-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Uhc7z1GLOfnDWfwXBJ/NaPmEcCaGMCj7zwkNjkZuht19PotcFUvArwHy/rrvAAFB J5PQUGZ1JAdj42S7/ZXRFQ== 0000950137-99-001655.txt : 19990517 0000950137-99-001655.hdr.sgml : 19990517 ACCESSION NUMBER: 0000950137-99-001655 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 19990514 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: WELLINGTON PROPERTIES TRUST CENTRAL INDEX KEY: 0000928953 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 396594066 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: SEC FILE NUMBER: 005-56291 FILM NUMBER: 99623335 BUSINESS ADDRESS: STREET 1: 18650 W CORPORATE DRIVE CITY: BROOKFIELD STATE: WI ZIP: 53045 BUSINESS PHONE: 4147928930 MAIL ADDRESS: STREET 1: 18650 W CORPORATE DRIVE STREET 2: SUITE 300 CITY: BROOKFIELD STATE: WI ZIP: 53045 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN REAL ESTATE EQUITIES LLC CENTRAL INDEX KEY: 0001086278 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 411923258 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 11000 PRAIRIE LAKES DRIVE STREET 2: SUITE 610 CITY: MINNEAPOLIS STATE: MN ZIP: 55344 BUSINESS PHONE: 6128266966 MAIL ADDRESS: STREET 1: 11000 PRAIRIE LAKES DRIVE STREET 2: SUITE 610 CITY: MINNEAPOLIS STATE: MN ZIP: 55344 SC 13D 1 SCHEDULE 13D 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13D Under the Securities Exchange Act of 1934 Wellington Properties Trust - -------------------------------------------------------------------------------- (Name of Issuer) Common Shares, $.01 par value - -------------------------------------------------------------------------------- (Title of Class of Securities) 949622 104 - -------------------------------------------------------------------------------- (CUSIP Number) Duane Lund 11000 Prairie Lakes Drive, Suite 610, Minneapolis, MN 55344 (612) 826-6966 - -------------------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) November 20, 1998 - -------------------------------------------------------------------------------- (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(b)(3) or (4), check the following box | |. Check the following box if a fee is being paid with this statement | |. (A fee is not required only if the reporting person: (1) has a previous statement on file reporting beneficial ownership of more than five percent of the class of securities described in Item 1; and (2) has filed no amendment subsequent to thereto reporting beneficial ownership of less than five percent of such class. See Rule 13d-7.) Note: Six copies of this statement, including all exhibits, should be filed with the Commission. See Rule 13d-1(a) for other parties to whom copies are to be sent. The remainder of this cover page shall be filled out for a reporting person's initial filing on this for with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). 2 - -------------------- ------------------ CUSIP NO. 949622104 13D PAGE 2 OF 7 PAGES - -------------------- ------------------ - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON S.S. or I.R.S. IDENTIFICATION NO. OF ABOVE PERSON American Real Estate Equities, LLC - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ] b) [ ] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* WC - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - -------------------------------------------------------------------------------- NUMBER OF SHARES 7 SOLE VOTING POWER BENEFICIALLY OWNED BY EACH 105,263 REPORTING PERSON WITH -------------------------------------------------- 8 SHARED VOTING POWER 0 -------------------------------------------------- 9 SOLE DISPOSITIVE POWER 105,263 -------------------------------------------------- 10 SHARED DISPOSITIVE POWER 0 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 105,263 - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11 12.5% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* 00 - -------------------------------------------------------------------------------- *SEE INSTRUCTION BEFORE FILLING OUT! 3 ITEM 1. SECURITY AND ISSUER. This Schedule 13D relates to the Common Shares, $.01 par value, of Wellington Properties Trust ("Wellington"), whose principal executive office is at 18650 W. Corporate Drive, Suite 300, P.O. Box 0919, Brookfield, Wisconsin 53008-0919 ITEM 2. IDENTITY AND BACKGROUND. This Schedule is being filed by: (i) American Real Estate Equities, LLC, a Delaware limited liability company ("AREE"), 11000 Prairie Lakes Drive, Suite 610, Minneapolis, MN 55344 The names and business addresses of the members and officers of the Reporting Person, and their present principal occupations or employment, are listed on Exhibit 1 attached hereto. All of said individuals are United States citizens. Neither AREE, nor any of the parties listed on Exhibit 1, has, during the last five years, been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors), or been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, Federal or state securities laws or finding any violation with respect to such laws. ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. AREE purchased these Common Shares with a portion of its working capital. ITEM 4. PURPOSE OF TRANSACTION. The transaction in which AREE purchased Common Shares of Wellington was a part of a series of transactions between Wellington, AREE and other parties related to those two entities. As a part of these transactions, AREE contributed certain real estate, as well as cash, to Wellington in exchange for Common Shares, future equity in Wellington and certain day-to-day control over Wellington's business. Through the series of transactions, principals of AREE gained positions on Wellington's Board of Trustees and one principal became the chief executive officer of Wellington. On August 31, 1998, Wellington entered into a certain Amended and Restated Master Contribution Agreement by and among Wellington, Wellington Properties Investments, L.P., a Delaware limited partnership (the "Operating Partnership"), AREE and certain other individuals (as amended, the "Master Contribution Agreement"). On November 20, 1998, pursuant to the Master Contribution Agreement, Wellington, through the Operating Partnership, of which Wellington is the sole general partner, acquired two office properties and one industrial property in the Minneapolis/St. Paul metropolitan area from AREE or its related entities. The combined purchase price of such properties totaled approximately $30.8 million, excluding closing costs. Such purchase price was funded through the issuance of an aggregate of 1,615,394 limited partnership units ("Units") in the Operating Partnership (valued at $8.50 per Unit, or an aggregate value of approximately $13.7 million) and the assumption of certain third-party indebtedness of approximately $17.1 million secured by such 4 properties. The Units are exchangeable, under certain circumstances, on a one-for-one basis for Common Shares of Wellington from and after November 20, 1999. As a result of the acquisitions described above, 129,413 Units were issued to AREE, 305,313 Units were issued to WLPT Funding, LLC, a Delaware limited liability company ("WLPT Funding"); 305,313 Units were issued to Lambert Equities II, LLC, also a Delaware limited liability company Lambert; and 782,683 Units were issued to Steven B. Hoyt and his wife. Each of AREE, WLPT Funding, Lambert Equities and Mr. Hoyt has agreed not to transfer any of these Units until November 20, 2001. These Units are not reported as shares of beneficial interest on this Schedule 13D. Effective November 16, 1998, Wellington expanded its Board of Trustees from five to seven members. Wellington's shareholders elected Paul T. Lambert and Steven B. Hoyt, both principals of AREE, to fill these two newly created positions, with terms expiring in 2001 and 2000, respectively. Also, effective November 16, 1998, Duane H. Lund, President and a principal of AREE, was elected Chief Executive Officer of Wellington. Mr. Lund entered into an employment agreement with Wellington. Further, as contemplated by the Master Contribution Agreement, Wellington issued to AREE 105,263 Common Shares in exchange for $1,000,000. These are the Common Shares reported in this Schedule 13D. In addition, Wellington issued warrants to acquire up to 500,000 Common Shares to AREE. The Warrants will become exercisable on November 16, 2000 and will be exercisable for a nine-year period thereafter, at an exercise price of $8.50 per Common Share with respect to 250,000 Warrants held by AREE, $10.25 per Common Share with respect to 125,000 Warrants held by AREE, $12.25 per Common Share with respect to 75,000 Warrants held by AREE and $14.75 per Common Share with respect to the remaining 50,000 Warrants. These