<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------------
FORM 8-K/A
CURRENT REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
---------------------------------
Date of Report June 12, 1996
First Union Real Estate Equity and Mortgage Investments
(Exact name of registrant as specified in its charter)
Ohio 1-6249 34-6513657
State or other jurisdiction (Commission File Number) (I.R.S. Employer
Identification No.)
Suite 1900, 55 Public Square
Cleveland, Ohio 44113-1937
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (216) 781-4030
Former name or former address, if changed since last report.
Total number of pages in report 5.
<PAGE> 2
ONLY THOSE ITEMS AMENDED ARE REPORTED HEREIN
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On June 12, 1996, First Union signed a Purchase and Sale Agreement with
Marathon U.S. Realties, Inc. for the purchase by First Union of a portfolio of
nine retail shopping malls as previously reported in a Form 8-K dated June 12,
1996.
As of September 27, 1996, First Union completed the transaction by
investing $30 million as equity in a joint venture which purchased the portfolio
of nine retail shopping malls, comprising approximately 5,800,000 square feet of
gross leasable area, located in mid-size markets in Louisiana, Arkansas, Texas,
Oklahoma and New Mexico. The joint venture's purchase price for the nine malls
was $311.7 million which included the assumption of approximately $50 million in
existing mortgage debt and a new mortgage loan for $165 million provided by an
affiliate of one of the members of the joint venture, as described below. Eight
of the mall properties were acquired in fee and one was acquired through the
purchase of a 50% partnership interest in the mall. The acquisition of Pecanland
Mall, one of the eight malls acquired in fee, is contingent upon the receipt of
a consent by the mortgagee, which consent First Union expects the joint venture
to receive.
The members of the joint venture are First Union and affiliates of
General Motors Acceptance Corporation ("GMAC") and Cargill, Incorporated
("Cargill"). First Union's $30 million investment in the joint venture is
comprised of $3.5 million in common and $26.5 million in preferred equity. The
aggregate equity investment of the other parties is $83.5 million which is
comprised of $10 million in common ($6.6 million owned by GMAC and $3.4 million
owned by Cargill) and $73.5 million in preferred equity owned by GMAC and
Cargill, as described below.
The preferred equity is divided into three series, of which First
Union's is the most junior in distribution and liquidation priority. First
Union's preferred equity is entitled to distributions at a fixed rate of 10% for
the first five years and 4% thereafter. The two senior series of preferred
equity consist of a $35 million series owned by Cargill (the "Senior Preferred")
and a $38.5 million series owned by GMAC (the "Series B Preferred"). The Senior
Preferred is entitled to distributions at a floating rate equal to LIBOR plus
500 basis points (which increases by 50 basis points after each three month
period). The joint venture has the right to redeem the Senior Preferred at any
time. First Union and GMAC will seek an investment by a third party to replace
Cargill's Senior Preferred and common equity as soon as practicable. The Series
B Preferred is entitled to distributions at a floating rate equal to LIBOR plus
600 basis points. The joint venture has purchased an interest rate cap that
limits its exposure to LIBOR increasing above 7%. Generally, additional income
and cash, if any, after preferred distributions will be allocated and
distributed proportionately to the joint venture members according to their
common equity ownership.
First Union has call options on all of the preferred equity held by the
other joint venture members, commencing immediately with respect to the Senior
Preferred and commencing after six months with respect to the Series B
Preferred. The call price of the Senior Preferred is equal to 100% of its face
amount plus accumulated distributions thereon, with interest but without any
additional premium. The call price of the Series B Preferred is equal to 100% of
its face
2
<PAGE> 3
amount plus the amount necessary to provide the holder thereof with a 15.75%
annualized internal rate of return, after taking into account distributions
previously made on the Series B Preferred.
The holders of the Senior Preferred and the Series B Preferred have put
options back to the joint venture with respect to their preferred equity
commencing after two years in the aggregate amount of $10 million; put options
on the remainder of the preferred equity are exercisable in the third and fourth
years. First Union has the right to contribute capital to the joint venture in
order to enable the joint venture to satisfy those puts. Any such capital
contributed by First Union will constitute additional amounts of First Union's
series of preferred equity. The put prices are identical to the call prices, as
described above.
If First Union is unable or unwilling to contribute capital to the
joint venture so that the put options can be satisfied, GMAC and Cargill have
the right to offset the dollar amount of such put option by transferring an
equivalent amount of capital from First Union's capital account and increasing
their own accounts by such amount. As long as First Union has any capital
balance remaining in the joint venture, it has the right to subsequently have
its capital account restored by meeting the put and paying certain additional
amounts. There can be no assurance that First Union will have sufficient funds
available to make the capital contributions which may be required to satisfy the
put options of the other joint venture members or that First Union will choose
to make such capital contributions at that time. The failure to make such
capital contributions would have a material adverse effect on the financial
condition of First Union.
Once all the Senior Preferred and the Series B Preferred have been
acquired, First Union will have call options on all of the common equity of the
other joint venture members as well. The call price of the common equity is
equal to 100% of the face amount plus the amount necessary to provide the holder
thereof with a 20% annualized internal rate of return, after taking into account
distributions previously made on the common equity. In addition, for so long as
Cargill's common equity is outstanding, Cargill is entitled to receive $75,000
per month. There are no put options on the common equity.
GMAC Commercial Mortgage Corporation provided an aggregate of $165
million in new first mortgage financing for this acquisition. The financing
encumbers seven of the properties and those properties are cross-collateralized
and their mortgages have cross default provisions. The mortgages are at an
interest rate of 8.43% and provide for amortization on a 30-year schedule. The
unpaid balances are due ten years after commencement.
The joint venture members selected First Union to be the managing
member of the joint venture, and First Union has in turn retained its affiliate,
First Union Management, Inc. (the "Management Company") as property manager for
all nine malls. Although presently a minority investor in the joint venture,
First Union has approval rights over major business and operating issues, such
as capital expenditures, leasing criteria, dispositions of any one of the nine
mall properties and changes to the joint venture arrangements.
3
<PAGE> 4
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
Listed below are the financial statements, pro forma financial
information and exhibits filed as a part of this report:
a. Financial Statements of Business Acquired.
The financial statements of the Marathon Centers are filed as
part of this report on Form 8-K/A beginning on page F-2.
b. Pro Forma Financial Information.
The pro forma financial information of First Union Real Estate
Equity and Mortgage Investments is filed as part of this report on Form
8-K/A beginning on page F-6.
c. Exhibits.
23.1 Consent of Price Waterhouse LLP
99.1 Press Release, dated October 1, 1996
99.2 Purchase and Sale Agreement, dated as of June 12, 1996,
between Marathon U.S. Realties, Inc., as Seller and
First Union Real Estate Equity and Mortgage Investments,
as Purchaser, as amended
99.3 Investment Agreement, dated as of September 27, 1996,
between GMAC Commercial Equity Investments, Inc., a
Pennsylvania corporation, First Union Real Estate
Equity and Mortgage Investments, an Ohio business
trust, and Cargill Financial Services Corporation, a
Delaware corporation.
99.4 Limited Liability Company Agreement of Southwest
Shopping Centers Co. I, L.L.C., a Delaware limited
liability company, dated as of September 27, 1996
99.5 Form of Management and Leasing Agreement, dated as of
September 30, 1996, between
_________________________________________ and First
Union Management, Inc., a Delaware corporation
99.6 Joinder Agreement, dated as of September 26, 1996,
among Marathon U.S. Realties, Inc., Centrixx Realty
Holdings Limited, Southwest Shopping Centers Co. I,
L.L.C. and First Union Real Estate Eqity and Mortgage
Investments
99.7 Joinder Agreement, dated as of September 26, 1996, among
Marathon U.S. Realties, Inc., Centrixx Realty Holdings
Limited, Southwest Shopping Centers Co. II, L.L.C. and
First Union Real Estate Equity and Mortgage Investments
99.8 Joinder Agreement, dated as of September 26, 1996, among
Marathon U.S. Realties, Inc., Centrixx Realty Holdings
Limited, Temple Shopping Center Co., L.L.C. and
First Union Real Estate Equity and Mortgage Investments
99.9 Escrow Agreement, dated as of September 26, 1996 among
Marathon U.S. Realties, Inc., First Union Real Estate
Equity and Mortgage Investments, Southwest Shopping
Centers Co. I, L.L.C. and First American Title
Insurance Company
4
<PAGE> 5
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
FIRST UNION REAL ESTATE EQUITY AND
MORTGAGE INVESTMENTS
By: /s/ James C. Mastandrea
----------------------------------------
James C. Mastandrea, Chairman, President,
Chief Executive Officer, and Chief
Financial Officer
Date: October 7, 1996
5
<PAGE> 6
INDEX TO FINANCIAL STATEMENTS AND
PRO FORMA FINANCIAL INFORMATION
The following financial statements and pro forma financial information are
included in Item 7 of this report on Form 8-K/A:
<TABLE>
<CAPTION>
THE MARATHON CENTERS PAGE
<S> <C>
Report of Independent Accountants F-2
Schedule of Operating Revenues and F-3
Certain Expenses for the Years Ended
December 31, 1995, 1994 and 1993
Notes to Schedule of Operating Revenues and
Certain Expenses for the Years Ended
December 31, 1995, 1994 and 1993 F-4 - F-5
FIRST UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS
Pro Forma Condensed Combined Statements of
Income for the Year Ended December 31, 1995
and the Nine Months Ended September 30, 1996 (Unaudited) F-7 - F-8
Condensed Combined Balance
Sheet as of September 30, 1996 (Unaudited) F-9
</TABLE>
F-1
<PAGE> 7
REPORT OF INDEPENDENT ACCOUNTANTS
To the Owners of the Marathon Centers:
We have audited the accompanying schedule of operating revenues and
certain expenses of the Marathon Centers (the "Properties") for each of the
three years in the period ended December 31, 1995. This schedule is the
responsibility of the Properties' management. Our responsibility is to express
an opinion on this schedule based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the schedule of operating revenues and
certain expenses is free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
schedule. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
schedule presentation. We believe that our audit provides a reasonable basis for
our opinion.
The accompanying schedule of operating revenues and certain expenses
was prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission in connection with the proposed sale of the
properties as described in Note 1 and is not intended to be a complete
presentation of the Properties' revenues and expenses.
In our opinion, the schedule of operating revenues and certain expenses
referred to above presents fairly, in all material respects, the operating
revenues and certain expenses of the Marathon Centers on the basis describe in
Note 1, for each of the three years in the period ended December 31, 1995, in
conformity with generally accepted accounting principles.
PRICE WATERHOUSE LLP
Dallas, Texas
July 3, 1996
F-2
<PAGE> 8
MARATHON CENTERS
SCHEDULE OF OPERATING REVENUES AND CERTAIN EXPENSES
(IN THOUSANDS)
<TABLE>
<CAPTION>
Year Ended December 31,
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Operating revenues $62,168 $60,457 $57,385
Operating expenses:
Property operating expenses 20,234 20,618 19,501
Property taxes 3,375 3,392 3,363
------- -------- --------
Excess of revenues over operating expenses 38,559 36,447 34,521
General and administrative expenses 4,690 4,518 3,890
------- -------- --------
Excess of operating revenues over certain expenses $33,869 $31,929 $30,631
======= ======== ========
</TABLE>
The accompanying notes are an integral part of this schedule.
F-3
<PAGE> 9
MARATHON CENTERS
NOTES TO THE SCHEDULE OF OPERATING REVENUES AND CERTAIN EXPENSES
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
The accompanying schedule of operating revenues and certain expenses
relates to the operations of the Marathon Centers (the Properties). The
Properties consist of the following nine regional malls:
Alexandria Mall, Alexandria, Louisiana
Brazos Mall, Lake Jackson, Texas
Killeen Mall, Killeen, Texas
Mesilla Valley Mall, Las Cruces, New Mexico
Park Plaza, Little Rock, Arkansas
Pecanland Mall, Monroe, Louisiana
Shawnee Mall, Shawnee, Oklahoma
Temple Mall, Temple, Texas
Villa Linda Mall, Santa Fe, New Mexico
Except for Temple Mall and Villa Linda Mall, the Properties are owned
by Marathon U.S. Realties, Inc. (MUSRI). Temple Mall is owned by Temple Mall
Company, a Texas general partnership, in which MUSRI owns a 50% general
partnership interest. Villa Linda Mall is owned by Centrixx Realty Holdings
Limited, an affiliate of MUSRI. MUSRI, Temple Mall Company and Centrixx Realty
Holdings Limited are collectively referred to as the Owners. The accompanying
schedule of operating revenues and certain expenses includes the following
amounts for MUSRI's 50% interest in Temple Mall Company (in thousands):
<TABLE>
<CAPTION>
Year Ended December 31,
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Revenues $3,049 $3,162 $2,828
Property operating expenses 1,161 1,059 986
Property taxes 214 266 266
</TABLE>
Basis of Presentation
The Owners are contemplating the sale of the Properties to First Union
Real Estate Equity and Mortgage Investments. Accordingly, certain expenses which
may not be comparable to the expenses expected to be incurred in the proposed
future operations of the Properties, have been excluded under the assumption
that the potential sale will be consummated. Expenses excluded consist of
depreciation and valuation adjustments to the buildings and improvements,
interest expense on debt incurred by the Properties to acquire and develop the
property, and amortization of expenses not directly related to the proposed
future operations of the Properties. Certain general and administrative expenses
incurred net of fee revenues earned by MUSRI in 1995, 1994, and 1993 of $93,464,
$403,536, and $406,627, respectively, related to properties not included in the
potential sale have been excluded. Limited administrative services are provided
at no cost to MUSRI by an affiliate.
F-4
<PAGE> 10
Revenue and Expense Recognition
The accompanying schedule of operating revenues and certain expenses
has been prepared on the accrual basis of accounting.
2. FUTURE MINIMUM RENTALS UNDER OPERATING LEASES
The future minimum lease payments to be received by the Owners under
noncancellable operating leases are as follows (in thousands):
<TABLE>
<CAPTION>
Year Ending December 31:
<S> <C> <C>
1996 $ 32,927
1997 30,365
1998 28,125
1999 24,259
2000 21,306
Thereafter 82,060
--------
$219,042
========
</TABLE>
F-5
<PAGE> 11
FIRST UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS
PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
The following sets forth the unaudited historical combined condensed Balance
Sheet of First Union Real Estate Equity and Mortgage Investments as of September
30, 1996 and the unaudited pro forma combined condensed Statements of Income for
the year ended December 31, 1995 and the nine months ended September 30, 1996.
The unaudited pro forma combined condensed financial information is based on the
historical financial statements of First Union and reflects First Union's
investment in a joint venture that acquired the nine mall portfolio from
Marathon U. S. Realties, Inc. Eight of the malls were acquired in fee and one
was acquired through the purchase of a 50% partnership interest in the mall. The
acquisition of one of the eight malls acquired in fee is contingent upon the
receipt of a consent by the mortgagee, which is assumed to occur in the pro
forma financial information. The unaudited pro forma information should be read
in conjunction with the historical combined financial statements and notes
related thereto of First Union.
The unaudited combined condensed Balance Sheet of First Union as of September
30, 1996 includes the investment in the joint venture which occurred as of
September 27, 1996. The unaudited combined condensed Statements of Income for
the year ended December 31, 1995 and nine months ended September 30, 1996, are
presented as if the investment in the joint venture occurred on January 1, 1995.
In management's opinion, all adjustments necessary to reflect the joint venture
investment have been included in the accompanying combined financial statements.
The unaudited pro forma combined condensed Statements of Income are not
necessarily indicative of the results which actually would have occurred if the
transaction had been consummated at the beginning of the periods presented, nor
do they purport to represent the financial results of operations for future
periods.
F-6
<PAGE> 12
FIRST UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS
PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
(IN THOUSANDS)
------------------------------------------
FIRST UNION
(HISTORICAL) ADJUSTMENTS PRO FORMA
------------ ------------ ---------
<S> <C> <C> <C>
Revenues
Rents $74,349 $ $74,349
Management and leasing fees 4,616 (a) 4,616
Interest 4,856 4,856
Equity in earnings of joint venture 1,405 (b) 1,405
-------- -------- --------
79,205 6,021 85,226
Expenses
Property operating 25,982 25,982
Real estate taxes 8,555 8,555
Depreciation and amortization 11,901 11,901
Interest 22,397 2,337 (c) 24,734
General and administrative 7,114 2,600 (d) 9,714
-------- -------- --------
75,949 4,937 80,886
Income before capital gain or loss,
extraordinary loss and cumulative
effect of accounting change $ 3,256 $1,084 $ 4,340
Per Share Data:
Income before capital gain or loss,
extraordinary loss and cumulative
effect of accounting change $ 0.18 $ 0.06(e) $ 0.24
======== ======== ========
</TABLE>
(a) To reflect the management and leasing fees assumed to be received by
First Union from the joint venture for management of the properties.
(b) To reflect First Union's share of equity earnings in the joint venture.
(c) To reflect the additional interest cost associated with financing First
Union's $30 million investment in the joint venture through bank loans.
(d) To reflect the additional estimated general and administrative costs
associated with managing and leasing the joint venture properties.
(e) The pro forma per share amount for income before capital gain or loss,
extraordinary loss and cumulative effect of change in accounting is based
on the weighted average shares of beneficial interest outstanding of
18,116,000.
F-7
<PAGE> 13
FIRST UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS
PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
(IN THOUSANDS)
---------------------------------------
FIRST UNION
(HISTORICAL) ADJUSTMENTS PRO FORMA
------------ ------------- ---------
<S> <C> <C> <C>
Revenues
Rents $55,386 $ $55,386
Management and leasing fees 3,407 (a) 3,407
Interest 3,609 3,609
Equity in earnings of joint venture 444 (b) 444
-------- ------- --------
58,995 3,851 62,846
Expenses
Property operating 19,517 19,517
Real estate taxes 6,198 6,198
Depreciation and amortization 9,858 9,858
Interest 17,513 1,688 (c) 19,201
General and administrative 4,769 1,950 (d) 6,719
-------- ------- --------
57,855 3,638 61,493
Income before capital gain or loss,
extraordinary loss and cumulative
effect of accounting change $ 1,140 $ 213 $ 1,353
Per Share Data:
Income before capital gain or loss,
extraordinary loss and cumulative
effect of accounting change $ 0.07 $ 0.01(e) $ 0.08
======== ======= ========
</TABLE>
(a) To reflect the management and leasing fees assumed to be received by
First Union from the joint venture for management of the properties.
(b) To reflect First Union's share of equity earnings in the joint venture.
(c) To reflect the additional interest cost associated with financing First
Union's investment of $30 million in the joint venture through bank loans.
(d) To reflect the additional estimated general and administrative costs
associated with managing and leasing the joint venture properties.
(e) The pro forma per share amount for income before capital gain or loss,
extraordinary loss and cumulative effect of change in accounting is based
on the weighted average shares of beneficial interest outstanding of
17,237,000.
F-8
<PAGE> 14
FIRST UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS
HISTORICAL COMBINED CONDENSED BALANCE SHEET
AS OF SEPTEMBER 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS (IN THOUSANDS)
<S> <C>
Investments in real estate, net $ 340,715
Investment in joint venture 30,000 (a)
Mortgage loans receivable 42,206
Other assets 17,346
----------
$ 430,267
==========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Liabilities
Mortgage loans $ 129,985
Senior notes 100,000
Bank loans 63,940
Accounts payable and other 38,361
----------
332,286
Shareholders' equity 97,981
----------
$ 430,267
==========
</TABLE>
(a) Reflects First Union's investment in a joint venture which acquired real
estate properties from Marathon U.S. Realties, Inc., as of September 27,
1996.
F-9
<PAGE> 15
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NUMBER
<S> <C>
Consent of Price Waterhouse LLP 23.1
Press Release, dated October 1, 1996 99.1
Purchase and Sale Agreement, dated as of June 12, 1996, between 99.2
Marathon U.S. Realties, Inc., as Seller and First Union Real Estate
Equity and Mortgage Investments, as Purchaser, as amended
Investment Agreement, dated as of September 27, 1996, between 99.3
GMAC Commercial Equity Investments, Inc., a Pennsylvania
corporation, First Union Real Estate Equity and Mortgage
Investments, an Ohio business trust, and Cargill Financial Services
Corporation, a Delaware corporation
Limited Liability Company Agreement of Southwest Shopping 99.4
Centers Co. I, L.L.C., a Delaware limited liability company, dated as
of September 27, 1996
Form of Management and Leasing Agreement, dated as of September 99.5
30, 1996, between ___________________________ _____________ and
First Union Management, Inc., a Delaware corporation
Joinder Agreement, dated as of September 26, 1996, among Marathon 99.6
U.S. Realties, Inc., Centrixx Realty Holdings Limited, Southwest
Shopping Centers Co. I, L.L.C. and First Union Real Estate Equity
and Mortgage Investments
Joinder Agreement, dated as of September 26, 1996, among Marathon 99.7
U.S. Realties, Inc., Centrixx Realty Holdings Limited, Southwest
Shopping Centers Co. II, L.L.C. and First Union Real Estate Equity
and Mortgage Investments
Joinder Agreement, dated as of September 26, 1996, among Marathon 99.8
U.S. Realties, Inc., Centrixx Realty Holdings Limited, Temple
Shopping Center Co., L.L.C. and First Union Real Estate Equity
and Mortgage Investments
Escrow Agreement, dated as of September 26, 1996, among Marathon 99.9
U.S. Realties, Inc., First Union Real Estate Equity and Mortgage
Investments, Southwest Shopping Centers Co. I, L.L.C. and First
American Title Insurance Company
</TABLE>
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statement on Form S-3 (No. 333-00953) of
First Union Real Estate Equity and Mortgage Investments of our report dated July
3, 1996 relating to the Schedule of Operating Revenues and Certain Expenses of
the Marathon Centers, which appears on page F-2 of the Current Report on Form
8-K/A of First Union Real Estate Equity and Mortgage Investments dated June 12,
1996. We also consent to the reference to us under the heading "Experts" in such
Prospectus.
<PAGE> 1
Exhibit 99.1
FIRST UNION REAL ESTATE INVESTMENTS
AT THE COMPANY IN CLEVELAND, OHIO
Thomas T. Kmiecik Peter H. Bryan
Senior Vice President /Treasurer Edward Howard & Co.
(216) 781-4030 (216) 781-2400
FOR IMMEDIATE RELEASE
FIRST UNION REAL ESTATE INVESTMENTS ANNOUNCES
COMPLETION OF $312 MILLION MARATHON ACQUISITION
CLEVELAND, OHIO, OCTOBER 1, 1996 -- FIRST UNION REAL ESTATE INVESTMENTS
(NYSE:FUR), today announced the completion of the $312 million acquisition of
Marathon US Realties' portfolio of nine shopping malls located in the
southwestern United States. As a result of this acquisition, one of the largest
real estate transactions by a REIT this year, First Union now has assets under
management exceeding $800 million and becomes one of the leading REIT
specialists in repositioning retail and apartment properties to maximize
intrinsic value.
The properties were acquired in a joint venture with affiliates of GMAC
Commercial Mortgage Corporation (GMAC-CM) and Cargill Financial Services
Corporation. First Union's investment totaled $30 million, financed through a
combination of internally generated funds and its recently expanded $96 million
credit facility. The investment in the joint venture will not be consolidated on
First Union's balance sheet, but will be shown as an equity investment in a
joint venture. Under the terms of the agreement, all properties will be managed
by First Union's affiliated management company, First Union Management, Inc.
Additionally, First Union has the right to acquire the interests of the other
partners after the first 6 months. This acquisition brings First Union's retail
portfolio of managed properties to over 13 million square feet.
James C. Mastandrea, Chairman and Chief Executive Officer of First Union Real
Estate Investments, said, "We are well under way in the execution of our five
year strategic plan, which began on January 1, 1994, to bring new life to First
Union. One key element of this plan is the strengthening our existing portfolio.
We have already upgraded and repositioned many of our properties, the benefit of
which is being reflected in our improving occupancies, revenues and property net
operating income. Another key element of our plan is growing our asset base to
exceed $1 billion by the year 2000. The Marathon acquisition represents a major
step toward this goal. Moreover, this acquisition is accretive to earnings, and
we estimate that First Union's share of profits from the joint venture's
operations will result in $0.08 to $0.10 per share in additional funds from
operations in the next 12 months."
(more)
<PAGE> 2
The acquisition was available as a result of the previously announced decision
of Marathon's parent, Canadian Pacific, to divest its U.S. retail real estate
holdings. It consists of 6 million square feet of space with an overall
occupancy of 92% and average in-line store sales of approximately $250 per
square foot. Anchor tenants include Dillard's, JC Penney, Sears, Wal-Mart,
Mervyn's, McRaes and Foley's. The malls are located in mid-size markets in Santa
Fe and Las Cruces, New Mexico; Killeen, Temple and Lake Jackson, Texas; Shawnee,
Oklahoma; Alexandria and Monroe, Louisiana; and Little, Arkansas. Each property
dominates its respective market.
First Union Real Estate Investments (NYSE:FUR) is an equity real estate
investment trust (REIT) specializing in repositioning real estate to extract
intrinsic value, primarily in retail and apartment properties in specific market
concentrations.
###
<PAGE> 1
Exhibit 99.2
PURCHASE AND SALE AGREEMENT
BETWEEN
MARATHON U.S. REALTIES, INC., AS SELLER
AND
FIRST UNION REAL ESTATE EQUITY AND MORTGAGE
INVESTMENTS, AS PURCHASER
<PAGE> 2
TABLE OF CONTENTS
ARTICLE 1 DEFINITIONS........................................... -1-
1.1 Definitions.......................................... -1-
1.2 Gender and Number.................................... -13-
1.3 References........................................... -14-
1.4 Illustrative Terms................................... -14-
ARTICLE 2 AGREEMENT TO SELL..................................... -14-
2.1 Agreement............................................ -14-
2.2 Purchase Price....................................... -14-
2.3 Deposit.............................................. -14-
ARTICLE 3 LENDER/PARTNER APPROVALS.............................. -15-
3.1 Assumption........................................... -15-
3.2 Loan Balances........................................ -15-
3.3 Contingency for Lender Approval...................... -15-
3.4 Partner Approvals.................................... -16-
ARTICLE 4 INSPECTIONS BY PURCHASER.............................. -17-
4.1 Purchaser's Inspection Period........................ -17-
4.2 Termination Right.................................... -18-
4.3 Extensions of Inspection Period...................... -18-
4.4 Indemnification by Purchaser......................... -18-
4.5 Limitations on Purchaser's Inspections............... -19-
4.6 Condition of Property................................ -19-
ARTICLE 5 TITLE AND SURVEYS..................................... -19-
5.1 Title and Survey..................................... -19-
5.2 Liens................................................ -20-
5.3 Approval/Disapproval of Title Review................. -20-
5.4 Purchaser's Options.................................. -20-
5.5 Escrow and Title Costs............................... -21-
ARTICLE 6 CLOSING............................................... -22-
6.1 Closing.............................................. -22-
6.2 Seller Closing Documents............................. -22-
6.3 Purchaser Closing Documents.......................... -24-
6.4 Occurrence of Closing................................ -26-
6.5 Title to Purchaser's Nominee......................... -26-
6.7 Further Assurances................................... -26-
6.8 FIRPTA Withholdings.................................. -27-
ARTICLE 7 APPORTIONMENTS AND PAYMENTS........................... -27-
7.1 Prorations........................................... -27-
7.2 Adjustments.......................................... -31-
7.3 Collection........................................... -31-
7.4 Closing and Final Proration Statements............... -32-
7.5 Utilities............................................ -32-
7.6 Reserves and Deposits................................ -32-
7.7 Construction Allowances.............................. -33-
<PAGE> 3
7.8 Proration of Temple and Alexandria................... -33-
7.9 Survival............................................. -33-
ARTICLE 8 ADDITIONAL AGREEMENTS OF SELLER AND PURCHASER......... -33-
8.1 Conduct of Business Prior to Closing Date............ -33-
8.2 Leasing.............................................. -35-
8.3 Insurance Policies................................... -36-
8.4 Management Office and Employees...................... -36-
8.5 Possession........................................... -37-
8.6 Management Information Systems....................... -37-
8.7 Mortgage Releases.................................... -37-
8.8 Lease/Estoppel Certificates.......................... -37-
8.9 Guaranty............................................. -37-
ARTICLE 9 REPRESENTATIONS AND WARRANTIES........................ -38-
9.1 Seller's Representations and Warranties.............. -38-
9.2 Seller's Knowledge Defined........................... -44-
9.3 Purchaser's Representations and Warranties........... -44-
9.4 Survival of Representations and Warranties........... -45-
ARTICLE 10 DAMAGE OR DESTRUCTION - CONDEMNATION................. -45-
10.1 Notice.............................................. -45-
10.2 Non-Material Damage................................. -46-
10.3 Loss Adjustments.................................... -46-
ARTICLE 11 CONDITIONS TO CLOSING................................ -47-
11.1 Conditions to Seller's Obligations.................. -47-
11.2 Conditions to Purchaser's Obligations............... -47-
ARTICLE 12 DEFAULT.............................................. -49-
12.1 Seller's Default.................................... -49-
12.2 Purchaser's Default................................. -49-
12.3 Liquidated Damages.................................. -49-
12.4 Closing is a Waiver................................. -49-
ARTICLE 13 BROKERAGE COMMISSIONS................................ -50-
ARTICLE 14 NOTICES.............................................. -50-
14.1 Notices............................................. -50-
14.2 Change of Address................................... -51-
ARTICLE 15 INDEMNIFICATION...................................... -51-
15.1 Purchaser Indemnification........................... -51-
15.2 Seller Indemnification.............................. -52-
15.3 Indemnification Procedure........................... -52-
ARTICLE 16 MISCELLANEOUS........................................ -53-
16.1 Parties Bound....................................... -53-
16.2 Headings; Exhibits.................................. -53-
(ii)
<PAGE> 4
16.3 Invalidity.......................................... -54-
16.4 Governing Law....................................... -54-
16.5 No Third Party Beneficiary.......................... -54-
16.6 Entirety and Amendments............................. -54-
16.7 Execution in Counterparts........................... -54-
16.8 Extension of Performance............................ -54-
16.9 Time................................................ -54-
16.10 Assignment......................................... -54-
16.11 Confidentiality.................................... -55-
16.12 Trustee Approval................................... -55-
16.13 No Solicitation.................................... -55-
16.14 Limit of Trustees' Liability....................... -55-
16.15 Exhibits........................................... -55-
(iii)
<PAGE> 5
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (the "AGREEMENT") is made as
of this ____ day of June, 1996 (the "EFFECTIVE DATE"), by and between MARATHON
U.S. REALTIES, INC., a Delaware corporation and FIRST UNION REAL ESTATE EQUITY
AND MORTGAGE INVESTMENTS, an Ohio business trust.
W I T N E S S E T H:
In consideration of and in reliance upon the covenants herein
contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
ARTICLE 1
DEFINITIONS
1.1 DEFINITIONS. Except as may otherwise be expressly provided
herein, and in addition to other defined terms contained herein, the following
terms, for all purposes of this Agreement, have the respective meanings set
forth below:
"ADDITIONAL CHARGES" means all charges (other than Rents)
payable to an Owner by any Party under a Lease or Specialty License Agreement or
by a Party under a Reciprocal Easement Agreement, including, without limitation,
advertising and promotional fees, common area maintenance charges, charges for
electricity or other utilities and HVAC charges, real estate taxes, insurance
premiums and other amounts payable to the extent denominated in such Lease or
Reciprocal Easement Agreement as a separate charge (as opposed to being included
in a stated gross or base rent).
"ADJUSTMENTS" shall have the meaning set forth in Section 7.2
hereof.
"ADMINISTRATIVE FEES" shall have the meaning set forth in
Section 7.1(c) hereof.
"AFFILIATE" means, with respect to either Seller or Purchaser,
as the case may be in each instance, any entity (a) that controls Seller or
Purchaser, (b) that is controlled by Seller or Purchaser, (c) that is under
common control with Seller or Purchaser, (d) into which Seller or Purchaser is
merged or consolidated or (e) as to Purchaser, the Joint Venture. FUMI shall be
deemed to be an "Affiliate" of Purchaser, even though it is not controlled by,
or under common control with, Purchaser.
"ALEXANDRIA" means Alexandria Mall Company, a Louisiana
general partnership, established pursuant to that certain Restatement of
Partnership Agreement of Alexandria Mall Company dated as of ________________,
as amended by Modification of Partnership dated as of January 27, 1978 (said
Restatement of Partnership Agreement, as amended, is hereinafter referred to as
the "ALEXANDRIA PARTNERSHIP AGREEMENT"), in which Seller owns a ninety percent
(90%) general partnership interest, which owns the regional mall
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<PAGE> 6
commonly known as Alexandria Mall located in Alexandria, Louisiana, more
particularly described in EXHIBIT A1 attached hereto ("ALEXANDRIA MALL").
"ALEXANDRIA INTEREST" means Seller's 90% general partnership
interest in Alexandria.
"AMENDMENTS TO PARTNERSHIP CERTIFICATES" means the amendments
to the partnership agreement and all partnership certificates or other filings,
to the extent such amendments, certificates or filings are required to be filed
under any Law, applicable to the Partnership Interests, evidencing or reflecting
in the public records the transfer of the respective Partnership Interests to
Purchaser, to be executed by Purchaser, Seller and each partner of the
applicable Partnership.
"ANCHOR STORE" means those retail stores listed on EXHIBIT
9.1(c) attached hereto.
"ASSIGNMENT OF CONTRACTS" means an assignment in the form of
EXHIBIT 6.2(g) attached hereto, to be executed and acknowledged by Seller and
Purchaser, pursuant to which Seller assigns to Purchaser, and Purchaser assumes,
all of Owner's right, title and interest under the Contracts relating to a
Seller-Owned Mall.
"ASSIGNMENT OF LEASES" means an assignment in the form of
EXHIBIT 6.2(f) attached hereto, to be executed and acknowledged by Seller and
Purchaser, pursuant to which Seller assigns to Purchaser, and Purchaser assumes,
all right, title and interest of the Seller under the Leases and the Specialty
License Agreements relating to a Seller-Owned Mall.
"ASSIGNMENT OF OFFICE AND EQUIPMENT LEASES" means an
assignment in the form of EXHIBIT 6.2(q) attached hereto, to be executed and
acknowledged by MRML and Purchaser or FUMI, pursuant to which MRML assigns, and
Purchaser or FUMI assumes, all right, title and interest of MRML under the
Office and Equipment Leases.
"ASSIGNMENT OF PARTNERSHIP INTERESTS" means an assignment in
the form of EXHIBIT 6.2(e) attached hereto, to be executed and acknowledged by
Seller and Purchaser, pursuant to which Seller assigns to Purchaser, and
Purchaser assumes, all of Seller's right, title and interest in and to the
respective Partnership Interests.
"ASSIGNMENT OF RECIPROCAL EASEMENT AGREEMENTS" means an
assignment in the form of EXHIBIT 6.2(h) attached hereto, to be executed and
acknowledged by Seller and Purchaser pursuant to which Seller assigns, and
Purchaser assumes, all of the Seller's right, title and interest in and to a
Reciprocal Easement Agreement relating to a Seller-Owned Mall.
"BALANCE OF THE PURCHASE PRICE" means the Purchase Price (a)
less the Deposit and (b) plus or minus the net sum of the prorations,
allocations, charges, credits, withholdings and other adjustments as provided in
this Agreement.
"BENEFIT PLAN" means any agreement, plan or arrangement for
employee benefits, including any bonus, deferred compensation, severance,
disability, sick pay, salary continuation, death benefit, vacation, stock
purchase or stock option, hospitalization or other
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<PAGE> 7
medical, life or other insurance, supplemental unemployment benefit,
profit-sharing, pension or retirement plan or arrangement maintained or
contributed to by Seller or any Seller Affiliate in connection with any Mall or
with respect to any of the Employees.
"BILLS OF SALE" means the bills of sale to be executed and
delivered by Seller and MRML, pursuant to which Seller and MRML transfer and
assign, and Purchaser or Purchaser's Nominee accepts, the title of Seller and
MRML in and to any Personality and Other Assets owned by Seller and MRML,
respectively, and used in connection with the management and operation of the
Malls.
"BRAZOS MALL" means that certain regional mall located in Lake
Jackson, Texas, more particularly described in EXHIBIT A2 attached hereto.
"BROKER" means Cushman & Wakefield of Texas, Inc., 1300 Post
Oak Boulevard, #1600, Houston, TX 77056.
"BUSINESS DAY" means any day other than a Saturday, Sunday or
legal holiday in the State of Texas.
"CENTRIXX" means Centrixx Realty Holdings Limited, a Canadian
corporation and an Affiliate of Seller.
"CLOSING" means the transfer of title to the Property to
Purchaser and the related transactions required by the terms of this Agreement
to occur contemporaneously therewith.
"CLOSING DATE" means the date that is fifteen (15) days after
the expiration of the Inspection Period, unless such date is not a Business Day,
in which event the Closing Date shall be the next Business Day thereafter, but
in no event later than September 30, 1996, subject to extension to the extent
expressly provided in accordance with the terms of this Agreement.
"CLOSING DOCUMENTS" means the Seller Closing Documents and the
Purchaser Closing Documents without distinction between them.
"CLOSING STATEMENT" shall have the meaning set forth in
Section 7.4(a) hereof.
"COBRA" means the requirements of Section 4980B of the Code,
Proposed Treasury Regulation Section 1.162-26 and Part 6 of Subtitle B of Title
I of ERISA.
"CODE" means the Internal Revenue Code of 1986, as amended,
and all rules and regulations promulgated thereunder.
"COMMON AREA EXPENSES" shall have the meaning set forth in
Section 7.1(c) hereof.
"CONFIDENTIAL INFORMATION" means the terms of this Agreement
and all information or documentation reviewed or received by either party hereto
in connection with this
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<PAGE> 8
Agreement or the Property, including, specifically, information regarding
Purchaser's financing plans, but excluding any information that is obtained from
a third-party or is publicly available.
"CONTRACTS" means all (a) management, service, maintenance,
operating and repair contracts (excluding the Leases, the Specialty License
Agreements and recorded documents evidencing the Permitted Exceptions) relating
to the Malls and to which an Owner is a party, and (b) equipment leases to which
an Owner is a party and all rights and options of an Owner thereunder, including
rights to renew or extend the term or purchase the leased equipment, relating to
equipment or property located in or upon the Malls or used in connection
therewith.
"CUTOFF DATE" means 11:59 p.m. on the day preceding the
Closing Date.
"DAMAGE NOTICE" shall have the meaning set forth in Section
10.1 hereof.
"DAMAGES" means any and all actual losses, costs, claims,
liabilities, damages, obligations, judgments, settlements, awards, offsets, fees
and expenses (including, without limitation, reasonable attorneys' fees and
expenses), fines, penalties, and charges, incurred as a result of administrative
and judicial proceedings and orders, judgments, remedial actions and
requirements thereof, but expressly excluding punitive damages.
"DELINQUENCIES" shall have the meaning set forth in Section
7.3 hereof.
"DEPOSIT" shall mean the sum of Three Million One Hundred
Sixty Thousand and No/100 Dollars ($3,160,000.00).
"DISAPPROVAL NOTICE" means a written notice of Purchaser
identifying any title matter related to any of the Malls which Purchaser
disapproves (a "DISAPPROVED TITLE MATTER").
"EFFECTIVE DATE" shall have the meaning set forth in the first
sentence of this Agreement.
"EMPLOYEES" means the on-site employees of MRML at each of the
Malls and the employees of MRML located at the Dallas, Texas and Houston, Texas
offices of MRML as of the Effective Date.
"EQUITY FUNDS" means that portion of the Purchase Price to be
paid by Purchaser out of Purchaser's own funds, or funds of the other party to
the Joint Venture, and excluding any portion of the Purchase Price which is
financed.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"ESCROW" shall have the meaning set forth in Section 6.2
hereof.
"ESCROW AGREEMENT" means the escrow agreement by and among
Seller, Purchaser and Escrowee, in the form of EXHIBIT 2.3 attached hereto,
executed by the parties thereto as of the Effective Date. This Agreement shall
not be merged into the Escrow
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<PAGE> 9
Agreement, but the Escrow Agreement shall be deemed auxiliary to this Agreement
and, as between the parties hereto, if there is any conflict between the Escrow
Agreement and this Agreement, the provisions of this Agreement shall govern and
control.
"ESCROWEE" means First American Title Insurance Company, 3033
LBJ Freeway, Suite 150, Dallas, Texas 75234, or any other nationally recognized
title insurance company designated by Seller and approved by Purchaser.
"ESTOPPEL CERTIFICATES" means the Lease Estoppel Certificates,
the REA Estoppel Certificates, the Lender Estoppel Certificates, the Partnership
Estoppel Certificates and the Seller Lease Estoppel Certificate.
"FILING DOCUMENTS" shall have the meaning set forth in Section
6.4 hereof.
"FINAL PRORATION STATEMENT" shall have the meaning set forth
in Section 7.4(b) hereof.
"FINANCIAL STATEMENTS" means profit and loss statements for
each Mall dated as of December 31, 1994 and as of December 31, 1995, and the
Interim Financial Statements, certified by Seller's Director of Finance.
"FUMI" means First Union Management, Inc., a Delaware
corporation and an Affiliate of Purchaser.
"GAAP" means generally accepted accounting principles in
Canada as in effect on the date hereof, as the same may be amended from time to
time, applied on a consistent basis.
"HAZARDOUS SUBSTANCE" means any hazardous, toxic or dangerous
waste, substance or material, pollutant or contaminant, as defined for purposes
of the Comprehensive Environmental Response, Compensation and Liability Act of
1980 (42 U.S.C. Section 9601 et seq.), as amended, or the Resource Conservation
and Recovery Act (42 U.S.C. Section 6901 et seq.), as amended, or any substance
which contains gasoline, diesel fuel or other petroleum hydrocarbons,
polychlorinated biphenyls (PCB's), radon gas, urea formaldehyde, asbestos or
lead.
"INDEMNIFIED PARTY" shall have the meaning set forth in
Section 15.3(a) hereof.
"INDEMNIFYING PARTY" shall have the meaning set forth in
Section 15.3(a) hereof.
"INITIAL SURVEY DELIVERY DATE" SHALL HAVE THE MEANING SET
FORTH IN SECTION 5.1(a).
"INSPECTION PERIOD" means the period of time from the
Effective Date through and including the date that is sixty (60) days after the
Effective Date and all extensions of such time period pursuant hereto.
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<PAGE> 10
"INSURANCE POLICIES" means the liability and property damage
insurance policies for each Mall listed in EXHIBIT 8.3 attached hereto.
"INTERIM FINANCIAL STATEMENTS" means unaudited profit and loss
statements for each Mall as of May 31, 1996, certified by Seller's Director of
Finance.
"JOINT VENTURE" means the joint venture to be formed by
Purchaser as part of Purchaser's equity funding for this transaction.
"KILLEEN MALL" means that certain regional mall located in
Killeen, Texas, more particularly described in EXHIBIT A3 attached hereto.
"LAWS" means all applicable laws, ordinances, rules,
regulations, codes, orders and requirements of any federal, state or local
governmental authority, including, without limitation, the Americans With
Disabilities Act of 1990 (the "ADA"), and regulations promulgated thereunder.
"LEASE ESTOPPEL CERTIFICATE" means the estoppel certificate in
the form of EXHIBIT 6.2(j)(i) attached hereto.
"LEASE PROPOSAL" shall have the meaning set forth in Section
8.2(b) hereof.
"LEASE YEAR" shall have the meaning set forth in Section
7.1(e) hereof.
"LEASES" means all leases, subleases, licenses, concessions
and other agreements relating to the use or occupancy of any portion of the
Malls, other than the Specialty License Agreements or Contracts, including those
and any amendments, modifications or work letters related thereto that may be
entered into by an Owner after the Effective Date and prior to Closing in
accordance with the terms of this Agreement.
"LENDER ESTOPPEL CERTIFICATES" means the estoppel certificates
in the form of EXHIBIT 6.2(j)(iv) attached hereto.
"LENDERS" means TIAA and NML.
"LIEN SEARCH" means a search of the Secretary of State
records, county recorder records, local court records (federal, state, county
and municipal) and such other official public records with respect to each Mall
that would disclose the presence of any Liens, bankruptcy proceedings, lis
pendens or other matters affecting a Mall or an Owner.
"LIENS" means any liens and/or security interests that
encumber any part of the Real Property, Personalty or Other Assets owned by
Alexandria, Temple or Seller, including, but not limited to, mortgages, deeds of
trust, mechanics, materialmens, judicial, tax or governmental liens, pledges,
options, rights of first offer or first refusal or other similar items relating
to the Real Property, Personalty or Other Assets of any nature whatsoever.
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<PAGE> 11
"MALL ASSETS" means with respect to the Seller-Owned Malls,
(i) the Real Property, (ii) the Other Assets, (iii) the Personalty, (iv) the
Leases, (v) the Specialty License Agreements, (vi) the Reciprocal Easement
Agreements and (vii) the Contracts.
"MALL INFORMATION" means the following existing information,
wherever located, with respect to each Mall: books and records, financial
statements, operating budgets, structural, mechanical, geotechnical or other
engineering studies, Plans, soil test reports, environmental reports,
feasibility studies, appraisals, ADA surveys or reports, OSHA asbestos surveys,
marketing studies, Mall documents and compilations, Lease summaries, the Leases,
the Contracts, the Specialty License Agreements, the Reciprocal Easement
Agreements and all other contracts, agreements and/or documents relating to the
Malls that have been prepared at an Owner's request and are within Seller's
possession or control.
"MALLS" means Alexandria Mall, Brazos Mall, Killeen Mall,
Mesilla Valley Mall, Park Plaza, Pecanland Mall, Shawnee Mall, Temple Mall and
Villa Linda Mall.
