificate or certificates
therefor to the principal office of any transfer agent for the Common Stock,
with the form of notice of election to convert as the Corporation shall
prescribe fully completed and duly executed and (if so required by the
Corporation or any conversion agent) accompanied by instruments of transfer in
form satisfactory to the Corporation and to any conversion agent, duly executed
by the registered holder or his duly authorized attorney, and transfer taxes,
stamps or funds therefor or evidence of payment thereof. The conversion right
with respect to any such shares shall be deemed to have been exercised at the
date upon which the certificates therefor accompanied by such duly executed
notice of election and instruments of transfer and such taxes, stamps, funds or
evidence of payment shall have been so delivered, and the person or persons
entitled to receive the shares of the Common Stock issuable upon such conversion
shall be treated for all purposes as the record holder or holders of such shares
of the Common Stock upon said date.
(c) If a holder converts shares of Class A-1 Common Stock, the Corporation
shall pay any documentary, stamp or similar issue or transfer tax due on the
issuance of shares of Common Stock upon the conversion. The holder, however,
shall pay to the Corporation the amount of any tax which is due (or shall
establish to the satisfaction of the Corporation payment thereof) if the shares
are to be issued in a name other than the name of such
holder and shall pay to the Corporation any amount required by the last sentence
of Section 4(a) hereof.
(d) The Corporation shall reserve and shall at all times have reserved out
of its authorized but unissued shares of Common Stock a sufficient number of
shares of Common Stock to permit the conversion of the then outstanding shares
of Class A-1 Common Stock. All shares of Common Stock which may be issued upon
conversion of shares of Class A-1 Common Stock shall be validly issued, fully
paid and nonassessable, and not subject to preemptive or other similar rights.
In order that the Corporation may issue shares of Common Stock upon conversion
of shares of Class A-1 Common Stock, the Corporation will endeavor to comply
with all applicable federal and state securities laws and will endeavor to list
such Common Stock to be issued upon conversion on each securities exchange on
which the Common Stock is listed.
(e) The Conversion Rate in effect at any time shall be subject to
adjustment from time to time as follows:
(i) If the Corporation shall (1) reclassify the outstanding shares of
Common Stock into shares of some other class or series of stock of the
Corporation, (2) subdivide the outstanding shares of Common Stock into a
greater number of shares of Common Stock or (3) combine the outstanding
shares of Common Stock into a smaller number of shares of Common Stock, the
conversion rate immediately prior to such action shall be adjusted so that
the holder of any shares of Class A-1 Common Stock thereafter surrendered
for conversion shall be entitled to receive the number of shares of Common
Stock which he would have owned immediately following such action had such
shares of Class A-1 Common Stock been converted immediately prior thereto.
An adjustment made pursuant to this Section 4(e)(i) shall become effective
immediately after the effective date of a subdivision, combination or
reclassification.
(ii) The Market Price per share of the Common Stock on any date shall
be deemed to be the average of the daily closing prices for 30 consecutive
trading days commencing 45 trading days before the date in question. The
closing price for each day shall be the last reported sales price or, in
case no such reported sale
takes place on such date, the average of the reported closing bid and asked
prices, regular way, in either case on the New York Stock Exchange, or if
the Common Stock is not listed or admitted to trading on such Exchange, on
the principal national securities exchange on which the Common Stock is
listed or admitted to trading or, if not listed or admitted to trading on
any national securities exchange, the closing sale price of the Common
Stock or, in case no reported sale takes place, the average of the closing
bid and asked prices, on NASDAQ or any comparable system, or if the Common
Stock is not quoted on NASDAQ or any comparable system, the closing sale
price or, in case no reported sale takes place, the average of the closing
bid and asked prices, as furnished by any two members of the National
Association of Securities Dealers, Inc. selected from time to time by the
Corporation for that purpose.
(iii) In any case in which this Section 4 shall require that an
adjustment be made immediately following a record date, the Corporation may
elect to defer (but only until five Business Days following the mailing of
the notice described in Section 4(j)) issuing to the holder of any Class
A-1 Common Stock converted after such record date the Common Stock and
other shares of stock of the Corporation issuable upon such conversion over
and above the Common Stock and other shares of stock of the Corporation
issuable upon such conversion only on the basis of the conversion rate
prior to adjustment; and, in lieu of the shares the issuance of which is so
deferred, the Corporation shall issue or cause its transfer agents to issue
appropriate evidence of the right to receive such shares.
(f) No adjustment in the Conversion Rate shall be required until cumulative
adjustments result in a change of 1% or more of the conversion price as in
effect prior to the last adjustment of the Conversion Rate; provided, however,
that any adjustment which by reason of this Section 4(f) is not required to be
made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 4 shall be made to the nearest
cent ($.01) or the nearest one-hundredth (1/100) of a share, as the case may be.
(g) If, as a result of an adjustment made pursuant to Section 4(e), the
holder of any Class A-1 Common Stock thereafter surrendered for conversion shall
become entitled to receive any shares of stock of the Corporation other than
Common Stock, thereafter the number of such other shares so receivable upon
conversion of any Class A-1 Common Stock shall be subject to adjustment from
time to time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Common Stock contained in this Section 4.
(h) The Corporation may make such increases in the Conversion Rate, in
addition to those required by Section 4(e), as is considered to be advisable in
order that any event treated for federal income tax purposes as a distribution
of shares or share rights shall not be taxable to the recipients thereof.