Warrants are not reported as shares of beneficial interest on this Schedule 13D. Neither AREE nor any related parties has any present plans or proposals with respect to Wellington that relate to or that could result in the occurrence of any events set forth in paragraphs (a) through (j) of Item 4 of Schedule 13D. ITEM 5. INTEREST IN SECURITIES OF THE ISSUER. (A) AMOUNT BENEFICIALLY OWNED (i) 105,263 PERCENT OF CLASS (i) 12.5% (B) NUMBER OF SHARES AS TO WHICH SUCH PERSON HAS: (I) SOLE POWER TO VOTE OR TO DIRECT THE VOTE (i) 105,263 (II) SHARED POWER TO VOTE OR TO DIRECT THE VOTE (i) 0 (III) SOLE POWER TO DISPOSE OR TO DIRECT THE DISPOSITION OF (i) 105,263 5 (IV) SHARED POWER TO DISPOSE OR TO DIRECT THE DISPOSITION OF (i) 0 (C) DESCRIPTION OF TRANSACTIONS None ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER. Certain parties, including AREE, have agreed not to dispose of their Units in the Operating Partnership, which entitle the holder to future Common Shares of Wellington, until on or after November 20, 2001. AREE and its members have also agreed to limit the aggregate number of Common Shares that they may sell after they have exercised their Warrants or conversion rights in respect to the Common Shares. The amount of Common Shares they may sell are limited (a) during any 10-day period, to a number not to exceed 20% of the average daily trading volume of the Common Shares for the 30 trading days immediately preceding such 10-day period, and (b) during any year, to a number equal to one-third of the number if Units initially issued to such a person. Also, the parties, including AREE, entered into a certain Master Registration Rights Agreement, incorporated herein by reference, pursuant to which Wellington will register its Common Shares issuable upon the exchange of Units within one year following the issuance of such Units and will agree to use commercially reasonable efforts to register for resale, under the Securities Act of 1934, as amended, the Common Shares issuable upon exchange of the Units, and to maintain the effectiveness of such registration statement until the earlier of the date of disposition of all such Common Shares or the three years after the exchange of all Units. Certain shareholders have also entered into a Shareholders' Agreement, pursuant to which the subject shareholders agree to take certain actions with respect to the election of Messrs. Hoyt and Lambert to the Board of Trustees, the filling of vacancies on the Board and the election of certain executive officers of Wellington. There are no other contracts, arrangements, understandings or relationships affecting Wellington's Common Shares, between or among AREE, its principals and any other party. ITEM 7. MATERIAL TO BE FILED AS EXHIBITS. The following exhibits are filed herewith or incorporated by reference: 1. List of the members and officers of AREE. 2. Wellington's Schedule 14A, filed with the Commission on November 6, 1998 (incorporated by reference). 3. Amended and Restated Contribution Agreement between Wellington Properties Trust, Wellington Properties Investments, L.P., American Real Estate Equities, 6 LLC and the other LP Unit Recipients reflected on the signature page thereto, dated as of August 31, 1998 (incorporated by reference to Exhibit A of Wellington's Schedule 14A filed November 6, 1998). 4. Agreement of Limited Partnership of Wellington Properties Investments, L.P. dated as of August 31, 1998 (incorporated by reference to Exhibit C of Wellington's Schedule 14A filed November 6, 1998). 5. Contribution Agreement between Wellington Properties Investments, L.P. and Wellington Management Corporation dated as of August 31, 1998 (incorporated by reference to Exhibit B of Wellington's Schedule 14A filed November 6, 1998). 6. Master Registration Rights Agreement dated as of August 31, 1998 (incorporated by reference to Exhibit E of Exhibit C of Wellington's Schedule 14A filed November 6, 1998). 7. Form of Warrant (incorporated by reference to Exhibit D of Wellington's Schedule 14A filed November 6, 1998). 8. Employment Agreement, dated November 16, 1998, by and between Duane H. Lund and Wellington. 9. Shareholders' Agreement, dated as of August 31, 1998, by and among Wellington and subject shareholders. [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK] 7 SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. May 12, 1999 ----------------------------------- Date AMERICAN REAL ESTATE EQUITIES, LLC By: /s/ Duane H. Lund -------------------------------- Duane H. Lund Its: President EX-99.1 2 LIST OF MEMBERS 1 EXHIBIT 99.1 EXHIBIT 1 I. Members of AREE a. WLPT Funding, LLC, a Delaware limited liability company 11000 Prairie Lakes Drive, Suite 610, Minneapolis, MN 55344 a. Lambert Equities II, LLC, a Delaware limited liability company 4155 E Jewell, Suite 103, Denver, CO 80222 b. Steven B. Hoyt, an individual 708 South 3rd Street, Suite 108, Minneapolis, MN 55415 Each of the above members owns 33.33% of the membership interests in AREE. II. Officer a. Duane H. Lund, Secretary and President 11000 Prairie Lakes Drive, Suite 610, Minneapolis, MN 55344 EX-99.8 3 SCHEDULE 14A 1 EXHIBIT 99.8 DUANE H. LUND EMPLOYMENT AGREEMENT This Employment Agreement (this "Agreement"), is made and entered into as of the 16th day of November, 1998 (the "Effective Date"), by and between Wellington Properties Trust, a Maryland real estate investment trust (the "Employer"), and Duane H. Lund (the "Executive"). RECITALS A. The Employer desires to employ the Executive as an officer of the Employer for a specified term. B. The Executive is willing to accept such employment, upon the terms and conditions hereinafter set forth. NOW, THEREFORE, in consideration of the premises and of the covenants and agreements hereinafter contained, it is covenanted and agreed by and between the parties hereto as follows: AGREEMENTS 1. POSITION AND DUTIES. The Employer hereby employs the Executive as Chief Executive Officer of the Employer, or in such other comparable or other capacity as shall be mutually agreed between the Employer and the Executive. During the period of the Executive's employment hereunder, the Executive shall devote his best efforts and full working time, energy, skills and attention to the business and affairs of the Employer, on an exclusive basis. The Executive's duties and authority shall consist of and include all duties and authority customarily performed and held by persons holding equivalent positions with real estate investment trusts ("REIT's") similar in nature and size to the Employer, as such duties and authority are reasonably defined, modified and delegated from time to time by the Board of Directors of the Employer (the "Board"). The Executive shall have the powers necessary to perform the duties assigned to him, and shall be provided such supporting services, staff, secretarial and other assistance, office space and accouterments as shall be reasonably necessary and appropriate in light of such assigned duties. 2. COMPENSATION. As compensation for the services to be provided by the Executive hereunder, the Executive shall receive the following compensation and other benefits: (a) BASE SALARY. The Executive shall receive an aggregate annual minimum "Base Salary" at the rate of One Hundred and Fifty Thousand dollars ($150,000) per annum, payable in periodic installments in accordance with the regular payroll practices of the Employer. Such Base Salary shall, during the term hereof, be subject to review annually by the Compensation Committee of the Board of Directors of the Employer (the "Board") to 2 determine appropriate adjustments, if any, in Base Salary, in accordance with the Employer's compensation policies, as they may be established from time to time. (b) PERFORMANCE BONUS. The Executive shall receive an annual cash "Performance Bonus," of up to a maximum of two hundred percent (200%) of the Executive's Base Salary for such fiscal year payable within thirty (30) days after the end of the fiscal year of the Employer, which shall be based upon company-wide and individual performance criteria mutually agreed upon from time to time by the Executive and the Board, and which shall be determined by the Board based upon the recommendation of the Compensation Committee of the Board. (c) BENEFITS. The Executive shall be entitled to all perquisites, plans and benefits extended to similarly situated executives, including as such are stated in the Employer's Executive Perquisite Policy (the "Perquisite Policy") promulgated for the Board by the Compensation Committee of the Board, and which Perquisite Policy is hereby incorporated by reference, as amended from time to time. In addition, the Executive shall be entitled to participate in all plans and benefits generally, from time to time, accorded to employees of the Employer ("Benefit Plans"), all as determined by the Board from time to time based upon the input of its Compensation Committee. (d) WITHHOLDING. The Employer shall be entitled to withhold, from amounts payable to the Executive hereunder, any federal, state or local withholding or other taxes or charges which, from time to time, it is required to withhold. The Employer shall be entitled to rely upon the advice and counsel of its independent accountants with regard to any question concerning the amount or requirement of any such withholding. 