"MATERIAL CONTRACTS" means any (a) contracts or other
agreements (but excluding Specialty License Agreements and Leases) that would
require performance (in whole or in part) by Purchaser on or after the Closing
Date of any expenditures that, in the aggregate with respect to each such
contract or agreement, would exceed Two Hundred Fifty Thousand Dollars
($250,000.00) in any calendar year); (b) any agreement for the sale of land
parcels that may comprise all or any portion of the Real Property; or (c)
Reciprocal Easement Agreements.
"MATERIAL LEASE" means any Lease or Specialty License
Agreement that either (a) covers more than ten thousand (10,000) square feet of
space or (b) provides for a construction allowance or other landlord
expenditures of more than One Hundred Fifty Thousand Dollars ($150,000.00).
"MESILLA VALLEY MALL" means that certain regional mall located
in Las Cruces, New Mexico, more particularly described in EXHIBIT A4 attached
hereto.
"MORTGAGE LOAN ASSIGNMENT AND ASSUMPTION AGREEMENT" means the
mortgage loan assignment and assumption agreement to be executed by and among
Purchaser, Seller and TIAA in the form of EXHIBIT 6.2(i) attached hereto or such
other form approved by Purchaser, Seller and TIAA.
"MORTGAGE LOAN DOCUMENTS" means those mortgages, deeds of
trust, promissory notes, financing statements, and other loan documents, and all
amendments, modifications and supplements thereto, securing or evidencing either
the Pecanland Loan or Temple Loan.
"MRML" means Marathon Realty Management Limited, a Delaware
corporation and an Affiliate of Seller.
"MUSRI LOAN" means the existing loan in the amount of Two
Million Two Hundred Thousand and No/100 Dollars ($2,200,000.00) from Seller to
Temple relating to the Temple Mall.
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<PAGE> 12
"MUSRI LOAN DOCUMENTS" means all promissory notes, mortgages,
deeds of trust, financing statements and other loan documents evidencing or
securing the MUSRI Loan, and all amendments, modifications and supplements
thereto.
"NEW CONTRACT" means any Contract or agreement entered into
after the expiration of the Inspection Period, having a term that expires after
the Closing Date and relating to the use, maintenance and operation of any Mall,
or any portion thereof.
"NEW LEASE" means any Lease entered into after the expiration
of the Inspection Period but excluding any of the foregoing that has a term that
expires prior to the Closing Date or is terminated by the Owner or the Tenant
thereunder on or prior to the Closing Date pursuant to a termination right
granted thereunder.
"NEW SPECIALTY LICENSE AGREEMENTS" means any Specialty License
Agreement entered into after the expiration of the Inspection Period but
excluding any of the foregoing that has a term that expires prior to the Closing
Date or is terminated by the Owner or the Tenant thereunder on or prior to the
Closing Date pursuant to a termination right granted thereunder.
"NML" means Northwestern Mutual Life Insurance Company.
"OFFICE AND EQUIPMENT LEASES" means the Dallas, Texas and
Houston, Texas office leases of MRML and the other office and/or equipment
leases of Seller or MRML used in connection with the management or operation of
the Malls, all of which leases are listed and described on EXHIBIT 9.1(f)
attached hereto.
"OTHER ASSETS" means all tangible and intangible assets of any
nature owned by Seller or Centrixx, as the case may be relating to the Malls
other than the Personalty, the Real Property, the Leases, the Specialty License
Agreements and the Contracts, including, without limitation, (a) all warranties
on the Personalty or Real Property, (b) all plans, specifications, engineering
drawings and prints relating to the construction of the buildings or other
improvements that comprise the Malls, (c) all copyrights, logos, designs,
trademarks, trade names, service marks and all goodwill associated with the
Malls (including, without limitation, those listed on EXHIBIT D attached
hereto), but excluding (i) those that are owned by a Tenant or a Party, (ii) the
name "Marathon," the Marathon logo and any similar or derivative names, (iii)
the HRIS software and system owned by J.D. Edwards and (iv) the name "Centrixx"
and any similar or derivative names and (d) all claims and causes of action
arising out of or in connection with the Mall that Purchaser expressly agrees to
assume (other than claims for delinquent Rents and tenant obligations accruing
prior to the Closing Date for which Seller has received no credit pursuant to
Article 7).
"OWNER" means (a) with respect to Alexandria Mall, Alexandria,
(b) with respect to Temple Mall, Temple, (c) with respect to Villa Linda Mall,
Centrixx, and (d) with respect to all Seller-Owned Malls other than Villa Linda
Mall, Seller.
"PARK PLAZA" means that certain regional mall located in
Little Rock, Arkansas, more particularly described in EXHIBIT A5 attached
hereto.
-8-
<PAGE> 13
"PARTNERSHIP AGREEMENTS" means the Alexandria Partnership
Agreement and the Temple Partnership Agreement.
"PARTNERSHIP CONSENTS" means the Roberts Consent and the White
Consents.
"PARTNERSHIP ESTOPPEL CERTIFICATES" means the Temple
Partnership Estoppel Certificate and the Alexandria Partnership Estoppel
Certificate both in the form of EXHIBIT 6.2(j)(v) attached hereto.
"PARTNERSHIP FINANCIAL STATEMENTS" means the financial
statements of the Partnerships audited by Price Waterhouse LLP and dated as of
December 31, 1995, and the Rent Roll and the Updated Rent Roll applicable to the
Partnership Sites.
"PARTNERSHIP INTERESTS" means the Alexandria Interest and the
Temple Interest.
"PARTNERSHIP SITES" means Alexandria Mall and Temple Mall.
"PARTNERSHIPS" means Alexandria and Temple.
"PARTY" means TIAA or NML, a party to a Reciprocal Easement
Agreement, a Specialty License Agreement, a Material Contract, an Office or
Equipment Lease or a Lease, in each case other than an Owner or its predecessors
in title with respect to any Mall.
"PBGC" means the Pension Benefit Guaranty Corporation.
"PECANLAND LOAN" means the existing mortgage loan encumbering
the Pecanland Mall payable to TIAA.
"PECANLAND MALL" means that certain regional mall located in
Monroe, Louisiana, more particularly described in EXHIBIT A6 attached hereto.
"PERMITTED EXCEPTIONS" means (a) real estate taxes and
assessments not yet due and payable, (b) exceptions to title that are approved
or deemed approved by Purchaser pursuant to Section 5.3, (c) the Liens securing
the Pecanland Loan or Temple Loan, as the case may be, and (d) any matters or
encumbrances arising by or through Purchaser or its agents, employees or
representatives.
"PERSON" shall mean an individual, a partnership, a
corporation, a trust, an unincorporated organization, a government or any
department or agency thereof or any other entity.
"PERSONALTY" means all moveable equipment, appliances,
machinery, furniture, furnishings, supplies, computer hardware and peripherals,
disks (including backup tapes and data), proprietary databases and programs and
other personal property located on or used in connection with the operation,
ownership or management of any Mall and owned by Seller or MRML.
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<PAGE> 14
"PLANS" means the as-built drawings and specifications for all
buildings and improvements comprising any portion of the Real Property,
including, without limitation, the plans and specifications for all existing
renovations and improvements to any Mall and all rentable space and common areas
therein, any off-site improvements related to the Malls and as-built drawings
for all underground utilities.
"PRIOR SURVEY" means a survey of each Mall complying with the
requirements set forth in the definition of "Survey" set forth in this Section
1.1, except that it shall be dated within one (1) year prior to the Effective
Date and shall be subject to the provisos set forth in the first sentence of
Section 5.1(a) of this Agreement.
"PROPERTY" means (i) the Partnership Interests and (ii) the
Mall Assets.
"PURCHASE PRICE" means Three Hundred Sixteen Million and
No/100 Dollars ($316,000,000.00).
"PURCHASE PRICE ALLOCATION" means the portion of the Purchase
Price allocated to each Seller-Owned Mall or Partnership Interest as set forth
in the Schedule of Purchase Price Allocations attached hereto as EXHIBIT B.
"PURCHASER" means First Union Real Estate Equity and Mortgage
Investments, an Ohio business trust, having its business offices at 55 Public
Square, Suite 1900, Cleveland, Ohio 44113.
"PURCHASER AFFILIATE" means any Affiliate of Purchaser.
"PURCHASER CLOSING DOCUMENTS" shall have the meaning set forth
in Section 6.3 hereof.
"PURCHASER INDEMNITEE" means each Purchaser Affiliate and each
agent, officer, director, trustee, servant or employee of either Purchaser or
any Purchaser Affiliate.
"PURCHASER'S NOMINEE" means such person as Purchaser shall
designate to receive title to any of the Mall Assets in accordance with Section
6.5, which conveyance shall occur simultaneously with or immediately after the
Closing as part of Purchaser's equity financing for the purchase of the
Property.
"PURCHASER'S POST-CLOSING COVENANTS" shall have the meaning
set forth in Section 12.4(b) hereof.
"REAL PROPERTY" means all of that certain land comprising the
Malls and any development tracts, outparcels or outlots relating to such Malls
owned or leased by any Owner, including the buildings and all other
improvements, structures, fixtures, parking area, facilities, installations,
non-movable machinery or equipment on the real property or used in connection
with the occupancy thereof (except to the extent of trade fixtures and equipment
owned by Tenants under the Leases or the Specialty License Agreements or owned
by other third parties), together with all easements, rights-of-way, strips and
gores, tenements, hereditaments and appurtenances, thereunto belonging or
appertaining and all right, title and interest of an Owner in and to any
streets, alleys, passages, common areas and other rights-of-
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way or appurtenances included in, adjacent to and used in connection with such
real property, before or after the vacation thereof, including, without
limitation, the easements, access rights and other rights provided in the
Reciprocal Easement Agreements.
"REA ESTOPPEL CERTIFICATE" means the estoppel certificate in
the form of EXHIBIT 6.2(j)(iii) attached hereto.
"RECIPROCAL EASEMENT AGREEMENTS" means all reciprocal easement
agreements, together with all modifications, amendments and supplements thereof
benefitting and/or burdening a Mall.
"RENT ROLL" means the rent roll for each Mall in the form set
forth in EXHIBIT C attached hereto, together with schedule(s), also set forth in
EXHIBIT C, setting forth (i) security deposits and (ii) minimum rent, breakpoint
and percentage rent factor for each Lease.
"RENTS" means all rents, including, without limitation, fixed,
minimum, percentage and overage rents, payable to Seller by any Party under a
Lease or Specialty License Agreement, but excluding Additional Charges.
"ROBERTS" means Arthur Roberts, the holder of the remaining
ten percent (10%) general partnership interest in Alexandria.
"ROBERTS CONSENT" means the written consent of Roberts to the
transfer of the Alexandria Interest to Purchaser or Purchaser's Nominee.
"ROBERTS INTEREST" means the ten percent (10%) general
partnership interest of Roberts in Alexandria.
"SELLER" means (a) with respect to Villa Linda Mall, Centrixx,
having a business address at 200 Wellington Street West, Suite 400, Toronto,
Ontario Canada M5V 3C7; (b) for all other purposes, Marathon U.S. Realties,
Inc., a Delaware corporation, having its business offices at One Galleria Tower,
13355 Noel Road, Suite 1200, Dallas, Texas 75240- 6678.
"SELLER AFFILIATE" means any Affiliate of Seller.
"SELLER CLOSING DOCUMENTS" shall have the meaning set forth in
Section 6.2 hereof.
"SELLER LEASE ESTOPPEL CERTIFICATE" means the Seller's
estoppel certificate in the form of EXHIBIT 6.2(j)(ii) attached hereto.
"SELLER INDEMNITEE" means each Seller Affiliate and each
agent, officer, director, partner, servant or employee of Seller or any Seller
Affiliate.
"SELLER-OWNED MALLS" shall mean Brazos Mall, Killeen Mall,
Mesilla Valley Mall, Park Plaza, Pecanland Mall, Shawnee Mall and Villa Linda
Mall.
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"SELLER'S POST-CLOSING COVENANTS" shall have the meaning set
forth in Section 12.4(a) hereof.
"SHAWNEE MALL" means that certain regional mall located in
Shawnee, Oklahoma, more particularly described in EXHIBIT A7 attached hereto.
"SPECIALTY LICENSE AGREEMENTS" means all agreements or
licenses for a term of one (1) year or less for occupancy of space within a
Mall, but generally terminable at the Owner's option upon not more than sixty
(60) days notice, and any amendments, modifications or work letters related
thereto including those that may be made by an Owner after the Effective Date
but prior to Closing in accordance with the terms of this Agreement.
"SURVEY" means a survey of each Mall dated within sixty (60)
days prior to the Effective Date, prepared by a surveyor or civil engineer duly
licensed in the jurisdiction in which the Mall is located in accordance with the
standards adopted by the American Land Title Association and the American
Congress on Surveying and Mapping in 1992 known as the "Minimum Standard Detail
Requirements of Land Title Surveys", including Table A Optional Survey
Responsibilities and Specifications 1 through 4, 6, 8, 9, 10, 11 and 13. The
Surveyor's certification of the Survey shall run to Seller, the Partnership
(with respect to the Partnership Sites), Purchaser, Purchaser's Nominee, Title
Insurer and any lenders to Purchaser that Purchaser may designate in writing to
Seller not less than thirty (30) days prior to the Closing Date.
"TAXES" shall have the meaning set forth in Section 7.1(a)
hereof.
"TEMPLE" means Temple Mall Company, a Texas general
partnership, established pursuant to that certain Agreement of Partnership dated
October 19, 1973, as amended by Amendment No. 1 to Partnership Agreement dated
April 11, 1974, as further amended by Amendment No. 2 to Partnership Agreement
dated December 28, 1978, as further amended by Amendment No. 3 to Partnership
Agreement dated January 20, 1984, (said Agreement of Partnership, as amended, is
hereinafter referred to as the "TEMPLE PARTNERSHIP AGREEMENT"), in which Seller
owns a fifty percent (50%) general partnership interest, and which owns the
regional mall commonly known as Temple Mall located in Temple, Texas more
particularly described on Exhibit A8 of ("Temple Mall").
"TEMPLE INTEREST" means Seller's 50% general partnership
interest in Temple.
"TEMPLE LOAN" the existing mortgage loan encumbering the
Temple Mall payable to NML.
"TENANTS" means tenants, subtenants, concessionaires,
licensees and/or occupants under the Leases.
"THIRD PARTY CLAIM" shall have the meaning set forth in
Section 15.3(a) hereof.
"TIAA" means Teachers Insurance and Annuity Association.
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"TITLE COMMITMENT" means an ALTA Commitment issued by the
Title Insurer committing to the issuance of a Title Policy.
"TITLE INSURER" means First American Title Insurance Company,
3033 LBJ Freeway, Dallas, Texas 75234 or any other nationally recognized title
insurance company designated by Seller and approved by Purchaser.
"TITLE POLICY" means a current ALTA Owner's Policy of Title
Insurance (Form B, 1992) or such other comparable form as is available in the
applicable jurisdiction issued by Title Insurer for each Mall dated the date and
time of Closing and with liability in the amount specified in Section 5.1,
insuring Purchaser or Purchaser's Nominee as owner of fee title to the
Seller-Owned Mall, Alexandria as owner of fee title to Alexandria Mall and
Temple as owner of fee title to Temple Mall (and with respect to the Partnership
Sites, showing Purchaser or Purchaser's Nominee as the named insured, with a
proportionate reduction exception as to the existing policies for Temple and
Alexandria) and with affirmative insurance as to all appurtenant easements
benefiting the Real Property, including, without limitation, those granted under
the Reciprocal Easement Agreement, subject only to the Permitted Exceptions
applicable to the Mall covered by such policy. Each Title Policy shall (a)
delete the standard or general exceptions from coverage (but may include an
exception relating to parties in possession under unrecorded Leases), (b)
contain a contiguity endorsement for each Mall that is comprised of more than
one parcel if available, (c) affirmatively insure the Purchaser's rights under
any Reciprocal Easement Agreements or other appurtenant easements that benefit
the Real Property, (d) contain a survey endorsement if available, (e) if such
endorsement is available, contain a zoning endorsement in the form of ALTA
Endorsement Form 3.1 (or equivalent endorsement approved by Purchaser), (f)
provide at Purchaser's expense for such coinsurance and direct access and such
other endorsements as Purchaser shall require, (g) as to Alexandria Mall and
Temple Mall, if Purchaser acquires the Partnership Interests therein rather than
fee title, contain a non-imputation endorsement if available, and (h) contain a
vehicular access endorsement if available.
"UPDATED RENT ROLL" means a rent roll (in the form of the Rent
Roll) certified for each Mall as true and correct by Seller as of a date not
later than ten (10) Business Days prior to the Closing Date.
"UPDATED SURVEY" shall have the meaning set forth in Section
5.1(b) hereof.
"VILLA LINDA MALL" means that certain regional mall located in
Santa Fe, New Mexico, more particularly described in EXHIBIT A9 attached hereto.
"WHITE CONSENTS" means the written consent of the trustees
under the White Trusts to the transfer of the Temple Interest to Purchaser or
Purchaser's Nominee.
"WHITE INTERESTS" means the fifty percent (50%) general
partnership interest of the White Trusts in Temple.
"WHITE TRUSTS" means those certain related trusts that
collectively hold the remaining fifty percent (50%) general partnership interest
in Temple.
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"WITHHOLDING CERTIFICATE" shall have the meaning set forth in
Section 6.8.
1.2 GENDER AND NUMBER. Words of any gender shall include the
other gender and the neuter. Whenever the singular is used, the same shall
include the plural wherever appropriate, and whenever the plural is used, the
same shall also include the singular wherever appropriate. Without limiting the
generality of the foregoing, the plural form of any term that is defined in the
singular shall mean collectively all items so defined and the singular form of
any term that is defined in the plural shall mean singly each item so defined.
1.3 REFERENCES. All references in this Agreement to particular
sections, subsections or articles shall, unless expressly otherwise provided, or
unless the context otherwise requires, be deemed to refer to the specific
sections or articles in this Agreement. The words "herein", "hereof",
"hereunder", "hereinafter", "hereinabove" and other words of similar import
refer to this Agreement as a whole and not to any particular section, subsection
or article hereof.
1.4 ILLUSTRATIVE TERMS. Whenever the word "including",
"includes" or any variation thereof is used herein, such term shall be construed
as a term of illustration and not a term of limitation. For example, the term
"including" shall be deemed to mean "including, without limitation", and the
term "includes" shall be deemed to mean "includes, without limitation".
ARTICLE 2
AGREEMENT TO SELL
2.1 AGREEMENT. Upon and subject to the terms and conditions
contained in this Agreement, Seller agrees to sell (or cause to be sold) and
Purchaser agrees to purchase from Seller, the Property.
2.2 PURCHASE PRICE. The Purchase Price for the Property shall
be payable as follows:
(a) Within one (1) Business Day after the Effective Date,
Purchaser shall deposit with Escrowee the Deposit, by wire transfer of
immediately available funds, which, along with all interest or other earnings
accrued on such sum, shall serve as earnest money for this transaction.
(b) The Balance of the Purchase Price shall be deposited by
Purchaser in escrow on or prior to the Closing Date in immediate, same-day
federal funds wired for credit into the escrow account established by Escrowee
for this transaction.
2.3 DEPOSIT. The Deposit shall be held by Escrowee pursuant to
the terms of the Escrow Agreement in the form of Exhibit 2.3 and shall be
invested by Escrowee in short term obligations of the U.S. Treasury. The
interest earned on the Deposit shall accrue to the benefit of the party to this
Agreement entitled to receive the interest on the Deposit pursuant to the terms
of this Agreement or the Escrow Agreement.
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ARTICLE 3
LENDER/PARTNER APPROVALS
3.1 ASSUMPTION. Subject to the terms and conditions of this
Agreement, including without limitation the provisions of this Article 3 and of
Article 11 relating to Lender and Partner Approvals and Purchaser's rights to
terminate under Article 4 and 5, the Mortgage Loan Documents that secure the
Pecanland Loan and the Temple Loan, respectively, shall be deemed to be
Permitted Exceptions. Seller shall assign its rights to Purchaser or Purchaser's
Nominee, and Purchaser or Purchase's Nominee shall assume Seller's obligations,
as to the Pecanland Loan pursuant to the terms and conditions of the Mortgage
Loan Assignment and Assumption Agreement.
3.2 LOAN BALANCES. Not less than fifty-five (55) days after
the Effective Date, Seller shall deliver to Purchaser a Lender Estoppel
Certificate from each Lender. In addition to the other requirements of the form
of Lender Estoppel Certificate attached hereto as EXHIBIT 6.2(j)(iv), the Lender
Estoppel Certificate shall include a statement of (i) the then outstanding
balance of each of the Pecanland Loan or the Temple Loan, as the case may be,
together with the amount of interest accrued thereon but not then paid, (ii) the
amount of all deposits or reserves referred to in Section 7.6 hereof held by
such Lender, if any, and (iii) the per diem interest charge for the period up to
and including the Closing Date. Notwithstanding the foregoing, in the event that
the Pecanland Mall is excluded from this transaction, no Lender Estoppel
Certificate shall be required for such Mall.
3.3 CONTINGENCY FOR LENDER APPROVAL. (a) The obligations of
the parties under this Agreement shall be contingent upon Seller obtaining, not
less than one (1) Business Day prior to the expiration of the Inspection Period,
written consent from TIAA to the transfer of Pecanland Mall to Purchaser or
Purchaser's Nominee and the assumption of the Pecanland Loan by Purchaser or
Purchaser's Nominee. If Seller is unable to obtain such written consent from
TIAA by such deadline, then Purchaser shall have the right, at its election
exercisable by written notice given within one Business Day after expiration of
the Inspection Period, to participate for an additional thirty (30) days after
such exercise, in further discussions or negotiations with TIAA to obtain such
consent, in which case the Closing Date shall be correspondingly extended. If
TIAA has not consented to the transfer and assumption by the Closing Date, as
extended, the Mall Assets with respect to Pecanland Mall shall be excluded from
the Property to be conveyed as part of the Closing, this Agreement shall not
terminate and the parties shall proceed to close on the sale of the remaining
Mall Assets and the Partnership Interests with a reduction in the Purchase Price
by an amount equal to the Purchase Price Allocation for Pecanland Mall.
Notwithstanding the foregoing, the parties shall continue in good faith to seek
consent from TIAA for a period of six (6) months after the Closing Date, and if
so obtained, Purchaser or Purchaser's Nominee shall purchase the Mall Assets
with respect to Pecanland Mall for the purchase price equal to the Purchase
Price Allocation applicable to Pecanland Mall, less the then outstanding
principal amount of the Pecanland Loan, but otherwise on the same terms and
conditions as are applicable to the other Seller-Owned Malls under this
Agreement. The closing of such purchase shall occur not more than thirty (30)
days after the parties obtain TIAA's consent to the transfer. In addition, if
TIAA does not consent to the transfer and assumption of Pecanland Mall by the
Closing Date, Seller agrees to enter into an agreement with Purchaser engaging
Purchaser or Purchaser's designated manager to manage and lease Pecanland Mall
on terms and conditions mutually acceptable to Purchaser and Seller, but such
management and leasing agreement shall be cancelable on thirty (30) days notice
by either
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party and shall be subject to the consent of TIAA. The provisions of this
Section 3.3(a) shall survive the Closing. As used in this Section 3.3(a) only,
the Inspection Period shall mean the initial sixty (60) day Inspection Period
without any extension as permitted under Section 4.3.
(b) The obligations of the parties under this Agreement shall
be contingent upon Seller obtaining written consent from NML to the transfer of
the Temple Interest to Purchaser or Purchaser's Nominee or, as the case may be,
the conveyance of the Temple Mall to Purchaser or Purchaser's Nominee as set
forth in Section 3.4(c) hereof. If Seller is unable to obtain such written
consent from NML prior to the Closing Date (or any extended Closing Date agreed
to by Purchaser and Seller), either Seller or Purchaser shall have the right to
exclude the Temple Interest from the Property to be transferred as part of the
Closing, this Agreement shall not terminate and the parties shall proceed to
close on the sale of the remaining Malls with a reduction in the Purchase Price
by an amount equal to the Purchase Price Allocation applicable to the Temple
Interest.
3.4 PARTNER APPROVALS. (a) The parties' obligations under this
Agreement with respect to the sale of the Alexandria Interest and the Temple
Interest are subject to Seller obtaining the Partnership Consents.
(b) As an alternative to obtaining the applicable Partnership
Consent, Seller may obtain the written agreement of Roberts and/or the White
Trusts for the purchase on the Closing Date by Seller of the Roberts Interest or
the White Interests, respectively. Purchaser agrees to cooperate with Seller in
negotiating any such agreements and in consummating any transaction agreed to by
Seller, Purchaser, and the seller(s) of such interest. Notwithstanding the
foregoing, the purchase price for the Roberts Interest shall not exceed Three
Million One Hundred Sixty-Seven Thousand and No/100 Dollars ($3,167,000.00) and
the purchase price for the White Interests shall not exceed Twelve Million Four
Hundred Thousand and No/100 Dollars ($12,400,000.00) less fifty percent (50%) of
the outstanding principal balance of the NML Loan on the Closing Date. The
purchase price for the Roberts Interest or the White Interests shall be in cash
unless Purchaser, Seller and the seller(s) of such interest mutually agree on
another form of consideration, such as, at Purchaser's option, shares of
Purchaser having a value equal to the applicable purchase price. If Purchaser
elects to permit the payment of the purchase price by issuing shares of
Purchaser's stock, such shares shall be issued on such terms and conditions as
Purchaser shall require, including, without limitation, the terms and conditions
contained in the form of the Shareholder Agreement attached as EXHIBIT 3.4(B)
hereto.
(c) In the event that Roberts and/or the White Trusts agree to
the sale of the Roberts Interest and/or the White Interests, Purchaser shall
purchase the Roberts Interest and/or the White Interests from Seller on the
Closing Date at a purchase price determined in the manner described in Section
3.4(b), or Purchaser shall have the right to elect to purchase, as part of the
Closing, the Mall Assets with respect to Alexandria Mall and/or the Mall Assets
with respect to Temple Mall directly from Alexandria or Temple, respectively,
rather than acquiring the Alexandria Interest and the Roberts Interest or the
Temple Interest and the White Interests, as the case may be. The parties
obligations with respect to the sale of the Mall Assets with respect to Temple
Mall and Purchaser's right to purchase the Mall Assets with respect to Temple
Mall shall be subject to Seller obtaining NML's written consent to the transfer
of the Temple Mall to Purchaser or Purchaser's Nominee prior to the Closing
Date. In the event that Purchaser makes such an election, (i) the Closing
Documents shall be modified so that documents identical in form to those
conveying the other Mall Assets are delivered with respect
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to the Mall Assets with respect to Alexandria Mall and/or Temple Mall, as
applicable, with the conveyance running to Purchaser or Purchaser's Nominee;
(ii) Seller shall assign Seller's rights, and Purchaser or Purchaser's Nominee
shall assume, Seller's obligations under the Temple Loan, which assignment and
assumption shall be in a form substantially similar to the Mortgage Loan
Assignment and Assumption and as approved by NML; and (iii) the Purchase Price
shall be increased by the purchase price for the White Interests or Roberts
Interest, as the case may be, established pursuant to Section 3.4(b) hereof.
(d) In the event that Seller is unable to obtain both the
Roberts Consent and the White Consents by the thirtieth (30th) day after the
Effective Date, then Purchaser shall have the right, at its election exercisable
by written notice given on or before the expiration of the Inspection Period, to
participate during the balance of the Inspection Period in further discussions
or negotiations with Roberts and/or the White Trusts to obtain such consent. If
both the Roberts Consent and the White Consents have not then been obtained,
Purchaser shall have the option, exercisable at any time during the Inspection
Period by written notice to Seller, to terminate this Agreement or, subject to
satisfaction of the other conditions to Closing, to proceed to Closing with all
of the Partnership Interests excluded from the sale of the Property, in which
event, the Purchase Price shall be reduced by the Purchase Price Allocation
applicable to the Partnership Interests. If Purchaser fails to notify Seller
during the Inspection Period that Purchaser elects to terminate, this Agreement
shall continue in full force and effect and Purchaser shall purchase the Mall
Assets on the Closing Date. If either the Roberts Consent or the White Consents
is obtained during the Inspection Period, the parties, subject to satisfaction
of the other conditions to Closing, shall proceed to Closing, with the
Partnership Interest as to which consent has not been obtained excluded from the
sale of the Property, and the Purchase Price shall be reduced by the Purchase
Price Allocation applicable to the excluded interest.
(e) If the White Consents are obtained during the Inspection
Period, but the trustees under the White Trusts do not elect to sell the White
Interests, then, in such event, Purchaser and Seller agree that the Purchase
Price Allocation applicable to the Temple Interest shall be increased by One
Million One Hundred Thousand and No/100 Dollars ($1,100,000.00) and Seller, at
Closing, shall assign to Purchaser or Purchaser's Nominee all of Seller's right,
title and interest and Purchaser or Purchaser's Nominee shall assume all of
Seller's obligations in, to and under the MUSRI Loan Documents pursuant to a
loan assignment and assumption agreement in a form and substance acceptable to
Seller and Purchaser.
3.5 PURCHASER'S NOMINEE. For purposes of the approvals by the
Lenders or the Partnership Consents referred to in this Article 3, Purchaser's
Nominee shall be the Joint Venture. Each request by Seller for such an approval
shall contemplate a transfer of the Property to either Purchaser or such Joint
Venture as Purchaser's Nominee.
ARTICLE 4
INSPECTIONS BY PURCHASER
4.1 PURCHASER'S INSPECTION PERIOD. Purchaser and its
engineers, surveyors, appraisers, attorneys, auditors and other agents or
representatives shall have the right during the Inspection Period at Purchaser's
sole cost and expense to inspect, examine, analyze, audit, survey, obtain
engineering inspections, conduct soil tests, environmental tests and inspections
of the Malls, examine, review and copy all Mall Information, the Office and
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Equipment Leases, examine, review and copy all records or files relating to the
Employees, the Benefit Plans or other employment matters relating to MRML, and
conduct such other tests, studies, reviews and inspections as Purchaser may
reasonably elect. Seller shall cooperate with Purchaser in conducting the
foregoing inspections and Seller shall make available to Purchaser at Seller's
Dallas, Texas office, all Mall Information reasonably requested by Purchaser.
Upon not less than twenty-four (24) hours prior written notice, Purchaser shall
have reasonable access to the Malls and the Mall Information wherever located
and shall be permitted to duplicate all or so much of the Mall Information
Purchaser deems appropriate. Seller shall cooperate with Purchaser and
facilitate Purchaser's inspection of the Malls and Mall Information and
Purchaser shall reimburse Seller for any reasonable out-of-pocket expenses
incurred by Seller, at Purchaser's request, in connection with Purchaser's due
diligence investigations. Prior to Closing, Seller shall deliver all Mall
Information to Purchaser at MRML's Dallas office and/or at the Malls, as the
case may be.
4.2 TERMINATION RIGHT. Notwithstanding anything in this
Agreement to the contrary, Purchaser may, in its sole discretion, elect to
terminate this Agreement during the Inspection Period if Purchaser is not
satisfied with the results of its due diligence review for any reason
whatsoever. Without limiting the foregoing, and notwithstanding any other
provision of this Agreement relating to Purchaser's presumed acceptance of the
Pecanland Loan or the Temple Loan as a Permitted Encumbrance, Purchaser may
elect to terminate this Agreement during the Inspection Period if it objects to
the terms and conditions of any Mortgage Loan Document, including, without
limitation, any modification thereto required as a condition to or in connection
with any consent to the transactions contemplated hereby that is required to be
obtained from a Lender pursuant to the terms of any Mortgage Loan Document. Such
election to terminate shall be exercisable by Purchaser's delivery to Seller of
a written notice of termination on or prior to the expiration of the Inspection
Period, as it may be extended pursuant to Section 4.3 hereof. The failure of
Purchaser to deliver to Seller the written notice of termination on or prior to
the expiration of the Inspection Period shall be deemed a waiver of Purchaser's
right to terminate this Agreement pursuant to this Section 4.2.
4.3 EXTENSIONS OF INSPECTION PERIOD. (a) The Inspection Period
shall also be extended, day-for-day, for each day that passes after the tenth
(10th) day after the Effective Date in which Purchaser has not received any
Survey, the Title Commitments or a copy of any matter of record reflected in the
Title Commitments, as and subject to the exceptions and provisos set forth in
Section 5.1.
(b) Purchaser shall have the right to further extend the
Inspection Period, as may be extended by Section 4.3(a) hereof, by an additional
period of thirty (30) days. The foregoing right to extend the Inspection Period
shall be exercisable by Purchaser's delivery to Seller of a written notice
electing to so extend the Inspection Period on or prior to the expiration of the
Inspection Period, as it may be extended by Section 4.3(a) hereof. If Purchaser
so elects to extend the Inspection Period, then the sum of One Million and
No/100 Dollars ($1,000,000.00) of the Deposit shall be non-refundable to
Purchaser in the event of termination of this Agreement for any reason other
than default by Seller.
4.4 INDEMNIFICATION BY PURCHASER. Purchaser agrees to repair
any material damage to the Malls, or to any office, room or other location owned
or leased by Seller or Seller's agents or representatives, caused by the entry
of Purchaser or any of Purchaser's agents, engineers, surveyors and other
representatives upon the Malls, or in any office, room
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or other location owned or leased by Seller or Seller's agents or
representatives, and Purchaser shall indemnify, defend and hold Seller and
Seller's Affiliates harmless from and against any and all Damages caused by or
resulting from any inspection, surveys, acts or omissions of Purchaser, its
agents, engineers, surveyors and other representatives while at the Malls or
while in any office, room or other location owned or leased by Seller or
Seller's agents or representatives. The provisions of this Section 4.4 shall
survive the Closing.
4.5 LIMITATIONS ON PURCHASER'S INSPECTIONS. Inspections of the
Malls by Purchaser and its agents shall in each case be subject to the
applicable Leases and Specialty License Agreements and conducted so as not to
unreasonably interfere with any Tenant's or licensee's quiet enjoyment of,
access to, use of, or business operations in, the Malls. Any inspections may be
observed by Seller or Seller's agents, including the Broker.
4.6 CONDITION OF PROPERTY. Purchaser acknowledges that neither
Seller nor any of its officers, directors, general or limited partners,
shareholders, agents, representatives or employees, nor the Broker, has made any
representation or warranty concerning the Property or the Partnership Sites
other than those representations and warranties of Seller expressly set forth in
this Agreement.
ARTICLE 5
TITLE AND SURVEYS
5.1 TITLE AND SURVEY. (a) Seller shall furnish to Purchaser,
for each Mall, a Survey (subject to 5.1(b)), a Title Commitment and copies of
matters of record reflected in each Title Commitment within ten (10) days after
the Effective Date (the "INITIAL SURVEY DELIVERY DATE"), subject to extension
due to delay on the part of the Title Insurer or surveyor; provided, however,
that Seller shall not be deemed to have failed to satisfy the foregoing Survey
delivery deadline if the sole omission from a Survey is the identification of
adjoining property owners or if any Purchaser Nominee or lender(s) to Purchaser
are not identified in the Survey certification; provided, further, however, that
the Inspection Period shall be extended due to any delay in providing such
adjoining property information beyond the thirtieth (30th) day after the
Effective Date and that Surveys certified to any such Purchaser Nominee or to
any such lender(s) shall be provided not later than the Closing Date. On the
Closing Date, Seller shall cause to be delivered to Purchaser the Title Policies
in the respective insured amount equal to the Purchase Price Allocation
applicable to each Seller-Owned Mall, and Partnership Interest and otherwise in
the form approved by the Purchaser pursuant to its review of title matters as
set forth below.
(b) Notwithstanding the provisions of Section 5.1(a),
Purchaser acknowledges that within ten (10) days after the Effective Date Seller
shall furnish to Purchaser a Prior Survey for each Mall, together with a
certification by Seller that there have been no material changes to the Real
Property relating to the Mall since the date of the Prior Survey that would
require a modification to the Prior Survey. Within thirty (30) days after the
Effective Date, Seller shall furnish to Purchaser a Survey as to each Mall
(subject to the provisions set forth in Section 5.1(a) hereof regarding
deliveries of Surveys certified to certain parties not later than the Closing
Date) (the "UPDATED SURVEY"). If one or more Updated Surveys discloses any title
matter that is not shown on the corresponding Prior Survey and that has a
material adverse effect on the title to or use of the Mall shown thereon, then
the Inspection Period shall be
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extended, day-for-day, for each day between the Initial Survey Delivery Date and
the date on which the last to be delivered of the Updated Surveys with a
discrepancy was delivered.
5.2 LIENS. Seller shall remove at or before Closing all Liens
on any of the Property, other than the Permitted Exceptions and the liens of the
Mortgage Loan Documents relating to the Pecanland Loan or the Temple Loan,
including, without limitation (a) all delinquent taxes, bonds and assessments
and interest and penalties thereon that are a Lien on the real property and (b)
all other Liens, whether or not shown on the Title Commitment, that are not
Permitted Exceptions. Seller shall be fully responsible for any fees, prepayment
premiums or penalties incurred in connection with the removal of all such Liens.
5.3 APPROVAL/DISAPPROVAL OF TITLE REVIEW. Purchaser has the
right to approve or disapprove the Title Commitments, the Surveys, the Lien
Searches and all items shown or referenced in any of them that are not Permitted
Exceptions, in the exercise of Purchaser's sole discretion, on or before the
expiration of the Inspection Period. If Purchaser disapproves any such condition
of title, Purchaser shall deliver to Seller a Disapproval Notice. If Purchaser
fails to give Seller a Disapproval Notice by the expiration of the Inspection
Period, Purchaser shall be deemed to have approved the Title Commitments, the
Lien Searches, the Surveys and all matters shown or referenced in any of them.
With respect to any Disapproved Title Matters, Seller shall notify Purchaser in
writing within ten (10) days after receipt of the Disapproval Notice whether
Seller will cause all or any Disapproved Title Matters to be removed or cured at
or prior to Closing, and Seller shall be deemed to have elected to remove or
cure all Disapproved Title Matters by Closing if Seller does not notify
Purchaser to the contrary in writing within such ten (10) day period. If Seller
elects not to remove or cure all Disapproved Title Matters with respect to any
particular Mall, Purchaser may elect, in its sole discretion, (a) subject to
satisfaction of the other conditions to Closing, to close the purchase of the
Mall in question, take title subject to the Disapproved Title Matter(s) that
Seller elects not to remove or cure and deduct from the respective Purchase
Price Allocation otherwise payable to Seller at Closing for the affected
Property(ies) all actual and direct costs incurred by Purchaser in connection
with its cure or removal up to a maximum of Fifty Thousand Dollars ($50,000.00)
as to each Disapproved Title Matter, (b) to terminate this Agreement only with
respect to such Mall, with the Purchase Price reduced by an amount equal to the
Purchase Price Allocation applicable to the Mall excluded or (c) to terminate
this Agreement, in which event the Deposit shall be returned to Purchaser. If
Seller elects to cure or remove any Disapproved Title Matter, then it thereafter
shall be obligated to do so as long as this Agreement is in effect. Seller shall
have thirty (30) days to remove or cure any Disapproved Title Matters that it
has elected to remove or cure (or deemed to have elected to remove or cure),
subject to extensions of such thirty (30)-day period as Purchaser, in its sole
discretion, may elect to grant to Seller. The Closing Date shall be extended as
necessary to permit the parties to exercise their respective rights and
obligations pursuant to this Section 5.3.
5.4 PURCHASER'S OPTIONS. If any Disapproved Title Matters that
Seller has elected to remove or cure (or deemed to have elected to remove or
cure) have not been removed at least five (5) days prior to Closing (as may be
extended pursuant to Section 5.3 hereof), or provision for their removal or cure
by Closing has not been made to Purchaser's satisfaction, Purchaser may elect,
in its sole discretion: (a) subject to satisfaction of the other conditions to
Closing, to close the purchase of the Mall in question, and take title subject
to any Disapproved Title Matters that have not been cured or removed at or
before Closing (provided that such election shall not release Seller from its
obligation to cure or remove Disapproved Title
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Matters after the Closing, which obligation shall survive the Closing); (b)
subject to satisfaction of the other conditions to Closing, to close the
purchase of the Mall in question, cure or remove the Disapproved Title Matters
that have not been cured or removed by Seller, and deduct from the respective
Purchase Price Allocation otherwise payable to Seller at Closing for the
affected Property(ies) all actual and direct costs, up to a maximum of Fifty
Thousand and No/100 ($50,000.00) as to each Disapproved Title Matter, incurred
by Purchaser in connection with its cure or removal of any Disapproved Title
Matters that Seller was obligated to cure or remove; (c) to terminate this
Agreement only with respect to such Mall and the Purchase Price shall be reduced
by an amount equal to the Purchase Price Allocation applicable to the Mall
excluded; or (d) to terminate this Agreement, in which event the Deposit shall
be returned to Purchaser.
5.5 ESCROW AND TITLE COSTS. Title insurance, survey and escrow
charges, transfer taxes and other closing costs shall be paid as follows, except
as otherwise expressly provided in this Agreement:
(a) The fees charged by Escrowee shall be divided equally
between Seller and Purchaser.
(b) Seller shall pay the cost of the Surveys, the cost of
securing the Title Commitments and the premium cost for the Title Policies
(including, as to endorsements, only the cost of the endorsements required
under the definition of Title Policy in Section 1.1 other than clause (f)
thereof).
(c) Purchaser shall pay the cost of any endorsements to the
Title Policies requested by Purchaser in addition to those required to be
provided by Seller pursuant to the definition of Title Policy in Section
1.1 including any costs arising under clause (f) thereof.
(d) Seller shall be solely responsible for the payment of any
real property transfer taxes, gains taxes levied or imposed upon Seller or
the Property as a result of the transfers to Purchaser or Purchaser's
Nominee, sales taxes levied or imposed upon Seller or the Property as a
result of the transfers to Purchaser or Purchaser's Nominee, documentary
stamps and other taxes, fees or charges imposed in connection with the
conveyance of any Mall Assets or the transfer of any Partnership Interests
but excluding any mortgage taxes or documentary taxes as to any of
Purchaser's financing documents and excluding any transfer taxes, gains
taxes, sales taxes, documentary stamps and other taxes arising from a
transfer to Purchaser's Nominee that would otherwise not be due upon a
transfer to Purchaser. Seller shall be required to pay any recording fees
or charges with respect to any instruments recorded in order to eliminate
Liens (except Permitted Exceptions) or Disapproved Title Matters, but
otherwise Purchaser, and not Seller, shall be responsible for the payment
of any other recording fees or charges. Purchaser shall pay the costs of
the Lien Search.
(e) At the Closing, and in addition to the delivery of any
required Closing Documents, Seller and Purchaser shall execute,
acknowledge and deliver such returns, questionnaires, certificates,
affidavits, declarations and other documents that may be required in
connection with the payment of transfer taxes, gains taxes, documentary
stamps, sales taxes and other taxes, fees or charges
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imposed by any governmental agency in connection with the transactions
contemplated hereby.
ARTICLE 6
CLOSING
6.1 CLOSING. Provided all conditions set forth in Sections
11.1 and 11.2 hereof have been either satisfied or waived, the Closing shall
take place on the Closing Date at the office of Seller, or such other date or
place as the parties shall agree.
6.2 SELLER CLOSING DOCUMENTS. On or before the Closing Date,
or, if a deadline is specified below, by such deadline, Seller shall deliver,
or, in the case of the Office and Equipment Leases, cause MRML to deliver,
directly to Purchaser or to the Escrowee, as is specified in Section 6.4 hereof,
two (2) executed originals (or four (4) counterparts, as the case may be, but
only one (1) executed original of each deed) of each of the following documents
for each Partnership Interest or for the Mall Assets with respect to each
Seller-Owned Mall, as the case may be (collectively, the "SELLER CLOSING
DOCUMENTS"):
(a) A resolution of the Board of Directors of each Seller,
certified by their respective Secretaries, authorizing the execution and
delivery of this Agreement, the Seller Closing Documents and the
consummation of the transactions contemplated hereby.
(b) An incumbency certificate certifying the authority of the
officers of each Seller executing this Agreement or any Seller Closing
Documents.
(c) Limited or Special Warranty Deeds transferring to
Purchaser or Purchaser's Nominee fee simple title to the Real Property
comprising each Seller-Owned Mall, subject only to the Permitted
Exceptions, in the form of the attached EXHIBIT 6.2(c).
(d) Bills of Sale, with limited warranty covenants,
transferring to Purchaser or Purchaser's Nominee all of the Personalty and
the Other Assets with respect to each Seller-Owned Mall and with respect
to any Personalty owned by MRML, in the form of EXHIBIT 6.2(d) attached
hereto.
(e) As to each Partnership Interest, four (4) counterparts of
the Assignment of Partnership Interests and of an Amendment to Partnership
Certificate.
(f) As to each Seller-Owned Mall, four (4) counterparts of the
Assignment of Leases.
(g) As to each Seller-Owned Mall, four (4) counterparts of the
Assignment of Contracts.
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(h) As to each Seller-Owned Mall, four (4) counterparts of the
Assignment of Reciprocal Easement Agreements.
(i) Four (4) counterparts of each Mortgage Loan Assignment and
Assumption Agreement, including, without limitation, any UCC filings
required in connection therewith.
