SUBSCRIPTION AGREEMENT
This Agreement is dated June 30, 1999, by and between Wellington
Properties Trust (the "Company") and American Real Estate Equities, LLC
("AREE").
WHEREAS, during the summer and fall of 1998, AREE advanced the Company
an aggregate of $1,392,000 for working capital purposes (together, the "AREE
Loan");
WHEREAS, on November 16, 1998, the shareholders of the Company approved
a number of real estate acquisitions by the Company or its subsidiaries and
related transactions (together, the "Proposed Transactions") pursuant to which,
among other things, the Company (i) issued to AREE a warrant to purchase 791,667
common shares of the Company (the "AREE Warrant"), (ii) agreed to issue to AREE
4,933,233 common units (the "Partnership Units") of the operating partnership of
the Company, Wellington Properties Investments, L.P., and (iii) agreed, subject
to certain contingencies, to reimburse AREE's costs in connection with the
Proposed Transactions, which costs totaled $1,356,000 (the "AREE Expenses");
WHEREAS, following shareholder approval of the Proposed Transactions
and the issuance of the AREE Warrant to AREE, the parties elected to consummate
only a portion of the Proposed Transactions and, as a result, the Company issued
only 204,904 Partnership Units to AREE; and
WHEREAS, during the fourth quarter of 1999, the Company intends to make
an offering of preferred shares to the public at a price of $10.00 per share and
with a preferred dividend equal to $0.95 per annum (the "Preferred Share
Offering");
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. Partial Repayment of AREE Loan. On August 11, 1999 (the "Effective
Date"), the Company shall issue to AREE 119,200 preferred shares of a class
equal in all respects to the shares offered in the Preferred Share Offering, but
ranking junior thereto as to payments of dividends and upon liquidation (the
"Junior Preferred Shares"). By the issuance of such shares, $1,192,000 in
principal amount of the AREE Loan shall be discharged.
2. Cancellation of Warrant. On the Effective Date, AREE shall return
the AREE Warrant to the Company for cancellation.
3. Issuance of Additional Junior Preferred Shares. On the Effective
Date, the Company shall issue 135,600 additional Junior Preferred Shares to the
Company and, effective upon such issuance, AREE hereby relinquishes any claim to
reimbursement of the AREE Expenses. In the event that the Company does not have
total assets in excess of $105,000,000 or has not achieved annual funds from
operations equal to $0.55 per common share (on a fully-diluted basis) on or
prior to June 30, 2002, then the Company shall have the right to redeem such
135,600 Junior Preferred Shares for $1.00.
4. Discharge of Certain Prior Obligations. The agreements set forth
herein are in full satisfaction of the parties' respective obligations to each
other in connection with the Proposed Transactions.
5. General Provisions.
(a) Successors; Assignment. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and each of their respective
successors and assigns. Neither party may assign its duties or obligations under
this Agreement without the prior written consent of the other party.
(b) Entire Agreement; Modifications. This Agreement
constitutes the entire agreement between the parties respecting the subject
matter hereof, and supersedes all prior negotiations, undertakings, agreements
and arrangements with respect thereto, whether written or oral. Except as
otherwise explicitly provided herein, this Agreement may not be amended or
modified except by written agreement signed by the Company and AREE.
(c) Arbitration. Any dispute or controversy arising under or
in connection with this Agreement shall be settled exclusively by arbitration,
conducted by a single arbitration sitting in Minneapolis, Minnesota, in
accordance with the rules of the American Arbitration Association (the "AAA")
then in effect. The arbitrator shall be selected by the parties from a list of
eleven (11) arbitrators provided by the AAA, provided that no arbitrator shall
be related to or affiliated with either of the parties. No later than ten (10)
days after the list of proposed arbitrators is received by the parties, the
parties, or their respective representatives, shall meet at a mutually
convenient location in Minneapolis, Minnesota, or telephonically. At that
meeting, the party who sought arbitration shall eliminate one (1) proposed
arbitrator and then the other party shall eliminate one (1) proposed arbitrator.
The parties shall continue to alternatively eliminate names from the list of
proposed arbitrators in this manner until each party has eliminated five (5)
proposed arbitrators. The remaining arbitrator shall arbitrate the dispute. Each
party shall submit, in writing, the specific requested action or decision it
wishes to take, or make, with respect to the matter in dispute ("Proposed
Solution"), and the arbitrator shall be obligated to choose one (1) party's
specific Proposed Solution, without being permitted to effectuate any compromise
or "new" position; provided, however, that the arbitrator is authorized to award
amounts not in dispute during the pendency of any dispute or controversy arising
under or in connection with this Agreement. The party whose Proposed Solution is
not selected shall bear the costs of all counsel, experts or other
representatives that are retained by both parties, together with all costs of
the arbitration proceeding, including, without limitation, the fees, costs and
expenses imposed or incurred by the arbitrator. Judgment may be entered on the
arbitrator's award in any court having jurisdiction.
(d) Waiver. No waiver by either party, at any time, of any
breach by the other party of, or compliance with, any condition or provision of
this Agreement to be performed by the other party, shall be deemed a waiver of
any similar or dissimilar provisions or conditions at the same time or any prior
or subsequent time.
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IN WITNESS WHEREOF, this Agreement has been executed by the undersigned
as of the date first written above.
AMERICAN REAL ESTATE EQUITIES, LLC
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇
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▇▇▇▇▇ ▇. ▇▇▇▇, President
WELLINGTON PROPERTIES TRUST
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
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▇▇▇▇▇▇ ▇. ▇▇▇▇, President