3. TERM AND TERMINATION. (a) TERM. The term of this Agreement and the Executive's employment hereunder shall be three (3) years, commencing as of the Effective Date. This Agreement and the term of the Executive's employment hereunder will automatically renew for one (1) additional year on each anniversary of the Effective Date, unless sooner terminated at any time by either party, with or without cause, such termination to be effective as of either (i) one (1) business day after written notice to that effect is delivered by the Employer to the Executive [except as and to the extent otherwise required under subparagraphs (e) and (g) of this Section 3]; or (ii) thirty (30) days after written notice to that effect is delivered to the Employer by the Executive, whichever is applicable to the termination in question. (b) VOLUNTARY TERMINATION BY EXECUTIVE. In the event that the Executive voluntarily terminates his employment under this Agreement, other than pursuant to Section 3(d) of this Agreement, then the Employer shall only be required to pay the Executive such Base Salary and other benefits as shall have accrued through the effective date of the termination, and the Employer shall not be obligated to pay any Performance Bonus for the then-current (or any prior) fiscal year, or have any further obligations whatsoever to the 2 3 Executive (other than payment of amounts remaining unpaid pursuant to declared Performance Bonuses for prior fiscal years and reimbursement of previously approved expenses). (c) PREMATURE TERMINATION BY EMPLOYER. (i) In the event of the termination of the employment of the Executive under this Agreement: (A) by the Employer for any reason other than in accordance with the provisions of subparagraph (e) ("for cause"), subparagraph (f) (death), or subparagraph (g) (disability) of this Section 3, then notwithstanding any actual or allegedly available alternative employment or other mitigation of damages by (or which may be available to) the Executive, the Executive shall be entitled to a "Lump Sum Payment" equal to the sum of: (w) his monthly Base Salary then payable, multiplied by thirty-six (36); plus (x) three (3) times the average of the two (2) most recent annual Performance Bonuses that the Executive received from the Employer; plus (y) the monthly average of the two (2) most recent annual Performance Bonuses that the Executive received from the Employer, multiplied by the number of full calendar months the Executive was employed during the then-current fiscal year of the Employer. In the event of a termination governed by this subparagraph (c)(i) of Section 3, the Employer shall also: (z) continue for the Executive (provided that such items are not available to him by virtue of other employment secured after termination) the perquisites, plans and benefits provided under the Employer's Perquisite Policy and Benefit Plans as of and after the date of termination, provided such plans or benefits permit such continuation, [all items in (z) being collectively referred to as "Post-Termination Perquisites and Benefits"], for thirty-six (36) months following such termination. The payments and benefits provided under (x), (y), and (z) above shall be in addition to such Base Salary as shall have accrued and remain unpaid as well as any expense reimbursements or other payments relating to the period preceding such termination and remaining due and owing to the Executive but shall (aa) be in lieu of any Performance Bonus that the Executive might have otherwise earned for the then-current fiscal year; and (bb) be in addition to the payment of any theretofore declared Performance Bonus compensation for any prior fiscal year that remains unpaid as of the date of termination. (ii) Payment to the Executive under this Section 3(c) will be made in a lump sum. (d) CONSTRUCTIVE DISCHARGE. If at any time during the term of this Agreement, except in connection with a "for cause" termination pursuant to subparagraph (e) of this Section 3 or the Executive's death or disability termination pursuant to subparagraphs (f) and (g) respectively of this Section 3, the Executive is Constructively Discharged (as hereinafter defined), then the Executive shall have the right, by written notice to the Employer given within one hundred and twenty (120) days of such Constructive Discharge, to terminate his services hereunder, effective as of thirty (30) days after such notice, and the Executive shall have no further rights or obligations under this Agreement except as specified in Section 5 hereof. The Executive shall in such event be entitled to a Lump Sum Payment of his Base Salary and Performance Bonus compensation, as well as, all of the Post-Termination 3 4 Perquisites and Benefits, as if such termination of his employment had been effectuated pursuant to subparagraph (c) of this Section 3 and subject to all of the conditions set forth in subparagraph (c) of this Section 3. For purposes of this Agreement, the Executive shall be deemed to have been "Constructively Discharged" upon the occurrence of any one of the following events: (i) The Executive is removed from the position with the Employer set forth in Section 1 hereof, other than as a result of the Executive's appointment to a position of comparable or superior authority and responsibility, or other than for cause, and provided further, that the Employer shall be permitted to broaden and expand the Executive's responsibilities, whether in the same or different position without such change constituting a "Constructive Discharge" hereunder; (ii) The Executive shall fail to be vested by the Employer with the powers, authority and support services customarily attendant to said office within the REIT industry, other than for cause; (iii) The Employer shall formally notify the Executive, in writing, that the employment of the Executive will be terminated (other than for cause) or materially modified (other than for cause) in the future, or that the Executive will be Constructively Discharged in the future; or (iv) The Employer changes the primary employment location of the Executive to a place that is more than one hundred (100) miles from the primary employment location as of the Effective Date of this Agreement, other than in connection with a general relocation of the headquarters office (or staff) of the Employer; or (v) The Employer commits a material breach of its obligations under this Agreement, which it fails to cure or commence to cure within thirty (30) days after receipt of written notice thereof from the Executive (or if cure is not possible within such thirty (30) days, then the Employer must have failed to either commence to cure within thirty (30) days or have failed to complete to cure within sixty (60) days). (e) TERMINATION FOR CAUSE. The employment of the Executive under this Agreement may be terminated by the Employer on a "for cause" basis, as hereinafter defined. If the Executive's employment is terminated by the Employer "for cause" under this subparagraph (e), then the Employer shall only be obligated to pay the Executive such Base Salary as shall have accrued through the effective date of the termination, and the Employer shall not be required to pay the Executive any Performance Bonus for the current fiscal year, or have any further obligations whatsoever to the Executive (other than payment of amounts remaining unpaid pursuant to declared Performance Bonuses for prior fiscal years and reimbursement for previously approved expenses). Termination "for cause" shall mean the termination of Executive's employment on the basis of, or as a result of, one or more of the following circumstances: (i) a violation by the Executive of any applicable material law or 4 5 regulation respecting the business of the Employer; (ii) the Executive being found guilty of, or being publicly associated with, a felony or an act of dishonesty or an act of willful or reckless behavior in connection with the performance of his duties as an officer of the Employer, or otherwise; or (iii) the Executive's course of conduct constituting the willful or negligent failure of the Executive