(j) Except as otherwise provided below, not later than fifty
(50) days after the Effective Date, (i) Lease Estoppel Certificates from
the tenant under each Lease for an Anchor Store, and, in the case of each
Mall, from Tenants occupying at least eighty percent (80%) of all
non-anchor rented area of the Mall, subject to the last sentence of this
Section 6.2(j) (such non-anchor rented area for each Mall as of the
Effective Date being listed on EXHIBITS A-1 through A-9); (ii) a Seller
Lease Estoppel Certificate if and as provided in the last sentence of this
Section ; (iii) a REA Estoppel Certificates from each Party to a
Reciprocal Easement Agreement; (iv) a Lender Estoppel Certificate, not
later than fifty-five (55) days after the Effective Date, from each
Lender; and (v) a Partnership Estoppel Certificate executed by each
partner in the respective Partnerships other than Seller and having
attached thereto a set of the same partnership documents provided to
Purchaser by Seller pursuant to Section 6.2(l). A Seller Lease Estoppel
Certificate with respect to any Tenant shall expire and be of no force or
effect upon Purchaser's receipt of the Lease Estoppel Certificate from the
applicable Tenant consistent with the information set forth on the Rent
Roll and the Seller Estoppel Certificate. An Estoppel Certificate shall be
deemed to be in form and substance satisfactory to Purchaser if it is
executed by the applicable Tenant or other Party with the information
consistent with that set forth in the Rent Roll and if it is dated not
more than sixty (60) days before the Closing Date, provided that if
Purchaser extends the Inspection Period under Section 4.3(b), the
foregoing sixty (60) day limitation shall be extended to ninety (90) days.
If and to the extent that, despite Seller's compliance with Section 8.8
hereof, Seller does not obtain Lease Estoppel Certificates from Tenants
occupying at least eighty percent (80%) of all non-anchor rented area of
each Mall, and provided that Seller has delivered Tenant Estoppel
Certificates from Tenants occupying at least sixty percent (60%) of all
non-anchor rented area of the Mall, then Seller may satisfy the
requirements of Section 6.2(j)(ii) by delivering to Purchaser, not later
than fifty-five (55) days after the Effective Date, a Seller Lease
Estoppel Certificate as to Leases identified by Purchaser (which
identification Purchaser shall provide to Seller by fifty-two (52) days
after the Effective Date) and sufficient to result in Purchaser having
received Lease Estoppel Certificates plus Seller Lease Estoppel
Certificates as to eighty percent (80%) of such non-anchor rented area of
each Mall.
(k) Not later than five (5) Business Days before the Closing
Date, the Updated Rent Roll.
(l) Not later than five (5) Business Days before the Closing
Date, the execution copies of the Partnership Agreements or copies
thereof, certified by an officer of Seller.
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(m) A FIRPTA Affidavit, executed by Marathon U.S. Realties,
Inc.
(n) A Form 1099S, executed by Marathon U.S. Realties, Inc..
(o) All consents and approvals of the Lenders necessary
pursuant to Section 3.3, the Partnership Consents and all consents listed
on EXHIBIT 9.1(m).
(p) Legal opinion of Seller's counsel relating to the matters
set forth in Sections 9.1(g), (h) and (o)(i).
(q) Four (4) counterparts of each Assignment of Office and
Equipment Lease.
(r) Four (4) counterparts of the written notices (i) to each
Party to any Reciprocal Easement Agreement affecting the Seller-Owned
Malls advising it of the change of ownership and directing it to pay all
charges under its Reciprocal Easement Agreement for all periods from and
after the Closing Date as directed by Purchaser; (ii) to each Tenant in
the Seller-Owned Malls advising it of the change of ownership and
directing it to pay Rent and other charges under its Lease for all periods
from and after the Closing Date as directed by Purchaser; (iii) a general
notice to any Party to the Contracts relating to the Seller-Owned Malls
advising of the transfer and assignment of Seller's interest in the
Contracts to Purchaser and directing that future inquiries be made
directly to Purchaser; and (iv) to each landlord under an Office and
Equipment Lease advising of the transfer and directing that future
invoices and other notices be given directly to Purchaser.
(s) GAP Undertaking from Seller to the Title Company; subject
to the provisions of Section 8.7 hereof, any documentation required to be
executed by Seller and/or any other party in order to remove all Liens
required to be removed by Seller pursuant to the terms of this Agreement,
together with any fees, prepayment premiums, penalties or other funds
needed to accomplish such removal (the net proceeds of the Balance of the
Purchase Price payable to Seller pursuant to the Closing Statement may be
applied for this purpose); and any documentation required to be executed
by Seller with respect to any state, county, or local transfer taxes or
documentary taxes applicable to the conveyance of the Property pursuant to
this Agreement.
(t) Such other documents, instruments or agreements that
Seller may reasonably be required to execute and/or deliver on or prior to
Closing pursuant to any provision of this Agreement.
In addition, at or prior to the Closing, Seller shall also
deliver to, or at the direction of, Purchaser all keys, codes, files, computer
disks and software included in the Personalty, books, records, Lease files,
marketing materials, surveys, plans, specifications, or other written
information or documents relating to any of the Malls in Seller's possession and
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control and all security codes relating to any Property and any other Personal
Property or other Assets.
6.3 PURCHASER CLOSING DOCUMENTS. On or before the Closing
Date, Purchaser shall deliver, or cause FUMI to deliver, as applicable, directly
to Seller or to the Escrowee, as is specified in Section 6.4 hereof, two (2)
executed originals (or four (4) counterparts, as the case may be) of each of the
following documents for each Mall or Partnership Interest, as the case may be
(collectively, as the "PURCHASER CLOSING DOCUMENTS"):
(a) A resolution of the Board of Trustees of Purchaser,
certified by its Secretary, authorizing the execution and delivery of this
Agreement, the Purchaser Closing Documents and the consummation of the
transactions contemplated by this Agreement and a Resolution of the Board
of Directors of FUMI authorizing the execution and delivery of the
Documents to be executed and delivered by FUMI as contemplated by the
terms of this Agreement.
(b) Incumbency certificates certifying the authority of the
officers of Purchaser executing and delivering this Agreement or any
Purchaser Closing Documents, and of FUMI executing and delivering any
Purchaser Closing Documents, as applicable.
(c) Four (4) counterparts of the Assignment of Partnership
Interests and of an Amendment to Partnership Certificate.
(d) Four (4) counterparts of the Assignment of Leases.
(e) Four (4) counterparts of the Assignment of Contracts.
(f) Four (4) counterparts of the Assignment of Reciprocal
Easement Agreement.
(g) Four (4) counterparts of the Mortgage Loan Assignment and
Assumption Agreement, including, without limitation, any UCC filings
required in connection therewith.
(h) Legal opinion of Purchaser's counsel relating to the
matters set forth in Sections 9.3(a), (b) and (c).
(i) Four (4) counterparts of each Assignment of Office and
Equipment Lease.
(j) Four (4) counterparts of the written notices (i) to each
Party to any Reciprocal Easement Agreement affecting the Seller-Owned
Malls advising it of the change of ownership and directing it to pay all
charges under its Reciprocal Easement Agreement for all periods from and
after the Closing Date as directed by Purchaser; (ii) to each Tenant in
the Seller-Owned Malls advising it of the change of ownership and
directing it to pay Rent and other charges under its Lease for all periods
from and after the Closing Date as directed by Purchaser; (iii) a general
notice to any party to the Contracts assigned to Purchaser advising
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of the transfer and assignment of Purchaser's interest in the Contracts to
Purchaser and directing that future inquiries be made directly to
Purchaser; and (iv) to each landlord under an Office and Equipment Lease
advising of the transfer and directing that future invoices and other
notices be given directly to FUMI.
(k) Any documentation required to be executed by Purchaser
with respect to any state, county, or local transfer taxes or documentary
taxes applicable to the conveyance of the Property pursuant to this
Agreement.
(l) Such other documents, instruments or agreements that
Purchaser may reasonably be required to execute and/or deliver on or prior
to Closing pursuant to any provision of this Agreement.
6.4 OCCURRENCE OF CLOSING. Seller and Purchaser shall deposit
jointly with the Escrowee counterpart executed copies of the Limited or Special
Warranty Deeds, the Assignments of Leases, the Assignments of Reciprocal
Easement Agreements, the Mortgage Loan Assignment and Assumption Agreement and
any documentation required to be executed by Seller or Purchaser pursuant to
Section 6.2(s) or Section 6.3(k) and to be filed with any governmental office in
connection with the recording of any of the foregoing (the "FILING DOCUMENTS"),
and any funds required to be deposited by Seller pursuant to Section 6.2(s)
hereof (which may be by credit against the Balance of the Purchase Price),
accompanied by joint filing instructions setting forth the order of recording.
As provided in Section 2.2(b), Purchaser also shall deposit the Balance of the
Purchase Price with the Escrowee. The Closing shall be deemed to have occurred
upon the completion of the following:
(a) Delivery of the Filing Documents to the Escrowee;
(b) Delivery of the other Seller Closing Documents to
Purchaser and of the other Purchaser Closing Documents to Seller;
(c) Delivery by the Title Insurer to Purchaser of either (at
Purchaser's option) "proforma" policies of title insurance or "mark-ups"
of the Title Commitments, in either case, conforming to the requirements
of the Title Policies described in Section 1.1 hereof and having an
effective date of insurance as of the date of recording of the Filing
Documents to the Escrowee; and
(d) Delivery of the Balance of the Purchase Price by the
Escrowee to Seller.
6.5 TITLE TO PURCHASER'S NOMINEE. Purchaser may elect to have
title to any one or more Properties conveyed to any one or more of Purchaser's
Nominees. In each such instance, Purchaser shall, on or before the date that is
five (5) Business Days before the Closing Date, deliver to Seller a written
notice setting forth the name, tax mailing address, state of incorporation and
other relevant information regarding each such Purchaser's Nominee for a
particular Property. Any such Purchaser's Nominee shall agree in writing to be
bound by the terms and conditions of this Agreement as they relate to such
Property, but Purchaser shall in no event be released from any of its
obligations or liabilities hereunder.
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6.6 CLOSING COSTS. Closing costs shall be paid in accordance
with the provisions of Section 5.5 hereof.
6.7 FURTHER ASSURANCES. Seller and Purchaser agree that the
intent and purpose of the Closing Documents is to convey all of the right, title
and interest of Seller or any Seller Affiliate in any Property to Purchaser. In
addition to the acts and deeds recited herein and contemplated to be performed,
executed and/or delivered by Seller to Purchaser, Seller and Purchaser agree to
perform, execute and/or deliver or cause to be delivered, executed and/or
delivered at the Closing or after the Closing any and all further acts, deeds
and assurances as may be necessary to consummate the transactions contemplated
hereby and carry out the intent and purpose of this Agreement. The provisions of
this Section 6.7 shall survive the Closing.
6.8 FIRPTA WITHHOLDINGS. Purchaser shall withhold 10% of the
amount realized on the disposition of all Real Property owned by Centrixx, and
Purchaser shall remit such amount to the Internal Revenue Service in accordance
with Code Section 1445 and the Treasury Regulation thereunder, unless Centrixx
establishes to the reasonable satisfaction of Purchaser that no withholding or a
reduced amount of withholding is required under Code Section 1445 and Treasury
Regulations thereunder, in which case Purchaser shall withhold and remit to the
Internal Revenue Service, or if the Purchaser already has withheld, shall remit
to the Internal Revenue Service such amounts as set forth in a withholding
certificate for the Real Property of Centrixx transferred hereunder issued by
the Internal Revenue Service or the United States Secretary of the Treasury
("WITHHOLDING CERTIFICATE"). To the extent Purchaser has withheld an amount in
excess of that set forth in the Withholding Certificate, Purchaser shall remit
such excess amount to Centrixx .
ARTICLE 7
APPORTIONMENTS AND PAYMENTS
7.1 PRORATIONS. Subject to the provisions of Section 7.3
below, the items pertaining to the Malls that are identified in this Section
shall be prorated between the parties on a per diem basis (employing the actual
number of calendar days in the period involved and a 365-day year) so that
credits and charges with respect to such items for all days preceding and
including the Cutoff Date shall be allocated to Seller, and credits and charges
with respect to such items for all days after the Cutoff Date shall be allocated
to Purchaser. Each payment received shall be attributed to the most recent
period for which such a payment is due. On or before May 1, 1997, Purchaser
shall prepare and submit to Seller the Final Proration Statement, and the
parties shall make final adjusting payments indicated thereon, all as provided
in Section 7.4(b) hereof.
(a) UNREIMBURSED REAL ESTATE TAXES. Real estate taxes and
assessments, both general and special, that are levied or assessed upon the Real
Property as such taxes may be increased or decreased following Closing
("TAXES"), excluding (i) Taxes paid directly to the taxing authority by Tenants
or Parties to a Reciprocal Easement Agreement or Specialty License Agreement,
and (ii) Taxes reimbursable to the Owner of the Real Property by Tenants thereof
or Parties to a Reciprocal Easement Agreement or Specialty License Agreement
with respect thereto, shall be prorated as of the Cutoff Date. If the Cutoff
Date occurs prior to issuance of the tax bill for the fiscal tax year in which
the Cutoff Date occurs, Purchaser and Seller shall
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initially prorate Taxes for such tax year based upon the most recently received
tax bill, and subsequently adjust such proration when the Taxes for such tax
year are officially determined.
(b) FIXED RENT AND FIXED CHARGES. Rents, other than percentage
or overage rents, together with other fixed or separately invoiced charges
thereunder and/or pursuant to the Reciprocal Easement Agreements, shall be
prorated as of the Cutoff Date.
(c) COMMON AREA CHARGES. Certain of the Leases and Specialty
License Agreements provide for reimbursement to the landlord thereunder of
certain expenses relating to common areas ("COMMON AREA EXPENSES"), including,
but without limitation, the expenses of operating and maintaining certain
improvements located on the Real Property, including exterior parking, roadways,
landscaping, sidewalks and other areas provided for the common use or benefit of
Tenants, Parties to Specialty License Agreements and their patrons, as well as
insurance, real estate taxes, heating and cooling charges, and various services
with respect thereto including the management and administration thereof, which
may be computed as a percentage of other costs of operating and maintaining the
common areas (the "ADMINISTRATIVE FEES"). Common Area Expenses are determined on
an annual basis, but the anticipated amount thereof may be estimated and paid in
monthly or other installments of the estimated amount during the course of the
year with a final adjustment made after the close of the year when such costs
and expenses have been finally determined. Seller and Purchaser have agreed as
follows with respect to Common Area Expenses:
(i) Except as hereinafter provided, Seller shall be
responsible for all Common Area Expenses through the Cutoff Date, and
shall be entitled to retain reimbursements thereof collected through the
Cutoff Date and to receive reimbursements therefor collected after the
Cutoff Date, up to the aggregate amount of such Common Area Expenses for
which Seller is responsible. Purchaser shall be responsible for all Common
Area Expenses after the Cutoff Date and shall be entitled to receive and
retain all remaining reimbursements of Common Area Expenses collected from
Tenants or Parties to Specialty License Agreements with respect thereto
after payment to Seller of reimbursements for periods prior to the Cutoff
Date.
(ii) Upon issuance of the Final Proration Statement referred
to in Section 7.4(b) hereof:
(Y) Seller shall pay to Purchaser the amounts (if any)
received by Seller on account of Common Area Expenses that is in
excess of those amounts to be paid by Seller as Common Area Expenses
as hereinabove provided; and/or
(Z) Purchaser shall pay to Seller any deficiency in the
reimbursement of Common Area Expenses to which Seller is entitled as
hereinabove provided.
(iii) The Final Proration Statement referred to in Section
7.4(b) hereof, shall show the total Common Area Expenses for the year in
which the Cutoff Date occurs, the amount thereof paid by Seller and by
Purchaser, respectively, and the reimbursements thereof received by Seller
and Purchaser, respectively, all as hereinabove provided, with a separate
computation showing the amount of the Administrative Fees
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allocable to Purchaser and Seller. Seller shall be entitled to that
portion of the total Administrative Fees actually collected for such year
as is determined by multiplying such total by a fraction the numerator of
which shall be the Common Area Expenses incurred by Seller with respect to
such year, and the denominator of which shall be the total Common Area
Expenses for such year. Purchaser shall be entitled to the remaining
portion of the Administrative Fees.
(d) REIMBURSED TAXES AND INSURANCE. Taxes or insurance
premiums that are reimbursed by Tenants under their Leases and/or by Parties to
Specialty License Agreements or under Reciprocal Easement Agreements shall be
prorated in the same manner as is provided in Section 7.1(c)(i) and (ii) above
with respect to Common Area Expenses.
(e) PERCENTAGE RENT. Percentage rent payable under the Leases
and Specialty License Agreements shall be prorated as of the Cutoff Date as
follows:
(i) Any percentage rent which is attributable to a lease year
as defined in each Lease or Specialty License Agreement (a "LEASE YEAR")
ending on or before the Cutoff Date shall be retained by Seller or
promptly paid over to the Seller if received by Purchaser.
(ii) Percentage rent payable with respect to a Lease Year
during which the Cutoff Date occurs, shall be apportioned between
Purchaser and Seller as and when received for such Lease Year as follows:
(Y) For Tenants or Parties to Specialty License Agreements
that report sales on a monthly basis, Seller shall be entitled
to that part of their percentage rent that is the aggregate
of:
(1) the sum determined by multiplying the total percentage
rent for such Lease Year by a fraction, the numerator of which
is the total sales prior to the month in which the Cutoff Date
occurs, and the denominator of which is the total sales for
such Lease Year, and
(2) for the month in which the Cutoff Date occurs, the sum
obtained by multiplying the percentage rent due for such month
by a fraction, the numerator of which is the number of days in
such month through and including the Cutoff Date, and the
denominator of which is the number of days in such month.
Purchaser shall be entitled to the remainder of such
percentage rent.
(Z) For Tenants or Parties to Specialty License Agreements that
report sales only on an annual basis, Seller shall be entitled to
percentage rent determined by multiplying the total percentage rent
for such Lease Year by a fraction, the numerator of which shall be
the total number of days in such Lease Year through and including
the Cutoff Date, and the denominator of which shall be the number of
days in such Lease Year. Purchaser shall be entitled to the
remainder of such percentage rent.
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The final amount of the foregoing allocations of percentage rent to Seller shall
be paid by Purchaser to Seller as provided in Section 7.4(b) hereof. Purchaser
agrees, upon Seller's request, to provide Seller with those statements of
monthly or annual gross sales received from Tenants or Parties to Specialty
License Agreements with respect to any Lease Year in which the Cutoff Date
occurs.
(f) VENDOR LICENSE PAYMENTS. All amounts collected or payable
for the admission to or use of any facilities comprising the Property, including
but not limited to the operation of storage, vending or other coin-operated
machines, shall be prorated as of the Cutoff Date.
(g) [Intentionally omitted]
(h) SALES TAXES. Sales, excise and similar taxes that have
been collected by Seller but that will be payable in whole or in part to
governmental authorities by Purchaser after Closing (other than such taxes, if
any, as result from the transfer of any part of the Property to Purchaser upon
Closing), shall be prorated as of the Cutoff Date.
(i) FUELS AND UTILITIES. To the extent not covered under
Section 7.1(c), utility and fuel charges, including, without limitation, charges
for water, electricity, gas, gasoline, steam, oil and telephones used in
connection with the heating, cooling, lighting, maintenance and operation of the
Property, shall be prorated as of the Cutoff Date.
(j) MERCHANT ASSOCIATION FUNDS AND EXPENSES. Contributions
held by an Owner for or as, or to be made by an Owner to, any merchants'
association or promotional fund established with respect to any Mall, and the
cost to such Owner of providing services to any such association or fund, shall
be prorated as of the Cutoff Date.
(k) PROMOTIONAL EXPENSE. Prepaid costs incurred by an Owner
for advertising and promotion of a Mall that has not yet occurred, to the extent
reimbursement therefor is not to be received from Tenants, shall be prorated as
of the Cutoff Date.
(l) PERMIT AND LICENSE FEES. Annual or other periodic fees for
permits and licenses required in connection with the operation of any part of
the Property shall be prorated as of the Cutoff Date to the extent that
Purchaser succeeds Seller as the permittee or licensee thereunder and is not
required to obtain new permits and/or licenses in its own name.
(m) CONTRACTS. Except to the extent reimbursable by Tenants or
by Parties to Specialty License Agreements or Reciprocal Easement Agreements,
payments to be made under any Contract that is to be assigned to and assumed by
Purchaser upon Closing shall be prorated as of the Cutoff Date.
(n) INTEREST EXPENSE. Current interest payable under the
Temple Loan and the Pecanland Loan shall be prorated as of the Cutoff Date.
Seller shall pay all past due interest, and all other fees, penalties and other
charges or costs due to each Lender, whether in connection with a Lender's
consent to the transfer of the Mall, or the transfer of the Temple Interest or
otherwise.
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(o) RECIPROCAL EASEMENT AGREEMENTS. Charges and payments, if
any, under the Reciprocal Easement Agreements not otherwise covered under
Section 7.1(a), (b) and (d) shall be prorated as of the Cutoff Date. Seller
shall pay all past due amounts required to be paid by a Seller under any
Reciprocal Easement Agreement. If any amount currently due to or payable by
Seller under a Reciprocal Easement Agreement is not known as of the Closing
Date, then a proration shall be made by the parties based on a reasonable
estimate of such amount and the parties shall adjust the proration when the
actual amount becomes known.
(p) [Intentionally omitted]
(q) OTHER EXPENSES. Except to the extent reimbursable by
Tenants or Parties to Reciprocal Easement Agreements or Specialty License
Agreements, or the subject of other express provision of this Agreement, all
other reasonable and necessary expenses, customary in connection with the
operation and maintenance of the Property and requiring payments for any period
in which the Cutoff Date occurs shall be prorated between Seller and Purchaser
as of the Cutoff Date.
(r) NO PRORATION OF CERTAIN TAXES. The parties have agreed
that Seller will not give Purchaser a credit for those Taxes that any Tenant or
Party to a Specialty License Agreement or Reciprocal Easement Agreement is
obligated by its Lease, Specialty License Agreement or Reciprocal Easement
Agreement to pay directly to the taxing authority.
7.2 ADJUSTMENTS. The following amounts, if any (the
"Adjustments"), without duplication, shall be paid or credited by Seller to
Purchaser upon Closing:
(a) SECURITY DEPOSITS. Tenant Security deposits which are held
by Seller as of the Closing Date. The Updated Rent Roll for each Mall shall
include a schedule setting forth the unapplied portion of any security deposits
relating to such Mall. To the extent such security deposits have been paid or
credited to Purchaser, Purchaser agrees to indemnify and hold Seller harmless
from any claim by the depositing Tenant for the return thereof.
(b) DEPOSITS FOR SPACE PREPARATION. Payments made to Seller by
or on behalf of any Tenant for the preparation or alteration of any space to be
occupied by such Tenant.
7.3 COLLECTION. To the extent that any sum to be received
pursuant to any Lease, Specialty License Agreement a Reciprocal Easement
Agreement, whether as Rent, percentage rent, or as reimbursement of Common Area
Expenses or any other item to be reimbursed thereunder, is past due on the
Cutoff Date (hereinafter collectively referred to as "DELINQUENCIES"), then (i)
Seller shall receive no credit therefor at Closing, and (ii) all payments, of
any kind, received by Purchaser after Closing from Tenants or Parties to
Specialty License Agreements or Reciprocal Easement Agreements with
Delinquencies still outstanding shall, as between Purchaser and Seller, be
applied first to installments of Rent, Common Area Expenses, Taxes and/or
percentage rent due from such Tenant or Parties to Specialty License Agreements
or Reciprocal Easement Agreements for any period following Closing, next to the
reasonable costs, if any, incurred by Purchaser in collecting payments of
Delinquencies from such Tenant or from Parties to Specialty License Agreements
or Reciprocal Easements Agreements and last paid to Seller with respect to the
Delinquencies due from such Tenant or Party to Specialty License Agreements or
Reciprocal Easement Agreements. Purchaser shall
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promptly remit to Seller all sums received by Purchaser after Closing to which
Seller is entitled pursuant to the foregoing provisions. Purchaser shall use
reasonable efforts to collect the Delinquencies; provided, however, that
Purchaser may, but shall not be obligated to, commence any litigation against
any Tenant or other Party from whom Delinquencies are due, incur any expenses
(other than the expense of routine billing), or terminate a Lease, Specialty
License Agreement or Reciprocal Easement Agreement. Purchaser shall not be
liable to Seller for any Delinquencies (unless collected) and shall not have any
obligation to collect any Delinquencies. Reasonable collection costs, including,
without limitation, reasonable attorneys' fees, shall be charged against the
amount of any Delinquencies that are collected.
7.4 CLOSING AND FINAL PRORATION STATEMENTS. In connection with
the foregoing prorations and adjustments, Seller and Purchaser shall prepare or
cause to be prepared, the following statements:
(a) CLOSING STATEMENT. Seller shall prepare and deliver on the
Closing Date a proration statement in reasonable detail showing each item
prorated, allocated or adjusted in accordance with this Article 7, in such form
as fairly reflects such prorations, allocations and adjustments to the
reasonable satisfaction of Purchaser and Seller, such form to be agreed upon by
Purchaser and Seller within forty-five (45) days following the Effective Date
(the "CLOSING STATEMENT"). The Closing Statement delivered at Closing shall be
certified by an officer of Seller as being accurate and complete and in
accordance with the provisions of this Article 7, and to correctly present the
prorations, allocations and adjustments to be made in accordance with the
requirements of this Article 7.
(b) FINAL PRORATION STATEMENT. On or before May 1, 1997,
Purchaser shall submit to Seller a final proration statement consistent with the
form of the Closing Statement, prepared as of the Cutoff Date but employing
information available as of April 1, 1997, and certified by an officer of
Purchaser as being accurate and complete and in accordance with the provisions
of this Article 7, and to correctly present the final prorations and adjustments
to be made in accordance with the requirements of this Article 7, and as to any
amounts for which final information is not available as of April 1, 1997,
employing an estimate agreed to by Purchaser and Seller in their reasonable
judgment (the "FINAL PRORATION STATEMENT"). Upon issuance of the Final Proration
Statement, the parties shall make such final proration payments as are thereby
indicated to be due. Following the Seller's receipt of the Final Proration
Statement, Purchaser agrees to allow Seller, its accountants and
representatives, to examine those books and records in the possession and
control of Purchaser which relate to the Final Proration Statement for a period
of one (1) year following issuance thereof, at the place or places where they
are then regularly maintained, during regular business hours and upon reasonable
prior notice to Purchaser, and to discuss the subject matter thereof with
Purchaser's employees and accountants. Purchaser agrees to retain such books and
records for one (1) year following issuance of the Final Proration Statement,
and in the event of an examination thereof that is commenced during such period
by Seller, then for such additional period as is reasonably necessary to permit
completion thereof and the resolution of any dispute in connection therewith.
7.5 UTILITIES. Seller shall cooperate with Purchaser in the
transfer of electricity, gas, water, sewer and other utility services for the
Seller-Owned Malls from the name of the current Owner to the name of Purchaser
as of the Closing Date. Seller shall also assign to Purchaser any deposits held
by a utility company with respect to any such utility services for the
Seller-Owned Malls and Purchaser shall pay to Seller the amount of any deposits
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so assigned. Seller shall pay or cause to be paid all utility bills for charges
that have been rendered for any Mall prior to the Cutoff Date.
7.6 RESERVES AND DEPOSITS. Purchaser shall pay to Seller the
amount of any reserves, escrow deposits or accruals made with, or held by, a
Lender or any insurance carrier for capital repair or replacement reserves, real
property taxes and assessments, insurance premiums, excess retention escrows
with any insurance carriers, and/or other items. As of the Closing, and
contingent upon the occurrence of the Closing, Seller hereby assigns to
Purchaser all of Seller's right, title and interest in and to any such reserves,
escrow deposits and accruals if any.
7.7 CONSTRUCTION ALLOWANCES. Responsibility for construction
allowances and other tenant inducements and for leasing commissions shall be
allocated as provided in Section 8.1.
7.8 PRORATION OF TEMPLE AND ALEXANDRIA. If a Partnership
Interest is transferred to Purchaser pursuant to the provisions of Section 3.4
hereof, the net prorations and adjustments calculated pursuant to this Article 7
for Alexandria Mall shall be multiplied by ninety percent (90%), and those for
Temple Mall shall be multiplied by fifty percent (50%).
7.9 SURVIVAL. The provisions of this Article 7 shall survive
the Closing.
ARTICLE 8
ADDITIONAL AGREEMENTS OF SELLER AND PURCHASER
8.1 CONDUCT OF BUSINESS PRIOR TO CLOSING DATE. Prior to
Closing, Seller covenants and agrees as follows:
(a) Seller shall comply with (or cause to be complied with)
all material terms of all Leases, Contracts, Specialty License Agreements,
Partnership Agreements, Reciprocal Easement Agreements, Office and
Equipment Leases and any other agreements, instruments and easements
applicable to the Malls, and timely pay (or cause to be paid) all taxes,
assessments, utility charges and other costs and expenses relating to the
Malls.
(b) Seller shall operate and manage (or cause to be operated
and managed) each Mall in the ordinary course of business in accordance
with Seller's past practice, but subject to the terms of this Agreement,
and in accordance with all applicable permits, licenses, approvals or
Laws, maintain in full force and effect through the Closing Date all
material licenses, all permits (including, without limitation, all
building permits and occupancy permits) and all easements and
rights-of-way that are required in order to continue the present use of
each Mall and ensure adequate vehicular and pedestrian ingress and egress
to each Mall, such that on the Closing Date, each Mall shall be in at
least as good a state of condition and repair as on the Effective Date,
reasonable wear and tear and damage by fire or other casualty excepted,
subject to the provisions of Article 10. Without limiting the generality
of the foregoing, Seller shall spend, at a minimum, such amounts for
repair and maintenance as are consistent with its
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prior practice. Seller shall promptly advise Purchaser in writing of any
significant repair or improvement required to keep a Mall in such
condition. During the Inspection Period, Seller shall not make any
alterations to any Mall which would materially adversely affect the Mall.
After the expiration of the Inspection Period, Seller shall not make any
material alterations to any Mall, or remove any of the Personalty
therefrom, without Purchaser's prior written consent, unless such
Personalty so removed is simultaneously replaced with new Personalty of
similar quality and utility.
(c) Seller shall, at its sole reasonable cost and expense, and
upon request from Purchaser given by the end of the Inspection Period,
terminate any Contracts identified by Purchaser to be terminated, which
termination shall be effected on or prior to the Closing Date to the
extent feasible and, if such termination cannot be effected on or prior to
the Closing Date by reason of the terms of any Contract which require
advance notice, Seller shall deliver notice of termination, which
termination shall become effective as early as possible under the terms of
the applicable Contract. Except with Purchaser's prior written consent,
Seller shall not enter into any Material Contract that will be an
obligation affecting Purchaser or any Mall subsequent to the Closing,
except for arms-length, market rate Contracts with unaffiliated parties in
the ordinary course of business that can be terminated upon not more than
sixty (60) days notice.
(d) Except with Purchaser's prior written consent, Seller
shall not, nor permit MRML or any other Seller Affiliate to, (i) enter
into any contract of employment with any Employee; (ii) grant any
increases in the rates of pay, salaries, or other compensation of any
Employees or any increase in the other benefits to which such Employees
are presently entitled, other than scheduled increases for management
employees consistent with Seller's compensation policies, regular wage
increases for employees paid on an hourly basis made in the ordinary
course of business, as required by law and/or consistent with prior
practice; or (iii) defer any portion of the compensation of any Employee
beyond the date such compensation would have been paid in the ordinary
course of business and consistent with prior practice.
(e) Prior to the Closing, Seller shall pay, or otherwise
provide for the payment of, in a manner reasonably acceptable to
Purchaser, all obligations for leasing commissions,construction allowances
and other tenant inducements incurred in connection with Leases and
Specialty License Agreements for which Seller has issued approval prior to
the date of this Agreement. Purchaser shall be responsible for and shall
pay in full, on the Closing Date, without credit from Seller, all leasing
commissions with respect to Leases and Specialty License Agreements which
are approved or deemed approved, or for which approval is not required
under the terms of this Agreement, subsequent to the date of this
Agreement and in accordance with the terms of this Agreement including
Purchaser's right to approve any Lease during the Inspection Period
pursuant to Section 8.2. Purchaser shall be responsible for and shall pay,
on or after the Closing Date, without credit from Seller, construction
allowances and other tenant inducements owed to Tenants under Leases or
Specialty License Agreements which Purchaser has approved or is deemed to
have approved pursuant to
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Section 8.2 of this Agreement, or for which approval is not required under
the terms of this Agreement.
(f) All federal, state, county and municipal taxes and
assessments and other governmental or quasi governmental levies of any
kind that relate to the Property or the operation of the Malls that are
required to be paid prior to the Cutoff Date shall be paid through the
Cutoff Date either in cash or by credit in favor of Purchaser as otherwise
provided in Article 7 hereof.
8.2 LEASING.
(a) Prior to the expiration of the Inspection Period, Seller
shall not enter into, amend, terminate or waive any rights under any Material
Leases or Material Contracts without Purchaser's prior written consent, which
consent shall not be unreasonably withheld or delayed. If and to the extent that
Purchaser does not deny a request for such consent by notice given to Seller
within two (2) Business Days after Purchaser's receipt of Seller's request
therefor, Purchaser shall be deemed to have provided such consent. In any event,
copies of the foregoing shall be provided to Purchaser prior to expiration of
the Inspection Period. Notwithstanding the foregoing, Seller shall have the
right at any time to exercise any or all of its legal remedies against any
Tenant who is in default under its Lease or Specialty License Agreement
(including, without limitation, the right to commence unlawful detainer or
eviction actions), provided Seller shall not following the expiration of the
Inspection Period seek to terminate any Lease or Specialty License Agreement or
any tenant's right of possession under any Lease or Specialty License Agreement
without Purchaser's written consent, which consent may be withheld in
Purchaser's sole discretion, and which shall be deemed given if Purchaser does
not deny a request for such consent by notice given to Seller within two (2)
Business Days after Purchaser's receipt of Seller's written request therefor.
(b) After the expiration of the Inspection Period, Seller
shall not enter into any New Lease, New Contract or New Specialty License
Agreement or amend, modify, terminate or waive any rights under any existing
Lease, Contract or Specialty License Agreement without Purchaser's prior written
consent, which consent may be withheld in Purchaser's sole discretion. Purchaser
shall review, and in Purchaser's sole discretion, either approve or disapprove
in writing, a written proposal from Seller for a New Lease or New Specialty
License Agreement (a "LEASE PROPOSAL") or for termination of an existing Lease
or Specialty License Agreement (a "TERMINATION PROPOSAL") within four (4)
Business Days after receipt of such Lease Proposal or Termination Proposal. If
Purchaser fails to deny a request for such consent to a Lease Proposal or
Termination Proposal within four (4) Business Days after receipt thereof,
Purchaser shall be deemed to have approved such Lease Proposal or Termination
Proposal. With respect to each Lease or Specialty License Agreement, Seller
shall utilize the standard form lease, specialty license agreement or lease
modification, as the case may be, then in use at the Mall provided, however,
that without Purchaser's consent Seller shall have the right to make such
modifications in said standard form which are consistent with modifications
generally made by Seller in the ordinary course of leasing space at the Malls.
Following approval or deemed approval of any Lease Proposal, Purchaser shall
have the right to review and approve any final form of Lease, Specialty License
Agreement or lease modification that Seller intends to execute; provided,
however, that Purchaser shall not be permitted to reject any Lease, Specialty
License Agreement or lease modification for which Purchaser approved the Lease
Proposal and which is prepared on the standard form lease,
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specialty license agreement or lease modification, as the case may be, then in
use at the Mall with only such modifications in said standard form which are
consistent with modifications generally made by Seller in the ordinary course of
leasing space at the Malls.
(c) Not later than the earlier of four (4) Business Days after
entering into same or two (2) days prior to the Closing Date, Seller shall
provide Purchaser with copies of all Leases, Specialty License Agreements and
lease amendments, modifications or terminations executed by Seller after the
Effective Date and prior to the Closing Date.
(d) Any request for a consent under this Section 8.2 shall
include a copy of all proposed actions and a statement of all material facts
relating thereto (including, without limitation, the amount of the leasing
commissions payable with respect thereto).
8.3 INSURANCE POLICIES. EXHIBIT 8.3 attached hereto is a
schedule of all insurance policies currently in effect with respect to any Mall.
Seller agrees to maintain or cause to be maintained the Insurance Policies in
effect through the Closing Date. Purchaser shall secure its own insurance with
respect to the Property and Seller shall have the right to terminate the
Insurance Policies effective on the Closing Date. Any unearned premiums and the
unabsorbed portions of any deposits with respect to the Insurance Policies shall
belong solely to the Seller. Seller shall have the right, at its sole cost and
expense, to renew or replace insurance policies that expire prior to the Closing
Date, provided that the policy limits are the same as, or greater than, those
set forth in EXHIBIT 8.3.
8.4 MANAGEMENT OFFICE AND EMPLOYEES. (a) Seller or MRML, as
the case may be, shall assign, and Purchaser shall cause FUMI to assume, the
obligations of Seller or MRML, as the case may be, under the Office and
Equipment Leases. Purchaser shall cause FUMI to enter into an agreement
concerning the employees of MRML in the form attached hereto as EXHIBIT 8.4.
(b) Effective as of the Closing Date, Seller shall cause MRML
to terminate the Employees, all of whom are employees of MRML.
(c) Notwithstanding the provisions of Section 8.4(b), in the
event that an Employee who accepts an offer of employment from FUMI ceases to be
employed by FUMI or a Purchaser Affiliate during the three (3) month period
beginning on the Closing Date under circumstances which would otherwise entitle
him to a severance benefit under the terms of either the Marathon Realty
Management Limited Special Severance Program (Salaried Employees) or the
Marathon Realty Management Limited Special Severance Program (Hourly Employees)
(as in effect as of the Effective Date of this Agreement) if he were then
employed by MRML and had not been employed by FUMI or a Purchaser Affiliate,
Seller shall or shall cause MRML to pay such severance benefit to such Employee.
In the event such an Employee who accepts an offer of employment from FUMI
ceases to be employed by FUMI or a Purchaser Affiliate after the three (3) month
period beginning on the Closing Date, but before the end of the six (6) month
period beginning on the Closing Date, Purchaser shall cause FUMI to pay any
severance benefit due to such Employee under the foregoing benefit programs, and
in the event such an Employee ceases to be employed by FUMI or a Purchaser
Affiliate after the six (6) month period beginning on the Closing, Date,
Purchaser shall cause FUMI to pay any severance benefit as shall be determined
under arrangements then maintained in effect by FUMI. The provisions of this
Section 8.4(c) shall survive the Closing.
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(d) Notwithstanding any provision of this Agreement to the
contrary, nothing in this Agreement shall confer upon any Employee the right to
continue for any definite term in the employ of FUMI or any Purchaser Affiliate
or, subject to any existing employment contracts, understandings or other
agreements expressly assumed by FUMI, shall interfere with or restrict in any
way the rights of FUMI to discharge any Employee at any time for any reason,
with or without cause. Seller shall pay, or cause to be paid, all wages,
salaries and benefits, including, but not limited to, amounts reflecting accrued
vacation owed by Seller or any Seller Affiliate to the Employees at the Closing
Date and in compliance with applicable laws. The provisions of this Section
8.4(d) shall survive the Closing.
(e) Seller shall provide or cause MRML to provide health plan
continuation coverage in accordance with and if required by COBRA with respect
to Employees who do not accept an offer of employment from FUMI and those former
employees of Seller or MRML and other qualified beneficiaries who are entitled
to such continuation coverage by reason of events prior to the Closing Date. The
provisions of this Section 8.4(e) shall survive the Closing.
8.5 POSSESSION. Seller shall deliver possession of the
Property to Purchaser upon the completion of the Closing, subject to the rights
of Tenants under the Leases and licensees under the Specialty License
Agreements.
8.6 MANAGEMENT INFORMATION SYSTEMS. Purchaser agrees that
Seller shall retain all software licenses necessary to comply with licensing
requirements. Following the Closing Date, Seller agrees to use its best efforts
to provide to Purchaser access to the data contained in Seller's management
information systems on disk form or otherwise permit access to Seller's software
for the purpose of the conversion of such data to Purchaser's management
information systems. Purchaser acknowledges that Seller's parent currently
outsources the management information system through an IBM subsidiary and that
Purchaser shall pay the reasonable costs of continuing such service post-Closing
until Purchaser completes its conversion of such data.
8.7 MORTGAGE RELEASES. Seller covenants and agrees to obtain
the release of any mortgages or other security instruments affecting the Malls,
other than Temple and Pecanland. Prior to the Closing, Seller shall request that
the parties holding such mortgage or other security interests deposit releases
of such instruments into escrow with the Escrowee. With respect to any releases
not so received prior to Closing, Seller shall secure the same and cause the
same to be recorded within one hundred and twenty (120) days following the
Closing Date.
8.8 LEASE/ESTOPPEL CERTIFICATES. Seller agrees to request the
Lease Estoppel Certificates from each of the Tenants or other parties
contemplated thereby as soon as reasonably possible following the Effective Date
and to use its best efforts to obtain the Lease Estoppel Certificates within the
time frame set forth in Section 6.2(j), and shall deliver copies of the Lease
Estoppel Certificates directly to Purchaser by telecopy on the day they are
respectively received by Seller, with copies delivered by overnight express
courier transmission to Purchaser at least once each week. For purposes of this
Section 8.8, best efforts shall not require commencement of litigation or
payments of money to secure estoppels.
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8.9 GUARANTY. Seller agrees to cause 2685752 CANADA, INC., a
Canadian corporation (the "Guarantor") which is an affiliate of Seller, to
deliver to Purchaser, simultaneously with the execution and delivery of this
Agreement, a Guaranty in the form attached to this Agreement. The parties agree
that, in any instance in which this Agreement terminates by its terms, with a
distribution of the Deposit pursuant to its terms, the Guaranty likewise shall
be returned to the Guarantor. In addition, within five (5) Business Days after
the Effective Date, Seller shall deliver to Purchaser a pro forma balance sheet
and operating statement of the Guarantor, the review of which shall be included
in Purchaser's due diligence.
ARTICLE 9
REPRESENTATIONS AND WARRANTIES
9.1 SELLER'S REPRESENTATIONS AND WARRANTIES. Seller makes the
following representations and warranties for the benefit of Purchaser, with the
understanding that such representations and warranties are material and are
being relied upon by Purchaser in entering into this Agreement.
(a) REAL PROPERTY. The Owners do not own any land in addition
to the land described on EXHIBITS A1 through A9 which is contiguous to any Mall
or located in the immediate vicinity of any Mall (e.g., located across a public
roadway) or otherwise related to any Mall. Seller has not entered into, and to
Seller's best knowledge, no predecessor in interest or title to Seller has
entered into, any unrecorded or undisclosed easement, liens or option agreements
that would have a material adverse effect on title to the Property.
(b) CONTRACTS. EXHIBIT 9.1(b) contains a description of all
Contracts entered into by or on behalf of an Owner in connection with the
management, maintenance or operation of such Mall. Except for the Contracts,
there are no other agreements to which an Owner is party or, to Seller's best
knowledge, by which it or any Mall or the Property is bound that may affect the
current use, operation or enjoyment of any Mall. Each Owner has performed all
the material obligations required to be performed by it under the Contracts, and
to Seller's best knowledge, no other parties to any of the Contracts are in
default of a material term thereunder. Except as set forth on EXHIBIT 9.1(b),
all of the Contracts can be terminated by the Owner who is a party thereto at
its option upon not more than thirty (30) days' prior written notice without
premium or penalty of any kind.
(c) LEASES. The information contained in the Rent Roll and
Updated Rent Roll is true, correct and complete, Seller has delivered to
Purchaser true, correct and complete copies of all of the Leases and the
Specialty License Agreements and there are no leases, occupancies, tenancies,
licenses or, to Seller's best knowledge, written subleases, in effect pertaining
to any portion of a Mall, and no persons, tenants, licensees or entities occupy
space in the Property, except as stated in the Rent Roll or the Updated Rent
Roll. There are no options or rights to renew, extend or terminate the Leases or
the Specialty License Agreements, or expand any leased or licensed premises,
except as shown in the Rent Roll or the Updated Rent Roll or as set forth in the
Leases or Specialty License Agreements. Except as disclosed by the Rent Roll,
the Updated Rent Roll or EXHIBIT 9.1(c): (i) the Leases and the Specialty
License Agreements and any guaranties thereof are in full force and effect and
no Rents or other payments, or other deposits, are held by an Owner except the
security deposits described on the
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Rent Roll or Updated Rent Roll and prepaid Rent for the current month; (ii) each
Owner is the sole owner of the landlord's or licensor's interest in the Leases
and the Specialty License Agreements; (iii) as of the Closing Date, except for
the Pecanland Loan and the Temple Loan, no Rents due under, or other interest
in, any of the Leases or the Specialty License Agreements will have been
assigned to any party other than Purchaser or otherwise pledged or encumbered in
any way; (iv) neither the landlord nor, to Seller's best knowledge, any Tenant
or licensee is in default under any Lease or Specialty License Agreement, nor,
except as disclosed in EXHIBIT 9.1(c), has Seller received any written notice
from any Tenant or licensee of any default under its Lease or Specialty License
Agreement or of any Tenant or licensee's termination of its Lease or Specialty
License Agreement in advance of the scheduled expiration date of its Lease or
Specialty License Agreement (except as disclosed in the Lease Estoppel
Certificates); (v) all of the improvements to be constructed by an Owner, if
any, contemplated under the Leases or the Specialty License Agreements or as
required therein or in any collateral agreement, plans or specifications
respecting the Leases or Specialty License Agreements have been fully completed
and paid for; and (vi) to Seller's knowledge, the Partnerships have no business
relationship with any Tenant or licensee other than that of landlord and Tenant
or licensee and no Partner owns ten percent (10%) or more of any Tenant or
licensee. EXHIBIT 9.1(c)(i) includes a list of all retail stores located within
a Mall having a floor area in excess of twenty thousand (20,000) square feet,
and including any combination of retail stores at a single Mall owned or
controlled by the same parent company and having an aggregate floor area in
excess of such amount which is under a single Lease.
(d) RECIPROCAL EASEMENT AGREEMENTS. The Reciprocal Easement
Agreements are in full force and effect. Each Owner is in compliance with all
its material obligations under all such agreements. To Seller's best knowledge,
all other parties to the Reciprocal Easement Agreements are in compliance with
all of their material obligations under the respective agreements.