(i) Whenever the Conversion Rate is adjusted, the Corporation shall
promptly mail to all holders of record of Class A-1 Common Stock a notice of the
adjustment and shall cause to be prepared a certificate signed by the principal
financial officer of the Corporation setting forth the adjusted Conversion Rate
and a brief statement of the facts requiring such adjustment and the computation
thereof; such certificate shall forthwith be filed with each transfer agent for
the Class A-1 Common Stock.
(j) If:
(i) the Corporation takes any action which would require an
adjustment in the Conversion Rate, or
(ii) the Corporation consolidates or merges with, or transfers all or
substantially all of its assets to, another corporation and
shareholders of the Corporation must approve the transaction,
the Corporation shall mail to holders of shares of Class A-1 Common Stock a
notice stating the proposed record or effective date of the transaction, as the
case may be. The Corporation shall mail the notice at least 10 days before such
date; however, failure to mail such notice or any defect therein shall not
affect the validity of any transaction referred to in clauses (i) or (ii) of
this Section 4(j).
(k) If any of the following shall occur, namely: (i) any reclassification
or change of outstanding shares of Common Stock issuable upon conversion of
Class A-1 Common Stock (other than a change in par value, or from par value to
no par value, or from no par value to par value, or as a result of a subdivision
or combination), (ii) any consolidation or merger to which the Corporation is a
party other than a consolidation or merger in which the Corporation is the
continuing corporation and which does not result in any reclassification of, or
change (other than a change in name, or par value, or from par value to no par
value, or from no par value to par value, or as a result of a subdivision or
combination) in, outstanding shares of Common Stock or (iii) any sale, transfer
or lease of all or substantially all of the property or business of the
Corporation as an entirety, then the Corporation, or such successor or
purchasing corporation, as the case may be, shall, as a condition precedent to
such reclassification, change, consolidation, merger, sale, transfer or lease,
provide in its charter that each share of Class A-1 Common Stock shall be
convertible into the kind and amount of shares of stock and other securities and
property (including cash) receivable upon such reclassification, change,
consolidation, merger, sale, transfer or lease by a holder of the number of
shares of Common Stock deliverable upon conversion of such shares of Class A-1
Common Stock immediately prior to such reclassification, change, consolidation,
merger, sale, transfer or lease. Such provision in the charter document shall
provide for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Section 4. If, in the case
of any such reclassification, change, consolidation, merger, sale, transfer or
lease, the shares of stock or other securities and property (including cash)
receivable thereupon by a holder of the Common Stock includes shares of stock or
beneficial interest or other securities and property of a corporation or other
entity other than the successor or purchasing corporation, as the case may be,
in such reclassification, change, consolidation, merger, sale, transfer or
lease, then the charter of such other corporation, as a condition precedent to
such transaction, shall contain such additional provisions to protect the
interests of the holders of Class A-1 Common Stock as the Board of Directors
shall reasonably consider necessary by reason of the foregoing. The provisions
of this Section 4(k) shall similarly apply to successive consolidations,
mergers, sales, transfers or leases.
No holder of Class A-1 Common Stock will possess any preemptive rights to
subscribe for or acquire any unissued shares of the Corporation (whether now or
hereafter authorized) or securities of the Corporation convertible into or
carrying a right to subscribe to or acquire shares of stock of the Corporation.
Section 5. AUTOMATIC CONVERSION. Any outstanding shares of Class A-1 Common
Stock shall automatically convert, at the Conversion Rate, into shares of Common
Stock upon the Transfer of such shares of Class A-1 Common Stock to any Person
other than an Affiliate of Equity Residential Properties Trust or ERP Operating
Partnership. Such automatic conversion shall be deemed to have occurred on the
date of such Transfer.
Section 6. PURCHASE OF SHARES OF VOTING STOCK IN EXCESS OF REIT OWNERSHIP
LIMIT. If, notwithstanding the other provisions contained in the terms of the
Class A-1 Common Stock, a Triggering Event shall occur, then the Corporation
shall (i) immediately deliver written notice of such Triggering Event to each of
Equity Residential Properties Trust and ERP Operating Partnership and (ii)
purchase such shares of Class A-1 Common Stock in excess of the REIT Ownership
Limit at a price per share equal to the Market Price per share of the Common
Stock no later than 25 days following the date of the Triggering Event which
resulted in the REIT Beneficially Owning shares of Class A-1 Common Stock in
excess of the REIT Ownership Limit.
SECOND: The Shares have been classified and designated by the Board of
Directors under the authority contained in the Charter.
THIRD: These Articles Supplementary have been approved by the Board of
Directors in the manner and by the vote required by law.
FOURTH: The undersigned President of the Corporation acknowledges these
Articles Supplementary to be the corporate act of the Corporation and, as to all
matters or facts required to be verified under oath, the undersigned President
acknowledges that to the best of his knowledge, information and belief, these
matters and facts are true in all material respects and that this statement is
made under the penalties for perjury.
IN WITNESS WHEREOF, the Corporation has caused these Articles Supplementary
to be executed under seal in its name and on its behalf by its President and
attested to by its Secretary on this ___ of May, 2000.
ATTEST: WELLSFORD REAL PROPERTIES, INC
/s/ Jeffrey H. Lynford By: /s/ Edward Lowenthal (SEAL)
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Jeffrey H. Lynford Edward Lowenthal
Secretary President