to perform his duties hereunder and which is, or may result in a material detriment to the Company as reasonably determined by the Board. The Executive shall be entitled to thirty (30) days' prior written notice (the "Termination Notice") of the Employer's intention to terminate his employment for cause and such Termination Notice shall: specify the grounds for such termination; afford the Executive a reasonable opportunity to cure any conduct or act (if curable) alleged as grounds for such termination; and, afford the Executive a reasonable opportunity to present to the Board his position regarding any dispute relating to the existence of such cause. Notwithstanding the foregoing procedure, the Employer (through the Board) shall have the unilateral right to make the final substantive determination as to whether the Executive has properly remedied or otherwise addressed those matters described in the Termination Notice as grounds for termination of the Executive's employment; and in the event that the Employer determines (as of the expiration of the above-contemplated 30-day period), that the Executive has not appropriately remedied or otherwise addressed those matters, then the Executive's term of employment shall in all events automatically terminate as of the thirtieth (30th) day after the Employer delivers the Termination Notice, without any responsibility of obligation of the Employer to provide the Executive with any further notice or explanation of the grounds for his termination. (f) PAYMENTS UPON DEATH. This Agreement shall terminate upon the death of the Executive. Upon the Executive's death and the termination of the Agreement the Employer shall only be obligated to pay: (i) such Base Salary as shall have accrued through the date of death; plus (ii) one-half (1/2) of the monthly average of the two (2) most recent annual Performance Bonuses that the Executive received from the Employer multiplied by the number of full calendar months the Executive was employed during the then-current fiscal year of the Employer, and the Employer shall not have any further obligations to the Executive (other than payment of amounts remaining unpaid pursuant to declared Performance Bonuses for prior fiscal years and reimbursement of previously approved expenses). The amount the Employer shall be obligated to pay upon the Executive's death shall be made to such beneficiary, designee or fiduciary as Executive may have designated in writing or, failing such designation, to the executor or administrator of his estate, in full settlement and satisfaction of all claims and demands on behalf of the Executive. Such payments shall be in addition to any other death benefits of the Employer made available for the benefit of the Executive, and in full settlement and satisfaction of all payments provided for in this Agreement. (g) DISABILITY DETERMINATION. The Employer may deliver a Termination Notice, except that the subject thereof shall be the Executive's "disability," and terminate the Executive's employment if the Executive is determined to be "disabled," which term shall mean the Executive's inability, as a result of physical or mental incapacity, substantially to perform his duties hereunder for a period of either six (6) consecutive months, or one hundred and twenty (120) business days within a consecutive twelve (12) month period. In the event of a dispute regarding the Executive's "disability," such dispute shall be resolved through 5 6 arbitration as provided in subparagraph (d) of Section 9 hereof, except that the arbitrator appointed by the American Arbitration Association shall be a duly licensed medical doctor. The Executive shall be entitled to the compensation and benefits provided under this Agreement during any period of incapacitation occurring during the term of this Agreement prior to the establishment of Executive's "disability" and subsequent termination of his employment. Upon the Executive's termination of employment under this Section 3(g), the Employer shall only be obligated to pay the Executive: (i) such Base Salary as shall have accrued through the effective date of termination; plus (ii) one-half (1/2) of the average of the two (2) most recent annual Performance Bonuses that the Executive received from the Employer multiplied by the number of full calendar months the Executive was employed during the then-current fiscal year of the Employer, and the Employer shall not have any further obligations to the Executive (other than payment of amounts remaining unpaid pursuant to declared Performance Bonuses for prior fiscal years and reimbursement of previously approved expenses). (h) TERMINATION UPON CHANGE IN CONTROL. (i) In the event of a Change in Control (as defined below) of the Employer and the termination of the Executive's employment by Executive or by the Employer under either 1 or 2 below in connection therewith ("Change in Control Termination"), the Executive shall be entitled to the Severance Amount determined under subparagraph (c) of this Section 3. The following shall constitute Change in Control Termination under this subparagraph (g): 1. The Executive terminates his employment under this Agreement pursuant to a written notice to that effect delivered to the Board within sixty (60) days after the occurrence of the event constituting a Change in Control. 2. Executive's employment is terminated (other than for cause or death or disability), but including Constructive Discharge, by the Employer or its successor, either within one (1) year prior to or following the event constituting a Change in Control. (ii) For purposes of this subparagraph, the term "Change in Control" shall mean the approval by the shareholders of the Employer of: (1) a merger or consolidation of the Employer, if the shareholders of the Employer immediately before such merger or consolidation do not, as a result of such merger or consolidation, own, directly or indirectly, more than fifty percent (50%) of the combined voting power of the then outstanding voting securities of the entity resulting from such merger or consolidation in substantially the same proportion as was represented by their ownership of the combined voting power of the voting securities of the Employer outstanding immediately before such merger or consolidation; (2) a complete or substantial liquidation or dissolution, or an agreement for the sale or other disposition, of all or substantially all 6 7 of the assets of the Employer; or (3) a complete or substantial liquidation or dissolution or an agreement for the sale or other disposition of its general partnership interests in Wellington Properties Investments, L.P. Notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely because forty percent (40%) or more of the combined voting power of the then-outstanding securities is acquired by: (1) a trustee or other fiduciary holding securities under one or more employee benefit plans maintained for employees of the entity; or (2) any corporation or other entity which, immediately prior to such acquisition, is substantially owned directly or indirectly by the stockholders of the Employer in the same proportion as their ownership of stock in the Employer immediately prior to such acquisition. (iii) If it is determined, in the opinion of the Employer's independent accountants, in consultation with the Employer's independent counsel, that any amount payable to the Executive by the Employer under this Agreement, or any other plan or agreement under which the Executive participates or is a party, would constitute an "Excess Parachute Payment" within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the "Code") and be subject to the excise tax imposed by Section 4999 of the Code (the "Excise Tax"), the Employer shall pay to the Executive a "grossing-up" amount equal to the amount of such Excise Tax and all federal and state income or other taxes with respect to the payment of the amount of such Excise Tax, including all such taxes with respect to any such grossing-up amount. If at a later date, the Internal Revenue Service assesses a deficiency against the Executive for the Excise Tax which is greater than that which was determined at the time such amounts were paid, the Employer shall pay to the Executive the amount of such unreimbursed Excise Tax plus any interest, penalties and professional fees or expenses, incurred by the Executive as a result of such assessment, including all such taxes with respect to any such additional amount. The highest marginal tax rate applicable to individuals at the time of payment of such amounts will be used for purposes of determining the federal and state income and other taxes with respect thereto. The Employer shall withhold from any amounts paid under this Agreement the amount of any Excise Tax or other federal, state or local taxes then required to be withheld. Computations of the amount of any grossing-up supplemental compensation paid under this subparagraph shall be made by the Employer's independent accountants, in consultation with the Employer's independent legal counsel. The Employer shall pay all accountant and legal counsel fees and expenses. 