(e) PERSONAL PROPERTY OTHER ASSETS; AND OFFICE AND EQUIPMENT
LEASES. Each Owner owns good title to the Personalty and Other Assets relating
to its Mall, free and clear of all Liens other than the Permitted Exceptions. To
Seller's knowledge, except as listed on EXHIBIT 9.1(e), Owner owns no material
Personal Property or Other Assets which are either located within or used in
connection with the Mall.
(f) OFFICE AND EQUIPMENT LEASES. EXHIBIT 9.1(f) contains a
description of all Office and Equipment Leases entered into by or on behalf of
Seller or MRML connection with the management, operation, leasing or maintenance
of any Mall. Except for the Office and Equipment Leases, there are no other
office and/or equipment leases to which Seller or MRML is a party that is
currently utilized in the management or operation of any Mall. Neither Seller,
MRML nor, to Seller's best knowledge, any party is in default under the terms of
any Office and Equipment Lease.
(g) SELLER'S AND AFFILIATES' AUTHORITY. Seller has been duly
formed and is validly existing and Seller has the full right and authority and,
subject to Section 9.1(m) hereof, has obtained any and all corporate consents
required to enter into this Agreement, consummate or cause to be consummated the
sale and make or cause to be made transfers and assignments contemplated herein;
the persons signing this Agreement on behalf of Seller are authorized to do so;
and this Agreement and all of the documents to be delivered by Seller at
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the Closing have been authorized and properly executed and will constitute the
valid and binding obligations of Seller, enforceable against Seller in
accordance with their terms.
(h) PENDING ACTIONS. Except as set forth in EXHIBIT 9.1(h),
Seller has not received written notice of any suit, action or proceeding pending
against Seller or any part of the Malls, and to the best of Seller's knowledge,
there are no suits, actions or proceedings threatened against Seller or any part
of the Malls which, if determined adversely to Seller, would have a material
adverse affect on any Mall.
(i) CONDEMNATION. Except as set forth on EXHIBIT 9.1(i)
attached hereto, Seller has not received written notice of any pending or
proposed condemnation or eminent domain proceedings affecting the Malls.
(j) PHYSICAL CONDITION OF THE IMPROVEMENTS. To Seller's best
knowledge, except as disclosed on EXHIBIT 9.1(j), there are no material
structural defects in the buildings located on the Real Property. Seller has
made available to Purchaser all Plans commissioned by Seller and all other Plans
in Seller's possession or control.
(k) LICENSES. The Owner of each Mall has all material
licenses, permits (including, without limitation, all building permits and
occupancy permits), easements and rights-of-way which are required for the
present use of the Mall.
(l) [Intentionally omitted.]
(m) CONSENTS/BULK SALES NOTICE. Except as set forth on EXHIBIT
9.1(m), and except for the Lender consents pursuant to Section 3.3 and the
Partnership Consents, no approval, consent, waiver, filing, registration or
qualification with any third party, including, but not limited to, any
governmental bodies, agencies or instrumentalities is required to be made,
obtained or given for the execution, delivery and performance of this Agreement
or any of the Closing Documents by Seller. To Seller's knowledge, there is no
bulk sales notice required in connection with the transfer to Purchaser of the
Property. Without limiting the foregoing, the Seller and Purchaser agree to
waive the applications of all bulk sales laws; provided, further, that Seller
indemnifies and holds Purchaser harmless from and against any actual and direct
loss, cost, expenses, and liabilities from failing to comply with any bulk sales
law.
(n) LOANS. EXHIBIT 9.1(n) attached hereto sets forth the
outstanding principal balance of each of the MUSRI Loan, the Temple Loan and the
Pecanland Loan and contains a complete list of the MUSRI Loan Documents and the
Mortgage Loan Documents. Seller or Temple, as the case may be, is in compliance
with their respective material obligations under the Mortgage Loan Documents. To
Seller's best knowledge, the Lenders under the Mortgage Loan Documents and the
borrower and lender under the MUSRI Loan Documents each are in compliance with
all of their respective material obligations thereunder.
(o) NO VIOLATION. Except for consent requirements under the
Partnership Agreements and the Mortgage Loan Documents, none of the execution,
delivery or performance of this Agreement by Seller does or will, (i) violate,
conflict with or constitute a default under any term or condition of (A) the
organizational documents of Seller or the Partnerships or any other agreement to
which Seller or the Partnerships is a party or by which they are bound, or (B)
any terms or provision of any judgment, decree, order, statute, injunction, rule
or regulation
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of a governmental unit applicable to Seller or the Partnerships or any agreement
to which Seller or the Partnerships is a party or by which they or their assets
are bound; or (ii) result in the creation of any Lien or other encumbrance upon
the Partnership Interests, the assets or properties of Seller or the
Partnerships, except as created by this Agreement.
(p) PARTNERSHIPS:
(i) ORGANIZATION; AUTHORITY. Each Partnership is a general
partnership duly formed and existing under the laws of the
jurisdiction of its formation.
(ii) OWNERSHIP OF THE PARTNERSHIP INTERESTS. The Partnership
Interests constitute Seller's entire and only ownership interest in
the Partnerships. Seller is the legal and beneficial owner of the
Partnership Interests free and clear of all mortgages, liens,
options, rights of first refusal, claims, encumbrances and other
security arrangements or restrictions of any kind. Seller has not
granted any outstanding rights to purchase the Partnership Interests
and Seller is not a party to any agreement, arrangement or
understanding restricting or otherwise relating to the transfer or
voting of the Partnership Interests, except for agreements in the
Partnership Agreements and the Mortgage Loan Documents.
(iii) ABSENCE OF UNDISCLOSED LIABILITIES AND CONTRACTUAL
OBLIGATIONS. Except for liabilities disclosed in the Partnership
Financial Statements or arising in the ordinary course of business
since the date of the Partnership Financial Statements, the
Partnerships have no material undisclosed liabilities of any nature,
whether matured or unmatured, fixed or contingent, regardless of
whether the disclosure thereof would otherwise be required by GAAP,
under circumstances whereby any such liabilities could or would
following the Effective Date hereof remain with such Partnership and
that would have, individually or in the aggregate, a material
adverse effect upon such Partnership, except for the Leases, the
Temple Loan, the MUSRI Loan, the Reciprocal Easement Agreements, the
Contracts, and/or the Specialty License Agreements and any other
disclosed liabilities.
(iv) [Intentionally omitted]
(v) LITIGATION. Except as disclosed in EXHIBIT 9.1(p)(v),
there are no actions, suits, proceedings, judgments, orders, decrees
or investigations pending, or, to the Seller's best knowledge,
threatened in writing before any court, governmental unit or any
arbitrator with respect to any of the Partnerships or their assets
that, if adversely determined, could adversely affect the
Partnerships, the Partnership Interests, or the purchase of the
Partnership Interests by Purchaser.
(vi) TRANSFER TAXES. To Seller's knowledge, there are no
transfer taxes payable, accruing or otherwise arising out of the
transfer of the Partnership Interests to the Purchaser.
(q) TAXES. There are no pending real estate tax challenges,
complaints or actions with respect to real estate or personal property taxes or
assessments for any of the
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Malls except as set forth on EXHIBIT 9.1(q) attached hereto. To Seller's
knowledge there are no outstanding or unpaid federal, state or local taxes or
tax assessments that relate to the Property which are delinquent against any
Owner that could become a lien against any of the Property.
(r) LAWS. Except as disclosed in EXHIBIT 9.1(r), to Seller's
knowledge, the buildings and improvements located upon the Malls and the current
use and operation thereof are in material compliance with all Laws, and, to
Seller's knowledge, the buildings and improvements located upon the Malls are in
material compliance with all covenants, conditions, or restrictions affecting
the Malls. Seller has not received written notice alleging any violation of
applicable zoning or subdivision laws, and Seller has not applied for and has
not received written notice of any application for rezoning or other change in
applicable land use laws, ordinances or resolutions that could adversely affect
the use, operation or enjoyment of any Mall. There are no agreements between an
Owner and any governmental authorities, agencies, utilities or
quasi-governmental entities that affect the Malls, except those agreements that
are identified in the Title Commitment, disclosed by the Survey or described in
EXHIBIT 9.1(r).
(s) UTILITIES. To Seller's knowledge, all utility services,
water supply, storm and sanitary sewer facilities, telephone lines and fire
protection facilities required by law or for the normal operation of the Malls
are (i) available at the property lines of the Real Property from public
rights-of-way, (ii) connected to the Malls with valid permits, and (iii) in good
working order and repair.
(t) FINANCIAL STATEMENTS. The Financial Statements, the Rent
Roll and the Updated Rent Roll furnished to Purchaser in connection with or
pursuant to this Agreement (i) accurately reflect the financial condition of the
Malls or Seller, as the case may be, as of the date thereof, (ii) were prepared
on behalf of Seller in accordance with GAAP and in the ordinary course of
business, (iii) the Financial Statements do not fail to state any material
liability contingent or otherwise, the omission of which would be misleading or
material in nature as of the Closing Date and (iv) there have been no material
adverse changes in the financial condition of the Property or Seller from that
shown in the Interim Financial Statements.
(u) ENVIRONMENTAL. Except as disclosed to Purchaser in those
certain environmental reports listed on EXHIBIT 9.1(u): (i) to Sellers'
knowledge, no underground storage tanks have ever been or are located in any
part of the Property; (ii) other than standard office and janitorial supplies
and pesticides used in landscaping, all of which are stored at the Malls by
Seller only in such amounts as are customary for such uses, to Seller's
knowledge, no Hazardous Substances have been introduced by Seller or are present
at the Malls; (iii) to Seller's knowledge, the Property has been used in
compliance with all environmental laws and requirements imposed by any
applicable governmental authority and Owner has not brought onto the Malls any
Hazardous Substance; (iv) to Seller's knowledge there are no lawsuits or other
proceedings initiated by any governmental agency or any other entity regarding
the environmental condition of the Malls or the presence or disposal of
Hazardous Substances at the Malls and neither Seller, any Owner nor, to Seller's
best knowledge, any Tenant of a Mall has received any written notice of
violation issued pursuant to any Law pertaining to environmental conditions with
respect to a Mall or any use or condition thereof.
(v) EMPLOYEE BENEFITS. Attached hereto as EXHIBIT 9.1(v) is an
Employee Benefits List that identifies each Benefit Plan. Except as identified
in the Employee Benefit List,
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none of the Benefit Plans is an "employee pension benefit plan" as defined in
Section 3(2) of ERISA. All of the Benefit Plans and related trusts, if any, are
in form and have been administered in substantial compliance with all Laws,
including, without limitation, ERISA, the Code and COBRA. Except as described in
the Employee Benefits List, Seller and its Affiliates are not obligated to pay
any additional amounts to or pursuant to any Benefit Plan or related trust. No
employees of Seller or MRML participate in any "multiemployer pension plan"
within the meaning of the Multiemployer Pension Plan Amendment Act of 1980, as
amended, and Seller and MRML do not have any liability under ERISA for any
complete or partial withdrawal from any such multiemployer plan. None of the
Property is currently subject to any lien or pledge as security, whether
perfected or unperfected, in favor of the PBGC, the Internal Revenue Service, or
any Benefit Plan arising under Title IV of ERISA, Section 306 of ERISA, or
Section 412 of the Code, and to Seller's best knowledge, no facts or
circumstances exist which would subject the Property to any such lien or pledge
in the future. The consummation of the transactions contemplated by this
Agreement do not present a material risk to Seller or MRML of incurring a
liability under such Title IV other than liability for premiums due the PBGC.
Except as described on the Employee Benefits List, no Benefit Plan provides
benefits, including without limitation, death or medical benefits (whether or
not insured), with respect to Employees beyond their retirement or other
termination of service (other than (i) coverage mandated by applicable law, (ii)
death benefits or retirement benefits under any "employee pension benefit plan,"
as that term is defined in Section 3(2) of ERISA or (iii) benefits the full cost
of which is borne by the Employee (or his or her beneficiary)). Except as
described on the Employee Benefits List, the consummation of the transaction
contemplated by this Agreement will not (i) entitle any Employee to severance
pay, unemployment compensation, or any other payment, benefit, or award, or (ii)
accelerate or modify the time of payment or vesting, or increase the amount of
any benefit, award, or compensation due any Employee. No "leased employee," as
that term is defined in Section 414(n) of the Code, performs services for Seller
or MRML. Seller will make available to Purchaser as part of the Mall Information
true and correct copies of, and included in EXHIBIT 9.1(v) is a listing of, all
of the Employee Benefit Plans, the most recent determination letters from the
Internal Revenue Service with respect thereto, the most recent annual reports
(Form 5500 and the schedules thereto), the most recent summary plan descriptions
and the most recent actuarial valuations, if any.
(w) EMPLOYEES. EXHIBIT 9.1(w) contains a complete and correct
list of the names of all of the current Employees (including Employees on
authorized leaves of absences), including their titles and their date of hire,
and Seller has delivered to Purchaser's general counsel a certificate stating
their salaries or hourly compensation and any bonuses received or granted in the
last twelve (12) months. None of such Employees has a contract of employment for
a definite term. There are no collective bargaining agreements or other
agreements or arrangements of any kind with, or recognition of, a union or
employee association of any kind with respect to any of the Employees. There are
no government contracts or subcontracts to which Seller or any Seller Affiliate
is subject that impose affirmative action obligations upon Seller or any Seller
Affiliate with respect to employment practices. With respect to any Employee,
there are: (i) no actions at law, suits in equity, administrative claims,
charges or complaints or investigations, pending or to Seller's knowledge
threatened, against Seller, any Seller Affiliate or MRML arising under any laws
governing employment, the employer employee relationship, the terms and
conditions of employment or employment practices; (ii) no matters, including but
not limited to investigations, hearings or appeals, involving Seller, any Seller
Affiliate or MRML are pending or to Seller's knowledge threatened before the
National Labor Relations Board, the Equal Employment Opportunity Commission, the
United
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States Department of Labor or any state or federal agency charged with
responsibility for labor or civil rights standards or violations; (iii) no
citations, fines or penalties heretofore have been asserted or are pending
against Seller or MRML relating to health and safety in its work places and to
Seller's knowledge none is threatened; and (iv) no matters involving Seller, any
Seller Affiliate or MRML are currently before any arbitrator, mediator or
conciliator in respect to the employer employee relationship or any of its
employees or former employees, except as set forth on EXHIBIT 9.1(w) hereto.
(x) DOCUMENTS. To Seller's knowledge, all of the documents and
Mall Information that have been delivered or made available to Purchaser by or
on behalf of Seller, (a) are true, correct and complete copies of what they
purport to be and (b) have not been modified, except as set forth therein.
(y) [Intentionally omitted]
(z) ALL ASSETS. The Property constitutes all of the assets
used by Owner to operate its Mall in the manner in which it is currently being
operated.
9.2 SELLER'S KNOWLEDGE DEFINED. Whenever the terms "Seller's
knowledge," "Seller's best knowledge" or terms of similar import are used in
this Agreement, they shall mean (a) the actual knowledge of Michael Rulli, the
Senior Vice President of Seller; Robert Lee, the Vice President, Property
Operations; Brian Peters, Regional Manager; Earl Dorsett, Regional Manager; and
Michael Ponds, Corporate Facilities Manager; whom Seller represents and warrants
are individuals who have the requisite knowledge regarding the condition,
management, leasing and operation of the Malls, after making an independent,
diligent investigation of all matters that are the subject of the
representations and warranties made by Seller in this Agreement. In order to
meet the criteria of an independent, diligent investigation as of the Effective
Date, the named individuals shall review all necessary or appropriate files, and
review and discuss the contents of all of Seller's representations and
warranties with appropriate officers and employees of Seller (but without any
obligation to hire any third party experts or consultants). In order to meet the
criteria of an independent, diligent investigation as of the Closing Date, the
named individuals shall review and discuss the contents of all of Seller's
representations and warranties with the persons described in the immediately
preceding sentence and property managers and Mall managers not more than five
(5) days before the Closing Date, and shall perform such additional and
follow-up inspections and inquiries as they deem reasonably necessary.
9.3 PURCHASER'S REPRESENTATIONS AND WARRANTIES. Purchaser
makes the following representations and warranties for the benefit of Seller
with the understanding that such representations and warranties are material and
are being relied upon by Seller in entering into this Agreement.
(a) PURCHASER'S AUTHORITY. Purchaser has been duly formed, is
validly existing and is in good standing (to the extent applicable), and
Purchaser has the full right and authority and has obtained any and all
corporate consents required to enter into this Agreement, consummate or cause to
be consummated the purchase and accept the transfers and assignments
contemplated herein; the persons signing this Agreement on behalf of Purchaser
are authorized to do so; and this Agreement and all of the documents to be
delivered by Purchaser at the
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Closing have been or will be authorized and properly executed and will
constitute the valid and binding obligations of Purchaser, enforceable against
Purchaser in accordance with their terms.
(b) PENDING ACTIONS. There is no action or proceeding pending
against Purchaser, and to Purchaser's knowledge, there are no actions or
proceedings threatened against Purchaser which, if determined adversely to
Purchaser, would have a material adverse affect on Purchaser or Purchaser's
ability to consummate the transactions contemplated under the terms of this
Agreement.
(c) NO VIOLATION. None of the execution, delivery or
performance of this Agreement by Purchaser does or will violate, conflict with
or constitute a default under any term or condition of (i) the organizational
documents of Purchaser or any other agreement to which Purchaser is a party or
by which they are bound, or (ii) any terms or provisions of any judgment,
decree, order, statute, injunction, rule or regulation of a governmental unit
applicable to Purchaser or any agreement to which Purchaser is a party or by
which they or their assets are bound.
(d) CLOSING FUNDS. Purchaser has available sufficient funds or
financing commitments, in combination with the Equity Funds, to close the
transaction contemplated in this Agreement, or will arrange for sufficient funds
on or prior to the Closing Date, so as to permit the Closing of this
transaction. Purchaser acknowledges that Purchaser's obligation to close this
transaction is not contingent upon Purchaser obtaining such financing.
9.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties made by Seller and Purchaser in this Agreement
shall be deemed to be remade as of the Closing Date and shall survive the
Closing for a period of eighteen (18) months after the Closing Date, and there
shall be no liability for breach of any representation or warranty in this
Agreement unless written notice of a claim specifying in reasonable detail the
claimed breach is delivered to the other party within such eighteen (18)-month
period. The foregoing limitations shall not apply to the warranties and
covenants as to title and ownership set forth in the limited or special warranty
deeds or bills of sale relating to any of the Real Property, the Personalty or
the Other Assets.
ARTICLE 10
DAMAGE OR DESTRUCTION - CONDEMNATION
10.1 NOTICE. (a) In the event of any damage to or destruction
or condemnation of any Mall or any portion thereof prior to Closing that Seller
reasonably believes would require repairs at a cost in excess of Fifty Thousand
Dollars ($50,000.00), Seller shall send written notice to Purchaser of such
occurrence within five (5) days after the date of such occurrence (the "DAMAGE
NOTICE"). Not later than fifteen (15) days after Seller's delivery to Purchaser
of the Damage Notice, Purchaser shall determine, and shall notify Seller in
writing, whether a Material Part of the Mall has been damaged, or whether such
taking or threatened taking has affected or will affect a Material Part of the
Mall. For purposes of this Article 10, Purchaser may determine that a "Material
Part" of the Mall has been damaged or taken if:
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(i) An Anchor Store would have the right to terminate any
Reciprocal Easement Agreement or its Lease, as applicable, as a result
thereof;
(ii) Tenants occupying an aggregate twenty percent (20%) or
more of the total net rentable area of the Mall not occupied by an Anchor
Tenant would have the right to terminate their Leases as a result thereof;
or
(iii) The estimated cost of repairing the damage (whether or
not insured), or restoring the Mall after the taking, will in Purchaser's
reasonable judgment equal or exceed One Million Dollars ($1,000,000.00).
(b) If Purchaser determines that a Material Part of the Mall
has been damaged, or that a Material Part of the Mall has been or will be
affected by the taking or threatened taking, Purchaser may elect, by written
notice delivered to Seller within fifteen (15) days after giving Seller notice
of such determination, to terminate this Agreement, in which event the Deposit
shall be returned to Purchaser, or to terminate this Agreement as to the Mall
only (or as to the applicable Partnership Interest, as the case may be), with
the Purchase Price reduced by the Purchase Price Allocation applicable to the
affected Mall or Partnership Interest.
If Purchaser does not so terminate, then:
(i) In the case of damage to a Material Part of a Seller-Owned
Mall, Seller shall (A) deliver to Purchaser at Closing all insurance
proceeds received on account of such damage, (B) assign to Purchaser
at Closing its right to recover under any insurance policies
covering such damage and (C) pay to Purchaser by credit to the
Purchase Price at Closing the amount of the deductible, if any;
provided, however, that the foregoing assignment of insurance policy
rights and proceeds shall not include those relating to business
interruption loss for the period prior to the Closing;
(ii) In the case of a threatened or actual taking of a
Material Part of a Seller-Owned Mall, Seller shall (A) deliver to
Purchaser at Closing all condemnation awards and other proceeds
received in connection with the taking and (B) assign to Purchaser
at Closing Seller's entire right, title and interest in all awards
and other proceeds connected with the taking; and
(iii) In the case of damage to or threatened or actual taking
of a material part of Temple or Alexandria, the Partnership shall
continue to own all rights to or under insurance policies or
condemnation on awards on proceeds.
10.2 NON-MATERIAL DAMAGE. If any Mall suffers damage to other
than a Material Part, the Closing Date shall not be extended, and, in the case
of a Seller-Owned Mall, Seller shall (A) deliver to Purchaser at Closing all
insurance or condemnation proceeds received on account of such damage or taking
(other than those relating to business interruption loss for the period prior to
the Closing) and (B) assign to Purchaser at Closing Seller's right to recover
under any insurance policies covering such damage and (C) shall pay to Purchaser
by credit to the Purchase Price at Closing the amount of the deductible, if any.
The provisions of
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Section 10.1(b)(iii) shall apply to any damage to other than a Material Part of
Temple Mall or Alexandria Mall.
10.3 LOSS ADJUSTMENTS. The Closing Date shall be extended as
necessary to permit Purchaser and Seller to exercise their rights within the
time periods set forth in this Article 10. In connection with any claim with
respect to insurance or condemnation proceeds pursuant to this Article 10,
Seller shall not settle or approve settlement of any claim after expiration of
the Inspection Period without Purchaser's prior written consent which consent
shall not be unreasonably withheld and Purchaser and Seller shall fully
cooperate with each other in prosecuting diligently the recovery of any such
claim(s). To the extent necessary, Purchaser shall give Seller reasonable access
after the Closing to the Mall and any records pertaining to the damaged or
condemned Mall. The provisions of this Section 10.3 shall survive the Closing.
ARTICLE 11
CONDITIONS TO CLOSING
11.1 CONDITIONS TO SELLER'S OBLIGATIONS. The obligations of
Seller under this Agreement are subject to the satisfaction on or prior to the
Closing Date of the conditions set forth in this Section 11.1. Each condition is
solely for the benefit of Seller and may be waived in whole or in part by Seller
in its sole discretion by written notice to Purchaser:
(a) Purchaser's representations and warranties made in this
Agreement are true on the Closing Date in all material respects as though
such representations and warranties were made on the Closing Date, subject
to factual modifications due to third-party events (such as, for example,
filing of a lawsuit by third-party) which do not have a material adverse
effect.
(b) Purchaser has performed and complied with all of its
obligations under this Agreement that are to be performed or complied with
by Purchaser prior to or on the Closing Date.
(c) Seller shall have received all third-party consents and
approvals, if any, required to permit the Closing.
(d) Neither Purchaser or Seller, as applicable, have
terminated this Agreement pursuant to any right of termination set forth
herein.
(e) Purchaser has delivered the Purchaser Closing Documents
and the balance of the Purchase Price.
(f) On or prior to the Closing Date, (i) Purchaser shall not
have applied for or consented to the appointment of a receiver, trustee or
liquidator for itself or any of its assets unless the same shall have been
discharged prior to the Closing Date, and no such receiver, liquidator or
trustee shall have otherwise been appointed, unless the same shall not
have admitted in writing an inability to pay its debts as they mature,
(ii) Purchaser shall not have admitted in writing an
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inability to pay its debts as they mature, (iii) Purchaser shall not have
made a general assignment for the benefit of creditors, (iv) Purchaser
shall not have been adjudicated bankrupt or insolvent, or had a petition
for reorganization granted with respect to Purchaser, or (v) Purchaser
shall not have filed a voluntary petition seeking reorganization or an
arrangement with creditors or taken advantage of any bankruptcy,
reorganization, insolvency, readjustment or debt, dissolution or
liquidation law or statute, or filed an answer admitting the material
allegations of a petition filed against it in any proceedings under any
such law, or had any petition filed against it in any proceeding under any
of the foregoing laws unless the same shall have been dismissed, cancelled
or terminated prior to the Closing Date.
11.2 CONDITIONS TO PURCHASER'S OBLIGATIONS. The obligations of
Purchaser under this Agreement are subject to the satisfaction on or prior to
the Closing Date of the conditions set forth in this Section 11.2. Each
condition is solely for the benefit of Purchaser and may be waived in whole or
in part by Purchaser in its sole discretion by written notice to Seller:
(a) Seller's representations and warranties made in this
Agreement are true on the Closing Date in all material respects as though
such representations and warranties were made on the Closing Date, subject
to factual modifications due to third-party events (such as, for example,
filing of a lawsuit by a third party or receipt of a notice of default
from a Tenant) which do not have a material adverse effect.
(b) Seller has performed and complied with all of its
obligations under this Agreement that are to be performed or complied with
by Seller prior to or on the Closing Date.
(c) Purchaser shall have received copies of the consent of the
Lenders, the Partnership Consents and any other consents set forth in
EXHIBIT 9.1(m) required in Section 9.1(m).
(d) Neither Purchaser nor Seller, as the case may be, shall
have terminated this Agreement pursuant to any right of termination set
forth herein.
(e) Seller shall have delivered the Seller Closing Documents.
(f) On or prior to the Closing Date, (i) Seller shall not have
applied for or consented to the appointment of a receiver, trustee or
liquidator for itself or any of its assets unless the same shall have been
discharged prior to the Closing Date, and no such receiver, liquidator or
trustee shall have otherwise been appointed, unless the same shall have
been discharged prior to the Closing Date, (ii) Seller shall not have
admitted in writing an inability to pay its debts as they mature, (iii)
Seller shall not have made a general assignment for the benefit of
creditors, (iv) Seller shall not have been adjudicated bankrupt or
insolvent, or had a petition for reorganization granted with respect to
Seller, or (v) Seller shall
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not have filed a voluntary petition seeking reorganization or an
arrangement with creditors or taken advantage of any bankruptcy,
reorganization, insolvency, readjustment or debt, dissolution or
liquidation law or statute, or filed an answer admitting the material
allegations of a petition filed against it in any proceedings under any
such law, or had any petition filed against it in any proceeding under any
of the foregoing laws unless the same shall have been dismissed, cancelled
or terminated prior to the Closing Date.
ARTICLE 12
DEFAULT
12.1 SELLER'S DEFAULT. If Seller shall fail to perform any of
its obligations hereunder, and if such failure is not cured within ten (10) days
after written notice to Seller specifying such failure, Purchaser shall have the
right to elect either to (a) proceed to Closing without any reduction or
abatement of the Purchase Price and without any claim against Seller with
respect to such failure, (b) seek specific performance of Seller's obligations
under this Agreement, or (c) terminate this Agreement, in which event the
Deposit shall be promptly returned to Purchaser, and Purchaser shall have the
right to bring an action for actual Damages against Seller; provided, however,
in any action by Purchaser against Seller for actual Damages due to Seller's
failure to close this transaction, Purchaser's right of recovery shall be
limited to an amount equal to Seven Hundred Fifty Thousand and 00/100 Dollars
($750,000.00), and in no event shall Purchaser be entitled to collect Damages
from Seller in excess of Seven Hundred Fifty Thousand and 00/100 Dollars
($750,000.00).
12.2 PURCHASER'S DEFAULT. If Purchaser shall default in the
performance of any of its obligations hereunder including, without limitation,
Purchaser's failure to close due to insufficient funds, and if such default is
not cured within ten (10) days after written notice to Purchaser specifying such
default, Seller shall have the right at its election either to (a) waive such
default and proceed to Closing notwithstanding such default by Purchaser, or (b)
terminate this Agreement in which event the Deposit shall be promptly paid to
Seller as full and complete liquidated damages (and not as a penalty or
forfeiture) in lieu of any and all other legal and equitable rights and remedies
that Seller may have hereunder or at law or in equity.
12.3 LIQUIDATED DAMAGES. Purchaser and Seller acknowledge
that, in the event that Purchaser shall fail or default in its obligation to
close the purchase and sale contemplated by this Agreement after expiration of
the applicable notice and cure periods, Seller will suffer damages. The exact
amount of such damages are and will be difficult to ascertain with certainty,
and, accordingly, Purchaser and Seller agree that the Deposit shall constitute
liquidated damages for Purchaser's default in its obligations to close the
purchase and sale contemplated by this Agreement after expiration of the
applicable notice and cure periods. Notwithstanding that Seller's actual damages
would be uncertain and difficult to ascertain, Purchaser and Seller agree that
the Deposit is reasonable and bears a relationship to the damages that Seller
might sustain in the event of Purchaser's default under this Agreement.
Purchaser and Seller agree that the Deposit is not intended to be, and in no
event should be construed to be, a penalty, but is intended as fixed damages
agreed to by the parties as settlement of damages
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in advance. Seller hereby agrees that its receipt of the Deposit in the event of
Purchaser's failure or default in its obligation to close under this Agreement
is the sole and exclusive right or remedy that Seller has, or may be entitled to
exercise or pursue, against Purchaser, whether at law or in equity, as to such
failure or default.
12.4 CLOSING IS A WAIVER. (a) In the event that Closing shall
actually occur, then the occurrence of such Closing shall be deemed a complete
waiver by Purchaser of all of its rights to make any claim for Seller's failure
to perform any of its obligations under this Agreement required to be performed
prior to or on the Closing Date; provided, however, that such waiver shall not
apply to or affect Seller's liability with respect to any breach of Seller's
representations and warranties made as of the Closing Date contained in this
Agreement or of any obligations or covenants to be performed by Seller following
the Closing Date or that expressly survive the Closing ("SELLER'S POST-CLOSING
COVENANTS").
(b) In the event that Closing shall actually occur, then the
occurrence of such Closing shall be deemed a complete waiver by Seller of all of
its rights to make any claim for Purchaser's failure to perform any of its
obligations under this Agreement required to be performed prior to or on the
Closing Date; provided, however, that such waiver shall not affect Purchaser's
liability with respect to any breach of Purchaser's representations and
warranties made as of the Closing Date contained in this Agreement or of any
obligations or covenants to be performed by Purchaser following the Closing Date
or that expressly survive the Closing ("PURCHASER'S POST-CLOSING COVENANTS").
ARTICLE 13
BROKERAGE COMMISSIONS
Seller and Purchaser represent and warrant, each to the
other, that they have not dealt with any real estate broker, sales person or
finder in connection with this transaction other than the Broker and no other
person initiated or participated in the negotiation of this Agreement or showed
the Property to Purchaser, and to the knowledge of Seller and Purchaser, except
for Seller's obligation to the Broker, there are no real estate brokerage
commissions, finder's fees, or other similar fees due any person or entity on
account of or as a result of this transaction, except as set forth herein.
Seller and Purchaser each agree to indemnify, defend and hold the other harmless
from and against any loss, cost, liability or expense suffered or incurred by
the other party as a result of a claim or claims for brokerage commissions,
finder's fees or other similar fees from any party or firm that is based on the
act or omission of the party in breach of the above warranty. Seller shall pay
all commissions, finder's fees or other similar expenses or fees of the Broker.
ARTICLE 14
NOTICES
14.1 NOTICES. Any notice, request, demand, instruction or
other document to be given or served hereunder or under any document or
instrument executed pursuant hereto shall be in writing and shall be deemed to
be delivered (a) upon personal delivery to and receipt
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by the person to whom delivered (including without limitation delivery to and/or
receipt by telecopy), or (b) four (4) days after deposit in United States
registered or certified mail, return receipt requested, or (c) one (1) Business
Day after deposit with a nationally recognized overnight express courier for
next day delivery, in each case, addressed to the parties at their respective
addresses or telecopy numbers (as applicable) set forth below:
If to Purchaser: First Union Real Estate Equity and Mortgage
Investments
55 Public Square
Suite 1900
Cleveland, Ohio 44113
Attention: Paul F. Levin
Telecopy No.: (216) 781-7364
with a copy to: Thompson Hine & Flory P.L.L.
3900 Society Center
127 Public Square
Cleveland, Ohio 44114-1216
Attention: Linda A. Striefsky, Esq.
Telecopy No.: (216) 566-5800
If to Seller: Marathon U.S. Realties, Inc.
One Galleria Tower
13355 Noel Road
Suite 1200
Dallas, Texas 75240-6678
Attention: Michael E. Rulli
Telecopy No.: (214) 448-2070
with a copy to: Marathon Realty Company Limited
200 Wellington Street West
Suite 400
Toronto, Ontario M5V 3C7
Canada
Attention: John E. Beales
Telecopy No.: (416) 348-1902
with a copy to: Neal, Gerber & Eisenberg
Two N. LaSalle Street
21st Floor
Chicago, Illinois 60602
Attention: Reuben C. Warshawsky
Telecopy No.: (312) 269-1747
14.2 CHANGE OF ADDRESS. A party may change its address and
telecopy number for receipt of notices by service of a notice of such change in
accordance herewith.
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ARTICLE 15
INDEMNIFICATION
15.1 PURCHASER INDEMNIFICATION. Purchaser hereby indemnifies
and agrees to hold harmless and defend Seller and each Seller Indemnitee from
and against all Damages imposed upon, suffered or incurred by Seller or any
Seller Indemnitee, (a) by reason of claims made by any Lender, Tenants under the
Leases, or other Parties under the Reciprocal Easement Agreements or Specialty
License Agreements or under those Contracts assigned to Purchaser, or by any
Partner or other party with respect to the Partnership Interests, or arising
under the Partnership Agreement or against the Partnership, that relate to any
actions or events first occurring, or obligations first accruing, on or after
the Closing Date; (b) by reason of an event or accident occurring at any time on
or after the Closing Date relating to the Property, except in each case those
obligations of Seller under this Agreement or the Seller Closing Documents that
expressly survive the Closing and those claims that constitute a breach of
warranties or representations of Seller hereunder or under any of the Seller
Closing Documents; (c) the breach of any representation or warranty made by
Purchaser under this Agreement; or (d) the failure by Purchaser to perform any
of Purchaser's Post-Closing Covenants.
15.2 SELLER INDEMNIFICATION. Seller hereby indemnifies and
agrees to hold harmless and defend Purchaser and each Purchaser Indemnitee from
and against all Damages imposed upon, suffered or incurred by Purchaser or any
Purchaser Indemnitee, (a) by reason of claims made by any Lender under the
Mortgages, Tenants under the Leases, or other Parties under the Reciprocal
Easement Agreements or the Specialty License Agreements or under those Contracts
assigned to Purchaser, or by any Partner or other party with respect to the
Partnership Interests, or arising under the Partnership Agreements or against
the Partnership, that relate to any actions or events first occurring, or
obligations first accruing, prior to the Closing Date; (b) by reason of an event
or accident occurring, at any time prior to the Closing Date relating to the
Malls, except in each case those obligations of Purchaser under this Agreement
or Purchaser Closing Documents that expressly survive the Closing and those
claims that constitute a breach of warranties or representations of Purchaser
hereunder or under any of the Purchaser Closing Documents; (c) the breach of any
representation or warranty made by Seller under this Agreement; or (d) the
failure by Seller to perform any of Seller's Post-Closing Covenants.
15.3 INDEMNIFICATION PROCEDURE.
(a) The indemnified party (the "INDEMNIFIED PARTY") shall give
the indemnifying party (the "INDEMNIFYING PARTY") prompt notice of any Damages
incurred (or likely to be incurred) by the Indemnified Party with respect to any
claim or assertion of claims by a third party ("THIRD PARTY CLAIM") for which
indemnification is available hereunder and the Indemnifying Party may (i) prior
to the commencement of any proceedings in connection with such Damages,
undertake the negotiation of any resolution of the dispute relating to such
Damages, including without limitation any settlement, release or remediation
(subject to Section 15.3(c)) or (ii) undertake the defense of any proceeding
(including any alternative dispute resolution proceeding) regarding such Damages
by selecting legal counsel who shall be reasonably acceptable to the Indemnified
Party.
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(b) Provided the Indemnifying Party shall have undertaken the
Indemnified Party's defense of a Third Party Claim with legal counsel reasonably
acceptable to the Indemnified Party, and shall have so notified the Indemnified
Party, the Indemnified Party shall be entitled to participate at its own expense
in the aforesaid negotiation or defense of any claim relating to such Damages
(subject to reimbursement to the limited extent provided in Section 15.3(e)),
but such negotiations or defense shall be controlled by counsel to the
Indemnifying Party.
(c) The Indemnifying Party shall not be liable for payments
relating to the resolution of any dispute or any settlement of any litigation or
proceeding effected without the written consent of the Indemnifying Party, which
consent shall not be unreasonably withheld. The Indemnifying Party shall not,
without the Indemnified Party's written consent, resolve any dispute or settle
or compromise any claim regarding Damages from a Third Party Claim or consent to
entry of any judgment which would impose an injunction or other equitable relief
upon the Indemnified Party or which does not include as an unconditional term
thereof the release by the claimant or the plaintiff of the Indemnified Party
from all liability in respect of any such Damages.
(d) Each party hereto agrees to give the other party prompt
notice of any Damages (or possible Damages) asserted against it which might be
Damages for which indemnity could be sought against the other party, but the
failure to give such notice shall not release the Indemnifying Party of its
obligations under this Section 15.3, expect to the extent of the actual harm
suffered thereby.
(e) In the event the Indemnifying Party fails to timely
undertake negotiation of any dispute or defend, contest or otherwise protect
against any claim or suit with respect to a Third Party Claim, and to so notify
the Indemnified Party, the Indemnified Party may, but will not be obligated to,
defend, contest or otherwise protect against the same, and make any compromise
or settlement thereof and recover the entire costs thereof from the Indemnifying
Party, including reasonable attorneys' and experts' fees, disbursements and all
amounts paid as a result of such claim or suit or the compromise or settlement
thereof; provided, however, that if the Indemnifying Party undertakes
negotiation of any dispute and the defense of such matter in accordance with and
subject to the above terms of this Section 15.3, the Indemnified Party shall not
be entitled to recover from the Indemnifying Party for its costs incurred
thereafter in connection therewith other than the reasonable costs of
investigation undertaken by the Indemnified Party and reasonable costs of
providing assistance. The Indemnified Party shall cooperate and provide such
assistance as the Indemnifying Party may reasonably request in connection with
the negotiation of any dispute and the defense of the matter subject to
indemnification and the Indemnifying Party shall reimburse the Indemnified
Party's reasonable costs incurred thereafter in connection with such cooperation
and assistance.
ARTICLE 16
MISCELLANEOUS
16.1 PARTIES BOUND. Subject to the provisions of Section 16.10
of this Agreement, all provisions hereof, including, without limitations, all
representations and
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warranties made hereunder, shall extend to, be obligatory upon and inure to the
benefit of the respective heirs, devisees, legal representatives, successors,
assigns and beneficiaries of the parties hereto.
16.2 HEADINGS; EXHIBITS. The headings of the various Articles
and Sections of this Agreement have been inserted solely for purposes of
convenience, are not part of this Agreement and shall not be deemed in any
manner to modify, explain, expand or restrict any of the provisions of this
Agreement. All Schedules and Exhibits annexed hereto are made a part hereof. All
terms defined herein shall have the same meanings in the Schedules and Exhibits,
except as otherwise provided therein.
16.3 INVALIDITY. If any term, provision or condition of this
Agreement is found to be or is rendered invalid or unenforceable, it shall not
affect the remaining terms, provisions and conditions of this Agreement, and
each and every other term, provision and condition of this Agreement shall be
valid and enforceable to the fullest extent permitted by law.
16.4 GOVERNING LAW. This Agreement shall, in all respects, be
governed, construed, applied and enforced in accordance with the laws of the
State of Texas.
16.5 NO THIRD PARTY BENEFICIARY. This Agreement is not
intended to give or confer any benefits, rights, privileges, claims, actions or
remedies to any person or entity as a third party beneficiary under any
statutes, laws, codes, ordinances, rules, regulations, orders, decrees or
otherwise.
16.6 ENTIRETY AND AMENDMENTS. This Agreement contains the
entire agreement among the parties hereto with respect to its subject matter and
supersedes all negotiations, prior discussions, agreements, letters of intent
and understandings (whether written or oral) relating to the subject matter of
this Agreement, including, without limitation, that certain letter of intent
dated May 14, 1996 from Purchaser to Seller. This Agreement may be amended or
supplemented only by an instrument in writing executed by the party against whom
enforcement is sought. This Agreement has been drafted through a joint effort of
the parties and, therefore, shall not be construed in favor of or against either
of the parties, but shall be construed in accordance with its fair meaning.
16.7 EXECUTION IN COUNTERPARTS. This Agreement may be executed
in any number of counterparts, each of which shall be deemed to be an original,
and all of such counterparts shall constitute one Agreement. Signature pages may
be detached from the counterparts and attached to a single copy of this
Agreement to physically form one document.
16.8 EXTENSION OF PERFORMANCE. Whenever under the terms of
this Agreement the time for performance of a covenant or condition falls upon a
Saturday, Sunday or legal holiday in the state of Texas, such time for
performance shall be extended to the next Business Day. Otherwise, unless a
provision of this Agreement specifically refers to Business Days, all references
in this Agreement to days shall mean calendar days.
16.9 TIME. Time is of the essence in the performance of each
and every term, condition and covenant contained in this Agreement.
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16.10 ASSIGNMENT. The rights and obligations of either party
under this Agreement may be assigned by either party to an Affiliate of such
party without the prior consent of, but with written notice to, the other party,
provided that (a) such Affiliate assumes the obligations of the assigning party,
(b) no such assignment will release the assigning party from any of its
obligations or liabilities under this Agreement, (c) such assignment shall not
delay the Closing, and (d) such assignment shall not require the non-assigning
party to obtain any additional or revised third party consents, certificates or
approvals. Except as provided in this Section , this Agreement may not be
assigned by either Seller or Purchaser without the prior written consent of the
other party.
16.11 CONFIDENTIALITY. The Confidential Information shall be
treated as confidential, and shall be maintained confidential, by the other
party and its employees, agents, contractors, attorneys, representatives and
such other parties as are reasonably deemed necessary by Seller or Purchaser,
any such disclosure to non-parties in all events to be subject to this
confidentiality provision, except as required by S.E.C. or NYSE regulations.
Each party agrees to use such Confidential Information only for the purpose of
this transaction, and for no other purpose. Seller acknowledges that possession
of Confidential Information relating to Purchaser may impose upon it and all
others to whom such Confidential Information is disclosed the status of
"Insider" as defined under the securities law of the United States, with respect
to securities of Purchaser governed by such laws, and Seller and such others
shall not engage in any transactions in such securities during the term of this
Agreement, nor thereafter, for a period of three (3) years from the Effective
Date.
16.12 TRUSTEE APPROVAL. Purchaser's obligations hereunder are
specifically contingent upon approval by Purchaser's Board of Trustees by no
later than the expiration of the Inspection Period.
16.13 NO SOLICITATION. From the Effective Date until the
Closing Date or the earlier termination of this Agreement, neither Seller nor
its officers, directors, employees and agents shall directly or indirectly, (a)
take any action to solicit or entertain any Acquisition Proposal (as defined
below), (b) disclose any nonpublic information relating to the Property and
designed to facilitate the sale of the Property or afford access to the
Property, books or records of the Seller to any Person (other than Purchaser) in
connection with soliciting or entertaining an Acquisition Proposal, or (c)
engage or participate in negotiations or enter into agreements with any Person
(other than Purchaser) with respect to an Acquisition Proposal. For purposes of
this Agreement, "ACQUISITION PROPOSAL" means any offer or proposal for (i) a
business combination involving the Seller and any Person (other than Purchaser)
or (ii) an acquisition by any Person (other than Purchaser) of any of the
Properties, in one or more transactions.
16.14 LIMIT OF TRUSTEES' LIABILITY. Notwithstanding anything
contained herein to the contrary, this Agreement is made and executed on behalf
of First Union Real Estate Equity and Mortgage Investments, a business trust
organized under the laws of the State of Ohio, by its officer(s) on behalf of
the trustees thereof, and none of the trustees or any additional or successor
trustee hereafter appointed, or any beneficiary, officer, employee or agent of
Purchaser shall have any liability in his personal or individual capacity, but
instead, all parties shall look solely to the property and assets of Purchaser
for satisfaction of any Damages of any nature in connection with this Agreement.
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16.15 EXHIBITS. The parties acknowledge that Seller's intent
is to sell and Purchaser's intent is to purchase the Property, but that (i) the
various exhibits setting forth the form of Closing Documents (excluding, for
purposes of this Section 16.15, any exhibits to be attached to Closing
Documents, such as legal descriptions) are subject to further review and
proposed modification by Seller and Purchaser during the ten (10)-day period
commencing on the Effective Date, provided that any such proposed modifications
must be acceptable to Seller and Purchaser, (ii) the other exhibits hereto are
subject to further review and modification by Seller during the ten (10)-day
period commencing on the Effective Date and (iii) such other exhibits hereto are
subject to further review by Purchaser, including, without limitation, as a part
of Purchaser's due diligence during the Inspection Period. Seller shall deliver
to Purchaser not later than the tenth (10th) day after the Effective Date any
modifications made by Seller to such other exhibits hereto, whereupon such
modifications shall be deemed to have been made as of the Effective Date for
purposes of Seller's representations and warranties hereunder.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the Effective Date.
SELLER: PURCHASER:
MARATHON U.S. REALTIES, INC., FIRST UNION REAL ESTATE EQUITY
a Delaware corporation AND MORTGAGE INVESTMENTS, an Ohio
business trust
By:___________________________ By:_________________________________________
Name: John E. Beales Name: James C. Mastandrea
Title: Vice President Title: President and Chief Executive Officer
By:_________________________________________
Name: Steven M. Edelman
Title: Executive Vice President and
Chief Investment Officer
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JOINDER:
The undersigned, as owner of the Villa Linda Mall, hereby
joins in the execution of this Agreement in order to bind itself to the terms
and provisions of this Agreement that relate to the undersigned and/or the Villa
Linda Mall and hereby confirms all representations, warranties and covenants
contained in this Agreement with respect to Villa Linda Mall.
CENTRIXX REALTY HOLDINGS LIMITED
By:____________________________________________
Name: John E. Beales
Title: Vice President
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LIST OF EXHIBITS
A - Legal Description of Real Property and Non-Anchor Rented Area of Each Mall
A1 - Alexandria Mall
A2 - Brazos Mall
A3 - Killeen Mall
A4 - Mesilla Valley Mall
A5 - Park Plaza
A6 - Pecanland
A7 - Shawnee Mall
A8 - Temple Mall
A9 - Villa Linda Mall
B -Schedule of Purchase Price Allocations
C -Rent Roll by Mall
D -Schedule of Tradenames, Servicemarkers, etc.
2.3 -Form of Escrow Agreement
3.2 -Loan Balances
3.4(b) -Form of Shareholder Agreement
6.2(c) -Form of Limited or Special Warranty Deeds
6.2(d) -Form of Bill of Sale
6.2(e) -Form of Assignment of Partnership Interests
6.2(f) -Form of Assignment of Leases
6.2(g) -Form of Assignment of Contracts
6.2(h) -Form of Assignment of Reciprocal Easement Agreements
6.2(i) -Form of Mortgage Loan Assignment and Assumption Agreement
6.2(j)(i) -Form of Lease Estoppel Certificate
6.2(j)(ii) -Form of Seller Estoppel Certificate
6.2(j)(iii) -Form of REA Estoppel Certificate
6.2(j)(iv) -Form of Lender Estoppel Certificate
6.2(j)(v) -Form of Partnership Estoppel Certificate
6.2(q) -Form of Assignment of Office Leases and Equipment
8.3 -Schedule of Insurance Policies
8.4 -FUMI Employee Agreement
9.1(b) -Schedule of (i) Defaults under Contracts and (ii) Contracts Not
Terminable on 30 Days' Notice
9.1(c) -Schedule of Defaults under Leases
9.1(c)(i) -List of Anchor Stores
9.1(e) -Schedule of Personal Property and Other Assets
9.1(f) -Schedule of Office and Equipment Leases
9.1(h) -Schedule of Pending Litigation
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9.1(i) -Schedule of Condemnation Disclosures
9.1(j) -Schedule of Mall Defects
9.1(m) -Schedule of Required Consents
9.1(n) -Schedule of Mortgage Loan Documents and MUSRI Loan Documents [with
outstanding principal balances]
9.1(p)(v) -Schedule of Partnership Litigation
9.1(q) -Pending Real Estate Tax Challenges, Complaints or Actions
9.1(r) -Schedule of Government Agreements
9.1(u) -Schedule of Environmental Reports
9.1(v) -Employee Benefits List
9.1(w) -List of Employees
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AMENDMENT TO PURCHASE AND SALE AGREEMENT
THIS AMENDMENT TO PURCHASE AND SALE AGREEMENT (the
"Amendment"), made and entered into as of the 12th day of August, 1996 (the
"Amendment Effective Date"), by and between MARATHON U.S. REALTIES, INC., a
Delaware corporation, and FIRST UNION REAL ESTATE EQUITY AND MORTGAGE
INVESTMENTS, an Ohio business trust ("Purchaser").
W I T N E S S E T H:
WHEREAS, Marathon U.S. Realties, Inc. and Purchaser
have entered into that certain Purchase and Sale Agreement (the "Agreement"),
dated as of June 12, 1996, which Agreement was also executed by Centrixx Realty
Holdings Limited ("Centrixx") pursuant to the joinder clause contained in the
Agreement (Marathon U.S. Realties, Inc. and Centrixx are hereinafter referred to
as "Seller" in accordance with the provisions of Section 1.1 of the Agreement);
and
WHEREAS, Seller and Purchaser desire to amend the
Agreement to reflect the parties' understanding with respect to any Ground
Leases (as hereinafter defined in this Amendment) affecting the Real Property
(as defined in the Agreement) and to reflect certain other changes agreed to by
Seller and Purchaser.
NOW, THEREFORE, in consideration of and in reliance
upon the covenants herein contained, and for good and other valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:
1. DEFINED TERMS. Except as may otherwise be
expressly provided herein, or unless the context clearly requires a different
meaning, the capitalized words and phrases used in this Amendment shall have the
same meanings ascribed to such words and phrases in the Agreement.
2. AMENDMENTS. The Agreement is hereby amended, as of
the Amendment Effective Date, as follows:
A. DEFINITIONS. (i) The following defined terms are
hereby added to Section 1.1 of the Agreement:
"ASSIGNMENT OF GROUND LEASES" means an assignment in
the form of EXHIBIT 6.2(u) attached hereto, to be executed and acknowledged by
Seller and Purchaser, pursuant to which Seller assigns, and Purchaser assumes,
all right, title and interest of Seller under the Ground Leases relating to the
Seller-Owned Malls.
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"GROUND LEASES" means all ground leases affecting or
relating to all or any portion of the Real Property as to which an Owner is the
ground lessee, including all amendments or modifications related thereto entered
into by an Owner prior to the Effective Date.
"GROUND LEASE ESTOPPEL CERTIFICATE" means the
estoppel certificate in the form of EXHIBIT 6.2(j)(vi) attached hereto.
(i) The defined terms "Closing Date", "Inspection
Period", "Leases", "Mall Information", "Party", "Purchase Price", "Real
Property" and "Title Policy", each contained in Section 1.1 of the
Agreement, are each deleted in their entirety and replaced with the
respective definitions set forth below:
"CLOSING DATE" means September 27, 1996, subject to
extension to the extent expressly provided in Sections 5.3 and 10.3 of this
Agreement.
"INSPECTION PERIOD" means the period ending September
6, 1996; provided, however, that such Inspection Period shall extend,
day-for-day, but in no event past September 13, 1996, for each day that passes
after August 23, 1996 in which Purchaser has not received, for each Mall, a
Survey, a Title Commitment (together with copies of matters of record reflected
in each Title Commitment) and the Estoppel Certificates required by Section
6.2(j) of this Agreement.
"LEASES" means all leases, subleases, licenses,
concessions and other agreements relating to the use or occupancy of any portion
of the Malls to which an Owner is a party, other than the Ground Leases,
Specialty License Agreements or Contracts, including those and any amendments,
modifications or work letters related thereto that may be entered into by an
Owner after the Effective Date and prior to Closing in accordance with the terms
of this Agreement.
"MALL INFORMATION" means the following existing
information, wherever located, with respect to each Mall: books and records,
financial statements, operating budgets, structural, mechanical, geotechnical or
other engineering studies, Plans, soil test reports, environmental reports,
feasibility studies, appraisals, ADA surveys or reports, OSHA asbestos surveys,
marketing studies, Mall documents and compilations, Lease summaries, the Leases,
the Ground Leases, the Contracts, the Specialty License Agreements, the
Reciprocal Easement Agreements and all other contracts, agreements and/or
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documents relating to the Malls that have been prepared at an Owner's request
and are within Seller's possession or control.
"PARTY" means TIAA or NML, a party to a Reciprocal
Easement Agreement, a Ground Lease, a Specialty License Agreement, a Material
Contract, an Office or Equipment Lease or a Lease, in each case other than an
Owner or its predecessors in title with respect to any Mall.
"PURCHASE PRICE" means Three Hundred Eight Million
Five Hundred Thousand and 00/100 Dollars ($308,500,000.00). Without waiving
Purchaser's right of termination pursuant to Section 4.2, it is the parties'
intention that there shall be no further reductions in the Purchase Price for
matters relating to Purchaser's due diligence investigations, or for any other
matter, except as expressly set forth in the Agreement.
"REAL PROPERTY" means all of that certain land
comprising the Malls and any development tracts, outparcels or outlots relating
to such Malls owned or leased by any Owner (including, without limitation,
pursuant to any Ground Lease), including the buildings and all other
improvements, structures, fixtures, parking area, facilities, installations,
non-movable machinery or equipment on the real property or used in connection
with the occupancy thereof (except to the extent of trade fixtures and equipment
owned by Tenants under the Leases or the Specialty License Agreements or owned
by other third parties), together with all easements, rights-of-way, strips and
gores, tenements, hereditaments and appurtenances, thereunto belonging or
appertaining and all right, title and interest of an Owner in and to any
streets, alleys, passages, common areas and other rights-of-way or appurtenances
included in, adjacent to and used in connection with such real property, before
or after the vacation thereof, including, without limitation, the easements,
access rights and other rights provided in the Reciprocal Easement Agreements.
"TITLE POLICY" means, with respect to Real Property
owned in fee simple by an Owner, a current ALTA Owner's Policy of Title
Insurance (Form B, 1992), and with respect to Real Property leased by an Owner
pursuant to a Ground Lease, a current ALTA Leasehold Owner's Policy (10-17-92),
or, in each case, such other comparable form as is available in the applicable
jurisdiction issued by Title Insurer for each Mall dated the date and time of
Closing and with liability in the amount specified in Section 5.1, insuring
Purchaser or Purchaser's Nominee as owner of fee title to the Seller-Owned Mall
and Alexandria Mall (or owner of a good and valid leasehold estate pursuant to a
Ground Lease, as the case may be) and Temple as owner of fee title to Temple
Mall (or owner of a good and valid leasehold estate pursuant to a Ground Lease,
as the case may be). With respect to the Partnership Sites, each Title Policy
shall
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<PAGE> 68
show Purchaser or Purchaser's Nominee as the named insured, with a proportionate
reduction exception as to the existing policy for Temple, if available in Texas.
Each Title Policy shall contain affirmative insurance as to all appurtenant
easements benefiting the Real Property, including, without limitation, those
granted under the Reciprocal Easement Agreement, subject only to the Permitted
Exceptions applicable to the Mall covered by such policy, and shall (a) delete
the standard or general exceptions from coverage (but may include an exception
relating to parties in possession under unrecorded Leases), (b) contain a
contiguity endorsement for each Mall that is comprised of more than one parcel
if available, (c) affirmatively insure the Purchaser's rights under any
Reciprocal Easement Agreements or other appurtenant easements that benefit the
Real Property, (d) contain a survey endorsement if available, (e) if such
endorsement is available, contain a zoning endorsement in the form of ALTA
Endorsement Form 3.1 (or equivalent endorsement approved by Purchaser), (f)
provide at Purchaser's expense for such reinsurance and direct access and such
other endorsements as Purchaser shall require, (g) as to Alexandria Mall and
Temple Mall, if Purchaser acquires the Partnership Interests therein rather than
fee title, contain a non-imputation endorsement if available, and (h) contain a
vehicular access endorsement if available.
B. CONTINGENCY FOR LENDER APPROVAL. (i) The first
three sentences of Section 3.3(a) of the Agreement shall be deleted in their
entirety and replaced with the following:
The obligations of the parties under this Agreement shall be contingent upon
Seller obtaining, not less than five (5) days prior to the Closing Date, written
consent from TIAA to the transfer of Pecanland Mall to Purchaser or Purchaser's
Nominee and the assumption of the Pecanland Loan by Purchaser or Purchaser's
Nominee. Seller and Purchaser acknowledge and agree that Purchaser is
participating in discussions with TIAA to obtain such consent. If TIAA has not
consented to the transfer and assumption by the Closing Date, the Mall Assets
with respect to Pecanland Mall shall be excluded from the Property to be
conveyed as part of the Closing, this Agreement shall not terminate and the
parties shall proceed to close on the sale of the remaining Mall Assets and the
Partnership Interests with a reduction in the Purchase Price by an amount equal
to the Purchase Price Allocation for Pecanland Mall.
(i) Section 3.3(b) is hereby amended by adding the
phrase ", not less than five (5) days prior to the Closing Date," before the
words "written consent" in the first sentence of Section 3.3(b) and by deleting
the phrase "prior to the Closing Date (or any extended Closing Date agreed to by
Seller and Purchaser)" in the second sentence of Section 3.3(b) and replacing it
with the words "by such deadline".
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<PAGE> 69
C. PARTNER APPROVALS. The first three (3) sentences
of Section 3.4(d) are hereby deleted in their entirety and replaced with the
following sentence: "Purchaser shall have the right to continue to participate
during the Inspection Period in discussions or negotiations with the White
Trusts to obtain the White Consents."
D. OPERATING AGREEMENT. The following provision is
added as Section 3.6 of the Agreement:
3.6 DELIVERY OF TERMS OF OPERATING AGREEMENT.
Purchaser shall deliver to TIAA, NML and the White Trusts (or the attorney for
the White Trusts) a synopsis of the salient terms of the Operating Agreement of
Purchaser's Nominee responsive to inquiries of such parties, respectively. Such
responses shall be provided from time to time with reasonable promptness and
copies thereof shall be delivered to Seller.
E. EXTENSIONS OF INSPECTION PERIOD. Section 4.3 of
the Agreement is hereby deleted in its entirety.
F. TITLE AND SURVEY. Notwithstanding anything in the
Agreement to the contrary, Seller shall, on or before August 23, 1996, deliver
to Purchaser, for each Mall, a Survey, a Title Commitment and copies of matters
of record reflected in each Title Commitment. In Section 5.1(a) of the
Agreement, the following language shall be deleted from the first sentence
thereof: "the Inspection Period shall be extended due to any delay in providing
such adjoining property information beyond the thirtieth (30th) day after the
Effective Date and that". The last sentence of Section 5.1(b) shall be deleted
in its entirety.
G. CLOSING. Section 6.1 is hereby amended by adding
the following as the last sentence to Section 6.1: "The parties agree that the
closing proceedings shall commence on September 24, 1996, and the parties shall
continue such proceedings with diligence so that the Closing can occur on or
before the Closing Date."
H. SELLER CLOSING DOCUMENTS. (i) Section 6.2(j) is
amended by deleting the word "and" before the number "(v)" and adding the
following at the end of the first sentence thereof:
and (vi) a Ground Lease Estoppel Certificate from each Party to a Ground Lease.
(i) Notwithstanding anything in the Agreement to the
contrary, Seller shall deliver to Purchaser, on or before August 23, 1996, all
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<PAGE> 70
Estoppel Certificates required by Section 6.2(j) of the Agreement. In addition,
in the last sentence of Section 6.2(j), delete the phrase "fifty-five (55) days
after the Effective Date" and replace with the date "September 3, 1996", and
delete the phrase "fifty-two (52) days after the Effective Date" and replace
with the date "August 28, 1996".
(ii) The following is added as a new subsection (u)
of Section 6.2 of the Agreement:
(u) Four (4) counterparts of each Assignment of
Ground Leases.
I. PURCHASER CLOSING DOCUMENTS. The following is
added as a new subsections (m) and (n) of Section 6.3:
(m) Four (4) counterparts of each Assignment of
Ground Leases.
(n) A resolution of the members of Purchaser's
Nominee (and a resolution of any such corporate member) authorizing the
execution and delivery of the Purchaser Closing Documents.
J. APPORTIONMENT AND PAYMENTS. The phrase
"[Intentionally omitted]" is deleted from Section 7.1(p) of the Agreement and is
replaced with the following:
(p) GROUND LEASES. Rent and, without duplication of
their proration pursuant to other provisions of this Section, all other costs,
charges, reimbursements and other expenses payable pursuant to each Ground Lease
by an Owner as the lessee thereunder, shall be prorated as of the Cutoff Date.
K. CONDUCT OF BUSINESS PRIOR TO CLOSING DATE. The
following is added as a new subsection (g) to Section 8.1 of the Agreement:
(g) Prior to Closing, Seller shall not enter into,
amend, terminate or waive any rights under any Ground Leases without Purchaser's
prior written consent, which consent may be withheld in Purchaser's sole
discretion.
L. SELLER'S REPRESENTATIONS AND WARRANTIES. (i)
Section 9.1(a) of the Agreement is hereby amended by adding the phrase "or
lease" after the word "own" in the first sentence.
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<PAGE> 71
(i) Delete the phrase "and paid for" at the end of
clause (v) of Section 9.1(c) and replace with the following: ", or are under
construction and Seller has reserved sufficient funds to pay for all costs of
construction required to be paid or otherwise provided for by Seller prior to
Closing in accordance with the terms of this Agreement".
(iii) The phrase "[Intentionally omitted]" is deleted
from Section 9.1(l) of the Agreement and is replaced with the following:
(l) GROUND LEASES. Other than the Ground Leases
affecting the Alexandria Mall described in EXHIBIT 9.1(l), there are no other
Ground Leases affecting any portion of the Real Property. Seller has delivered
to Purchaser true, correct and complete copies of all of the Ground Leases. The
Ground Leases are in full force and effect. Neither the ground lessee nor, to
Seller's knowledge, any other Party to any Ground Lease is in default thereunder
and Seller has not received notice of any default pursuant to any Ground Lease,
except in each case as disclosed in EXHIBIT 9.1(l). All the improvements that an
Owner is obligated to construct as the lessee pursuant to any Ground Lease have
been completed except as disclosed in EXHIBIT 9.1(l).
M. SELLER INDEMNIFICATION. Section 15.2 of the
Agreement is hereby amended by deleting the word "or" before clause (d) and
adding a new clause (e) as follows immediately before the period ending Section
15.2:
; or (e) by reason of any labor, employment, employee benefit or other claim
that arises out of an employment relationship and that relates to any action
or events first occurring, or obligations first accruing, prior to the
Closing Date and that is made by or relating to any Employee or former
employee of Seller, MRML or any Affiliate of Seller, or by such Employee's
or former employee's successor(s), assign(s) or estate or any other person
claiming through such Employee or former employee, including, but not
limited to, any such claim relating to compensation, workers' compensation
or any benefit
N. EXHIBITS. (i) The List of Exhibits attached to the
Agreement is hereby amended to add the following:
6.2(j)(vi) -Form of Ground Lease Estoppel Certificate
9.1(l) -Description of Alexandria Ground Leases and List of Defaults
6.2(u) -Form of Assignment of Ground Leases
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<PAGE> 72
(i) EXHIBIT B to the Purchase Agreement entitled
"Schedule of Purchase Price Allocations" is hereby deleted and replaced with
EXHIBIT B attached to this Amendment and made a part hereof.
3. EFFECTIVE DATE OF AGREEMENT. The parties hereby
confirm that the Effective Date of the Agreement is June 12, 1996.
4. RATIFICATION OF AGREEMENT. This Amendment shall be
deemed to form a part of and be construed in connection with and as part of the
Agreement. Except as herein expressly amended, all of the other terms, covenants
and conditions contained in the Agreement shall continue to remain unchanged and
in full force and effect and are hereby ratified and confirmed.
5. EXECUTION IN COUNTERPARTS. This Amendment may be
executed in any number of counterparts, each of which shall be deemed an
original and all of such counterparts shall constitute one Amendment. Signature
pages may be attached from the counterparts and attached to a single copy of the
Amendment to physically form one document.
6. PARTIES BOUND. Subject to the provisions of
Section 16.10 of the Agreement, all provisions hereof, including, without
limitation, all representations and warranties made hereunder, shall extend to,
be obligatory upon and inure to the benefit of the respective heirs, devisees,
legal representatives, successors, assigns and beneficiaries of the parties
hereto.
7. HEADINGS/EXHIBITS. The headings of the various
Articles and Sections of this Amendment have been inserted solely for purposes
of convenience, are not part of this Amendment and shall not be deemed in any
manner to modify, explain, expand or restrict any of the provisions of this
Amendment. All Schedules and Exhibits annexed hereto are made a part hereof. All
terms defined herein shall have the same meanings in the Schedules and Exhibits,
except as otherwise provided therein.
8. LIMIT OF TRUSTEES' LIABILITY. Notwithstanding
anything contained herein to the contrary, this Amendment is made and executed
on behalf of First Union Real Estate Equity and Mortgage Investments, a business
trust organized under the laws of the State of Ohio, by its officer(s) on behalf
of the trustees thereof, and none of the trustees or any additional or successor
trustee hereafter appointed, or any beneficiary, officer, employee or agent of
Purchaser shall have any liability in his personal or individual capacity, but
instead, all parties shall look solely to the property and assets of Purchaser
for satisfaction of any Damages of any nature in connection with this Amendment.
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<PAGE> 73
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE> 74
IN WITNESS WHEREOF, the parties hereto have executed
this Amendment as of the Amendment Effective Date.
SELLER: PURCHASER:
MARATHON U.S. REALTIES, INC., FIRST UNION REAL ESTATE EQUITY
a Delaware corporation AND MORTGAGE INVESTMENTS,
an Ohio business trust
By:/s/ John E. Beales By:/s/ James C. Mastandrea
------------------ -----------------------
Name: John E. Beales Name: James C. Mastandrea
Title: Vice President Title: President and
Chief Executive Officer
By:/s/ Steven M. Edelman
---------------------
Name: Steven M. Edelman
Title: Executive Vice President and
Chief Investment Officer
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<PAGE> 75
JOINDER:
The undersigned, as owner of the Villa Linda Mall,
hereby joins in the execution of this Amendment in order to bind itself to the
terms and provisions of this Amendment that relate to the undersigned and/or the
Villa Linda Mall and hereby confirms all representations, warranties and
covenants contained in the Amendment with respect to Villa Linda Mall.
CENTRIXX REALTY HOLDINGS
LIMITED
By:/s/ John E. Beales
------------------------
Name: John E. Beales
Title: Vice President
The undersigned, as Guarantor pursuant to that
certain Guaranty dated as of June 12, 1996, delivered in connection with the
Agreement, hereby joins in the execution of this Amendment for the purpose of
evidencing its consent to the terms and provisions thereof.
2685752 CANADA, INC.,
a Canadian corporation
By:M.J. Patava
---------------------------------
Name:
-------------------------------
Title:Vice President and Treasurer
------------------------------
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<PAGE> 76
September 26, 1996
(216) 566-5500
Marathon U.S. Realties, Inc.
One Galleria Tower
13355 Noel Road
Suite 1200
Dallas, TX
Attn: Michael E. Rulli
RE: Purchase and Sale Agreement between
Marathon U.S. Realties, Inc. ("Seller")
and First Union Real Estate Equity and
Mortgage Investments ("Purchaser")
dated June 12, 1996, as amended (as so
amended, the "Purchase Agreement")
Gentlemen:
As you are aware, pursuant to Paragraph 3.3 of the
Purchase Agreement, in the event that Seller does not obtain the TIAA consent as
contemplated therein by the Closing Date, the parties shall continue in good
faith to seek consent from TIAA for a period of six months after the Closing
Date. This letter is intended to amend the Purchase Agreement by allowing
additional time to obtain such consent. Terms capitalized herein and not
otherwise defined herein shall have the meaning set forth in the Purchase
Agreement.
Accordingly, this is to confirm our agreement that in
the event that, at the end of such initial six month period, TIAA has not
granted its consent, the parties shall, at Purchaser's election, exercisable by
delivering written notice to Seller, continue in good faith to seek the consent
from TIAA for an additional, period of six months thereafter, and further, that
in the event that the TIAA consent has still not been granted by the expiration
of such second six month period, then the parties shall, at Purchaser's
election, again exercisable by delivering written notice to Seller, continue in
good faith to seek the consent from TIAA for an additional
<PAGE> 77
Page 2
period of six months thereafter; provided, that (a) the extension rights
provided for above shall be exercisable only so long as the Pecanland Escrow
Agreement (referenced below) remains in effect, and (b) the cancellation right
with respect to the management agreement referred to in Paragraph 3.3 of the
Purchase Agreement shall not be exercisable by Seller so long as the Pecanland
Escrow Agreement (referenced below) remains in effect. In connection with the
Closing, the parties further agree to enter into the Pecanland Escrow Agreement
in the form of Exhibit A attached hereto and made a part hereof.
Please confirm your agreement to the foregoing by
executing below and returning a copy of this letter to the undersigned.
Very truly yours,
First Union Real Estate Equity
and Mortgage Investments
By: /s/ James C. Mastandrea
------------------------
Marathon U.S. Realties, Inc.
By: /s/ John E. Beales
-------------------------
Its: Vice President
------------------------
cc: Neal, Gerber & Eisenberg
Two North LaSalle Street
21st Floor
Chicago, Illinois 60602
Attn: Reuben Warshawsky, Esq.
Thompson, Hine & Flory P.L.L.
3900 Key Tower
127 Public Square
Cleveland, Ohio 44114-1216
Attn: Linda A. Striefsky, Esq.
<PAGE> 78
September 27, 1996
First Union Real Estate Equity
and Mortgage Investments
55 Public Square
Suite 1900
Cleveland, OH 44113
Attention: Paul F. Levin
Re: Purchase and Sale Agreement between Marathon U.S. Realties, Inc.
("Seller") and First Union Real Estate Equity and Mortgage
Investments ("Purchaser") dated as of June 12, 1996, as amended
(as so amended, the "Purchase Agreement")
Gentlemen:
This letter will amend the Purchase Agreement in the manner described
herein. Capitalized terms not otherwise defined herein shall have the same
meaning in this letter as defined in the Purchase Agreement.
1. Proration of Real Estate Taxes. Notwithstanding anything to the
contrary contained in the Purchase Agreement, including, without limitation,
Article 7 thereof, Seller will pay on the Closing Date the discounted present
value of Seller's prorata share of the tax expenses for the Property which are
reimbursed by tenants. The tax expenses are to be based on the actual 1995 taxes
discounted at five percent (5%) from the due date of such taxes. For the final
reproration on the Final Proration Statement, the actual tax expenses will be
prorated and Seller will pay or receive credit for the actual versus the
undiscounted amount paid on the Closing Date. The revenue will be prorated based
upon actual expenses.
2. Temple Mall Flume and Drain Easement. Seller has provided an
indemnification to First American Title Insurance Company ("First American") in
order to cause First American to remove the exception for the encroachment of
the flumes and drains at Temple Mall. In accordance with the terms of said
indemnification, within sixty (60) days after the Closing Date, Seller shall
cause the abandonment of the encroachments labeled "A" and "C" on the survey of
Temple Mall, and either (a) obtain an easement from Douglas & Associates, LLC
and Lowe's with respect to the encroachment labeled "D" on the survey of Temple
Mall in the form previously approved by Purchaser or (b) relocate the drainage
pipe for the encroachment labeled "D" on the survey of Temple Mall in order to
eliminate the encroachment and tie into the storm drainage system of the City of
Temple, Texas in accordance with plans approved by Purchaser. The encroachment
noted at "B" is located on a platted road. Seller shall provide an original
executed copy of the easement agreement to Purchaser.
3. Vehicle Titles. Seller shall cooperate with Purchaser after the
Closing Date to cause the transfer of all vehicle titles owned by Seller or its
predecessors in interest to be properly transferred to Purchaser within sixty
(60) days after the Closing Date. Such vehicles include those listed on Exhibit
A and identified as "to be transferred". Such cooperation shall include, without
limitation, execution of assignments of title or leases, transfers of registered
title or such other documents reasonably required to transfer such vehicle
titles. Seller agrees to maintain
<PAGE> 79
First Union Real Estate Equity
and Mortgage Investments
September 27, 1996
Page 2
insurance on all vehicles at the levels set forth in Exhibit B hereto until such
time as they have been transferred to Purchaser.
4. Pecanland Escrow. Purchaser and Seller acknowledge that a Lender
Estoppel Certificate has not been received from TIAA, and therefore the Escrow
Agreement between Purchaser, Seller, Southwest Shopping Centers Co. I, L.L.C.
and First American with respect to Pecanland Mall is hereby amended to the
extent necessary to acknowledge that such Lender Estoppel Certificate has not
been obtained and that it must be obtained by Seller and delivered to Purchaser
prior to the Closing as to Pecanland Mall.
5. Not later than Tuesday, October 1, 1996, Seller shall obtain and
deliver to Purchaser the original executed copy of the Ground Lessor Estoppel
Certificate and Consent from the Abrahams.
Please confirm your agreement to the foregoing by executing below and
returning a copy of this letter to the undersigned.
Very truly yours,
MARATHON U.S. REALTIES, INC.
By:/s/ Michael E. Rulli
--------------------
Michael E. Rulli
Vice-President
FIRST UNION REAL ESTATE EQUITY
AND MORTGAGE INVESTMENTS
By:/s/ Frank Schwab
-------------------------------
Frank Schwab
Vice-President
Title:
-----------------------
cc: Linda A. Striefsky
Reuben C. Warshawsky
<PAGE> 1
Exhibit 99.3
INVESTMENT AGREEMENT
THIS INVESTMENT AGREEMENT, dated as of September 27, 1996 is between
GMAC COMMERCIAL EQUITY INVESTMENTS, INC., a Pennsylvania corporation
("GMAC-CM"), FIRST UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS, an Ohio
business trust ("FUR"), and CARGILL FINANCIAL SERVICES CORPORATION, a Delaware
corporation ("CFSC").
W I T N E S S E T H:
- - - - - - - - - --
FUR, GMAC-CM and CFSC desire to form a limited liability company
("NEWCO") under the laws of the State of Delaware under the name "Southwest
Shopping Centers Co. I, L.L.C." to own, manage and operate, directly or
indirectly, nine (9) regional shopping malls, or interests therein, including
partnership interests (the "PROPERTIES") to be acquired by Newco (or LLC #2 or
LLC #3, as hereinafter defined), as the designee of FUR under a Purchase
Agreement dated June 12, 1996, as amended (the "PURCHASE AGREEMENT"), between
Marathon U.S. Realties, Inc., a Delaware corporation ("MARATHON"), as seller,
and FUR, as purchaser, all on the terms and conditions set forth in this
Investment Agreement, the LLC Agreements and the Management Agreements. A list
of the Properties is attached as SCHEDULE 1.
It is hereby agreed as follows:
SECTION 1. DEFINITIONS.
------------
The following terms used herein shall have the respective meanings
given below, such definitions to be equally applicable to both singular and
plural forms of the terms defined:
"ACQUISITION LOAN" shall mean the $165,000,000 loan to be made by the
GMAC Lender to LLC #2 on the Closing Date pursuant to the Acquisition Loan
Documents.
"ACQUISITION LOAN DOCUMENTS" shall mean the financing and related
security documentation entered into between LLC #2 and GMAC Lender providing for
the Acquisition Loan.
"AFFILIATE" of any Person shall mean any other Person directly or
indirectly controlling, controlled by or under direct or indirect common control
with such Person. A Person shall be deemed to control another Person if such
first Person owns, directly or indirectly, more than 50% of the voting stock of
the second Person or has the power, directly or indirectly, to elect or remove a
majority of the members of the Board of Directors, trustees or comparable
governing body of such second Person.
<PAGE> 2
"CFSC" shall have the meaning given thereto in the opening paragraph.
"CFSC INVESTMENT" shall mean the contribution of $38,132,286 made by
CFSC Subsidiary to Newco on the Closing Date in payment for its limited
liability company interest therein (including $35,000,000 for its Senior
Preferred Capital).
"CFSC LLC #2 INVESTMENT" shall mean the contribution of $259,891 made
by CFSC Subsidiary in LLC #2 Manager on the Closing Date in payment for its
limited liability company interest therein.
"CFSC LLC #3 INVESTMENT" shall mean the contribution of $7,823 made by
CFSC Subsidiary in LLC #3 on the Closing Date in payment for its limited
liability company interest therein.
"CFSC PARTY" shall mean, as applicable, CFSC or CFSC Subsidiary.
"CFSC SUBSIDIARY" shall mean CFSC Capital Corp. XXXI, a Delaware
corporation.
"CLOSING DATE" shall have the meaning given in SECTION 2(a) of this
Investment Agreement.
"COMMON CAPITAL" shall have the meaning given thereto in the LLC #1
Agreement.
"FUR" shall have the meaning given thereto in the opening paragraph.
"FUR INVESTMENT" shall mean the contribution of $29,724,409 made by FUR
Subsidiary to Newco on the Closing Date in payment for its limited liability
company interest therein (including $26,500,000 for its Series A Preferred
Capital).
"FUR LLC #2 INVESTMENT" shall mean the contribution of $267,538 made by
FUR Special Subsidiary in LLC #2 Manager on the Closing Date in payment for its
limited liability company interest therein.
"FUR LLC #3 INVESTMENT" shall mean the contribution of $8,053 made by
FUR Subsidiary in LLC #3 on the Closing Date in payment for its limited
liability company interest therein.
"FUR PARTY" shall mean, as applicable, FUR, FUR Subsidiary, FUR Special
Subsidiary or FUMI.
2
<PAGE> 3
"FUR SPECIAL SUBSIDIARY" shall mean First Southwest II, Inc., a
Delaware corporation and wholly-owned subsidiary of FUR.
"FUR SUBSIDIARY" shall mean First Union Southwest L.L.C., a Delaware
limited liability company of which FUR and First Southwest I, Inc., a
wholly-owned subsidiary of FUR, are the members.
"GMAC-CM" shall have the meaning given thereto in the opening
paragraph.
"GMAC-CM INVESTMENT" shall mean the contribution of $44,580,315 made by
GMAC-CM to Newco on the Closing Date in payment for its limited liability
company interest therein (including $38,500,000 for its Series B Preferred
Capital).
"GMAC-CM LLC #2 INVESTMENT" shall mean the contribution of $504,499
made by GMAC-CM in LLC #2 Manager on the Closing Date in payment for its limited
liability company interest therein.
"GMAC-CM LLC #3 INVESTMENT" shall mean the contribution of $15,186 made
by GMAC-CM in LLC #3 on the Closing Date in payment for its limited liability
company interest therein.
"GMAC LENDER" shall mean GMAC Commercial Mortgage Corporation.
"INVESTMENTS" shall mean, collectively, the CFSC Investment, the FUR
Investment and the GMAC-CM Investment.
"LLC #1 AGREEMENT" shall mean the Limited Liability Company Agreement
of Newco substantially in the form of Exhibit A-1 to be dated as of the Closing
Date among FUR Subsidiary, CFSC Subsidiary and GMAC-CM.
"LLC #2 AGREEMENT" shall mean the Limited Liability Company Agreement
of Southwest Shopping Centers Co. II, L.L.C. substantially in the form of
Exhibit A-2 to be dated as of the Closing Date among Newco and LLC #2 Manager.
"LLC #2 MANAGER" shall mean First SW, II, L.L.C., a Delaware limited
liability company.
"LLC #2 MANAGER AGREEMENT" shall mean the Limited Liability Company
Agreement of LLC #2 Manager substantially in the form of Exhibit A-4 to be dated
as of the Closing Date among FUR Special Subsidiary, GMAC-CM and CFSC
Subsidiary.
"LLC #3 AGREEMENT" shall mean the Limited Liability Company Agreement
of Temple Shopping Center Co., L.L.C. substantially in the form of Exhibit A-3
to be
3
<PAGE> 4
dated as of the Closing Date among Newco, FUR Subsidiary, CFSC Subsidiary and
GMAC-CM.
"LLC AGREEMENTS" shall mean, collectively, the LLC #1 Agreement, the
LLC #2 Agreement, the LLC #2 Manager Agreement and the LLC #3 Agreement.
"LLC #2" shall mean Southwest Shopping Centers Co. II, L.L.C.
"LLC #3 shall mean Temple Shopping Center Co., L.L.C.
"MANAGEMENT AGREEMENTS" shall mean, collectively, (i) with respect to
each of the Properties other than Temple Mall, a form of Management and Leasing
Agreement between FUMI and Newco or LLC #2, as applicable, in substantially the
form of Exhibit A to LLC #1 Agreement, and (ii) with respect to LLC #3, the
existing Management Agreement for such Property, as assigned to FUMI on the
Closing Date.
"MARATHON" shall have the meaning given thereto in the Witnesseth
paragraph.
"NEWCO" shall have the meaning given thereto in the Witnesseth
paragraph.
"PERSON" shall mean any individual, corporation, limited liability
company, partnership, association, trust or other entity or organization.
"PROPERTIES" shall have the meaning given thereto in the Witnesseth
paragraph.
"PURCHASE AGREEMENT" shall have the meaning given thereto in the
Witnesseth paragraph.
"SENIOR PREFERRED CAPITAL" shall have the meaning given thereto in the
LLC #1 Agreement.
"SENIOR PREFERRED DISTRIBUTION" shall have the meaning given thereto in
the LLC #1 Agreement.
"SERIES A PREFERRED CAPITAL" shall have the meaning given thereto in
the LLC #1 Agreement.
"SERIES B PREFERRED CAPITAL" shall have the meaning given thereto in
the LLC #1 Agreement.
"SERIES B PREFERRED DISTRIBUTION" shall have the meaning given thereto
in the LLC #1 Agreement.
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<PAGE> 5
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
SECTION 2. INVESTMENTS.
------------
(a) INVESTMENTS BY FUR. Subject to the terms and conditions of this
Investment Agreement, FUR agrees (i) to cause FUR Subsidiary to make the FUR
Investment in Newco on the closing date under the Purchase Agreement (the
"Closing Date"), (ii) to cause FUR Special Subsidiary to make the FUR LLC #2
Investment in LLC #2 Manager on the Closing Date, and (iii) to cause FUR
Subsidiary to make the FUR LLC #3 Investment in LLC #3 on the Closing Date. FUR
covenants that FUR Subsidiary will always be controlled, directly or indirectly,
by FUR.
(b) INVESTMENTS BY GMAC-CM. Subject to the terms and conditions of this
Investment Agreement, GMAC-CM agrees (i) to make the GMAC-CM Investment in Newco
on the Closing Date, (ii) to make the GMAC-CM LLC #2 Investment in LLC #2
Manager on the Closing Date, and (iii) to make the GMAC-CM LLC #3 Investment in
LLC #3 on the Closing Date.
(c) INVESTMENT BY CFSC. Subject to the terms and conditions of this
Investment Agreement, CFSC agrees (i) to cause CFSC Subsidiary to make the CFSC
Investment in Newco on the Closing Date, (ii) to cause CFSC Subsidiary to make
the CFSC LLC #2 Investment in LLC #2 Manager on the Closing Date, and (iii) to
cause CFSC Subsidiary to make the CFSC LLC #3 Investment in LLC #3 on the
Closing Date. CFSC covenants that CFSC Subsidiary will always be controlled,
directly or indirectly, by CFSC.
SECTION 3. CONDITIONS PRECEDENT
--------------------
(a) The obligations of FUR to take the actions on the Closing Date
specified in SECTION 2(a) shall be subject to the fulfillment to the
satisfaction of, or waiver in writing by, FUR on or prior to the Closing Date of
the following conditions precedent:
(i) MARATHON TRANSACTION. The conditions precedent under the
Purchase Agreement to the consummation of the transaction with Marathon
shall have been met or waived, it being understood and agreed that FUR
shall have the right in its sole discretion to decide whether such
conditions precedent in the Purchase Agreement have been fulfilled or
to waive the same.
(ii) OTHER INVESTMENTS. GMAC-CM and CFSC Subsidiary shall
have made their respective Investments on the Closing Date
contemplated by SECTIONS 2(b) and 2(c), respectively, and LLC #2
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<PAGE> 6
Manager and LLC #1 shall have made the investment in LLC #2
contemplated by the Acquisition Loan Documents.
(iii) ACQUISITION LOAN. GMAC Lender shall have funded the
Acquisition Loan.
(iv) WARRANTIES. The respective representations and warranties
of GMAC-CM and CFSC set forth in SECTIONS 4(b) and 4(c), respectively,
shall be true and correct in all material respects on and as of the
Closing Date with the same effect as though made on and as of the
Closing Date.
(v) PERFORMANCE. GMAC-CM and CFSC shall each have performed
and complied in all material respects with all agreements and
conditions contained herein required to be performed or complied with
on or prior to the Closing Date.
(vi) LITIGATION. No material action or proceeding shall have
been instituted nor shall have any governmental action been threatened
before any court or governmental agency, nor shall any order, judgment
or decree have been issued or proposed to be issued by any court or
governmental agency to set aside, restrain, enjoin or prevent the
performance of this Investment Agreement and the transactions
contemplated hereby.
(vii) OPINIONS. FUR shall have received a favorable opinion of
counsel for each of GMAC-CM and CFSC, dated the Closing Date, addressed
to FUR and substantially in the form of SCHEDULES 2 and 3,
respectively.
(viii) [Intentionally omitted].
(ix) SWAP AGREEMENT. Newco shall have entered into an interest
rate swap agreement with respect to the Senior Preferred Distribution
and the Series B Preferred Distribution on terms satisfactory to FUR.
(b) The obligations of GMAC-CM to take the actions on the Closing Date
specified in SECTION 2(b) shall be subject to the fulfillment to the
satisfaction of, or waiver in writing by, GMAC-CM on or prior to the Closing
Date of the following conditions precedent:
6
<PAGE> 7
(i) MARATHON TRANSACTION. The conditions precedent under the
Purchase Agreement to the consummation of the transaction with Marathon
shall have been met or waived, it being understood and agreed that
GMAC-CM shall have the right in its sole discretion to decide whether
such conditions precedent in the Purchase Agreement have been fulfilled
or to waive the same.
(ii) OTHER INVESTMENTS. FUR and CFSC shall have made their
respective Investments on the Closing Date contemplated by SECTIONS
2(a) and 2(c), respectively, and LLC #2 Manager and LLC #1 shall have
made the investment in LLC #2 contemplated by the Acquisition Loan
Documents.
(iii) ACQUISITION LOAN. GMAC Lender shall have funded the
Acquisition Loan.
(iv) WARRANTIES. The respective representations and warranties
of FUR and CFSC set forth in SECTIONS 4(a) and 4(c), respectively,
shall be true and correct in all material respects on and as of the
Closing Date with the same effect as though made on and as of the
Closing Date.
(v) PERFORMANCE. FUR and CFSC shall each have performed and
complied in all material respects with all agreements and conditions
contained herein required to be performed or complied with on or prior
to the Closing Date.
(vi) LITIGATION. No material action or proceeding shall have
been instituted nor shall have any governmental action been threatened
before any court or governmental agency, nor shall any order, judgment
or decree have been issued or proposed to be issued by any court or
governmental agency to set aside, restrain, enjoin or prevent the
performance of this Investment Agreement and the transactions
contemplated hereby.
(vii) OPINIONS. GMAC-CM shall have received a favorable
opinion of counsel for each of FUR and CFSC, dated the Closing Date,
addressed to GMAC-CM and substantially in the form of SCHEDULES 4 and
3, respectively.
(viii) [Intentionally omitted].
(ix) SWAP AGREEMENT. Newco shall have entered into an
interest rate swap agreement with respect to the Senior Preferred
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<PAGE> 8
Distribution and the Series B Preferred Distribution on terms
satisfactory to GMAC-CM.
(c) The obligations of CFSC to take the actions on the Closing Date
specified in SECTION 2(c) shall be subject to the fulfillment to the
satisfaction of, or waiver in writing by, CFSC on or prior to the Closing Date
of the following conditions precedent:
(i) MARATHON TRANSACTION. The conditions precedent under the
Purchase Agreement to the consummation of the transaction with Marathon
shall have been met or waived, it being understood and agreed that CFSC
shall have the right in its sole discretion to decide whether such
conditions precedent in the Purchase Agreement have been fulfilled or
to waive the same.
(ii) OTHER INVESTMENTS. FUR and GMAC-CM shall have made their
respective Investments on the Closing Date contemplated by SECTIONS
2(a) and 2(b), respectively, and LLC #2 Manager and LLC #1 shall have
made the investment in LLC #2 contemplated by the Acquisition Loan
Documents.
(iii) ACQUISITION LOAN. GMAC Lender shall have funded the
Acquisition Loan.
(iv) WARRANTIES. The respective representations and warranties
of FUR and GMAC-CM set forth in SECTIONS 4(a) and 4(b), respectively,
shall be true and correct in all material respects on and as of the
Closing Date with the same effect as though made on and as of the
Closing Date.
(v) PERFORMANCE. FUR and GMAC-CM shall each have performed and
complied in all material respects with all agreements and conditions
contained herein required to be performed or complied with on or prior
to the Closing Date.
(vi) LITIGATION. No material action or proceeding shall have
been instituted nor shall have any governmental action been threatened
before any court or governmental agency, nor shall any order, judgment
or decree have been issued or proposed to be issued by any court or
governmental agency to set aside, restrain, enjoin or prevent the
performance of this Investment Agreement and the transactions
contemplated hereby.
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<PAGE> 9
(vii) OPINIONS. CFSC shall have received a favorable opinion
of counsel for each of FUR and GMAC-CM, dated the Closing Date,
addressed to CFSC and substantially in the form of SCHEDULES 4 and 2,
respectively.
(viii) [Intentionally omitted].
(ix) SWAP AGREEMENT. Newco shall have entered into an interest
rate swap agreement with respect to the Senior Preferred Distribution
and the Series B Preferred Distribution on terms satisfactory to CFSC.
(x) CASH FLOW COVERAGE RATIO. CFSC shall have satisfied itself
that the coverage ratio for payment of the Senior Preferred
Distribution from net cash flow available for distributions (cash flow
available after debt service on Acquisition Loan, operating expenses,
reserves, tenant improvements and leasing commissions) will not be less
than 1.60 to 1.00.
(d) AUTHORIZATION, EXECUTION, AND DELIVERY OF DOCUMENTS. The
obligations of FUR, GMAC-CM and CFSC to take their respective actions on the
Closing Date under SECTIONS 2(a), 2(b) and 2(c), respectively, shall further be
subject to the conditions precedent that this Investment Agreement and each of
the following documents shall have been duly authorized, executed and delivered
by the respective parties thereto and shall be in full force and effect:
(i) each of the LLC Agreements; and
(ii) each of the Management Agreements (or, in the case of
LLC #3, the applicable Assignment Agreement).