4. CONFIDENTIALITY AND LOYALTY. The Executive acknowledges that during the course of his employment prior to his entry into this Agreement, he has produced, received and had access to, and may hereafter continue to produce, receive and otherwise have access to various materials, records, data, trade secrets and information not generally available to the public (collectively, "Confidential Information") regarding the Employer and its subsidiaries and affiliates. Accordingly, during and subsequent to any termination of this Agreement, on any basis, the Executive shall hold in confidence and shall not directly or indirectly disclose, use, copy or make lists of any such Confidential Information, except to the extent that (a) such information is or thereafter becomes lawfully available from public sources; or (b) such 7 8 disclosure is authorized in writing by the Employer; or (c) such disclosure is required by law or by any competent administrative agency or judicial authority; or (d) such disclosure is otherwise reasonably necessary or appropriate in connection with the performance by the Executive of his duties hereunder. All records, files, documents, computer diskettes, computer programs and other computer-generated material, as well as all other materials or copies thereof relating to the Employer's business, which the Executive shall prepare or use, shall be and remain the sole property of the Employer, shall not be removed from the Employer's premises without its written consent, and shall be promptly returned to the Employer upon termination of the Executive's employment hereunder. The Executive agrees to abide by the Employer's general policies, as in effect from time to time, respecting confidentiality and the avoidance of interests conflicting or appearing to be in conflict with those of the Employer. 5. NON-COMPETITION COVENANT. (a) RESTRICTIVE COVENANT The Employer and the Executive have jointly reviewed the tenant lists, property submittals, logs, broker lists, and operations of the Employer, and have agreed that in consideration of this Agreement and the payment of the amounts described in Sections 2 and 3 hereof, the Executive hereby agrees that, except with the express prior written consent of the Employer, during the term of Executive's employment with the Employer hereunder (the "Restrictive Period"), he will not directly or indirectly compete with the business of the Employer, including, but not by way of limitation, by directly or indirectly violating any duty the Executive owes the Employer under applicable state law, owning, managing, operating, controlling, financing, or by directly or indirectly serving as an employee, officer or director of or consultant to, or by soliciting or inducing, or attempting to solicit or induce, any employee or agent of Employer to terminate employment with Employer and become employed by any person, firm, partnership, corporation, trust or other entity which owns or operates a business similar to that of the Employer (the "Restrictive Covenant"). For purposes of this subparagraph (a), a business shall be considered "similar" to that of the Employer if it is engaged in the ownership, acquisition, development, ownership, operation, management or leasing of multi-unit residential, commercial or industrial property (i) in any geographic market or territory in which the Employer owns properties either as of the date hereof or as of the date of termination of the Executive's employment; or (ii) in any "Target Market" publicly identified by the Employer; or (iii) in any market in which an acquisition is pending at the time of the termination of the Executive's employment. If the Executive violates the Restrictive Covenant and the Employer brings legal action for injunctive or other relief, the Employer shall not, as a result of the time involved in obtaining such relief, be deprived of the benefit of the full period of the Restrictive Covenant. Accordingly, the Restrictive Covenant shall be deemed to have the duration specified in this paragraph (a) computed from the date the relief is granted but reduced by the time between the period when the Restrictive Period began to run and the date of the first violation of the Restrictive Covenant by the Executive. In the event that a successor of the Employer assumes and agrees to perform this Agreement or otherwise acquires the Employer, this Restrictive Covenant shall continue to apply only to the primary service area of the Employer as it existed immediately before such assumption or acquisition and shall not apply to any of the successor's other 8 9 offices or markets. The foregoing Restrictive Covenant shall not prohibit the Executive from owning, directly or indirectly, capital stock or similar securities which are listed on a securities exchange or quoted on the National Association of Securities Dealers Automated Quotation System which do not represent more than five percent (5%) of the outstanding capital stock of any corporation. (b) REMEDIES FOR BREACH OF RESTRICTIVE COVENANT. The Executive acknowledges that the restrictions contained in Sections 4 and 5 of this Agreement are reasonable and necessary for the protection of the legitimate proprietary business interests of the Employer; that any violation of these restrictions would cause substantial injury to the Employer and such interests; that the Employer would not have entered into this Agreement with the Executive without receiving the additional consideration offered by the Executive in binding himself to these restrictions; and that such restrictions were a material inducement to the Employer to enter into this Agreement. In the event of any violation or threatened violation of these restrictions, the Employer shall be relieved of any further obligations under this Agreement, shall be entitled to any rights, remedies or damages available at law, in equity or otherwise under this Agreement, and shall be entitled to preliminary and temporary injunctive relief granted by a court of competent jurisdiction to prevent or restrain any such violation by the Executive and any and all persons directly or indirectly acting for or with him, as the case may be, while awaiting the decision of the arbitrator selected in accordance with paragraph (d) of Section 9 of this Agreement, which decision, if rendered adverse to the Executive, may include permanent injunctive relief to be granted by the court. 6. INTERCORPORATE TRANSFERS. If the Executive shall be transferred by the Employer to an affiliate of the Employer, such transfer shall not be deemed a Constructive Termination or otherwise be deemed to terminate or modify this Agreement, and the employing corporation to which the Executive shall have been transferred shall, for all purposes of this Agreement, be construed as standing in the same place and stead as the Employer as of the date of such transfer. For purposes hereof, an affiliate of the Employer shall mean any corporation or other entity directly or indirectly controlling, controlled by, or under common control with the Employer. For all relevant purposes hereof, the tenure of the Executive shall be deemed to include the aggregate term of his employment by both the Employer and its affiliate. 7. INTEREST IN ASSETS AND PAYMENTS. Neither the Executive nor his estate shall acquire any rights in any funds or other assets of the Employer, otherwise than by and through the actual payment of amounts payable hereunder; nor shall the Executive or his estate have any power to transfer, assign, anticipate, pledge, hypothecate or otherwise encumber any of said payments; nor shall any of such payments be subject to seizure for the payment of any debt, judgment, alimony, separate maintenance or be transferable by operation of law in the event or as a result of any bankruptcy, insolvency or other legal proceeding otherwise relating to the Executive. 