SECTION 4. REPRESENTATIONS AND WARRANTIES.
-------------------------------
(a) REPRESENTATIONS AND WARRANTIES OF FUR. FUR represents and
warrants to GMAC-CM and CFSC that:
(i) DUE ORGANIZATION. FUR is a business trust duly organized
and existing under the laws of the State of Ohio and has the power,
authority and legal right to enter into, and perform its obligations
under, this Investment Agreement. Each other FUR Party is a corporation
(or, in the case of FUR Subsidiary, a limited liability company) duly
organized and existing under the laws of the State of Delaware and has
the power, authority and legal right to enter into, and perform its
obligations under,
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<PAGE> 10
each LLC Agreement to which it is or will be a party and, in the case
of FUMI, the Management Agreements.
(ii) DUE AUTHORIZATION; ENFORCEABILITY. This Investment
Agreement has been duly authorized, executed and delivered by FUR and
constitutes a valid and legally binding obligation of FUR. Each LLC
Agreement to which a FUR Party is or will be a party has been duly
authorized, and when executed and delivered by such FUR Party, will
constitute its valid and legally binding obligation. The Management
Agreements have been duly authorized by FUMI, and when executed and
delivered by FUMI, will constitute its valid and legally binding
obligations.
(iii) NO VIOLATION. The execution and delivery by FUR of this
Investment Agreement, the execution and delivery by each FUR Party of
each LLC Agreement to which such FUR Party is or will be a party and
the execution and delivery by FUMI of the Management Agreements are
not, and the performance by FUR or such FUR Party, as applicable, of
its obligations hereunder and thereunder will not be, inconsistent with
its Declaration of Trust, certificate of incorporation or limited
liability company agreement, as applicable, or bylaws, do not and will
not contravene any law, governmental rule or regulation, judgment or
order applicable to it, and do not and will not contravene any
provision of, or constitute a default under, any material indenture,
mortgage, contract or other instrument to which FUR or such FUR Party
is a party or by which it or its property is bound or require the
consent or approval of, the giving of notice to, the registration with
or the taking of any action in respect of or by, any Federal or state
governmental authority or agency, except such as have been duly
obtained, given or accomplished and are in full force and effect.
(iv) LITIGATION. There is no litigation, proceeding or
investigation pending, or to FUR's actual knowledge, threatened against
FUR or any FUR Party which questions the validity or legality of this
Investment Agreement or of any action taken or to be taken by FUR or
any FUR Party pursuant to or in connection with the provisions of this
Investment Agreement.
(v) ERISA. FUR represents and warrants that no FUR Party will
purchase or hold its interest in any of the LLC Agreements with plan
assets of any "employee benefit plan" (as defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended,
("ERISA")) which is subject to Title I of ERISA or a "plan" covered by
Section 4975 of the Internal Revenue Code of 1986, as amended.
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<PAGE> 11
(vi) BROKERS. All negotiations relating to this Investment
Agreement and the transactions contemplated hereunder have been carried
on by FUR without the intervention of any person as the result of any
action by FUR (and, so far as known to FUR, without the intervention of
any other person), in such manner as to give rise to any valid claim
against FUR for a brokerage commission, finder's fee or like payment,
except for NatWest Markets, whose fees and expenses are to be paid by
Newco under Section 24(o) of the LLC #1 Agreement.
(vii) PURCHASE FOR INVESTMENT. FUR Subsidiary is purchasing
its membership interests in Newco and LLC #3, and FUR Special
Subsidiary is purchasing its membership interest in LLC #2 Manager, for
its own account with no present intention of distributing any such
membership interest or any part thereof in any manner which would
violate the Securities Act. FUR acknowledges that the membership
interests of FUR Subsidiary and FUR Special Subsidiary, as applicable,
have not been registered under the Securities Act, and that neither
Newco nor any such other limited liability company contemplates any
filing, and is not legally required to file, any such registration
statement. FUR Subsidiary and FUR Special Subsidiary are each an
"accredited investor" as defined in Rule 501(a) of Regulation D
promulgated under the Securities Act.
(b) REPRESENTATIONS AND WARRANTIES OF GMAC-CM. GMAC-CM represents
and warrants to FUR and CFSC that:
(i) DUE ORGANIZATION. GMAC-CM is a corporation duly organized
and validly existing in good standing under the laws of the
Commonwealth of Pennsylvania and has the corporate power, authority and
legal right to enter into and perform its obligations under this
Investment Agreement and each LLC Agreement to which it is or will be a
party.
(ii) DUE AUTHORIZATION; ENFORCEABILITY. This Investment
Agreement has been duly authorized, executed and delivered by GMAC-CM
and constitutes a valid and legally binding obligation of GMAC-CM. Each
LLC Agreement to which GMAC-CM is or will be a party has been duly
authorized, and when executed and delivered by GMAC-CM, will constitute
its valid and legally binding obligation.
(iii) NO VIOLATION. The execution and delivery by GMAC-CM
of this Investment Agreement and each LLC Agreement to which GMAC-CM
is or will be a party is not, and the performance by GMAC-CM of its
obligations hereunder and thereunder will not be, inconsistent with its
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<PAGE> 12
charter or bylaws, do not and will not contravene any law, governmental
rule or regulation, judgment or order applicable to it, and do not and
will not contravene any provision of, or constitute a default under,
any material indenture, mortgage, contract or other instrument to which
GMAC-CM is a party or by which it or its property is bound, or require
the consent or approval of, the giving of notice to, the registration
with or the taking of any action in respect of or by, any governmental
authority or agency, except such as have been obtained, given or
accomplished and are in full force and effect.
(iv) LITIGATION. There is no litigation, proceeding or
investigation pending, or to GMAC-CM's actual knowledge, threatened
against GMAC-CM which questions the validity or legality of this
Investment Agreement or of any action taken or to be taken by GMAC-CM
pursuant to or in connection with the provisions of this Investment
Agreement.
(v) ERISA. GMAC-CM represents and warrants that it will not
purchase or hold its interest in any of the LLC Agreements with plan
assets of any "employee benefit plan" (as defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended,
("ERISA")) which is subject to Title I of ERISA or a "plan" covered by
Section 4975 of the Internal Revenue Code of 1986, as amended.
(vi) BROKERS. All negotiations relating to this Investment
Agreement and the transactions contemplated hereunder have been carried
on by GMAC-CM without the intervention of any person as the result of
any action by GMAC-CM (and, so far as known to GMAC-CM, without the
intervention of any other person), in such manner as to give rise to
any valid claim against GMAC-CM for a brokerage commission, finder's
fee or like payment, except for NatWest Markets, whose fees and
expenses are to be paid by Newco under Section 24(o) of the LLC #1
Agreement.
(vii) PURCHASE FOR INVESTMENT. GMAC-CM is purchasing its
membership interests in Newco, LLC #2 Manager and LLC #3 for its own
account with no present intention of distributing any such membership
interest or any part thereof in any manner which would violate the
Securities Act. GMAC-CM acknowledges that the membership interests have
not been registered under the Securities Act, and that neither Newco
nor any such other limited liability company contemplates any filing,
and is not legally required to file, any such registration statement.
GMAC-CM is an "accredited investor" as defined in Rule 501(a) of
Regulation D promulgated under the Securities Act.
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<PAGE> 13
(c) REPRESENTATIONS AND WARRANTIES OF CFSC. CFSC represents and
warrants to FUR and GMAC-CM that:
(i) DUE ORGANIZATION. CFSC is a corporation duly organized and
validly existing in good standing under the laws of the State of
Delaware and has the corporate power, authority and legal right to
enter into and perform its obligations under this Investment Agreement.
CFSC Subsidiary is a corporation duly organized and validly existing in
good standing under the laws of the State of Delaware and has the
corporate power, authority and legal right to enter into and perform
its obligations under each LLC Agreement to which it is or will be a
party.
(ii) DUE AUTHORIZATION; ENFORCEABILITY. This Investment
Agreement has been duly authorized, executed and delivered by CFSC and
constitutes a valid and legally binding obligation of CFSC. Each LLC
Agreement to which CFSC Subsidiary is or will be a party has been duly
authorized, and when executed and delivered by CFSC Subsidiary, will
constitute its valid and legally binding obligation.
(iii) NO VIOLATION. The execution and delivery by CFSC of this
Investment Agreement, and the execution and delivery by CFSC Subsidiary
of each LLC Agreement to which it is or will be a party, are not, and
the performance by CFSC or CFSC Subsidiary, as applicable, of its
obligations hereunder and thereunder will not be, inconsistent with its
charter or bylaws, do not and will not contravene any law, governmental
rule or regulation, judgment or order applicable to it, and do not and
will not contravene any provision of, or constitute a default under,
any material indenture, mortgage, contract or other instrument to which
CFSC or CFSC Subsidiary is a party or by which it or its property is
bound, or require the consent or approval of, the giving of notice to,
the registration with or the taking of any action in respect of or by,
any governmental authority or agency, except such as have been
obtained, given or accomplished and are in full force and effect.
(iv) LITIGATION. There is no litigation, proceeding or
investigation pending, or to CFSC's actual knowledge, threatened
against CFSC or CFSC Subsidiary which questions the validity or
legality of this Investment Agreement or of any action taken or to be
taken by CFSC or CFSC Subsidiary pursuant to or in connection with the
provisions of this Investment Agreement.
(v) ERISA. CFSC represents and warrants that CFSC Subsidiary
will not purchase or hold its interest in any of the LLC Agreements
with
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plan assets of any "employee benefit plan" (as defined in Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended,
("ERISA")) which is subject to Title I of ERISA or a "plan" covered by
Section 4975 of the Internal Revenue Code of 1986, as amended.
(vi) BROKERS. All negotiations relating to this Investment
Agreement and the transactions contemplated hereunder have been carried
on by CFSC without the intervention of any person as the result of any
action by (and, so far as known to CFSC, without the intervention of
any other person), in such manner as to give rise to any valid claim
against CFSC for a brokerage commission, finder's fee or like payment
(vii) PURCHASE FOR INVESTMENT. CFSC Subsidiary is purchasing
its membership interests in Newco, LLC #2 Manager and LLC #3 for its
own account with no present intention of distributing any such
membership interest or any part thereof in any manner which would
violate the Securities Act. CFSC acknowledges that the membership
interests of CFSC Subsidiary have not been registered under the
Securities Act, and that neither Newco nor any such other limited
liability company contemplates any filing, and is not legally required
to file, any such registration statement. CFSC Subsidiary is an
"accredited investor" as defined in Rule 501(a) of Regulation D
promulgated under the Securities Act.
SECTION 5. CONFIDENTIALITY.
----------------
Each party and its Affiliates shall treat all data and information
furnished by a party hereto or an Affiliate to the other party hereto or to one
of its Affiliates which is marked "Confidential" or contains a similar
proprietary notice clause as confidential, and shall take or cause to be taken
such reasonable precautions as are necessary to prevent disclosure thereof to
others during the term of this Investment Agreement and for a period of three
(3) years from the date of this Investment Agreement; PROVIDED, HOWEVER, that
this obligation shall not be applicable:
(i) to the extent such data or information was part of the
public domain at the time of its disclosure to such party;
(ii) to the extent such data or information became generally
available to the public or otherwise part of the public domain after
its disclosure to such party other than through any act or omission of
such party or its Affiliate in breach of this Investment Agreement;
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<PAGE> 15
(iii) to the extent such data or information was subsequently
disclosed to such party by a third party on a nonconfidential basis who
had no obligation to either party or any Affiliate of either party or
Newco (whether directly or indirectly) not to disclose such
information; or
(iv) to the extent that a party can demonstrate that such data
or information was in such party's possession at the time of disclosure
and was not acquired, directly or indirectly, from the other party or
an Affiliate on a confidential basis.
Each party may disclose such data and information to (i) its respective
Affiliates, (ii) its directors, officers, employees, agents, attorneys and
affiliates (to the extent such disclosure reasonably relates to the
administration of its investment in Newco), (iii) its financial advisors and
other professional advisors, (iv) any investor to which such party sells or
offers to sell its interest in Newco in accordance with Section 18(a) of the LLC
Agreement, (v) any federal or state regulatory authority having jurisdiction
over such party, (vi) any national securities exchange or nationally recognized
rating agency that requires access to information about such party's investment
portfolio or (vii) upon prompt notice to the other parties hereto, any other
Person to which such delivery or disclosure may be necessary or appropriate (w)
to effect compliance with any law, rule, regulation or order applicable to such
party, (x) in response to any subpoena or other legal process, or (y) in
connection with any litigation to which such party is a party; provided that
each party shall take all reasonable measures to impose upon any such Person
described in clauses (i)-(iv) of this SECTION 5 an obligation to respect the
confidential nature of the data and information disclosed substantially in
accordance with the terms of this SECTION 5. The provisions of this SECTION 5
shall survive the termination of this Investment Agreement.
SECTION 6. NOTICES.
--------
All communications, notices and consents provide for herein shall be in
writing and be given in person (or air freight delivery) or by means of
facsimile or other wire transmission (with request for assurance of receipt in a
manner typical with respect to communications of that type) or by mail, and
shall become effective (x) on delivery if given in person or by air freight
delivery, (y) on the date of transmission if sent by telecopy or other wire
transmission, or (z) five business days after being deposited in the mails, with
proper postage for first class registered or certified air mail, prepaid.
Notices shall be addressed as follows:
(i) if to FUR, at: 55 Public Square, Suite 1900
Cleveland, Ohio 44113
Attention: Paul F. Levin, Esq.
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with a copy to: 55 Public Square, Suite 1900
Cleveland, Ohio 44113
Attention: Steven M. Edelman
(ii) if to GMAC-CM, at: 650 Dresher Road
Horsham, Pennsylvania 19044-8015
Attention: General Counsel
with a copy to: Commercial Capital Initiatives, Inc.
Wall Street Plaza
88 Pine Street, 21st Floor
New York, New York 10005
Attention: Dan Driscoll
(iii) if to CFSC, at: 6000 Clearwater Drive
Minnetonka, Minnesota 55343
Attention: Gregory T. Zoidis
or at such other address as either party hereto may from time to time designate
by notice duly given in accordance with the provisions of this Section to the
other party hereto.
SECTION 7. GOVERNING LAW; WAIVER OF JURY TRIAL.
------------------------------------
(a) GOVERNING LAW. This Investment Agreement shall be governed by and
construed in accordance with the law of the State of Delaware, without regard to
its conflict of law rules.
(b) WAIVER OF JURY TRIAL. Each of FUR, GMAC-CM and CFSC hereby waives
any right to a trial by jury in any suit, action or proceeding arising out of or
relating to this Investment Agreement and agrees that any such suit, action or
proceeding shall be tried before a court and not before a jury.
SECTION 8. TERMINATION.
------------
In the event that the Closing Date contemplated by SECTION 2 hereof has
not occurred prior to October 31, 1996, then FUR, GMAC-CM or CFSC, acting alone,
may upon notice to the other parties terminate this Investment Agreement
together with any LLC Agreement and any Management Agreement which has
theretofore been executed and delivered by the parties or their respective
Affiliates; PROVIDED, HOWEVER, that no such termination shall relieve any party
from any breach or default of any of its duties or obligations under this
Investment Agreement which may have occurred
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prior to the date of such termination; and provided further that the provisions
of SECTIONS 5 and 10(F) shall survive any such termination.
SECTION 9. REPLACEMENT OF SENIOR PREFERRED CAPITAL.
----------------------------------------
Newco will have the right under the LLC #1 Agreement to redeem the
Senior Preferred Capital and the Common Capital of CFSC at any time after the
Closing Date. FUR and CFSC agree that GMAC-CM may act on behalf of Newco in
directing the terms and conditions of any such redemption and the resultant
replacement Senior Preferred Capital. Each of FUR and CFSC agrees to cooperate
in good faith with GMAC-CM and Newco in connection with any such redemption and
replacement and to execute and deliver such amendments to the LLC Agreements and
other agreements as may be necessary or advisable to consummate such
replacement, provided that (i) the after-tax future economic return of FUR
Subsidiary and the other rights, obligations and benefits of FUR (taking into
account, among other things, FUR's REIT status) under the LLC Agreements as a
result of the replacement are not in any way adversely affected and (ii) the
selection and identity of any person replacing CFSC in Newco, LLC #2 Manager and
LLC #3 shall be subject to FUR's reasonable approval. All costs and expenses of
negotiating and documenting the refinancing (including, without limitation, the
fees and expenses of counsel for FUR and Newco) shall be for the account of
GMAC-CM.
SECTION 10. MISCELLANEOUS.
--------------
(a) COUNTERPARTS. This Investment Agreement may be executed in any
number of counterparts and by either party hereto on separate counterparts, each
of which, when so executed and delivered, shall be an original, but all such
counterparts shall together constitute but one and the same instrument.
(b) SURVIVAL. All covenants, agreements, indemnities, representations
and warranties contained in this Investment Agreement and in any agreement,
document or certificate delivered pursuant hereto or in connection herewith,
shall survive the execution and delivery of this Investment Agreement and the
consummation of the transactions contemplated hereby.
(c) BINDING EFFECT. All covenants, agreements, indemnities,
representations and warranties in this Investment Agreement, the LLC Agreements
and the Management Agreements, and in any agreement, document or certificate
delivered hereunder or thereunder, shall bind the party making the same and its
permitted successors and assigns and shall inure to the benefit of each party
for whom made and their respective permitted successors and assigns. Except as
otherwise indicate, all references herein to any party to this Investment
Agreement, the LLC Agreements and the Management Agreements shall include the
permitted successors and assigns
17
<PAGE> 18
of such party. Notwithstanding the foregoing, no party hereto shall assign its
rights or obligations under this Investment Agreement without the prior written
consent of the other parties, which consent may be withheld in each such other
party's sole discretion.
(d) AMENDMENTS, SUPPLEMENTS, ETC. Neither this Investment Agreement nor
any of the terms hereof may be amended, modified or supplemented orally, but
only by an instrument in writing signed by the party against which enforcement
of such change is sought.
(e) HEADINGS. The headings of the sections and paragraphs of this
Investment Agreement have been inserted for convenience of reference only and
shall in no way restrict or otherwise modify any of the terms or provisions
hereof.
(f) EXPENSES. The fees and expenses of FUR and GMAC-CM (including,
without limitation, the reasonable fees and expenses of their outside counsel
with respect to this Investment Agreement, the Purchase Agreement and the
Acquisition Loan Documents) shall be paid by Newco, LLC #2 or LLC #3, as
applicable; such fees and expenses of CFSC shall be paid by GMAC-CM.
(g) ENTIRE AGREEMENT. This Investment Agreement together with the LLC
Agreements and the Management Agreements embody the entire agreement and
understanding between the parties with respect to the subject matter hereof and
thereof, and supersede any agreements, representations, warranties or
understandings, oral or written, between the parties with respect to the subject
matter of this Investment Agreement, the LLC Agreement and the Management
Agreements entered into prior to the date hereof.
(h) LIMITATION OF LIABILITY. Notwithstanding anything contained herein
to the contrary, this Investment Agreement is made and executed on behalf of FUR
by its officers on behalf of the trustees thereof, and none of the trustees or
any additional or successor trustee hereafter appointed, or any beneficiary,
officer, employee or agent of FUR shall have any liability in his personal or
individual capacity, but instead, all parties shall look solely to the property
and assets of FUR for satisfaction of claims of any nature arising under or in
connection with this Investment Agreement.
(i) NO CONSEQUENTIAL OR LOST PROFIT DAMAGES. No party to this
Investment Agreement, nor any Affiliate of any such party, shall seek or be
entitled to incidental, indirect or consequential damages or damages for lost
profits in any claim made under this Investment Agreement or in connection with
the transactions contemplated hereby.
18
<PAGE> 19
IN WITNESS WHEREOF, the parties hereto have each caused this Investment
Agreement to be duly executed by their respective officers thereunto duly
authorized as of the date first above given.
FIRST UNION REAL ESTATE EQUITY
AND MORTGAGE INVESTMENTS
By: /s/ PAUL LEVIN
-------------------------
Its: VICE PRESIDENT AND SECRETARY
----------------------------
GMAC COMMERCIAL
EQUITY INVESTMENTS, INC.
By: /s/ JAMES DALTON
------------------------------
Its: SENIOR VICE PRESIDENT
----------------------------
CARGILL FINANCIAL
SERVICES CORPORATION
By: /s/ AUTHORIZED OFFICER
------------------------------
Its: AUTHORIZED OFFICER
----------------------------
<PAGE> 20
EXHIBITS
--------
Exhibit A-1 Form of LLC #1 Agreement
Exhibit A-2 Form of LLC #2 Agreement
Exhibit A-3 Form of LLC #3 Agreement
Exhibit A-4 Form of LLC #2 Manager Agreement
SCHEDULES
---------
Schedule 1 List of Properties
Schedule 2 Opinion of Counsel for GMAC-CM
Schedule 3 Opinion of Counsel for CFSC
Schedule 4 Opinion of Counsel for FUR
<PAGE> 1
Exhibit 99.4
======================================================================
LIMITED LIABILITY COMPANY AGREEMENT
OF
SOUTHWEST SHOPPING CENTERS CO. I, L.L.C.,
A DELAWARE LIMITED LIABILITY COMPANY
DATED AS OF SEPTEMBER 27, 1996
======================================================================
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
<S> <C> <C>
SECTION 1. Formation of Limited Liability Company................................................... 1
SECTION 2. Name..................................................................................... 1
SECTION 3. Definitions.............................................................................. 1
SECTION 4. Business of the Company.................................................................. 9
(a) Purpose......................................................................... 9
(b) Subsidiary Companies............................................................ 9
(c) Separateness Covenants..........................................................10
SECTION 5. Term.....................................................................................11
SECTION 6. Principal Place of Business..............................................................11
SECTION 7. Registered Agent; Registered Office......................................................11
SECTION 8. Capital Contributions; No Withdrawal or Resignation......................................11
(a) Initial Capital Contributions...................................................11
(b) Additional Contributions; Interest..............................................11
(c) Withdrawal and Resignation; Return of
Capital Contribution............................................................12
(d) Special Rules for Capital Accounts..............................................12
SECTION 9. Distributions............................................................................12
(a) Current Distributions...........................................................12
(b) Distributions from Sale.........................................................13
SECTION 10. Allocations of Income and Losses.........................................................14
(a) Allocations.....................................................................14
(b) Priority........................................................................14
(c) Qualified Income Offset.........................................................15
(d) Minimum Gain Chargeback.........................................................15
(e) Nonrecourse Liability...........................................................15
(f) Section 754 Related Adjustments.................................................16
(g) Change in Membership Interests..................................................16
(h) Loss Limitation.................................................................16
(i) [Intentionally omitted].........................................................16
(j) State and Local Taxes...........................................................16
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 11. Withholding............................................................................. 16
SECTION 12. Books, Records and Accounting........................................................... 17
(a) Books and Records.............................................................. 17
(b) Fiscal Year; Accounting........................................................ 17
(c) Reports........................................................................ 17
(d) Access......................................................................... 17
SECTION 13. Company Funds........................................................................... 17
SECTION 14. Management.............................................................................. 17
(a) Manager Powers................................................................. 17
(b) Election....................................................................... 18
(c) Resignation.................................................................... 19
(d) Removal........................................................................ 19
(e) Limitations on Powers.......................................................... 19
(f) Reimbursement.................................................................. 19
SECTION 15. Meetings................................................................................ 19
(a) Meetings of Members............................................................ 19
(b) Consent of Members............................................................. 19
SECTION 16. Voting.................................................................................. 20
(a) Members........................................................................ 20
(b) Voting......................................................................... 20
(c) Actions Requiring Member Approval.............................................. 20
SECTION 17. Limitation of Liability and Indemnification............................................. 21
(a) Limitation of Liability........................................................ 21
(b) Indemnification by the Company................................................. 21
(c) Expenses....................................................................... 22
(d) Not Exclusive.................................................................. 22
(e) Insurance...................................................................... 23
SECTION 18. Assignment of Membership Interests and New Members...................................... 23
(a) Assignment..................................................................... 23
(b) Limitations on Assignment...................................................... 23
(c) Negative Pledge................................................................ 23
(d) Admission of Assignees......................................................... 23
(e) Admission of New Members....................................................... 24
</TABLE>
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<PAGE> 4
<TABLE>
<S> <C> <C>
SECTION 19. Put and Call Options.................................................................... 24
(a-1) Refinancing Senior Preferred Capital........................................... 24
(a-2) Senior Preferred Capital Options............................................... 24
(b) Series B Preferred Capital Options............................................. 25
(c) CFSC Common Capital Option..................................................... 26
(d) GMAC-CM Common Capital Option.................................................. 26
(e) CFSC Redemption Options........................................................ 26
(f) GMAC-CM Redemption Options..................................................... 27
(g) Failure to Purchase Senior Preferred Capital................................... 28
(h) Failure to Purchase Series B
Preferred Capital.............................................................. 28
(i) No Purchase of Common Capital.................................................. 29
(j) Exercise of Options............................................................ 30
(k) New Member; Certain Assignments................................................ 31
(l) FUR Subsidiary Capital Contributions
Under Section 19............................................................... 31
SECTION 20. Dissolution............................................................................. 31
SECTION 21. Winding Up and Distribution of Assets................................................... 32
(a) Winding Up..................................................................... 32
(b) Distribution of Assets......................................................... 32
SECTION 22. Conflict of Interest.................................................................... 33
SECTION 23. Taxation................................................................................ 33
(a) Status of the Company.......................................................... 33
(b) Tax Elections.................................................................. 33
(c) Company Tax Returns............................................................ 34
(d) Tax Audits..................................................................... 34
</TABLE>
-iii-
<PAGE> 5
<TABLE>
<S> <C> <C>
SECTION 24. Miscellaneous........................................................................... 35
(a) Governing Law.................................................................. 35
(b) Binding Effect................................................................. 35
(c) Pronouns and Number............................................................ 35
(d) Captions....................................................................... 35
(e) Enforceability................................................................. 35
(f) Counterparts................................................................... 36
(g) Notices........................................................................ 36
(h) Entire Agreement; Amendment.................................................... 36
(i) Further Assurances............................................................. 36
(j) Third Parties.................................................................. 37
(k) Facsimile Signatures........................................................... 37
(l) Reliance upon Books, Reports and Records....................................... 37
(m) Time Periods................................................................... 37
(n) Waiver......................................................................... 37
(o) Expenses....................................................................... 37
</TABLE>
SCHEDULE I MEMBERS
SCHEDULE II PROPERTIES
SCHEDULE III ASSUMED LOANS
SCHEDULE IV TAX REPORTING REQUIREMENTS
EXHIBIT A MANAGEMENT AGREEMENT
-iv-
<PAGE> 6
Exhibit 99.4
LIMITED LIABILITY COMPANY AGREEMENT
OF
SOUTHWEST SHOPPING CENTERS CO. I, L.L.C.
This Limited Liability Company Agreement is made and entered into as of
the 27th day of September, 1996 by and among the Members listed on Schedule I
attached hereto.
SECTION 1. FORMATION OF LIMITED LIABILITY COMPANY. The Members agree to
the formation of a limited liability company (the "Company") pursuant to the Act
and for that purpose have caused a Certificate of Formation to be filed with the
Secretary on September 19, 1996. The rights and duties of the Members shall be
as provided in the Act, except as modified by this Agreement. For and in
consideration of the mutual covenants herein contained and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Members executing this Agreement hereby agree to the terms and
conditions of this Agreement.
SECTION 2. NAME. The business of the Company shall be conducted under
the name "Southwest Shopping Centers Co. I, L.L.C.".
SECTION 3. DEFINITIONS.
For purposes of this Agreement, unless the context clearly indicates
otherwise, the following terms shall have the following meanings (such meanings
to be equally applicable to both the singular and plural forms of the terms
defined):
"Acquisition Loan" shall have the meaning given thereto in the
Investment Agreement.
"Act" means the Delaware Limited Liability Company Act, Delaware Code
Title 6, Sections 18.101 ET SEQ., as amended from time to time.
"Adjusted Capital Account Deficit" means, with respect to any Member,
the deficit balance, if any, in such Member's Capital Account as of the end of
the relevant fiscal year, after giving effect to the following adjustments: (i)
credit to such Capital Account any amounts that such Member is obligated to
restore pursuant to any provision of this Agreement; (ii) credit to such Capital
Account the Member's share of Company Minimum Gain and the Member's amount of
Member Minimum Gain; and (iii) debit to such Capital Account any items described
in Treasury Regulations section 1.704-1(b)(2)(ii)(d)(4), (5) and (6). The
foregoing definition of Adjusted Capital Account Deficit is intended to comply
with
1
<PAGE> 7
the provisions of section 1.704-1(b)(2)(ii)(d) of the Treasury Regulations and
shall be interpreted consistently therewith.
"Affiliate" of any Person shall mean any other Person directly or
indirectly controlling, controlled by or under direct or indirect common control
with such Person. A Person shall be deemed to control another Person if such
first Person owns, directly or indirectly, more than 50% of the voting stock of
the second Person or has the power, directly or indirectly, to elect or remove a
majority of the members of the Board of Directors, trustees or comparable
governing body of such second Person.
"Agreement" means this Limited Liability Company Agreement, as amended,
modified or supplemented from time to time.
"Applicable Margin" means (i) 5.0%, plus (ii) 0.5% for each three-month
period commencing on each three-month anniversary of the date hereof while the
Senior Preferred Capital is outstanding.
"Assumed Loans" means the existing loans on the Properties assumed by
the Company (or Subsidiary Company) under the Purchase Agreement or which the
Company (or Subsidiary Company) may take subject to, as described on Schedule
III.
"Capital Account" means, with respect to each Member, the capital
account established and maintained on the books and records of the Company for
such Member. Each Member's Capital Account shall initially equal the value of
the Capital Contribution to the Company made by the Member as set forth on
Schedule I attached hereto. During the term of the Company, (i) each Member's
Capital Account shall be INCREASED by the amount of (w) income and gain
allocated to the Member and (x) any cash or the fair market value of property
(net of any liability assumed or to which such property is subject) subsequently
contributed by the Member to the Company, (ii) each Member's Capital Account
shall be DECREASED by the amount of (y) loss and deduction allocated to the
Member and (z) all cash and the fair market value of property (net of any
liability assumed or to which such property is subject) distributed to the
Member, and (iii) each Member's Capital Account shall otherwise be kept in
accordance with Section 704(b) of the Code and applicable United States Treasury
Regulations promulgated thereunder. In addition, Capital Accounts shall be
affected by the operation of Section 19 hereof.
"Capital Contribution" means the total amount of cash or other property
contributed to the Company by a Member. Contributed property shall be valued at
fair market value, net of any liabilities assumed or to which the contributed
property is subject.
"Capital Interest" means a percentage determined for each Member
equivalent to a fraction, the numerator of which is the aggregate Capital
Contributions made by such Member with respect to Common Capital and Preferred
Capital and the denominator of
2
<PAGE> 8
which is the aggregate Capital Contributions made by all Members with respect to
Common Capital and Preferred Capital. The amount of FUR Subsidiary's Capital
Contribution acquired by CFSC Subsidiary or GMAC-CM pursuant to Section 19(g) or
19(h) shall be deemed a Capital Contribution by such acquiring Member (and not
of FUR Subsidiary until such time, if any, as it is reacquired by FUR Subsidiary
pursuant to Section 19(a-2) or 19(b)) for purposes of determining the Capital
Interest of such Member.
"CFSC" means Cargill Financial Services Corporation, a Delaware
corporation, and its permitted successors and assigns.
"CFSC Subsidiary" means CFSC Capital Corp. XXXI, a Delaware
corporation.
"CFSC Common Capital" means that portion of CFSC Subsidiary's Capital
Contribution not constituting Senior Preferred Capital or Class B Common
Capital.
"Class B Common Capital" means the capital interest in the Company into
which FUR Subsidiary may convert its Series A Preferred Capital or FUR Common
Capital or into which CFSC Subsidiary or GMAC may convert its CFSC Common
Capital or GMAC Common Capital respectively. The Class B Common Capital shall be
non-voting until such time that only Class B Common Capital is outstanding.
"Code" means the United States Internal Revenue Code of 1986, as
amended, modified or rescinded from time to time, or any similar provision of
succeeding law.
"Common Capital" means the FUR Common Capital, the GMAC-CM Common
Capital and the CFSC Common Capital.
"Common Membership Percentage" shall mean the percentage share of a
Member, solely with respect to its Membership Interest in Common Capital, as set
forth opposite such Member's name on Schedule I attached hereto as it may be
amended, modified or supplemented from time to time or adjusted pursuant to
Section 19.
"Company Redemption Default" means a failure by the Company to redeem
in excess of $10,000,000 of Preferred Capital at the request of either or both
of CFSC Subsidiary or GMAC-CM pursuant to the requirements of either or both of
Sections 19(e) and 19(f), respectively, and the continuance of such failure to
perform for 30 days.
"Fair Market Value" means, with respect to Common Capital, the amount
of such Common Capital plus such additional amount which, after giving
recognition to the amount and timing of any Net Cash Flow distributions made to
a Member on account of its Common Capital, results in an internal rate of return
of 20% per annum (compounded annually) on the Common Capital of such Member, but
if the determination is made as of a date after the fifth anniversary of the
date hereof and the Net Cash Flow
3
<PAGE> 9
distributions thereon through the fifth anniversary of the date hereof exceeded
20% per annum, the determination shall be for the period commencing on the fifth
anniversary of the date hereof.
"FUMI" means First Union Management Inc., a Delaware corporation.
"FUR" means First Union Real Estate Equity and Mortgage Investments, an
Ohio business trust.
"FUR Common Capital" means that portion of FUR Subsidiary's Capital
Contribution not constituting Series A Preferred Capital or Class B Common
Capital.
"FUR Subsidiary" means First Union Southwest L.L.C., a Delaware limited
liability company of which FUR and First Southwest I, Inc., a wholly-owned
subsidiary of FUR, are the members, and its permitted successors and assigns.
"GMAC-CM" means GMAC Commercial Equity Investments, Inc., a
Pennsylvania corporation, and its permitted successors and assigns.
"GMAC-CM Common Capital" means that portion of GMAC-CM's Capital
Contribution not constituting Series B Preferred Capital or Class B Common
Capital.
"Investment Agreement" means the Investment Agreement dated as of
September 27, 1996 among FUR, CFSC and GMAC-CM, as it may be amended, modified
or supplemented from time to time.
"IRS" means the United States Internal Revenue Service or any successor
entity.
"LIBOR" means the average (rounded upward, if necessary, to the next
higher 1/16 of 1%) of the rates, reported from time to time by Bloomberg
Business Services On- Line Financial Data Service ("Bloomberg"), at which
foreign branches of major United States banks offer United States dollar
deposits to other banks for a one-month period in the London interbank market at
approximately 11:00 A.M. (London time) two business days before the first day of
such month. If such interest rate shall cease to be available from Bloomberg,
LIBOR shall be determined from such financial reporting service or other
information as shall be mutually acceptable to the Members.
"LLC #2" shall have the meaning given thereto in Section 4(b).
"LLC #2 Manager" shall mean First SW II, L.L.C., a Delaware limited
liability company of which each of the Members holding Common Capital (or their
Affiliates) holds a 33 1/3% membership interest.
"LLC #3" shall have the meaning given thereto in Section 4(b).
4
<PAGE> 10
"Majority Interest" means more than 50% of Common Membership
Percentages.
"Management Agreement" has the meaning set forth in Section 4(c)(vii).
"Manager" means any Person elected by the Members to manage the Company
in accordance with Section 14.
"Member" means any Person with a Membership Interest in the Company.
"Membership Interest" means the interest of a Person in the Common
Capital, Class B Common Capital or Preferred Capital of the Company (including,
but not limited to, all rights, obligations, capital contributions, benefits and
other attributes with respect to such Common Capital, Class B Common Capital or
Preferred Capital, respectively) as provided in this Agreement.
"Minimum Gain" has the meaning set forth in Section 1.704-2(d) of the
Treasury Regulations.
"Net Cash Flow" means for any period the amount equal to:
(i) the sum of (A) gross receipts from business operations,
all investment income and investment gain of the Company and all other
cash received by the Company and (B) any amounts released from
Reserves;
DECREASED by
(ii) the sum of (A) disbursements of the Company for operating
expenses, expenditures for capital investments and reinvestments,
principal payments on indebtedness, interest and other expenses,
including any repayment of indebtedness required or elected to be made
in connection with any refinancing, sale or other event, and (B) any
increase in Reserves.
"Option Closing Date" shall have the meaning given thereto in SECTION
19(j).
"Person" means any individual, corporation, partnership, association,
limited liability company, trust, estate or other enterprise or entity.
"Preferred Capital" means, collectively, the Senior Preferred Capital,
the Series A Preferred Capital and the Series B Preferred Capital.
"Preferred Distribution" means, collectively, the Senior Preferred
Distribution, the Series A Preferred Distribution, the Series B Preferred
Distribution, the Senior
5
<PAGE> 11
Accumulated Preferred Distribution, the Series A Accumulated Preferred
Distribution and the Series B Accumulated Preferred Distribution.
"Preferred Distribution Default" means a failure by the Company to pay
three (3) consecutive quarterly Preferred Distributions on the Senior Preferred
Capital or the Series B Preferred Capital.
"Preferred Interest" means a percentage determined for CFSC Subsidiary
or GMAC-CM, as applicable, equivalent to a fraction, the numerator of which is
such Member's Preferred Capital, and the denominator of which is the sum of the
Senior Preferred Capital and the Series B Preferred Capital.
"Properties" means the real estate properties listed on Schedule II
hereto.
"Purchase Agreement" means the Purchase Agreement dated June 12, 1996,
as amended, between Marathon U.S. Realties, Inc. and FUR, as it may be amended,
modified or supplemented from time to time.
"Reserves" means the reasonable reserves established and maintained
from time to time in amounts reasonably determined in the annual management plan
and budget or in amounts approved by a Majority Interest to be adequate and
sufficient for current and future operating and working capital and to pay for
structural capital expenditures, tenants' alterations and leasing commissions or
other costs and expenses incident to the Company's business.
"Secretary" means the Secretary of State of Delaware.
"Senior Accumulated Preferred Distribution" means the amount of any
Senior Preferred Distribution which is accrued but not paid to CFSC Subsidiary
with respect to any quarter under Section 9, which Senior Preferred Distribution
shall bear interest from each payment date until paid at a rate equal to LIBOR
plus the Applicable Margin, compounded monthly.
"Senior Preferred Capital" means $35,000,000 contributed by CFSC
Subsidiary, as such amount may be increased or reduced from time to time in
accordance with Sections 9 and 19.
"Senior Preferred Distribution" means an amount equal to LIBOR plus the
Applicable Margin (each as determined as of the end of each month for the
following month) of the Senior Preferred Capital from time to time outstanding,
compounded monthly and calculated on the basis of a year of 360 days consisting
of twelve 30-day months; provided, however, that the Senior Preferred
Distribution on any Special Senior Preferred Capital shall be 10% per annum on
the notional amount thereof.
6
<PAGE> 12
"Series A Accumulated Preferred Distribution" means the amount of any
Series A Preferred Distribution which is accrued but not paid to FUR Subsidiary
with respect to any quarter under Section 9, which Series A Accumulated
Preferred Distribution shall bear interest from each payment date until paid at
the rate of 10% per annum, compounded monthly, until the fifth anniversary of
the date hereof, and 4% per annum thereafter, compounded monthly.
"Series A Preferred Capital" means $26,500,000 contributed by FUR
Subsidiary, as such amount may be increased or reduced from time to time in
accordance with Sections 9 and 19.
"Series A Preferred Distribution" means an amount equal to (i) 10% per
annum from the date hereof to the date which is the fifth anniversary of the
date hereof, and (ii) 4% per annum thereafter, of the Series A Preferred Capital
from time to time outstanding, compounded monthly and calculated on the basis of
a year of 360 days consisting of twelve 30-day months.
"Series B Accumulated Preferred Distribution" means the amount of any
Series B Preferred Distribution which is accrued but not paid to GMAC-CM with
respect to any quarter under Section 9, which Series B Accumulated Preferred
Distribution shall bear interest from each payment date until paid at the rate
of 6% per annum in excess of LIBOR, compounded monthly.
"Series B Preferred Capital" means $38,500,000 contributed by GMAC-CM,
as such amount may be reduced from time to time in accordance with Sections 9
and 19.
"Series B Preferred Distribution" means an amount equal to 6.00% per
annum in excess of LIBOR (determined as of the end of each month for the
following month) of the Series B Preferred Capital from time to time
outstanding, compounded monthly and calculated on the basis of a year of 360
days consisting of twelve 30-day months; provided, however, that the Series B
Preferred Distribution on any Special Series B Preferred Capital shall be 10%
per annum on the notional amount thereof.
"Special Majority" means more than 74.5% of Common Membership
Percentages, plus 100% of the Members holding Senior Preferred Capital;
provided, however, that if a Company Redemption Default (or, with respect to
clause (iii) of Section 16(c) only, a Preferred Distribution Default) shall have
occurred and be continuing, Special Majority shall mean the approval of Members
holding at least 65% of the Capital Interest (including 100% of the Members
holding Senior Preferred Capital); and provided further, that any (1)
dissolution, merger or consolidation pursuant to clause (i), (ii) or (vi) of
Section 16(c) shall always require unanimous approval of the Members to the
extent such action may violate any financing documents, (2) any action under
clause (x) of Section 16(c) shall always require unanimous approval of the
Members and (3) the
7
<PAGE> 13
provisions of Section 24(h) shall be given effect with respect to any amendment,
modification or supplement to this Agreement.
"Special Senior Preferred Capital" shall have the meaning given thereto
in the second paragraph of Section 19(a-2).
"Special Series A Preferred Distribution" means any distribution made
with respect to the Series A Preferred Capital in accordance with Section 19(i).
"Special Series B Preferred Capital" shall have the meaning given
thereto in the second paragraph of Section 19(b).
"Subsidiary Company" means (i) Southwest Shopping Centers Co. II,
L.L.C., a Delaware limited liability company in which the Company owns a 99%
membership interest and LLC #2 Manager owns a 1% membership interest, or (ii)
Temple Shopping Center Co., L.L.C., a Delaware limited liability company in
which the Company owns a 99% membership interest and the Members holding Common
Capital own in the aggregate 1% of the membership interest.
"Subsidiary Fair Market Value" means, with respect to the membership
interest of each Member owning Common Capital (or Affiliate thereof) in LLC #2
Manager and in LLC #3, the amount of its capital contribution in such limited
liability company plus such additional amount which, after giving recognition to
the amount and timing of any "Net Cash Flow" (as defined in the operating
agreement for such limited liability company) distributions made to such Member
on account of its membership interest, results in an internal rate of return of
20% per annum (compounded annually) on the capital contribution therein of such
Member, but if the determination is made as a date after the fifth anniversary
of the date hereof and such Net Cash Flow distributions thereon through the
fifth anniversary of the date hereof exceeded 20% per annum, the determination
shall be for the period commencing on the fifth anniversary of the date hereof.
"Treasury Regulations" means the income tax regulations, including any
temporary regulations, from time to time promulgated under the Code.
"Value" means, with respect to any asset, the asset's adjusted basis
for federal income tax purposes except as follows:
(a) The Value of any asset contributed by a Member to the
Company is the fair market value of such asset as determined at the
time of contribution;
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<PAGE> 14
(b) The Value of any Company asset distributed to a Member
shall be adjusted to equal the fair market value of such asset on the
date of distribution;
(c) If the Capital Accounts of the Members are adjusted
pursuant to Treasury Regulation Section 1.704-1(b)(2)(iv)(f) to reflect
the fair market value of the Company's assets, the Value of each such
asset shall be adjusted to equal its fair market value as of the time
of such adjustment in accordance with such Treasury Regulation;
(d) If the Value of a Company asset has been determined or
adjusted pursuant to clause (a) or (c) above, such Value shall
thereafter be adjusted by the depreciation, amortization or cost
recovery deductions, if any, taken into account with respect to such
asset under Treasury Regulation Section 1.704-1(b)(2)(iv)(g); and
(e) Solely for purposes of this definition of "Value", the
term "fair market value" shall mean the amount which, in the reasonable
judgment of the Manager (with the consent of the other Members, which
consent will not be unreasonably withheld), would be paid for a
particular security or property by a willing buyer to a willing seller
(neither under any compulsion to buy or sell) unreduced by any
liabilities secured by the security or property or assumed by any party
in connection therewith.
SECTION 4. BUSINESS OF THE COMPANY.
(a) PURPOSE. The purpose of the Company is to (i) own, manage, operate,
finance (whether secured or unsecured), hold, lease, pledge, develop and realize
upon the Properties and any related real property or tangible or intangible
personal property (including any interests in partnerships that own the
Properties), and in connection therewith, the Company shall have the right to
dispose of and exchange any Property or interest therein or other asset of the
Company, and to carry on any actions necessary, convenient or incidental to the
conduct, promotion or attainment of the aforementioned purpose, and (ii)
execute, deliver and perform the Limited Liability Company Agreement for each
Subsidiary Company and to be a member thereof.
(b) SUBSIDIARY COMPANIES. On the closing date, upon receipt of the
Capital Contributions from the Members, the Company shall contribute (i)
$102,160,845 to Southwest Shopping Centers Co. II, L.L.C. ("LLC #2) in payment
for its limited liability company interest therein, and (ii) $3,072,220 to
Temple Shopping Center Co., L.L.C. ("LLC #3") in payment for its limited
liability company interest therein.
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(c) SEPARATENESS COVENANTS. The Company shall at all times:
(i) maintain books and records separate from any other Person
at its principal office which show a true and accurate record in United
States dollars of all business transactions arising out of and in
connection with the conduct of the Company and the operation of its
business in sufficient detail to allow preparation of tax returns
required to be prepared pursuant to Section 23;
(ii) not commingle assets with those of any other Person,
including Members;
(iii) conduct its own affairs in its own name;
(iv) maintain and periodically prepare financial statements
separate from those of any other Person;
(v) pay its own liabilities out of its own funds;
(vi) observe all organizational formalities required by the
Act, the Certificate of Formation and this Agreement;
(vii) maintain an "arm's-length relationship" with each of its
Affiliates and Members; provided, however, that this clause (vii) shall
not prevent (1) the execution, delivery and performance of (x) the
Management and Leasing Agreements between the Company and LLC #2, as
the applicable owner, and FUMI, as manager, for each of their
respective Properties substantially in the form approved by the Members
and attached hereto as Exhibit A and (y) in the case of LLC #3, the
assignment of the existing Temple Mall management agreement to FUMI, as
successor manager for its Property (each such management agreement for
the respective Property being a "Management Agreement"), (2) the
execution, delivery and performance of the Acquisition Loan Documents
(as defined in the Investment Agreement) with GMAC Lender (as so
defined) or (3) the payment to GMAC-CM of the equity placement fee
previously agreed to;
(viii) not guarantee or become obligated for the debts of any
other Person or hold out its credit as being available to satisfy the
obligations of any other Person;
(ix) use stationery, invoices and checks separate from those
of all other Persons;
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(x) not pledge its assets for the benefit of any other
Person except pursuant to the purposes and activities set forth in
Section 4(a);
(xi) hold itself out as an entity separate from all other
Persons;
(xii) not engage in any merger, consolidation or
combination transaction with any Person;
(xiii) not incur debt except pursuant to the purposes and
activities set forth in Section 4(a); and
(xiv) not make any loans to its Members.
SECTION 5. TERM. The term of the Company shall begin upon the filing of
the Certificate of Formation with the Secretary and shall continue until the
earlier of (a) December 31, 2050 or (b) the date as of which the Company is
dissolved in accordance with this Agreement or by law.
SECTION 6. PRINCIPAL PLACE OF BUSINESS. The principal place of business
of the Company shall be located at 55 Public Square, Suite 1900, Cleveland, Ohio
44113. The Members may, from time to time, change the principal place of
business of the Company and/or establish additional places of business of the
Company.
SECTION 7. REGISTERED AGENT; REGISTERED OFFICE. The registered agent
for the service of process shall be The Corporation Trust Company. The
registered office in the State of Delaware shall be 1209 Orange Street, in the
City of Wilmington, County of New Castle. The Members may, from time to time,
change the registered agent or office through appropriate filings with the
Secretary.
SECTION 8. CAPITAL CONTRIBUTIONS; NO WITHDRAWAL OR RESIGNATION.
(a) INITIAL CAPITAL CONTRIBUTIONS. In accordance with the Investment
Agreement, each Member shall make the Capital Contribution set forth opposite
such Member's name on Schedule I attached hereto in cash. Each Member holding
Common Capital shall receive the Common Membership Percentage set forth opposite
such Member's name on such Schedule.
(b) ADDITIONAL CONTRIBUTIONS; INTEREST. No Member shall be obligated to
make (nor shall any Member have the right to make without the consent of all
Members) any additional Capital Contribution, provided, however, that (i) FUR
Subsidiary shall have the right to make, or cause to be made, additional Capital
Contributions pursuant to Section 19, and (ii) additional Common Capital may be
contributed with the approval of a Special Majority. Any additional Capital
Contribution made by a Member (other than FUR Subsidiary pursuant to Section 19)
shall be in the form of Common Capital. No
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Member has any obligation to restore a deficit balance in such Member's Capital
Account or to make any contributions to the Company in order to restore such
deficit balance. No Member shall be paid any interest or specified return on any
Capital Contribution other than as provided herein.
(c) WITHDRAWAL AND RESIGNATION; RETURN OF CAPITAL CONTRIBUTION. No
Member shall be entitled to withdraw or resign as a Member or to receive any
part of such Member's Capital Contribution or any distribution from the Company
in connection therewith except as expressly provided in Sections 9(b) and 19(b).
(d) SPECIAL RULES FOR CAPITAL ACCOUNTS. It is the intention of the
Members that Capital Accounts shall be maintained in accordance with Section
704(b) of the Code and with the Treasury Regulations thereunder.
The following rules shall apply in maintaining Capital Accounts:
(i) In the event any interest in the Company is transferred in
accordance with the terms of this Agreement, the transferee shall
succeed to the Capital Account of the transferor to the extent it
relates to the transferred interest.
(ii) If property is distributed by the Company, Capital
Accounts shall be adjusted as though such property had been sold on the
date of such distribution for its then fair market value, and any
income, gain or loss on such sale had been calculated and allocated
pursuant to Section 1.704-1(b)(2)(iv)(e) of the Treasury Regulations
in accordance with Section 10. Upon the liquidation of the Company or
any Membership Interest in the Company, the Members' Capital Accounts
shall be adjusted to reflect allocations of income, gain and losses
determined as though there were an actual sale of the Company's assets
on the date of the liquidation for fair market value.
SECTION 9. DISTRIBUTIONS.
(a) CURRENT DISTRIBUTIONS. Except as specified in Sections 9(b) and 19
hereof, Net Cash Flow shall be distributed to the Members quarterly (except that
the distribution specified in clause (vii) below shall be made annually) in
accordance with the following priority:
(i) first, the Senior Accumulated Preferred Distribution, if any, shall
be made to CFSC Subsidiary;
(ii) second, the Senior Preferred Distribution shall be made to CFSC
Subsidiary;
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(iii) third, the Series B Accumulated Preferred Distribution, if any,
shall be made to GMAC-CM;
(iv) fourth, the Series B Preferred Distribution shall be made to
GMAC-CM;
(v) fifth, the Series A Accumulated Preferred Distribution, if any,
shall be made to FUR Subsidiary;
(vi) sixth, the Series A Preferred Distribution shall be made to FUR
Subsidiary; and
(vii) seventh, the remainder shall be distributed among the Members in
accordance with their respective Common Membership Percentages.
Quarterly distributions shall be made on the last day of each calendar
quarter unless such day is not a business day in which event the distribution
shall be made on the last business day of such quarter. Annual distributions
shall be made on December 31 of each year unless such day is not a business day
in which event the distribution will be made on the last business day of the
year.
(b) DISTRIBUTIONS FROM SALE. In the event of the sale of any of the
Properties or destruction or condemnation of any of the Properties, the net
proceeds thereof (other than insurance and condemnation proceeds which will be
used to rebuild such Property) available for distribution shall be distributed
within 30 days of such event in the following manner:
(i) first, the Senior Accumulated Preferred Distribution, if any,
shall be made to CFSC Subsidiary;
(ii) second, the Senior Preferred Capital shall be redeemed by the
Company at the redemption price set forth in Section 19(e) and
the second paragraph of Section 19(a-2), as applicable;
(iii) third, the Series B Accumulated Preferred Distribution, if any,
shall be made to GMAC-CM;
(iv) fourth, the Series B Preferred Capital shall be redeemed by the
Company at the redemption price set forth in Section 19(f) and
the second paragraph of Section 19(b), as applicable;
(v) fifth, the Series A Accumulated Preferred Distribution, if any,
shall be made to FUR Subsidiary;
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(vi) sixth, the Series A Preferred Capital shall be redeemed by the
Company at a redemption price of par, plus the accrued but
unpaid Series A Preferred Distribution; and
(vii) seventh, the remainder shall be distributed in accordance with
clause (vii) of Section 9(a) above; provided, however, that if
all or a portion of FUR Subsidiary's Capital Contribution has
been converted pursuant to Section 19(g) or 19(h), then a
distribution shall be made to the holders of the Common
Capital in an amount equal to Fair Market Value and the
remainder shall be distributed to the Members in accordance
with their respective Capital Interests.
SECTION 10. ALLOCATIONS OF INCOME AND LOSSES.
(a) ALLOCATIONS. All income, gains, losses and deductions of the
Company (I.E., each item of Company income, gain, loss and deduction) shall be
determined annually by the Manager or accountants designated by it in accordance
with the Federal income tax accounting rules in Section 703 of the Code and
Section 1.704-1(b)(2)(iv) of the Treasury Regulations. The Members intend that
the allocations set forth in this Section 10 shall reflect the Members'
interests in the Company (within the meaning of Section 704(b) of the Code), and
to the extent that the Manager determines that adjustments are necessary to such
allocations to reflect such Members' interests in the Company, the Members agree
to determine reasonably in good faith the adjustments that should be made with
the consent of all Members.
(b) PRIORITY. Except as provided otherwise in this Section 10, the
income, gains, losses and deductions of the Company (including any items thereof
if necessary) for each Company fiscal year (or portion thereof) shall be
allocated among the Members in a manner that will, as nearly as possible (taking
into account the immediately succeeding sentence), cause the Capital Account
balance of each Member (as computed for purposes of Section 704(b) of the Code)
at the end of such Company fiscal year (but without taking into account actual
cash distributions made during such year) to be equal to an amount equal to the
hypothetical distribution (if any) that such Member would receive if, on the
last day of such Company fiscal year (or portion thereof), (w) all Net Cash Flow
subject to Section 9(a) distributed during, or distributable for, such Company
fiscal year (or portion thereof) were distributed in accordance with Section
9(a), (x) all remaining assets, including cash, were sold for cash equal to
their Value, taking into account any adjustments thereto for such Company fiscal
year (or portion thereof), (y) all Company liabilities were satisfied in cash
according to their terms (limited, with respect to each nonrecourse liability,
to the Value of the assets securing such liability) and (z) the net proceeds of
such sale (after satisfaction of such liabilities) were distributed in full
pursuant to Section 21(b). By way of illustration and not limitation, to the
extent necessary to, as nearly as possible, cause the Capital Account balance of
each Member (as computed for purposes of Section 704(b) of the Code) at the end
of
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such Company fiscal year (but without taking into account actual cash
distributions made during such year) to be equal to such Member's hypothetical
distribution (if any), items of gross income, gain, loss and deduction shall be
specially allocated among the Members so that if for any Company fiscal year
there is Company net income which is less than total cash distributions made for
such year under Section 9 or there is Company net loss, items of gross income
and gain shall first be allocated to those Members receiving cash distributions
to the extent of such cash distributions. Insofar as the character of income
allocable under this Section 10(b) as ordinary income or capital gain is
concerned (but without affecting the amount of income allocable to any Member
under the preceding sentences of this Section 10(b) or otherwise), to the extent
that for any Company fiscal year there are cash distributions distributed under
both Section 9(a) and Section 9(b), ordinary income attributable to cash
distributions under Section 9(a) and capital gain attributable to cash
distributions under Section 9(b) shall be allocable, to the extent possible, in
proportion to the cash distributions made to each Member under Section 9(a) and
Section 9(b), respectively. It is the intent of this Section 10(b) that with
respect to any class of Preferred Capital prior to conversion or redemption
thereof, for any Company fiscal year the aggregate income and gain allocated to
such holder of Preferred Capital shall not exceed the actual Preferred
Distribution payable to such holder for such Company fiscal year.
(c) QUALIFIED INCOME OFFSET. Except as provided in Section 10(d)
hereof, in the event that any Member unexpectedly receives any adjustments,
allocations or distributions described in Section 1.704-1(b)(2)(ii)(d)(4), (5)
or (6) of the Treasury Regulations, items of Company income and gain shall be
specially allocated to each such Member in an amount and manner sufficient to
eliminate as quickly as possible, to the extent required by the Treasury
Regulations, the Adjusted Capital Account Deficit of such Member created by such
adjustments, allocations and distributions.
(d) MINIMUM GAIN CHARGEBACK. Notwithstanding any other provision of
this Section 10 (but subject to Section 10(e)), if there is a net decrease in
Company Minimum Gain during any Fiscal Year, each Member shall be specially
allocated items of Company income and gain for such year (and, if necessary,
subsequent years) in an amount equal to the portion of such Member's share of
the net decrease in Company Minimum Gain, determined in accordance with Section
1.704-2(g)(2) of the Treasury Regulations. The items to be so allocated shall be
determined in accordance with Section 1.704-2(f) of the Treasury Regulations.
This Section 10(d) is intended to comply with the minimum gain chargeback
requirement in such Sections of the Treasury Regulations and shall be
interpreted consistently therewith.
(e) NONRECOURSE LIABILITY. Notwithstanding any other provision of this
Section 10, (i) there is hereby incorporated by reference a partner nonrecourse
debt minimum gain chargeback within the meaning of Treasury Regulation
section 1.704-2(i)(4), (ii) losses, income and gains shall be allocated in
accordance with Treasury Regulation section 1.704-2(i) where such losses,
income and gains are attributable to a partner nonrecourse liability
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(within the meaning of such Treasury Regulation), and (iii) for purposes of the
aforementioned Treasury Regulations (and without limiting any other provision of
this Agreement), the Members shall be treated as partners and the Company shall
be treated as a partnership.
(f) SECTION 754 RELATED ADJUSTMENTS. To the extent an adjustment to the
adjusted tax basis of any Company asset pursuant to Code Section 734(b) or Code
Section 743(b) is required to be taken into account in determining Capital
Accounts pursuant to Section 1.704-1(b)(2)(iv)(m) of the Treasury Regulations,
the amount of such adjustment to the Capital Accounts shall be treated as an
item of gain (if the adjustment increases the basis of the asset) or loss (if
the adjustment decreases such basis) and such gain or loss shall be specially
allocated to the Members in a manner consistent with the manner in which their
Capital Accounts are required to be adjusted pursuant to such Section of the
Treasury Regulations.
(g) CHANGE IN MEMBERSHIP INTERESTS. If there is a change in any
Member's Membership Interest during any year, allocations among the Members
shall be made in accordance with their Membership Interests in the Company from
time to time during such year in accordance with Section 706 of the Code using
the closing-of-the-books method, except that depreciation, amortization and
similar items shall be deemed to accrue ratably on a daily basis over the entire
year during which the corresponding asset is owned by the Company for the entire
year, and over the portion of a year after such asset is placed in service by
the Company if such asset is placed in service during the year.
(h) LOSS LIMITATION. Net loss allocated to a Member shall not exceed
the maximum amount of net loss that can be so allocated without causing such
Member to have an Adjusted Capital Account Deficit at the end of the fiscal
year. All net loss in excess of the limitation set forth in this Section 10(h)
shall be allocated to the other Member(s) to the extent that the allocation
would not cause such other Member(s) to have an Adjusted Capital Account
Deficit.
(i) [Intentionally omitted].
(j) STATE AND LOCAL TAXES. Items of income, gain, loss, deduction,
credit and tax preference for state and local income tax purpose shall be
allocated to and among the Members in a manner consistent with the allocation of
such items for federal income tax purposes in accordance with the foregoing
provisions of this Section 10.
SECTION 11. WITHHOLDING. The Company is authorized to withhold from
distributions to be made to a Member, or with respect to allocations to a
Member, and to pay over to a federal, state or local government, any amounts
required to be withheld pursuant to the Code or any provisions of any other
federal, state or local law. Any amounts so withheld shall be treated as
distributed to such Member pursuant to this
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Section 11 for all purposes of this Agreement and shall be offset against the
net amounts otherwise distributable to such Member. The Company may also
withhold from distributions that would otherwise be made to a Member, and apply
to the obligations of such Member, any amounts that such Member owes to the
Company.
SECTION 12. BOOKS, RECORDS AND ACCOUNTING.
(a) BOOKS AND RECORDS. The Company shall maintain complete and accurate
books and records of the Company's business and affairs in accordance with
generally accepted accounting principles. The books and records shall be
maintained at the principal place of business of the Company and shall be
accessible to the Members in accordance with the Act.
(b) FISCAL YEAR; ACCOUNTING. The Company's fiscal year shall be the
calendar year for accounting and tax purposes. The accounting methods and
principles to be followed by the Company shall be selected from time to time by
the Manager, subject to the approval of a Special Majority.
(c) REPORTS. The Company shall provide to the Members (i) an annual
report concerning the financial condition and results of operation of the
Company and the Members' Capital Accounts within ninety (90) days after the end
of each fiscal year, which annual report shall be certified by independent
public accountants of nationally recognized standing, and (ii) copies of the
monthly reports on the Properties provided to the Company pursuant to the
Management Agreement.
(d) ACCESS. Each Member shall have access, during normal business hours
and upon reasonable notice to the Manager, to the Company's books and records in
accordance with the provisions of Section 18-305 of the Act.
SECTION 13. COMPANY FUNDS. The funds of the Company shall be
deposited in such bank or other financial institution account or accounts, or
invested in such interest-bearing or non-interest-bearing investments, as shall
be designated by the Manager. All withdrawals from any such bank accounts shall
be made only by the Manager or by individuals duly appointed by the Manager.
SECTION 14. MANAGEMENT.
(a) MANAGER POWERS. The business of the Company shall be managed by or
under the authority of the Manager, and the Company shall not have any
employees. The Manager shall have all rights, powers and authority of a Manager
under the Act and as provided for in this Agreement. The Manager shall cause the
Company to enter into the Management Agreements with FUMI on the date hereof
with respect to the management, leasing and operation of the Properties. Subject
to Section 14(e), the Manager shall have all rights, power and authority to do
for, on behalf of and in the
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name of the Company all things that it deems necessary, proper or desirable to
carry out its duties and responsibilities, including, without limitation:
(1) acquire by purchase, lease, or otherwise, any real
property constituting or related to the Properties;
(2) finance, improve, own, sell, convey or assign any real
estate constituting or related to the Properties;
(3) borrow money for and on behalf of the Company, and, in
connection therewith, mortgage or grant a security interest in all or
any portion of the Company's assets;
(4) prepay, in whole or in part, refinance, amend, modify, or
extend any mortgages, trust deeds or security agreements which may
affect any asset of the Company and in connection therewith execute for
and on behalf of the Company any extensions, renewals or modifications
of such mortgages, trust deeds or security agreements;
(5) execute any and all other instruments and documents which
may be necessary or in the opinion of the Manager desirable to carry
out the intent and purpose of this Agreement and the purpose of the
Company;
(6) make any and all expenditures which the Manager, in its
sole discretion, deems necessary or appropriate in connection with the
management of the affairs of the Company and the carrying out of its
obligations and responsibilities under this Agreement, including,
without limitation, all legal, accounting, and other related expenses
incurred in connection with the organization and financing and
operating of the Company;
(7) appoint Persons to act on behalf of the Company; and
(8) approve any non-budgeted expenditures.
(b) ELECTION. The initial Manager shall be FUR Subsidiary and shall
serve until its resignation in accordance with Section 14(c) or removal in
accordance with Section 14(d). Upon such resignation or removal, a replacement
Manager shall be elected by the affirmative vote of a Special Majority (without
including in such calculation the Membership Interest of any Member who is the
Manager or an Affiliate of the Manager who was so removed, in the event of the
removal of the Manager for cause under Section 14(d)).
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(c) RESIGNATION. The Manager may not resign without the prior written
consent of GMAC-CM, which consent shall be not be unreasonably withheld.
(d) REMOVAL. The Manager may be removed with cause by the affirmative
vote of a Special Majority without including in such calculation the Membership
Interest of any Member who is the Manager or who is an Affiliate of the Manager.
The Manager may be removed without cause by the unanimous vote of all Members.
For purposes hereof, "cause" shall mean (i) a Company Redemption Default; (ii)
the Manager is convicted of fraud, theft, embezzlement or other felony; (iii)
the Manager shall have materially breached any of its obligations under this
Agreement; (iv) the wilful misconduct or gross negligence of the Manager in the
performance of its duties hereunder; (v) FUMI shall have been (or concurrently
shall be) replaced as the property manager under and in accordance with the
Management Agreements, or the Management Agreements shall have been (or
concurrently shall be) terminated (other than as a result of the sale of the
Properties subject thereto); or (vi) an event of default shall have been
declared under the Acquisition Loan or any of the Assumed Loans.
(e) LIMITATIONS ON POWERS. The Manager shall not have any power, right
or authority to take any action requiring Member approval as set forth in
Section 16 in the absence of the requisite Member approval.
(f) REIMBURSEMENT. The Manager shall be reimbursed by the Company for
any reasonable out-of-pocket expenses incurred by the Manager on behalf of the
Company but shall not otherwise receive any compensation as Manager hereunder.
SECTION 15. MEETINGS.
(a) MEETINGS OF MEMBERS. Meetings of Members for any proper purpose may
be called at any time by any Member or Members whose Common Membership
Percentage(s) equal or exceed 10% or by the Manager. Members may participate in
any meeting through the use of a conference telephone or similar communications
equipment by means of which all individuals participating in the meeting can
hear each other, and such participation shall constitute presence in person at
the meeting. The Company shall give written notice of the date, time, place and
purpose of any meeting to all Members at least ten (10) days and not more than
sixty (60) days prior to the date fixed for the meeting. Notice may be waived by
any Member.
(b) CONSENT OF MEMBERS. Any action required or permitted to be taken at
any annual or special meeting of Members may be taken by the written consent of
the Members entitled to vote holding the requisite Membership Interests without
a meeting, without prior notice and without a vote. The written consent shall
set forth the action so taken, and counterparts thereof shall be furnished to
all Members.
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SECTION 16. VOTING.
(a) MEMBERS. The affirmative vote or written consent of a Majority
Interest shall decide all matters properly brought before the Members; provided,
however, that no action set forth in subsection (c) shall be taken by the
Company without the approval of a Special Majority.
(b) VOTING. A Member may vote either in person or by written proxy or
consent signed by the Member or by his duly authorized attorney in fact.
(c) ACTIONS REQUIRING MEMBER APPROVAL. Notwithstanding any other
provision of this Agreement, the approval of a Special Majority (determined
after giving effect to Section 24(h) in the case of any amendment, modification
or supplement to this Agreement) shall be required to approve the following
actions (but in the case of clauses (vii) and (xii) only, without including in
such calculation the Membership Interest of any Member who is an Affiliate of
the managing agent thereunder in the event that "cause" exists for removing the
Manager or circumstances exist under the Management Agreement for removing the
managing agent thereunder):
(i) The dissolution or winding up of the Company or any
Subsidiary Company;
(ii) The merger or consolidation of the Company or any
Subsidiary Company;
(iii) The sale, exchange, mortgage, pledge, encumbrance,
lease (other than a lease in accordance with the criteria set forth in
the Management Agreement) or other disposition or transfer of any
Property or all or substantially all of the assets of the Company or
any Subsidiary Company;
(iv) The annual management plan and budget, including a
cash management plan, of the Company or any Subsidiary Company;
(v) Amendments to this Agreement or the Certificate of
Formation or the organizational documents of any Subsidiary Company;
(vi) Establishment, formation, dissolution, liquidation,
merger or consolidation of any Subsidiary Company or sale of a
Membership Interest therein (other than as contemplated in Section
19(c) or 19(d));
(vii) The termination or amendment of any Management
Agreement or any change in the managing agent appointed under any
thereof;
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(viii) The amendment, modification, extension, refinancing or
prepayment of the Acquisition Loan or any Assumed Loans, or the
incurrence of any indebtedness for borrowed money other than the
Acquisition Loan and the Assumed Loans;
(ix) Capital or operating expenditures by the Company or any
Subsidiary Company in excess of the annual budget, including the
Permitted Variance Range permitted under the related Management
Agreement, for each Property owned by the Company or the relevant
Subsidiary Company;
(x) The authorization of any action by the Company that, if
taken, would result in FUR failing to qualify as a real estate
investment trust under the Code;
(xi) The institution of (or consent or approval to) any
proceeding in bankruptcy or any other insolvency or reorganization
proceeding involving the Company or any Subsidiary Company;
(xii) Matters specified in Sections 4.2 and 4.3 of each
Management Agreement (other than the Temple Mall Management Agreement)
and any other matter therein as requiring owner's consent; and
(xiii) The redemption by the Company of any Membership
Interest other than as provided for in Section 19.
SECTION 17. LIMITATION OF LIABILITY AND INDEMNIFICATION.
(a) LIMITATION OF LIABILITY. The debts, obligations and liabilities of
the Company, whether arising in contract, tort or otherwise, shall be solely the
debts, obligations and liabilities of the Company, and no Member or Manager
shall be obligated personally for any such debt, obligation or liability of the
Company solely by reason of being a Member or Manager. Further, this Agreement
is made and executed on behalf of each Member by its officers duly authorized,
and no director, trustee, officer, employee, agent, stockholder or beneficiary
of any such Member (or any Affiliate thereof) shall have any liability in his or
its personal or individual capacity, but instead, all parties shall look solely
to the property and assets of the Company for satisfaction of claims of any
nature arising under or in connection with this Agreement.
(b) INDEMNIFICATION BY THE COMPANY. The Company shall indemnify, in
accordance with and to the full extent now or hereafter permitted by law, any
Person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (including, without limitation, an
action by or in the right of the Company)
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by reason of the fact that such Person is or was a Member, Manager or officer of
the Company (and the Company may so indemnify a Person by reason of the fact
that such Person is or was an employee or agent of the Company, or is or was
serving at the request of the Company as a director, trustee, member, manager,
officer, employee or agent of another limited liability company, corporation,
partnership, joint venture, trust or other enterprise), against any liabilities,
expenses (including, without limitation, attorneys' fees and expenses and any
other costs and expenses incurred in connection with defending such action, suit
or proceeding), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such Person in connection with such action, suit or
proceeding if such Person acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of the
Company, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order, settlement, conviction, or
upon a plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption (a) that the Person did not act in good faith and in a manner which
he or she reasonably believed to be in or not opposed to the best interests of
the Company, or (b) with respect to any criminal action or proceeding, that the
Person had reasonable cause to believe that his or her conduct was unlawful.
"Other enterprise" shall include employee benefit plans; references to "fines"
shall include any excise taxes assessed on a Person with respect to an employee
benefit plan; and references to serving at the request of the Company shall
include, without limitation, any service as a member, manager, officer, employee
or agent of the Company or any other entities in which it has an ownership
interest which imposes duties on, or involves services by, such member, manager,
officer, employee or agent with respect to an employee benefit plan, its
participants or beneficiaries.
(c) EXPENSES. Expenses (including, without limitation, attorneys' fees
and expenses) incurred by a Member, Manager or officer of the Company in
defending a civil, criminal, administrative or investigative action, suit or
proceeding shall be paid by the Company in advance of the final disposition of
such action, suit or proceeding upon receipt of an undertaking by or on behalf
of the Member, Manager or officer to repay such amount if it shall ultimately be
determined that such Member, Manager or officer is not entitled to be
indemnified by the Company under this Section 17 or under any other contract or
agreement between such Member, Manager or officer and the Company. Such expenses
(including attorneys' fees) incurred by employees or agents of the Company may
be so paid upon the receipt of the aforesaid undertaking and such terms and
conditions, if any, as the Manager deems appropriate.
(d) NOT EXCLUSIVE. The indemnification and advancement of expenses
provided by this Section 17 shall not be deemed exclusive of any other rights to
which those seeking indemnification or advancement of expenses may be entitled
under any by-law, agreement, vote of Members or otherwise, both as to action in
such Person's official capacity and as to action in another capacity while
holding such office, and shall continue as to a Person who has ceased to be a
Member, Manager, officer, employee
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or agent and shall inure to the benefit of the successors, assigns, heirs,
executors and administrators of such a Person.
(e) INSURANCE. The Company may purchase and maintain insurance on
behalf of any Person who is or was a Member, Manager, officer, employee or agent
of the Company, or is or was serving at the request of the Company as a
director, trustee, member, manager, officer, employee or agent of another
limited liability company, corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against such Person and incurred
by such Person in any such capacity, or arising out of such Person's status as
such, whether or not such Person would be entitled to indemnity against such
liability under the provisions of this Section 17.
SECTION 18. ASSIGNMENT OF MEMBERSHIP INTERESTS AND NEW MEMBERS.
(a) ASSIGNMENT. A Membership Interest shall not be assignable in whole
or in part, except as expressly provided in this Agreement. An assignment of a
Membership Interest shall not entitle the assignee to become or to exercise any
rights or powers of a Member until such assignee is admitted as a Member in
accordance with this Agreement. An assignment shall entitle the assignee only to
receive such distributions, to share in such profits and to receive such
allocations of income, gain, loss, deduction, credit, tax preference and similar
items to which the assignor was entitled to the extent assigned. Notwithstanding
anything to the contrary, a Member which assigns its interest in the Company
shall continue to have the power to exercise any voting, consent or approval
rights attributable to the interest so assigned unless and until the assignee of
such interest is or is admitted as a Member.
(b) LIMITATIONS ON ASSIGNMENT. Except as provided in Section 19 hereof,
no Member may assign any Membership Interest (or any portion thereof or interest
therein), and no Person shall become a Member, unless (i) in the opinion of
counsel selected by or acceptable to the Manager, such action will not subject
the Company to federal income taxation as an association taxable as a
corporation or violate applicable state or federal securities laws, and (ii)
such proposed Member shall make ERISA representations and warranties to the
Company comparable to those made by or on behalf of the original Members in
Section 4(a)(v), 4(b)(v) and 4(c)(v) of the Investment Agreement. Any attempted
action in contravention of this Section 18(b) shall be void and of no force or
effect.
(c) NEGATIVE PLEDGE. No Member shall pledge, or create or suffer to
exist any lien upon, its Membership Interest or any portion thereof.
(d) ADMISSION OF ASSIGNEES. Notwithstanding anything to the contrary in
this Agreement, an assignee of a Membership Interest shall be admitted as a
Member only upon (i) the written consent of all other Members and the Manager,
which consent may be granted or withheld in the sole and absolute discretion of
such Member and Manager
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<PAGE> 29
whose consent is required hereby and (ii) the execution by such Person of this
Agreement. Until the assignee of a Membership Interest is admitted as a Member,
the assignor, subject to the penultimate sentence of Section 18(a), shall
continue to be a Member and upon such admission, the assignor shall be released
of all obligations hereunder.
(e) ADMISSION OF NEW MEMBERS. A new Member shall be admitted only upon
(i) the consent of a Special Majority, and (ii) the execution by such new Member
of this Agreement; provided, however, that any amendments to this Agreement
required as a result of such new Member admission shall be subject to the
provisions of Section 24(h).
SECTION 19. PUT AND CALL OPTIONS.
(a-1) REFINANCING SENIOR PREFERRED CAPITAL. The Company shall have the
right to redeem the outstanding Senior Preferred Capital, in whole but not in
part, at any time in connection with a refunding or refinancing thereof at a
redemption price equal to the face amount of the Senior Preferred Capital, plus
the Senior Accumulated Preferred Distribution, if any, plus the amount of any
accrued but unpaid Senior Preferred Distribution.
(a-2) SENIOR PREFERRED CAPITAL OPTIONS. FUR Subsidiary shall have the
option to purchase, and upon the exercise of such option CFSC Subsidiary shall
have the obligation to sell, all or a portion of the outstanding Senior
Preferred Capital in a minimum amount of $5,000,000 (except that if the
outstanding amount of Senior Preferred Capital at such time is less than
$5,000,000, then in a minimum amount equal to such outstanding amount) at any
time and from time to time on or before the fifth anniversary of the date hereof
in accordance with Section 19(j). The purchase price of such Senior Preferred
Capital (except as provided in the paragraph below) shall be equal to 100% of
the face amount being purchased plus the portion of the sum of the Senior
Accumulated Preferred Distribution, if any, and the amount of any accrued but
unpaid Senior Preferred Distribution allocable to such amount of Senior
Preferred Capital being purchased, to the date of such purchase. For purposes of
determining the foregoing, Senior Preferred Distributions (other than Senior
Preferred Distributions on any Special Senior Preferred Capital) shall be
prorated between the amount of Senior Preferred Capital then being purchased and
the amount of Senior Preferred Capital not then being purchased (other than any
Special Senior Preferred Capital). Any Senior Preferred Capital acquired by FUR
Subsidiary hereunder shall be automatically converted without any action by the
Company on the Option Closing Date into an equal amount of Series A Preferred
Capital.
If any of the Senior Preferred Capital held by CFSC Subsidiary on the
Option Closing Date has been obtained by the operation of Section 19(g) or 19(h)
(the "Special Senior Preferred Capital"), FUR Subsidiary shall purchase all
Senior Preferred Capital before any Special Senior Preferred Capital is
purchased by FUR Subsidiary under this
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Section 19(a-2). The purchase price for such Special Senior Preferred Capital
shall be equal to (i) the sum of two times the Senior Accumulated Preferred
Distribution, if any, thereon plus (ii) two times the accrued and unpaid Senior
Preferred Distribution thereon plus (iii) the aggregate amount of all Senior
Preferred Distributions made thereon and (iv) $100, all determined after giving
effect to the 10% per annum rate provided for in the definition of Senior
Preferred Distribution. Any Special Senior Preferred Capital acquired by FUR
Subsidiary hereunder shall be automatically converted without any action by the
Company into an equal amount of Series A Preferred Capital.
(b) SERIES B PREFERRED CAPITAL OPTIONS. FUR Subsidiary shall have the
option to purchase, and upon the exercise of such option GMAC-CM shall have the
obligation to sell, all or a portion of the outstanding Series B Preferred
Capital in a minimum amount of $5,000,000 (except that if the outstanding amount
of Series B Preferred Capital at such time is less than $5,000,000, then in a
minimum amount equal to such outstanding amount) at any time on or after the
six-month anniversary of the date hereof and from time to time on or before the
fifth anniversary of the date hereof in accordance with Section 19(j); provided,
however, that FUR Subsidiary shall not be permitted to exercise its option under
this Section 19(b) so long as any Senior Preferred Capital is outstanding. The
purchase price of such Series B Preferred Capital (except as provided in the
paragraph below) shall be equal to 100% of the face amount being purchased plus
such additional amount, if any, as would provide GMAC-CM with a 15.75% per annum
internal rate of return, compounded monthly, on the amount of Series B Preferred
Capital purchased, after giving recognition to the amount and timing of Series B
Preferred Distributions (other than Series B Preferred Distributions on any
Special Series B Preferred Capital) until all Series B Preferred Capital (other
than Special Series B Preferred Capital) has been purchased. For purposes of
determining such return, Series B Preferred Distributions (other than Series B
Preferred Distributions on any Special Series B Preferred Capital) shall be
prorated between the amount of Series B Preferred Capital then being purchased
and the amount of Series B Preferred Capital not then being purchased (other
than any Special Series B Preferred Capital). Any Series B Preferred Capital
acquired by FUR Subsidiary hereunder shall be automatically converted without
any action by the Company on the Option Closing Date into an equal amount of
Series A Preferred Capital.
If any of the Series B Preferred Capital held by GMAC-CM on the Option
Closing Date has been obtained by the operation of Section 19(g) or (h) (the
"Special Series B Preferred Capital"), FUR Subsidiary shall purchase all Series
B Preferred Capital before any Special Series B Preferred Capital is purchased
by FUR Subsidiary under this Section 19(b). The purchase price for such Special
Series B Preferred Capital shall be equal to (i) the sum of two times the Series
B Accumulated Preferred Distribution, if any, thereon plus (ii) two times the
accrued and unpaid Series B Preferred Distribution thereon plus (iii) the
aggregate amount of all Series B Preferred Distributions made thereon and (iv)
$100, all determined after giving effect to the 10% per annum rate provided for
in the definition of Series B Preferred Distribution. Any Special Series B
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Preferred Capital acquired by FUR Subsidiary hereunder shall be automatically
converted without any action by the Company into an equal amount of Series A
Preferred Capital.
(c) CFSC COMMON CAPITAL OPTION. At any time after (or concurrently
with) the acquisition by FUR Subsidiary or redemption by the Company of all of
the outstanding Senior Preferred Capital and Series B Preferred Capital, until
and including the date which is the earlier of the first anniversary thereof or
the fifth anniversary of the date hereof, FUR Subsidiary shall have the option
to purchase, and upon the exercise of such option CFSC Subsidiary shall have the
obligation to sell, CFSC Subsidiary's entire Membership Interest in the Company
at a purchase price equal to its Fair Market Value; provided, however, that FUR
Subsidiary shall simultaneously with its exercise of the option under this
Section 19(c) exercise its option to purchase GMAC-CM's entire Membership
Interest under Section 19(d). Simultaneously with the exercise of FUR
Subsidiary's option hereunder, FUR Subsidiary shall cause First Southwest II,
Inc. to exercise an option to purchase the membership interest of CFSC
Subsidiary in each of LLC #2 Manager and LLC #3 at a purchase price equal to its
respective Subsidiary Fair Market Value.
(d) GMAC-CM COMMON CAPITAL OPTION. At any time after (or concurrently
with) the acquisition by FUR Subsidiary or redemption by the Company of all of
the outstanding Senior Preferred Capital and Series B Preferred Capital, until
the earlier of the first anniversary thereof or the fifth anniversary of the
date hereof, FUR Subsidiary shall have the option to purchase, and upon the
exercise of such option GMAC-CM shall have the obligation to sell, GMAC-CM's
entire Membership Interest in the Company at a purchase price equal to its Fair
Market Value; provided, however, that FUR Subsidiary shall simultaneously with
its exercise of the option under this Section 19(d) exercise its option to
purchase CFSC Subsidiary's entire Membership Interest under Section 19(c).
Simultaneously with the exercise of FUR Subsidiary's option hereunder, FUR
Subsidiary shall cause First Southwest II, Inc. to exercise an option to
purchase the membership interest of GMAC-CM in each of LLC #2 Manager and LLC #3
at a purchase price equal to its respective Subsidiary Fair Market Value.
(e) CFSC REDEMPTION OPTIONS. Unless CFSC Subsidiary shall exercise its
right to avoid a redemption in accordance with Section 19(j), the Company shall
have the obligation to redeem, (i) on the second anniversary of the date hereof,
$10,000,000 of the outstanding Senior Preferred Capital, (ii) on the third
anniversary of the date hereof, an amount equal to (u) $30,000,000 of the
outstanding Senior Preferred Capital, PLUS (v) the amount of outstanding Senior
Preferred Capital specified in clause (i) to the extent the put option therefor
was not exercised by CFSC Subsidiary on the second anniversary date, LESS (w)
the amount of any Series B Preferred Capital redeemed on the second anniversary
date pursuant to Section 19(f), (iii) on the fourth anniversary of the date
hereof, (x) $33,500,000 of the outstanding Senior Preferred Capital, PLUS (y)
the amount of outstanding Senior Preferred Capital specified in clauses (i)
and/or (ii) to the extent
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<PAGE> 32
the put option therefor was not exercised by CFSC Subsidiary on the second
and/or third anniversary date, LESS (z) the amount of Series B Preferred Capital
redeemed on the second and third anniversary dates pursuant to Section 19(f);
provided, however, that the amounts specified in clauses (i), (ii) and (iii)
above shall be decreased dollar for dollar by (1) the aggregate amount of Senior
Preferred Capital purchased by FUR Subsidiary pursuant to Section 19(a-2) prior
to each respective anniversary date (applying the amount of such FUR Subsidiary
purchases of Senior Preferred Capital first to the amount in clause (i), then
clause (ii) and then clause (iii)), and (2) the aggregate amount of Series B
Preferred Capital purchased by FUR Subsidiary pursuant to Section 19(b) prior to
each respective anniversary date (applying the amount of such FUR Subsidiary
purchases of Series B Preferred Capital first to the amounts in clause (i), then
clause (ii) and then clause (iii)). The redemption price of such Senior
Preferred Capital shall be equal to 100% of the face amount being purchased plus
a portion of the sum of the Senior Accumulated Preferred Distribution, if any,
and the accrued but unpaid Senior Preferred Distribution allocable to such
amount being purchased, to the date of such purchase. For purposes thereof,
Senior Preferred Distributions (other than Senior Preferred Distributions on any
Special Senior Preferred Capital) shall be prorated between the amount of Senior
Preferred Capital then being purchased and the amount of Senior Preferred
Capital not then being purchased (other than any Special Senior Preferred
Capital). FUR Subsidiary shall have the right to make additional Capital
Contributions to the Company in such amounts as shall be required to meet the
Company's obligations to redeem the Senior Preferred Capital pursuant to this
Section 19(e). Any such additional Capital Contribution made by FUR Subsidiary
shall constitute Series A Preferred Capital.
(f) GMAC-CM REDEMPTION OPTIONS. GMAC-CM shall have the right to cause
the Company to redeem, and upon the exercise of such right the Company shall
have the obligation to redeem, (i) on the second anniversary of the date hereof,
to the extent that CFSC Subsidiary shall not have exercised its put option on
such date pursuant to clause (i) of Section 19(e), $10,000,000 of the
outstanding Series B Preferred Capital, (ii) on the third anniversary of the
date hereof, an amount equal to (u) $30,000,000 of the outstanding Series B
Preferred Capital, PLUS (v) the amount of outstanding Series B Preferred Capital
specified in clause (i) to the extent the put option therefor was not exercised
by GMAC-CM on the second anniversary date, LESS (w) the amount of Senior
Preferred Capital redeemed on the second and third anniversary dates pursuant to
Section 19(e), (iii) on the fourth anniversary of the date hereof, an amount
equal to (x) $33,500,000 of the outstanding Series B Preferred Capital, PLUS (y)
the amount of outstanding Series B Preferred Capital specified in clauses (i)
and/or (ii) to the extent the put option therefor was not exercised by GMAC-CM
on the second and/or third anniversary date, LESS (z) the amount of Senior
Preferred Capital redeemed on the second, third and fourth anniversary dates
pursuant to Section 19(e); provided, however, that the amounts specified in
clauses (i), (ii) and (iii) above shall be decreased dollar for dollar by (1)
the aggregate amount of Series B Preferred Capital purchased by FUR Subsidiary
pursuant to Section 19(b) prior to each respective anniversary date (applying
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<PAGE> 33
the amount of such FUR Subsidiary purchases of Series B Preferred Capital first
to the amounts in clause (i), then clause (ii) and then clause (iii)), and (2)
the aggregate amount of Senior Preferred Capital purchased by FUR Subsidiary
pursuant to Section 19(a-2) prior to each respective anniversary date (applying
the amount of such FUR Subsidiary purchases of Senior Preferred Capital first to
the amounts in clause (i), then clause (ii) and then clause (iii)). The
redemption price of such Series B Preferred Capital shall be equal to 100% of
the face amount being purchased plus such additional amount, if any, as would
provide GMAC-CM with a 15.75% per annum internal rate of return, compounded
monthly, on the amount purchased, after giving recognition to the amount and
timing of Series B Preferred Distributions (other than Series B Preferred
Distributions on any Special Series B Preferred Capital). For purposes of
determining such return, Series B Preferred Distributions (other than Series B
Preferred Distributions on any Special Series B Preferred Capital) shall be
prorated between the amount of Series B Preferred Capital then being purchased
and the amount of Series B Preferred Capital not then being purchased (other
than any Special Series B Preferred Capital). FUR Subsidiary shall have the
right to make additional Capital Contributions to the Company in such amounts as
shall be required to meet the Company's obligations to redeem the Series B
Preferred Capital pursuant to this Section 19(f). Any such additional Capital
Contribution made by FUR Subsidiary shall constitute Series A Preferred Capital.
(g) FAILURE TO PURCHASE SENIOR PREFERRED CAPITAL. If CFSC Subsidiary
does not exercise its right to avoid a redemption under Section 19(e) and the
Company fails to redeem the requisite Senior Preferred Capital on the Option
Closing Date, each of CFSC Subsidiary and GMAC-CM shall have the right, by
notice to the Company, FUR and such other Member, upon tender of payment to FUR
Subsidiary of $100 by each of them, to effect the transfer to CFSC Subsidiary
and GMAC-CM, pro rata, of an amount of FUR Subsidiary's Capital Contribution (up
to a maximum of FUR Subsidiary's remaining Capital Contribution) equal to the
product of each such Member's Preferred Interest and the dollar amount of the
Senior Preferred Capital the Company failed to redeem; provided that such
purchase option shall be satisfied first from the Series A Preferred Capital and
then against the remaining Capital Contribution of FUR Subsidiary. Any portion
of FUR Subsidiary's Capital Contribution as to which notice is delivered
hereunder shall be automatically converted without any action by the Company or
FUR Subsidiary on the Option Closing Date into an amount of Senior Preferred
Capital and an amount of Series B Preferred Capital, each determined on a pro
rata basis as hereinabove provided.
(h) FAILURE TO PURCHASE SERIES B PREFERRED CAPITAL. If GMAC-CM
exercises its put option under Section 19(f) and the Company fails to redeem the
requisite Series B Preferred Capital on the Option Closing Date, each of GMAC-CM
and CFSC Subsidiary shall have the right, by notice to the Company, FUR and such
other Member, upon tender of payment to FUR Subsidiary of $100 by each of them,
to effect the transfer to GMAC-CM and CFSC Subsidiary, pro rata, of an amount of
FUR Subsidiary's Capital
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Contribution (up to a maximum of FUR Subsidiary's remaining Capital
Contribution) equal to the product of each such Member's Preferred Interest and
the dollar amount of the Series B Preferred Capital the Company failed to
redeem; provided that such purchase option shall be satisfied first from the
Series A Preferred Capital and then against the remaining Capital Contribution
of FUR Subsidiary. Any portion of FUR Subsidiary's Capital Contribution as to
which notice is delivered hereunder shall be automatically converted without any
action by the Company or FUR Subsidiary on the Option Closing Date into an
amount of Series B Preferred Capital and an amount of Senior Preferred Capital,
each determined on a pro rata basis as hereinabove provided.
(i) NO PURCHASE OF COMMON CAPITAL. If there is neither Senior Preferred
Capital nor Series B Preferred Capital outstanding and FUR Subsidiary has not
exercised its call option pursuant to either or both Section 19(c) and/or
Section 19(d), then FUR Subsidiary may elect to convert all of its outstanding
Series A Preferred Capital to Class B Common Capital within five (5) business
days of the expiration of FUR Subsidiary's call options under said Sections
19(c) and 19(d).