9 10 8. INDEMNIFICATION. (a) The Employer shall provide the Executive (including his heirs, personal representatives, executors and administrators), during the term of this Agreement and thereafter throughout all applicable limitations periods, with coverage under the Employer's then-current directors' and officers' liability insurance policy, at the Employer's expense. (b) In addition to the insurance coverage provided for in paragraph (a) of this Section 8, the Employer shall defend, hold harmless and indemnify the Executive (and his heirs, executors and administrators) to the fullest extent permitted under applicable law, and subject to the requirements, limitations and specifications set forth in the Bylaws and other organizational documents of the Employer, against all expenses and liabilities reasonably incurred by him in connection with or arising out of any action, suit or proceeding in which he may be involved by reason of his having been an officer of the Employer (whether or not he continues to be an officer at the time of incurring such expenses or liabilities), such expenses and liabilities to include, but not be limited to, judgments, court costs and attorneys' fees and the cost of reasonable settlements. (c) In the event the Executive becomes a party, or is threatened to be made a party, to any action, suit or proceeding for which the Employer has agreed to provide insurance coverage or indemnification under this Section 8, the Employer shall, to the full extent permitted under applicable law, advance all expenses (including the reasonable attorneys' fees of the attorneys selected by Employer and approved by Executive for the representation of the Executive), judgments, fines and amounts paid in settlement (collectively "Expenses") incurred by the Executive in connection with the investigation, defense, settlement, or appeal of any threatened, pending or completed action, suit or proceeding, subject to receipt by the Employer of a written undertaking from the Executive covenanting: (i) to reimburse the Employer for all Expenses actually paid by the Employer to or on behalf of the Executive in the event it shall be ultimately determined that the Executive is not entitled to indemnification by the Employer for such Expenses; and (ii) to assign to the Employer all rights of the Executive to insurance proceeds, under any policy of directors' and officers' liability insurance or otherwise, to the extent of the amount of Expenses actually paid by the Employer to or on behalf of the Executive. 9. GENERAL PROVISIONS. (a) SUCCESSORS; ASSIGNMENT. This Agreement shall be binding upon and inure to the benefit of the Executive, the Employer, the Executive's personal representatives, the Employer's successors and assigns, and any successor or assignee of the Employer shall be deemed the successor to all or substantially all of the business and/or assets of the Employer, whether directly or indirectly, by purchase, merger, consolidation, acquisition of stock, or otherwise, by an agreement in form and substance satisfactory to the Executive, expressly to assume and agree to perform this Agreement in the same manner and to the same extent as the Employer would be required to perform if no such succession had taken place. The Executive may neither assign his duties or obligations this Agreement, nor sell, assign, pledge, 10 11 encumber, transfer or hypothecate his entitlement hereunder, and the Employer shall have no obligation to recognize any such purported alienation, or pay any funds to any party claiming the benefit thereof. (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 Executive and the Employer. (c) ENFORCEMENT AND GOVERNING LAW. The provisions of this Agreement shall be regarded as divisible and separate; if any of said provisions should be declared invalid or unenforceable by a court of competent jurisdiction, the validity and enforceability of the remaining provisions shall not be affected thereby. This Agreement shall be construed and the legal relations of the parties hereto shall be determined in accordance with the laws of the State of Wisconsin as it constitutes the situs of the corporation and the employment hereunder, without reference to the law regarding conflicts of law. (d) ARBITRATION. Except as otherwise provided in paragraph (b) of Section 5, any dispute or controversy arising under or in connection with this Agreement or the Executive's employment by the Employer shall be settled exclusively by arbitration, conducted by a single arbitrator sitting in Milwaukee, Wisconsin, 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 Chicago, Illinois, 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; including, if applicable, entry of a permanent injunction under paragraph (b) of Section 5. 11 12 (e) PRESS RELEASES AND PUBLIC DISCLOSURE. Any press release or other public communication by either the Executive or the Employer with any other person concerning the terms, conditions or circumstances of Executive's employment, or the termination of such employment, shall be subject to prior written approval of both the Executive and the Employer, subject to the proviso that the Employer shall be entitled to make requisite and appropriate public disclosure of the terms of this Agreement and any termination hereof, without the Executive's consent or approval, as may be required under applicable statutes, and the rules and regulations of the Securities and Exchange Commission and New York Stock Exchange. Employer shall be entitled to rely on the advice and counsel of its professional advisors in determining whether any such disclosure is required. (f) 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. (g) NOTICES. Notices given pursuant to this Agreement shall be in writing, and shall be deemed given when received if personally delivered, or on the first (1st) business day after deposit with a commercial overnight delivery service. Notices to the Employer shall be addressed and delivered to the principal headquarters office of the Employer, Attention: Chairman, with a copy concurrently so delivered to General Corporate Counsel to the Employer, Barack Ferrazzano Kirschbaum Perlman & Nagelberg, 333 West Wacker Drive, Suite 2700, Chicago, Illinois 60606, to the joint attention of Suzanne Bessette-Smith and Lynne D. Mapes-Riordan. Notices to the Executive shall be sent to the address set forth below the Executive's signature on this Agreement, or to such other address as Executive may hereafter designate in a written notice given to the Employer and its counsel. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. WELLINGTON PROPERTIES TRUST, DUANE H. LUND a Maryland real estate investment trust By: /s/ Robert Rice /s/ Duane Lund ------------------------------------ -------------------------- Address of Executive: 9169 Larkspur Lane Eden Prairie, MN 55347 12 EX-99.9 4 AMENDED AND RESTATED CONTRIBUTION AGREEMENT 1 EXHIBIT 99.9 SHAREHOLDERS' AGREEMENT THIS SHAREHOLDERS' AGREEMENT (this "AGREEMENT"), made as of the 31st day of August, 1998, by and among Wellington Properties Trust, a Maryland real estate investment trust (the "COMPANY") and the parties identified as "Subject Shareholders" on the signature page hereto (hereinafter referred to collectively as the "SUBJECT SHAREHOLDERS" and individually as a "SUBJECT SHAREHOLDER"); WITNESSETH: THAT WHEREAS, the Company is authorized to issue 100,070,000 common shares of beneficial interest, $0.01 par value per share, 734,161.409 shares of which were outstanding as of August 21, 1998 (and of which 106,917.187 are presently owned by the Subject Shareholders); WHEREAS, the Company has entered into a certain Amended and Restated Master Contribution Agreement dated August 31, 1998 (the "MASTER CONTRIBUTION AGREEMENT") with American Real Estate Equities, LLC ("AREE"), Steven B. Hoyt ("HOYT"), Lambert Equities II, LLC ("LAMBERT LLC"), and WLPT Funding, LLC ("WLPT"), pursuant to which AREE has agreed to contribute certain contracts to the Company in exchange for the issuance of limited partnership interests (the "LP UNITS") in Wellington Properties Investments, L.P. (the "UPREIT"), a Delaware limited partnership, of which the Company is the sole general partner; WHEREAS, Hoyt, Lambert LLC and WLPT are all of the members of AREE and whereas Duane H. Lund ("LUND") is a member of WLPT, and whereas Paul T. Lambert ("LAMBERT") is a member of Lambert LLC and, in those capacities, will receive LP Units pursuant to the Master Contribution Agreement and related agreements; WHEREAS, pursuant to the terms of the limited partnership agreement (the "OP AGREEMENT") of the UPREIT, the LP Units are convertible into common shares of beneficial interest of the Company; and WHEREAS, the Subject Shareholders desire to exercise the voting rights of their shares in the Company, and to restrict the transferability of their shares in the Company, as set forth in this Agreement; NOW THEREFORE, in consideration of the foregoing premises and the mutual covenants herein contained, and of other good and valuable considerations, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. DEFINITIONS. For purposes of this Agreement, the following terms shall have the respective meanings stated: 1.1. "AFFILIATE" shall mean, (i) with respect to any individual or entity (the "FIRST PERSON"), any entity (the "SECOND PERSON"), directly or indirectly, (A) controlled or 2 more than 50% owned (directly or indirectly) by the First Person, (B) if the First Person is an entity, controlling or owning (directly or indirectly) more than 50% of the First Person, or (C) if the First Person is an entity, controlled or more than 50% owned (directly or indirectly) by an individual or entity which controls or owns (directly or indirectly) more than 50% of the First Person, and (ii) with respect to any First Person who is an individual, any members of the immediate family of such individual and any trusts established exclusively for the benefit of such individual and/or any such immediate family members. If the First Person is an individual, any ownership and/or control of the Second Person by immediate family members and/or trusts who are Affiliates of such First Person pursuant to clause (ii) above shall be attributed to, and deemed exercised and owned by, such First Person. If the First Person is the successor to a Subject Shareholder by reason of death of such Subject Shareholder, any person who was an Affiliate of the decedent Subject Shareholder shall be deemed to be an Affiliate of such First Person. For purposes of this SECTION 1.1, "IMMEDIATE FAMILY" of an individual shall mean such individual's siblings, spouse and his lineal ancestors and descendants. 1.2. "SHAREHOLDERS" shall mean, as of any date, all beneficial holders of any or all of the Shares. 1.3. "SHARES" shall mean, as of any date, any and all shares of beneficial interest of the Company, of whatever class, issued and outstanding, including, but not limited to, shares issued or created in connection with any share dividend, share split or other capital readjustment. 1.4. "SUBJECT SHAREHOLDER" shall mean any person (other than the Company) who is or becomes a party to, or bound by, this Agreement, whether or not such person owns any Shares. 1.5. "SUBJECT SHARES" shall mean any and all Shares owned (whether directly or through a trust for the benefit of the Subject Shareholder) or controlled by any Subject Shareholder, from time to time, now or hereafter, including, without limitation any Shares issued in connection with the conversion of LP Units into Shares pursuant to the OP Agreement. 1.6. "TRANSFER" shall mean and include any sale, assignment, transfer, gift, pledge, encumbrance, hypothecation, distribution pursuant to a liquidation, or other disposition or alienation, direct or indirect, of any of the Shares or any interest of a Shareholder, legal, equitable or beneficial therein. 1.7. "WMC" shall mean Wellington Management Corporation. 2. ISSUANCE OF ADDITIONAL SHARES. In the event the Company intends to issue additional Shares (whether pursuant to a secondary offering, share dividend, share split or otherwise) to any or all of the Subject Shareholders or their Affiliates, whether or not such Shares are currently authorized by the Articles of Amendment and Restatement of the Company, such Shares, upon issuance, shall automatically become Subject Shares. As a condition to the issuance of any additional Shares to any Affiliate of a Subject Shareholder who 2 3 is not already a Subject Shareholder, the Company shall require that the proposed holder of such additional Shares execute and deliver to the Company a joinder (a "JOINDER") to this Agreement in the form attached hereto as EXHIBIT A. 3. MANAGEMENT OF THE COMPANY. 3.1. ELECTION OF TRUSTEES. The Subject Shareholders acknowledge that upon the closing of the transactions contemplated by the Master Contribution Agreement, the board of trustees of the Company will be expanded to seven members and Lambert and Hoyt shall be elected as trustees to fill the vacancies created by such expansion. Each Subject Shareholder (and its successors, transferees and assigns entitled to exercise such rights) shall take all action necessary or appropriate (including, without limitation, voting all Subject Shares, calling special meetings of Shareholders and executing and delivering proxies and written consents) to ensure that Hoyt and Lambert are and continue to be elected to the board of trustees of the Company. In addition, in the event that any additional vacancies occur in the board of trustees of the Company, each Subject Shareholder shall use its best efforts to cause the board of trustees of the Company to fill any such vacancy with a person selected by AREE and WMC. In the event that any trustee decides not to stand for re-election, each Subject Shareholder shall use its best efforts to cause the board of trustees of the Company to present to the Shareholders, at the next Shareholders meeting, a person selected by AREE and WMC as a nominee for election to such position. 3.2. ELECTION OF OFFICERS. Each Subject Shareholder shall use its best efforts to cause the board of trustees of the Company to elect Lund as the Chief Executive Officer of the Company, Robert Rice as the President of the Company and Arnold Leas as Chairman of the Board of the Company. 3.3. CERTAIN PROXIES. In the event that (i) any Subject Shareholder shall fail to vote its Subject Shares in accordance with the terms of this SECTION 3 with respect to any matter provided for in this SECTION 3, (ii) such Subject Shareholder has been given written notice of such failure, and (iii) if such failure is subject to cure, such failure has not been cured within five days after such notice has been effectively given to such Subject Shareholder, then, in addition to all other remedies available at law and in equity with respect to such failure, such Subject Shareholder (the "DEFAULTING SHAREHOLDER") shall be deemed to have granted the other Subject Shareholders (the "NONDEFAULTING SHAREHOLDERS") an irrevocable proxy coupled with an interest to vote all the Subject Shares of the Defaulting Shareholder in accordance with the terms of this SECTION 3 as to which the Defaulting Shareholder has failed to so vote, and the Nondefaulting Shareholders shall not be entitled to vote the Subject Shares of the Defaulting Shareholder with respect to any other matter. 4. GENERAL RESTRICTIONS ON TRANSFER. In the event a Subject Shareholder attempts to Transfer any or all of its Shares to any person, such Transfer shall be valid only as provided in and permitted by SECTION 5. Any purported Transfer made any time hereafter in violation of the provisions of SECTIONS 4 or 5 shall be absolutely null and void and shall confer no rights whatsoever on the purported transferee as against the Company or any other Shareholders. 3 4 The Company shall not transfer, and shall cause its transfer agent not to transfer, on the books of the Company, or the transfer agent, as the case may be, any certificates for any Shares owned by any Subject Shareholder, nor issue any certificate in lieu of any such Shares, nor issue any new Shares, unless each and all of the conditions hereof affecting such Shares or certificates and the transfer thereof have been complied with. Until the certificates representing the Shares to be transferred (either properly endorsed for transfer or accompanied by the necessary stock powers, with all necessary stock transfer stamps attached thereto) are delivered to the Company, no such Transfer of Subject Shares shall be made and title shall remain in the transferring Shareholder. 5. AFFILIATE TRANSFERS. 5.1. TO SUBJECT SHAREHOLDERS. A Subject Shareholder may Transfer Subject Shares to any other Subject Shareholder. 5.2. TO AFFILIATES. A Subject Shareholder may Transfer Subject Shares to any Affiliate of any Subject Shareholder, which Affiliate is not already a Subject Shareholder, provided the transferring Subject Shareholder delivers a Joinder executed by the transferee to the Company prior to such Transfer. 6. LEGEND ON CERTIFICATES. In addition to any other legends required by agreement or by law, each certificate representing one or more of the Subject Shares now or hereafter held by any of the Subject Shareholders shall be endorsed with the following legend (the "REQUIRED LEGEND") in substantially the following form: "The voting, transfer, pledge or other encumbrance of the securities represented by this certificate is restricted under the terms of a certain Shareholders' Agreement dated as of August 31, 1998, a copy of which is on file at the office of the Company." In the event that the Company at any time or times shall distribute any Shares as a dividend upon the Subject Shares or shall issue any Shares in lieu of, or in exchange for, or in addition to, the Subject Shares, or shall have had a reclassification of Shares, then all certificates evidencing the same shall bear the Required Legend. Promptly after execution and delivery of this Agreement, each Subject Shareholder shall deliver certificates representing all of its Subject Shares to the Company, whereupon the Company shall endorse such certificates with the Required Legend or shall reissue such certificates with the Required Legend. 7. REPRESENTATIONS AND WARRANTIES. Each of the parties hereto represents and warrants to the others that as of the date of its entry into this Agreement: 7.1. GENERAL. Such party has full power, authority and legal capacity to execute and deliver this Agreement and to perform its obligations hereunder, in each capacity in which such party is executing this Agreement, and no consent, approval or other authorization of, notice to or registration with any governmental authority, or other person, is required in connection with the execution, delivery and performance of this Agreement by such 4 5 party, which has not been obtained, given or made. With respect to any party which is not a natural person, the execution, delivery and performance of the Agreement have been duly authorized by all requisite action by such entity, and are not in conflict with the terms of any organizational instruments of such entity. 7.2. OWNERSHIP OF SHARES. Such party is the true and lawful owner, beneficially and of record, of that number of Shares indicated below such parties signature. 8. TERMINATION. 8.1. GENERAL. This Agreement shall terminate upon the first of any of the following events to occur: (i) the date that is 10 years after the date hereof; (ii) the written agreement of AREE and WMC to terminate this Agreement; (iii) there ceasing to be any Shares of the Company outstanding other than those held by a single Shareholder, (iv) the dissolution of the Company, or (v) the consummation of a merger or consolidation of the Company as to which an entity other than the Company is a surviving entity, unless the stock of such surviving entity is owned by substantially the same parties and in substantially in the same proportions as the stock of the Company was owned prior to any such merger or consolidation. The termination of this Agreement shall not impair or affect any obligations or liabilities accrued prior to any such termination. 8.2. ELECTION OBLIGATIONS. The obligations to elect Arnold K. Leas, Robert F. Rice, Hoyt, Lambert and/or Lund set forth in SECTION 3 shall terminate with respect to any of the foregoing individuals upon such individual's death, disability or resignation from the Company. 9. MISCELLANEOUS. 9.1. NOTICES. All notices given pursuant to or in connection with this Agreement shall be in writing and shall be served by United States registered or certified mail, return receipt requested, proper postage prepaid, or by a reputable express delivery service which guarantees next business day delivery, addressed, as appropriate, to the Company at its registered office, and to any Shareholder at the last address of such Shareholder shown on the records of the Company. Any such notice shall be deemed given and effective (a) if by registered or certified mail, five days after deposit thereof in the U.S. mail, and (b) if by such express delivery service, on the next business day following deposit thereof with such express delivery service. 9.2. BENEFIT AND ASSIGNMENT. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective heirs, executors, administrators, legal representatives, successors, and assigns and to no other persons or entities. No person may assign any of his rights or obligations under this Agreement without the unanimous written consent of all other parties hereto. If any original Subject Shareholder or any other subsequent Subject Shareholder transfers any of its Shares to any Affiliate of any Subject Shareholder, for any reason whatsoever, then, without limitation of SECTION 4, such transferee shall become and be conclusively deemed to be a party to this Agreement and be 5 6 bound by its terms, without further action on his part. In addition, as a condition to the issuance of a replacement certificate to said transferee, again without limitation of SECTION 4, said transferee shall execute and deliver a Joinder to the Company, if such transferee has not already delivered such Joinder. 9.3. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between the parties hereto pertaining to the subject matter hereof, and supersedes all prior and contemporaneous agreements and understandings of the parties. The parties hereto may amend or modify this Agreement in such manner as may be agreed upon only by a written instrument executed by all such parties. 9.4. NO WAIVER. No waiver of any provision or condition of this Agreement by any party shall be valid unless in writing signed by such party. No such waiver shall be taken as a waiver of any other or similar provision or of any future event, act, or default. 9.5. SEVERABILITY. In the event any provision of this Agreement shall be unenforceable in whole or in part, such provision shall be limited to the extent necessary to render the same valid, or shall be excised from this Agreement, as circumstances require, and this Agreement shall be construed as if said provision had been incorporated herein as so limited, or as if said provision had not been included herein, as the case may be. 9.6. CONSTRUCTION. This Agreement shall be governed by the laws of the State of Maryland, without reference to its statutory or judicially pronounced rules regarding conflicts of law or choice of law. Wherever used in this Agreement, the singular shall be construed to include the plural and vice versa, where applicable, and the use of the masculine, feminine or neuter gender shall include the other genders. The term "person" shall refer to both natural persons and legal entities. The headings used in this Agreement are for convenience only and do not define, limit or construe the contents thereof. 9.7. COUNTERPARTS. This Agreement may be executed in any number of identical counterparts, any or all of which may contain the signatures of less than all of the parties, and all of which shall be construed together as but a single instrument. 6 7 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the day and year first above written. SUBJECT SHAREHOLDERS: AMERICAN REAL ESTATE EQUITIES, LLC, a Delaware limited liability company By: /s/ Duane Lund ------------------------------------- Its: Member ___0___ Shares /s/ Steven B. Hoyt ---------------------------------------------- STEVEN B. HOYT ___0___ Shares /s/ Paul T. Lambert ---------------------------------------------- PAUL T. LAMBERT ___0___ Shares /s/ Duane H. Lund ---------------------------------------------- DUANE H. LUND ___0___ Shares WLPT FUNDING, LLC, a Delaware limited liability company By: /s/Duane H. Lund ------------------------------------- Its: Member ___0___ Shares LAMBERT EQUITIES II, LLC, a Delaware limited liability company By: /s/Paul T. Lambert ------------------------------------- Its: Member ___0___ Shares 7 8 WELLINGTON MANAGEMENT CORPORATION, a Wisconsin corporation By: /s/Arnold K. Leas ------------------------------------- Its: President 84,002 Shares --------- /s/ Arnold K. Leas ---------------------------------------------- ARNOLD K. LEAS 20,210.001 Shares ------------ /s/ Rose Marie Leas ---------------------------------------------- ROSE MARIE LEAS 605.186 Shares --------- /s/ Gregory Leas ---------------------------------------------- GREGORY LEAS 1,100 Shares ------- /s/ Robert F. Rice ---------------------------------------------- ROBERT F. RICE 1,000 Shares ------- COMPANY: WELLINGTON PROPERTIES TRUST, a Maryland real estate investment trust By: /s/ Arnold K. Leas ------------------------------------- Its President ------------------------------------- 8 9 EXHIBIT A FORM OF JOINDER The undersigned hereby joins in and agrees to be bound by all of the terms and provisions applicable to "Subject Shareholders" under that certain Shareholders' Agreement between Steven B. Hoyt, Paul T. Lambert, Duane H. Lund, American Real Estate Equities, LLC, WLPT Funding, LLC, Lambert Equities II, LLC, Arnold K. Leas, Rose Marie Leas, Gregory Leas, Robert F. Rice, Wellington Management Corporation and Wellington Properties Trust dated August 31, 1998 (as amended from time to time, the "AGREEMENT"). The Shares (as defined in the Agreement) of the undersigned shall be subject to all of the terms and provisions of the Agreement relating to Subject Shares (as defined in the Agreement). The undersigned shall be deemed to be a party to the Agreement. --------------------------------------------- Shares -------- -----END PRIVACY-ENHANCED MESSAGE-----