(i) If FUR Subsidiary does not convert its Series A Preferred
Capital to Class B Common Capital within the time period specified
above, then as of the first distribution of Net Cash Flow after the
fifth anniversary of the date hereof, Net Cash Flow shall be
distributed in accordance with the following priority: (A) first, to
the Members in accordance with their respective Common Membership
Percentage until an amount equal to the Fair Market Value of the
outstanding Common Capital on the date of such distribution is
received; (B) second, the Series A Accumulated Preferred Distribution,
if any, shall be made to FUR Subsidiary; (C) third, the Series A
Preferred Distribution shall be made to FUR Subsidiary; and (D) fourth,
the remainder shall be distributed 1% among the Members in accordance
with their Common Membership Percentages (based on their respective
Common Membership Percentages on the fifth anniversary hereof), and 99%
shall be distributed to FUR Subsidiary as a Special Series A Preferred
Distribution. Once distributions pursuant to (A) hereof have fully
satisfied the Common Capital of a Member, such Common Capital shall be
considered fully redeemed and no longer outstanding.
(ii) If FUR converts its Series A Preferred Capital to Class B
Common Capital within the time period specified above:
(A) Any Member owing Common Capital may elect either
(x) to convert all of its outstanding Common Capital into
Class B Common Capital or (y) to receive first the amount
equivalent to Fair Market Value of its outstanding Common
Capital on the date of such distribution as of the first
distribution of Net Cash Flow after the fifth anniversary of
the date hereof and then its pro rata portion (based
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on its Common Membership Percentage immediately prior to such
election under this clause (y)) of 1% of the remaining
distributions of Net Cash Flow, and 99% of the remaining
distributions of Net Cash Flow would be distributed pro rata
to the holders of the Class B Common Capital (once
distributions pursuant to clause (y) hereof have fully
satisfied such Member's Common Capital, such Common Capital
shall be considered fully redeemed and no longer outstanding);
and
(B) If all of the Members owning Common Capital elect
to convert their respective Common Capital into Class B Common
Capital under (A) above, the Class B Common Capital shall
thereafter be included in computing the Common Membership
Percentages and as of the first distribution of Net Cash Flow
after the fifth anniversary of the date hereof, Net Cash Flow
shall be distributed among the Members in accordance with
their Common Membership Percentages.
(j) EXERCISE OF OPTIONS. In the event that the Company exercises its
refinancing option under Section 19(a-1) or FUR Subsidiary elects to exercise
its purchase option under Sections 19(a-2), 19(b), 19(c) or 19(d), the Company
or FUR Subsidiary, as the case may be, shall give CFSC Subsidiary or GMAC-CM, as
applicable, thirty (30) days' prior notice of such election specifying the
portion of the Senior Preferred Capital, Series B Preferred Capital or Common
Capital, as applicable, to be purchased and the applicable purchase price
therefor. The Company shall be required to effect each redemption specified in
Section 19(e) unless CFSC Subsidiary shall give the Company and the other
Members notice of its election to avoid such redemption not more than one
hundred fifty (150) nor less than ninety (90) days prior to the applicable
anniversary date. In the event that GMAC-CM is permitted under the terms of
Section 19(f) to exercise its redemption option and it elects to do so, GMAC-CM
shall give the Company and the other Members notice of such election not less
than seventy-five (75) days prior to the applicable anniversary date specifying
the amount of outstanding Series B Preferred Capital to be redeemed and the
applicable redemption price therefor. In the event CFSC Subsidiary or GMAC-CM
elects to exercise its remedies under Section 19(g) or 19(h), CFSC Subsidiary or
GMAC-CM, as applicable, shall give the Company and the other Members ten (10)
days' prior notice of such election specifying the Series A Preferred Capital
and/or FUR Subsidiary's remaining Capital Contribution to be purchased. The
closing of any purchase or redemption under this Section 19 shall take place on
a mutually acceptable date not later than thirty (30) days after receipt of
notice provided by FUR Subsidiary, GMAC-CM or CFSC Subsidiary, as the case may
be, on the applicable anniversary date, as applicable (the "Option Closing
Date") at a location acceptable to CFSC Subsidiary or GMAC-CM, as applicable,
and FUR Subsidiary in New York, New York; provided, however, that the Company
shall be able to satisfy its redemption obligation under Section 19(e) or 19(f)
prior to any
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scheduled Option Closing Date with respect to CFSC Subsidiary's or GMAC-CM's
remedy under Section 19(g) or 19(h). At the closing the parties shall execute
and deliver such documents of transfer, and the Company, FUR Subsidiary, CFSC
Subsidiary or GMAC-CM, as applicable, shall make payment of the redemption or
purchase price in immediately available funds, as may be necessary to give
effect to the transfer of Senior Preferred Capital, Series B Preferred Capital,
Series A Preferred Capital, or Common Capital of CFSC Subsidiary, GMAC-CM or FUR
Subsidiary, as applicable, free and clear of all liens, claims and encumbrances.
Anything in this Section 19 to the contrary notwithstanding, FUR Subsidiary
shall not be entitled to exercise rights under Sections 19(a-2), 19(b), 19(c)
and 19(d) if a Company Redemption Default shall have occurred and be continuing
as a result of a failure by the Company to redeem Preferred Capital under
Sections 19(e) and/or 19(f) on both of the second anniversary and the third
anniversary of the date hereof.
(k) NEW MEMBER; CERTAIN ASSIGNMENTS. Within the thirty days after the
exercise of an option that would cause a Membership Interest to be redeemed or
reduced to zero but before the transaction is consummated at a time when there
are only two Members, the other Member shall be entitled to cause one of its
Affiliates to acquire a one percent interest in the Company by making a cash
contribution equal to the fair market value of such interest (with fair market
value being determined by reference to the purchase price reflected in the
option being exercised). Subject to Section 18(d), FUR Subsidiary may assign to
a third Person FUR Subsidiary's purchase rights under Sections 19(a-2), 19(b),
19(c), 19(d) and its right to make additional Capital Contributions pursuant to
Sections 19(e) and 19(f).
(l) FUR SUBSIDIARY CAPITAL CONTRIBUTIONS UNDER SECTION 19. Each Capital
Contribution made by FUR Subsidiary (or its assignee pursuant to Section 19(k))
under Section 19(e) or 19(f) shall be used by the Company solely to redeem the
applicable Preferred Capital under Section 19(e) or 19(f), respectively, and
shall not be used for any other purpose.
SECTION 20. DISSOLUTION.
The Company shall be dissolved and terminated upon the happening of
first to occur of any of the following events:
(a) The expiration of the term of the Company;
(b) The approval or written consent of the Members as provided in
Section 16(c) for the dissolution or winding up of the Company;
(c) The bankruptcy (as defined in Section 18-304 of the Act), death,
insanity, retirement, resignation, expulsion, withdrawal or dissolution of any
Member, unless within ninety (90) days of such occurrence the Company is
continued by the written consent
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of the holders of a majority of both (i) the remaining Members determined on the
basis of such Members' Capital Accounts on the date of such occurrence and (ii)
the remaining Members determined on the basis of such Members' profits interests
(from the date of such occurrence through the date that the Company would
terminate if not continued), which consent may be granted or withheld in the
sole and absolute discretion of each Member whose consent is required hereby,
and if there is only one (1) Member remaining, the admission of one (1) or more
additional Members; and
(d) Judicial dissolution pursuant to the Act.
SECTION 21. WINDING UP AND DISTRIBUTION OF ASSETS.
(a) WINDING UP. If the Company is dissolved, the Manager shall wind
up the affairs of the Company.
(b) DISTRIBUTION OF ASSETS. Upon the winding up of the Company, the
Manager shall pay or make reasonable provision to pay all claims and obligations
of the Company, including all costs and expenses of the liquidation and all
contingent, conditional, or unmatured claims and obligations that are known to
the Manager but for which the identity of the claimant is unknown. If there are
sufficient assets, such claims and obligations shall be paid in full and any
such provision shall be made in full. If there are insufficient assets, such
claims and obligations shall be paid or provided for according to their priority
and, among claims and obligations of equal priority, ratably to the extent of
assets available therefor. Any remaining assets shall be distributed as follows:
(i) First, to creditors, including Members in their
capacities as creditors, in the order of priority as provided by law;
(ii) Second, to CFSC Subsidiary, the amount of any Senior
Accumulated Preferred Distribution;
(iii) Third, to CFSC Subsidiary, the redemption price of the
outstanding Senior Preferred Capital (determined in accordance with
Section 19(e) and the second paragraph of Section 19(a-2), as
applicable);
(iv) Fourth, to GMAC-CM, the amount of any Series B
Accumulated Preferred Distribution;
(v) Fifth, to GMAC-CM, the redemption price of the Series
B Preferred Capital (determined in accordance with Section 19(f) and
the second paragraph of Section 19(b), as applicable);
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(vi) Sixth, to FUR Subsidiary, the amount of any Series A
Accumulated Preferred Distribution;
(vii) Seventh, to FUR Subsidiary, the redemption price of the
outstanding Series A Preferred Capital, plus any accrued but unpaid
Series A Preferred Distribution thereon; and
(viii) Eighth, to Members, the balance in accordance with
their respective Common Membership Percentages; provided, however, that
if all or a portion of FUR Subsidiary's Capital Contribution has been
converted pursuant to Section 19(g) or 19(h), then a distribution shall
be made to the holders of the Common Capital in an amount equal to Fair
Market Value and the remainder shall be distributed to the Members in
accordance with their respective Capital Interests.
SECTION 22. CONFLICT OF INTEREST. No Member or Manager shall be
required to act hereunder as its sole and exclusive business activity and any
Member or Manager may have other business interests and engage in other
activities in addition to those relating to the Company. Neither the Company nor
any Member or Manager shall have any right by virtue of this Agreement in or to
any other interests or activities or to the income or proceeds derived
therefrom. A Member or Manager may transact business with the Company and,
subject to applicable laws, has the same rights and obligations with respect
thereto as any other Person. No transaction between a Member or Manager and the
Company shall be voidable solely because a Member or Manager has a direct or
indirect interest in the transaction if either the transaction is fair and
reasonable to the Company or the percentage or number of disinterested Members
as required under this Agreement or applicable law, authorize, approve or ratify
the transaction.
SECTION 23. TAXATION.
(a) STATUS OF THE COMPANY. The Members acknowledge that this Agreement
creates a partnership for federal and state income tax purposes (and only for
such purposes), and hereby agree not to elect to be excluded from the
application of Subchapter K of Chapter 1 of Subtitle A of the Code or any
similar state statute.
(b) TAX ELECTIONS. The Manager shall, upon the written request of any
Member benefitted thereby, cause the Company to file an election under Section
754 of the Code and the Treasury Regulations thereunder to adjust the basis of
the Company assets under Section 734(b) or 743(b) of the Code and a
corresponding election under the applicable sections of state and local law. The
Manager shall have the authority to make all other Company elections permitted
under the Code, including elections of methods of depreciation.
33
<PAGE> 39
(c) COMPANY TAX RETURNS. The Manager shall cause the necessary federal
income and other tax returns and information returns for the Company to be
prepared. Each Member shall provide such information, if any, as may be needed
by the Company for purposes of preparing such tax returns and information
returns. The Manager shall deliver to each Member within 90 days after the end
of each fiscal year a copy of all federal, state and local income and franchise
tax returns for the Company and each entity in which the Company owns an
interest for approval. In addition, the Manager shall deliver to each Member the
information described on Schedule IV. Each Member shall approve or disapprove of
each such return within ten days after receipt of any such return by such
Member. In the event that any Member does not approve or disapprove of any such
return within such ten days, such return shall be deemed approved by such
Member. The Manager shall provide copies of all final returns to each of the
Members within 15 days of filing such returns with the appropriate taxing
authorities.
(d) TAX AUDITS.
(i) FUR Subsidiary shall be the Company's tax matters partner
within the meaning of Section 6231(a)(7) of the Code (the "Tax Matters
Member") with respect to federal income tax audits. If at any time the
Tax Matters Member cannot or elects not to serve as the Tax Matters
Member, is removed by the Members as the Tax Matters Member or ceases
to be a Member, a Majority Interest shall select another Member to be
the Tax Matters Member. The Tax Matters Member, as an authorized
representative of the Company, shall direct the defense of any claims
made by the IRS to the extent that such claims relate to the adjustment
of Company items at the Company level. The Tax Matters Member shall
promptly deliver to each Member a copy of any notice of beginning of
administrative proceedings or any report explaining the reasons for a
proposed adjustment received from the IRS relating to or potentially
resulting in an adjustment of Company items. The Tax Matters Member
shall, unless a Majority Interest consents to the contrary, diligently
and in good faith contest any proposed adjustment of a Company item
that principally affects the Members at the administrative and judicial
levels, including, if appropriate or if requested by a Majority
Interest, appealing any adverse judicial decision, and shall consider
in good faith any suggestions made by any Member or its counsel
regarding the conduct of such administrative or judicial proceedings.
The Tax Matters Member shall keep each Member advised of all material
developments with respect to any proposed adjustment that come to its
attention, including, without limitation, the scheduling of all
conferences and substantive telephone calls with the IRS. Each Member
shall be entitled, at the Company's expense, to attend all meetings
with the IRS and to review in advance any material written information
(including, without limitation, any pleadings, memoranda or similar
items) to be submitted to the IRS. Without first obtaining the
34
<PAGE> 40
consent of all Members, the Tax Matters Member shall not, with respect
to any proposed adjustment of a Company item that materially and
adversely affects any Member, (A) enter into a settlement agreement
that purports to bind Members other than the Tax Matters Member
(including, without limitation, any stipulation consenting to an entry
of decision by any tax court), or (B) enter into an agreement or
stipulation extending the statute of limitations.
(ii) The Company shall promptly deliver to each Member a copy
of all notices, communications, reports or writings of any kind with
respect to income or similar taxes received from any state or local
taxing authority relating to the Company that might materially and
adversely affect each Member, and shall keep such Members advised of
all material developments with respect to any proposed adjustment of
Company items that come to its attention.
(iii) Each Member shall continue to have the rights described
in this Section 23(d) with respect to tax matters relating to any
period during which it was a Member, whether or not it is a Member at
the time of the tax audit or contest.
SECTION 24. MISCELLANEOUS.
(a) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without regard
to its conflict of law rules.
(b) BINDING EFFECT. Except as otherwise specifically provided
herein, this Agreement shall be binding upon and inure to the benefit of the
parties and their legal representatives, heirs, administrators, executors,
successors and assigns.
(c) PRONOUNS AND NUMBER. Wherever from the context it appears
appropriate, each term stated in either the singular or the plural shall include
the singular and the plural, and pronouns stated in either the masculine, the
feminine or the neuter gender shall include the masculine, feminine and neuter.
(d) CAPTIONS. Captions or section headings contained in this
Agreement are inserted only as a matter of convenience and in no way define,
limit or extend the scope or intent of this Agreement or any provision hereof.
(e) ENFORCEABILITY. If any provision of this Agreement, or the
application of the provision to any Person or circumstance shall be held
invalid, the remainder of this Agreement, or the application of that provision
to Persons or circumstances other than those with respect to which it is held
invalid, shall not be affected thereby. To the extent
35
<PAGE> 41
any provision of this Agreement is prohibited or ineffective under the Act, this
Agreement shall be considered amended to the smallest degree possible in order
to make this Agreement effective under the Act. In the event the Act is
subsequently amended or interpreted in such a way to make any provision of this
Agreement that was formerly invalid valid, such provision shall be considered to
be valid from the effective date of such interpretation or amendment.
(f) COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument.
(g) NOTICES. Any notices permitted or required under this
Agreement shall be deemed to have been given when delivered in person, by
facsimile transmission or by courier or three (3) days after being deposited in
the United States mail, postage prepaid, and addressed to the Company at its
principal place of business and to any Member at the address reflected on the
books and records of the Company.
(h) ENTIRE AGREEMENT; AMENDMENT. This Agreement constitutes the
entire agreement between the parties hereto with respect to the matters set
forth herein and supersedes all prior understandings or agreements between the
parties with respect to such matters. This Agreement, including all schedules
hereto, may only be amended, modified or supplemented (including, without
limitation, any amendment, modification or supplement arising out of a
refinancing under Section 19(a-1)) by written agreement of Members holding both
a Special Majority and Members holding a majority of the Capital Interests;
provided, however, that any amendment, modification or supplement which
adversely affects a class of Membership Interest (i.e., the Common Capital, the
Class B Common Capital or any class of Preferred Capital) shall also be approved
by the Members owning such class of Membership Interest, voting separately as a
class; and provided further, that the Membership Interest of any Member which in
connection with any such amendment, modification or supplement is being redeemed
in full in accordance with the terms of this Agreement then in effect and before
giving effect to any such amendment, modification or supplement shall not be
included in any such calculation of Special Majority, Capital Interests or class
voting hereunder.
(i) FURTHER ASSURANCES. The Members shall execute and deliver such
further instruments and do such further acts and things as may be required to
carry out the intent and purposes of this Agreement. Each Member shall execute
all such certificates and other documents and shall do all such filing,
recording, publishing, and other acts as the Manager deems appropriate to comply
with the requirements of law for the formation and operation of the Company and
to comply with any laws, rules, and regulations relating to the acquisition,
operation, or holding of the property of the Company.
36
<PAGE> 42
(j) THIRD PARTIES. Nothing in this Agreement, whether express or
implied, shall be construed to give any Person other than a Member or the
Company any legal or beneficial or other equitable right, remedy or claim under
or in respect of this Agreement, any covenant, condition, provision or agreement
contained herein or the property of Company.
(k) FACSIMILE SIGNATURES. The facsimile signature of any Manager
or Member may be used at all times and for all purposes in place of an original
signature.
(l) RELIANCE UPON BOOKS, REPORTS AND RECORDS. Unless he has
knowledge concerning the matter in question which makes his reliance
unwarranted, each Manager and Member shall, in the performance of his duties
hereunder, be entitled to rely on information, opinions, reports or statements,
including, without limitation, financial statements and other financial data, if
prepared or presented by one or more employees of the Company or by legal
counsel, accountants or other Persons as to matters such Manager or Member
reasonably believes to be within such Person's professional or expert
competence.
(m) TIME PERIODS. In applying any provision of this Agreement
which requires that an act be done in or not done in a specified number of days
prior to an event or that an act be done during a period of a specified number
of days, calendar days shall be used, the day of the doing of the act shall be
excluded, and the day of the event shall be included.
(n) WAIVER. No failure by any Manager or Member to insist upon the
strict performance of any covenant, duty, agreement or condition of this
Agreement or to exercise any right or remedy consequent upon a breach thereof
shall constitute waiver of any such breach or any other covenant, duty,
agreement or condition.
(o) EXPENSES. The Company shall be responsible for the fees and
expenses of NatWest Markets for its services in connection with the transactions
contemplated by the Investment Agreement.
37
<PAGE> 43
IN WITNESS WHEREOF, the undersigned Members have executed this
Agreement as of the date first set forth above.
FIRST UNION SOUTHWEST L.L.C.
BY: FIRST SOUTHWEST I, INC., ITS
MANAGER
By: /s/ PAUL LEVIN
-------------------------
Its: VICE PRESIDENT AND SECRETARY
----------------------------
GMAC COMMERCIAL
EQUITY INVESTMENTS, INC.
By: /s/ JAMES DALTON
------------------------------
Its: SENIOR VICE PRESIDENT
------------------------------
CFSC CAPITAL CORP. XXXI
By: /s/ Jeffrey Leu
------------------------------
Its: Senior Vice President
------------------------------
<PAGE> 44
SCHEDULE
MEMBERS
COMMON MEMBERSHIP
NAME AND ADDRESS CAPITAL CONTRIBUTION PERCENTAGE INTEREST
- ---------------- -------------------- -------------------
First Union Southwest L.L.C. $3,224,409 of Common 25.926%
55 Public Square Capital (plus Series A
Suite 1900 Preferred Capital of
Cleveland, OH 44113 $26,500,000)
GMAC Commercial Equity $6,080,315 of Common 48.889%
Investments, Inc. Capital (plus Series B
650 Dresher Road Preferred Capital of
Horsham, PA 19044-8015 $38,500,000)
CFSC Capital Corp. XXXI $3,132,286 of Common 25.185%
6000 Clearwater Drive Capital (plus Senior
Minnetonka, MN 55343-3905 Preferred Capital of
$35,000,000)
<PAGE> 45
SCHEDULE II
PROPERTIES
SOUTHWEST SHOPPING CENTERS CO. I, L.L.C.
- ----------------------------------------
Pecanland Mall
Monroe, Louisiana
SOUTHWEST SHOPPING CENTERS CO. II, L.L.C.
- -----------------------------------------
Park Plaza Mall
Little Rock, Arkansas
Alexandria Mall
Alexandria, Louisiana
Villa Linda Mall
Santa Fe, New Mexico
Mesilla Valley Mall
Las Cruces, New Mexico
Shawnee Mall
Shawnee, Oklahoma
Killeen Mall
Killeen, Texas
Brazos Mall
Lake Jackson, Texas
TEMPLE SHOPPING CENTER CO., L.L.C.
- ----------------------------------
Temple Mall
Temple, Texas
<PAGE> 46
SCHEDULE III
ASSUMED LOANS
SOUTHWEST SHOPPING CENTERS CO. I, L.L.C.
- ----------------------------------------
Creditor: Teachers Insurance and Annuity Association of America
Debtor: Pecanland Mall Associates, Ltd.
c/o The Herring Group
Dated: December 18, 1985
Maturity: January 1, 2018
SOUTHWEST SHOPPING CENTERS CO. II, L.L.C.
- -----------------------------------------
None
TEMPLE SHOPPING CENTER CO., L.L.C.
- ----------------------------------
Creditor: Northwestern Mutual Life Insurance Company
Debtor: Temple Mall
Maturity: March 15, 2001
<PAGE> 47
SCHEDULE IV
TAX REPORTING REQUIREMENTS
A. Manager shall provide or cause asset manager or outside tax preparer to
provide the following state tax apportionment information ("Apportionment
Information") to the Members with respect to each Member's Membership Interest
in the Company, within 45 days of the end of each fiscal quarter:
(1) tax gain or loss and gross proceeds realized upon foreclosure,
including date, by location (state) of property;
(2) tax gain or loss on disposition of real or tangible personal property,
including date, by location (state) of property;
(3) Company payroll by location (state);
(4) adjusted tax basis of real property by location (state) of property;
and,
(5) gross rental income on real property or personal property by location
(state) of property.
B. Manager shall also use its best efforts or cause the asset manager or
outside tax preparer to obtain such Apportionment Information with respect to
the Company's ownership interest in any underlying entity.
C. Manager shall file or shall cause the asset manager or outside tax
preparer to file all state income and franchise tax returns of the Company and
any underlying flow through entity in which the Company owns an interest in each
state in which the Company or the underlying flow through entity does business,
for purposes of income and franchise taxes, as such terms or equivalent may be
defined by the various states.
D. Manager shall file or cause the asset manager or outside tax preparer to
file all state income and franchise tax returns of the Company and any
underlying flow through entity in which the Company owns an interest in each
state consistently with the Apportionment Information provided to the Members.
Included with each Member's K-1, shall be information summarizing Apportionment
Information for the taxable year of the Company with respect to each Member.
E. Manager shall provide or shall cause the asset manager or outside tax
preparer to provide each Member with the name and telephone number of a contact
person with respect to federal and state tax matters pertaining to the Company,
and any flow through entity in which the Company owns an interest.
<PAGE> 1
Exhibit 99.5
Copy of Form of
Management and Leasing Agreement
dated September 30, 1996
between
__________________________________________________
and
First Union Management, Inc., a Delaware corporation
for each of the following properties:
Alexandria Mall, Alexandria, Louisiana
Brazos Mall, Lake Jackson, Texas
Killeen Mall, Killeen, Texas
Mesilla Valley Mall, Las Cruces, New Mexico
Park Plaza, Little Rock, Arkansas
Shawnee Mall, Shawnee, Oklahoma
Villa Linda Mall, Santa Fe, New Mexico
<PAGE> 2
MANAGEMENT AND LEASING AGREEMENT
--------------------------------
THIS MANAGEMENT AND LEASING AGREEMENT is made as of September 30, 1996 by
and between SOUTHWEST SHOPPING CENTERS CO. II, L.L.C., a Delaware limited
liability company ("OWNER"), and FIRST UNION MANAGEMENT, INC., a Delaware
corporation ("MANAGER").
RECITALS
--------
A. Owner holds title to an approximately ____________ square foot shopping
center known as ____________, located at ____________________________, ________
and legally described on EXHIBIT A attached hereto (the "PROPERTY").
B. Owner wishes to provide for the management, leasing and operation of the
Property and Manager is willing to perform such services as an independent
contractor for Owner, all pursuant to the terms of this Agreement.
NOW, THEREFORE, incorporating the Recitals as set forth above, and in
consideration of the mutual covenants herein contained, Owner and Manager
hereby agree as follows:
ARTICLE 1
AGREEMENT TO MANAGE AND TERM
----------------------------
1.1 AGREEMENT TO MANAGE. Owner hereby appoints Manager, an independent
contractor, as the sole and exclusive property manager and leasing agent for the
Property upon the terms hereinafter set forth. Manager hereby accepts such
appointment and agrees to furnish the services provided in this Agreement.
1.2 TERM. This Agreement shall commence on the date hereof, shall have an
initial term of one (1) year from the date hereof and shall be automatically
renewed for additional one (1) year terms until the earlier to occur of (i) the
termination of this Agreement as provided herein or (ii) the date that is the
seventh anniversary of the date hereof.
1.3 TERMINATION BY EITHER PARTY. Either party has the right at any time by
giving five (5) days' notice to the other party to terminate this Agreement upon
the occurrence of any of the following "Events of Default":
(a) If the other party shall fail to make any payment which it is
obligated to make pursuant to the terms of this Agreement and such failure
shall continue for a period of five (5) days after notice thereof to the
defaulting party;
<PAGE> 3
(b) If the other party shall fail to keep, observe or perform any
material covenant, agreement, term or provision of this Agreement, other
than an obligation to pay money, to be kept, observed or performed by such
other party, and such failure shall continue for a period of thirty (30)
days after notice thereof to the defaulting party; provided, however, that
if such default is curable but cannot be cured with reasonable diligence in
said 30-day period and the applicable party shall have commenced such cure
within said 30-day period and is diligently proceeding to complete such
cure, such 30-day period shall be extended during the period of such
diligent cure but not longer than one hundred eighty (180) days after the
expiration of the initial thirty (30) day period, unless further extended
by the non-defaulting party;
(c) If the other party shall (i) apply for or consent to the
appointment of a receiver, trustee or liquidator of such party or of all or
a substantial part of its assets, (ii) file a voluntary petition in
bankruptcy, or admit in writing its inability to pay its debt as they come
due, (iii) make a general assignment for the benefit of creditors, or (iv)
file a petition or an answer seeking reorganization or agreement with
creditors or take advantage of any insolvency law, or file an answer
admitting the material allegations of a petition filed against it in any
bankruptcy, reorganization or insolvency proceeding;
(d) If the other party shall have an order, judgment or decree entered
against it by any court of competent jurisdiction, on the application of a
creditor, adjudicating such party a bankrupt or insolvent or approving a
petition seeking reorganization of such party or appointing a receiver,
trustee or liquidator of such party or of all or a substantial part of its
assets, and such order, judgment or decree shall continue unstayed and in
effect for a period of ninety (90) consecutive days.
1.4 AUTOMATIC TERMINATION. This Agreement shall automatically terminate
upon the occurrence of any of the following conditions:
(a) The Property is sold to a party that is not an affiliate of First
Union (defined below);
(b) If GMAC or the Senior Preferred Holder (each as defined below),
individually or collectively, exercises its or their right to acquire all
of the interests in Owner pursuant to Section 19 of that certain Limited
Liability Company Agreement of Southwest Shopping Centers Co. I, L.L.C.,
dated as of September _, 1996, by and among GMAC Commercial Equity
Investments, Inc. ("GMAC") CFSC Capital Corp. XXXI ("CARGILL") and First
Union Southwest L.L.C. ("FIRST UNION"), then upon six months' notice from
GMAC to Manager after consummation of such acquisition, this Agreement
shall terminate on the date specified in such notice; or
(c) Subject to the consent of the Lender (as defined below), upon
written notice from the Owner at any time that an Event of Default shall be
continuing under the Acquisition Loan Documents (as defined in the below).
2
<PAGE> 4
(d) First SW II, L.L.C. resigns as "Manager" pursuant to Section 14(c)
of that certain Limited Liability Company Agreement of Southwest Shopping
Centers Co. II, L.L.C., dated as of September __, 1996 between Southwest
Shopping Centers Co. I, L.L.C. and First SW II, L.L.C. (the "Operating
Agreement").
(e) First SW II, L.L.C. is removed as "Manager" pursuant to Section
14(d) of the Operating Agreement.
As used herein, the term Senior Preferred Holder shall mean the holder from
time to time of the Senior Preferred Capital (as defined in the Operating
Agreement).
1.5 TERMINATION BY LENDER. The holder of any mortgage lien against the
Property, including, without limitation, the holder of the Acquisition Loan
Documents (the "Lender") shall have the right to terminate this Agreement upon
thirty (30) days notice to Manager and without penalty or premium (i) upon the
appointment of a receiver, (ii) if it, or its successors or assigns, shall
succeed to the interest of the Owner in the Property by reason of foreclosure of
such mortgage or a deed-in-lieu thereof or (iii) in accordance with the
provisions of Section 3.13(c) of the Mortgage and Security Agreement of even
date herewith granted by First Owner to Lender, encumbering the Property and
more fully described on Exhibit B hereto.
1.6 EFFECT OF EXPIRATION OR TERMINATION. (a) Any expiration or termination
of this Agreement shall in no way affect or impair any rights or obligations
which have accrued to either party hereto for the period ending on or prior to
the earlier to occur of such expiration or termination; provided, however, that
no such expiration or termination shall impair the rights of Manager to receive
payments provided for in SECTION 1.7 or ARTICLE 4 hereof. Immediately upon the
expiration or termination of this Agreement, Manager shall deliver to Owner all
funds, including tenant security deposits, tenant correspondence, property
files, vendor invoices and books and records of Owner related to the Property
then in possession or control of Manager. Within sixty (60) days following
expiration or termination of this Agreement, Manager shall deliver to Owner a
final accounting concerning the operations of the Property through the date of
expiration or termination.
(b) EFFECT ON TEMPLE AGREEMENT. Manager has assumed the obligations of
manager under a certain property management agreement relating to management and
leasing of the Temple Mall in Temple, Texas (the "Temple Agreement"). The Temple
Agreement provides, among other things, that the manager thereunder may resign
upon 30 days notice. Notwithstanding any other provision of this Agreement or
the Temple Agreement, Manager agrees that it shall be deemed to have given such
notice under the Temple Agreement in the event that Manager shall be terminated
pursuant to Section 1.4 or Section 1.5 of this Agreement and shall,
nevertheless, promptly give such notice to the other party to the Temple
Agreement. The foregoing covenant may be enforced directly by GMAC or Cargill,
and their respective successors and assigns under the applicable operating
agreement.
1.7 PENDING MATTERS. Within fifteen (15) days after the expiration or
termination of this Agreement, Manager shall submit to Owner a pending matters
list (the "PENDING MATTERS
3
<PAGE> 5
LIST") setting forth in reasonable detail all leasing transactions that were in
the course of active negotiation at the time of such expiration or termination.
In the event any leasing transaction appearing on said Pending Matters List is
consummated (as evidenced by the execution and delivery of a Lease executed and
delivered by the tenant and Owner) within twelve (12) months after the
cancellation or termination of this Agreement, then such transaction shall be
deemed a transaction consummated during the term hereof, and Owner shall pay a
Commission (such commission, a "POST-TERMINATION COMMISSION") to Manager for
such transaction in accordance with the applicable provisions and conditions of
this Agreement. The provisions of this SECTION shall survive the expiration or
termination of this Agreement.
ARTICLE 2: MANAGEMENT
---------------------
2.1 GENERAL. Subject to the availability of funds in the Operating Account
(defined below), Manager shall manage and operate the Property in a manner
consistent with the management and operation of comparable regional malls in the
same market or similar market as the Property, shall provide such services as
are customarily provided by a manager of regional malls of comparable class and
standing in the same market or similar market as the Property, and shall consult
with Owner and keep Owner advised as to all material or extraordinary matters
and decisions affecting the Property. Without limiting the foregoing, Manager
shall timely prepare and deliver to Owner such accounting and operations reports
in the manner required hereunder and maintain businesslike relations with
tenants of the Property whose service requests shall be received, considered and
recorded in systematic fashion in order to show the action taken with respect to
each request. Complaints of a serious nature shall be promptly reported to Owner
and, after thorough investigation, Manager shall timely report to Owner with
appropriate recommendations for addressing such complaints.
2.2 BUDGETS.
(a) BUDGET APPROVAL PROCESS. Manager shall submit by November 15th of each
year during the term hereof an estimated budget detailing all projected revenues
and expenses for the operation of the Property during the next calendar year.
Manager shall prepare such budget in the form and with such detail as reasonably
required by Owner. Owner shall, within thirty (30) days after receipt of such
budget, notify Manager of its approval or disapproval of such budget. Owner's
failure to timely respond shall be deemed Owner's approval of such budget. In
the event Owner disapproves of any proposed budget, Manager shall make all
revisions thereto which Owner shall direct. Manager shall promptly resubmit the
revised proposed budget to Owner for approval and upon such approval, or deemed
approval as provided above, such budget shall be the "APPROVED BUDGET" for such
calendar year. Until a proposed budget is approved, Manager shall continue to
operate the Property pursuant to the Approved Budget for the prior calendar year
except for increased expenses relating to taxes, insurance, then existing
financing and utilities which shall be paid on a current basis.
4
<PAGE> 6
Manager agrees that it shall, to the extent that it is so informed of any
requirements, comply with any budget preparation requirements agreed upon
between the members of Owner pursuant to the terms of Owner's formation
documents.
(b) PAYMENT OF BUDGETED EXPENSES. Manager shall have the right to withdraw
funds from the Operating Account in order to pay all Property expenses then due
and in accordance with the Approved Budget. Manager shall also have the right to
pay those Property expenses that vary from the Approved Budget without first
obtaining Owner's consent, so long as such variances (the "PERMITTED VARIANCE
RANGE") do not exceed, on an expense category subtotal line basis ten percent
(10%) of the applicable subtotal line value in the Approved Budget, and all
variances, whether permitted or approved do not in the aggregate exceed 10%. (By
way of illustration, see Exhibit G. In Exhibit G. "Total HVAC" is an expense
category subtotal, made up of lines 5220, 5270 and 5280). Excluded from the
variance restrictions in the immediately preceding sentence are those variances
(collectively, the "VARIANCE EXCLUSIONS") which are created because of the
timing of their payment during the year, utility expenses, general real estate
taxes, insurance premiums, financing costs and emergency expenses which Owner
authorizes Manager to pay on a current basis.
2.3 REIMBURSABLE AND NONREIMBURSABLE COSTS. All costs incurred by Manager
in the performance of its duties under this Agreement that are in accordance
with the Approved Budget, within the Permitted Variance Range or are Variance
Exclusions shall be reimbursed by Owner to the extent not reimbursed out of the
Operating Account. The following costs, however, shall not be reimbursable by
Owner to Manager:
(a) salaries and payroll expenses of Manager's executives, personnel,
and employees of Manager above the level of Regional Manager, other than
those typically charged in whole or in part to tenants through common area
maintenance or other passthroughs;
(b) Manager's off-site overhead and general administrative expenses,
except long distance telephone, fax, overnight delivery, courier,
registered mail, copying, entertainment (subject to Owner's prior approval
in each instance), uniforms, and twoway radios, where such charges are
directly related to the operation of the Property;
(c) costs of Manager's principal and branch offices;
(d) any costs incurred by Manager as a result of Manager's Event of
Default hereunder, Manager's gross negligence or Manager's willful
misconduct; and
(e) any costs incurred by Manager in the performance of its duties
hereunder that are not (i) approved by Owner, or (ii) in accordance with
the Approved Budget, or (iii) within the Permitted Variance Range, or (iv)
a Variance Exclusion or (v) incurred by Manager in the performance of its
obligations under SECTION 2.7 hereof, or (vi) expressly provided for in
this Agreement.
5
<PAGE> 7
2.4 EMPLOYMENT AND SUPERVISION OF PERSONNEL. Manager shall retain qualified
outside vendors or employ and supervise all personnel required for the
management and leasing of the Property, as well as the maintenance of the
necessary books and records in connection therewith, including management for
on-site supervision, operation and security of the Property. All such employees
shall be employees of the Manager, shall be on Manager's payroll, shall be
under the control of the Manager and shall not be employees of Owner. Manager
will, in the hiring and retention of such employees, use reasonable care to
select qualified, competent and trustworthy employees. Manager shall procure and
maintain, at Owner's sole expense, worker's compensation insurance and
employer's liability insurance covering all employees working on or about the
Property and, to the extent reasonably required in writing by Owner and at
Manager's expense, fidelity bonds covering all employees who handle funds of
Owner.
2.5 CONTRACTS AND SUPPLIES. Manager shall, at Owner's expense, enter into
contracts on behalf of Owner for the furnishing to the Property of required
utility services, and shall arrange for appropriate heating and air-conditioning
services and other janitorial, maintenance, pest control, and any other services
and concessions which are reasonably required in connection with the maintenance
and operation of the Property through such contracts or its employees. Owner's
prior approval shall be required for any contracts (a) that have a term in
excess of one (1) year and that are not terminable on sixty (60) days notice or
less or (b) that are with affiliates of Manager and that are on terms in excess
of those that would have been obtained in a bona fide arms-length negotiation.
Manager shall provide Owner with prior written notice before it enters into any
agreement with an affiliate of Manager pursuant to clause (b) of the immediately
preceding sentence. Manager shall also place purchase orders for cleaning and
maintenance supplies, goods and other personal property as are reasonably
necessary to properly maintain the Property. All such contracts and orders shall
be for amounts in accordance with the Approved Budget, the Permitted Variance
Range and the Variance Exclusions. When taking bids or issuing purchase orders,
Manager shall use all reasonable efforts to secure for and credit to Owner, any
discounts, commissions or rebates obtainable as a result of such purchases or
services.
2.6 ALTERATIONS, REPAIRS AND MAINTENANCE. Manager shall, at Owner's sole
expense, ensure that the Property's physical facilities, personal property and
grounds are at all times well maintained and kept in good order and repair and
in a proper state of cleanliness. Manager shall, on behalf of Owner and at
Owner's expense, make or contract for all repairs, alterations, decorations, or
replacements which shall be reasonably required to preserve, maintain and keep
the Property in similar condition to that of the Property at the commencement of
this Agreement (ordinary wear and tear excepted). Manager shall not make or
contract for any repair or improvement in or to the Property without Owner's
prior written approval if the cost would exceed the year to date allocation for
the applicable line items for such repairs set forth in the Approved Budget plus
the Permitted Variance Range, unless the same is immediately required by law, is
necessary without delay in order to protect the Property or any person, is a
Variance Exclusion or is made under other circumstances which Manager reasonably
deems to be an emergency.
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2.7 COMPLIANCE WITH LAWS.
(a) Subject to the availability of funds in the Approved Budget or
otherwise made available by Owner, Manager shall use commercially
reasonably efforts to cause the Property to be in full compliance with all
applicable federal, state, and municipal laws, ordinances, regulations and
orders relating to the use, operation, repair and maintenance of the
Property and with the rules, regulations or orders of the local Board of
Fire Underwriters or other similar body, if any. Manager shall give prompt
notice to Owner of any violation or notice of alleged violation of any
laws, ordinances, regulations, rules and orders that comes to its
attention. Subject to the availability of funds in the Approved Budget or
otherwise made available by Owner and provided Owner has not notified
Manager that it intends to contest any violation, Manager shall promptly
remedy any violation of any such federal, state and municipal law,
ordinance, rule, regulation or order which comes to its attention. Owner
and Manager agree to cooperate with each other to cause the Property to be
operated at all times in compliance with all applicable federal, state and
municipal laws, ordinances and regulations and shall not knowingly,
directly or indirectly, suffer, permit or make any use of the Property
which is prohibited by any such laws, ordinances and regulations. Owner
hereby indemnifies and agrees to defend and hold Manager and its partners,
officers, employees and agents harmless from any Losses (defined below) by
virtue of the Property's noncompliance with federal, state or municipal
laws, ordinances or regulations or its use prohibited thereby, to the
extent not caused by the gross negligence or willful misconduct of Manager.
(b) The Property is currently subject to the agreements, covenants,
conditions and restrictions contained in those certain deeds, mortgages,
easements, and ordinances listed in EXHIBIT B attached hereto as well as to
all existing leases (as the same may be amended from time to time, the
"AGREEMENTS"). Manager shall use commercially reasonable efforts to fully
perform all of the obligations and duties on the part of Owner to be
performed under the Agreements and all other agreements binding against the
Property of which Owner makes Manager aware, provided, that Manager shall
not be required to make any payment or incur any liability on account
thereof and provided, further, that with respect to any such agreements,
amendments or other documents entered into after the date hereof, such
documents shall not materially increase Manager's obligations hereunder
without Owner first obtaining Manager's prior consent.
2.8 COLLECTION OF RENT. Manager shall exercise commercially reasonable
efforts to collect all rents and other sums and charges due from tenants,
subtenants, licensees and concessionaires of the Property. However, Manager
shall not terminate any lease, lock out a tenant, institute suit for rent or for
use and occupancy, or institute proceedings for recovery of possession, without
in each case first obtaining the prior written approval of Owner which approval
may not be unreasonably withheld, and shall be deemed received if Owner does not
respond within five (5) business days. In connection with such suits or
proceedings only legal counsel designated by Owner shall be retained, and all
such suits or proceedings shall be brought
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in the name of Owner, at Owner's expense, and (except to the extent Owner
directs otherwise) shall be handled in such manner as Manager elects.
2.9 INVENTORY. Manager shall maintain a current inventory of all equipment
supplies, furnishings, furniture and all other items of personal property now or
hereafter owned by Owner and located upon or used in the operation of the
Property. Within ten (10) days after written request by Owner, Manager shall
provide Owner with a copy of such inventory list.
2.10 SIGNS. Manager may place one or more signs on or about the Property
stating, among other things, that Manager is the exclusive management and
leasing agent for the Property. All such signs and locations thereof shall be
subject to Owner's prior reasonable approval.
2.11 ADDITIONAL SERVICES. If Owner requests Manager to perform services
which are not specifically provided for in this Agreement (including without
limitation, the supervision of tenant improvements or the supervision of capital
repairs or replacements), Manager shall be compensated for such services on an
hourly basis or on a negotiated fee basis consistent with market terms for such
service in the market in which the Property is located.
2.12 ADVANCES. Manager shall not be obligated to make any advance to or for
the account of Owner or to pay any sum except out of funds held or provided as
set forth in this Agreement. Manager shall not be obligated to incur any
liability or obligation for the account of Owner without assurance that the
necessary fund for the discharge thereof will be promptly provided.
2.13 OWNER'S SEPARATE LEGAL EXISTENCE. Manager shall act, as appropriate,
in a manner that identifies and recognizes the separate legal existence of
Owner.
ARTICLE 3: MANAGEMENT FEE
-------------------------
3.1 MANAGEMENT FEE. As consideration for the performance by Manager of all
of its property management duties under this Agreement, Owner agrees to pay to
Manager a property management fee (the "MANAGEMENT FEE") equal to four percent
(4%) of Gross Receipts (defined below). The Management Fee shall be paid in
arrears on a monthly basis, not later than the tenth (1Oth) day of the month
following the month for which such fee is earned. "GROSS RECEIPTS" means all
revenues of every kind and nature derived from the operation of the Property
during a month determined on a cash basis, including, without limitation, (i)
rent, (ii) rent adjustments, (iii) utility charges, (iv) parking charges, (v)
service charges, (vi) forfeited security deposits and other forfeited tenant
deposits, (vii) proceeds of rent interruption insurance and (viii) tenant
reimbursements for operating expenses, taxes and insurance. Gross Receipts shall
not include: (i) non-forfeited security deposits and other non-forfeited
refundable deposits; (ii) interest on bank accounts for the operation of the
Property; (iii) proceeds from the sale or refinancing of any part of the
Property; (iv) insurance proceeds or dividends received from any insurance
policies pertaining to physical loss or damage to the Property or any part
thereof (but
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not proceeds of rent interruption insurance which are included as provided
above); (v) condemnation awards or payments received in lieu of condemnation of
the Property or any part thereof; and (vi) any trade discounts and rebates
received in connection with the purchase of personal property.
3.2 PAYMENT OF MANAGEMENT FEE AND LEASING COMMISSION. Provided that no
Event of Default is then existing with respect to Manager, Manager shall be
entitled to pay itself from the Operating Account the monthly Management Fee
then due as well as any Commission then due hereunder. Upon the cure of such
Event of Default, Manager shall be entitled to deduct any past Management Fee or
Commission which was not paid by virtue of the immediately preceding sentence.
ARTICLE 4: LEASING
------------------
4.1 LEASING. Owner hereby designates Manager as its exclusive broker for
leasing of space in the Property and agrees that it shall refer all inquiries
for leases and renewals to Manager and Manager shall negotiate all such leases,
subleases, renewals, licenses and agreements (collectively, "LEASES"). Manager
shall make every reasonable effort to obtain and keep desirable tenants for the
Property. Manager shall, so far as reasonably possible, procure financial
references for prospective tenants, investigate such references, and use its
best judgment in the selection of prospective tenants. Manager agrees to perform
whatever reasonable service may be required in connection with the negotiation
of Leases or renewals, extensions, modifications, or cancellations thereof.
4.2 EXECUTION OF LEASES. All Leases are to be prepared by Manager in
accordance with the leasing guidelines set forth in any loan document
constituting an Agreement as well as any further guidelines established by
Owner, unless Owner shall otherwise consent in writing. The initial leasing
guidelines required by Owner are attached hereto as EXHIBIT C. Manager
is authorized to enter into and execute on Owner's behalf Leases for space in
the Property in accordance with the terms hereof and, except as otherwise
directed by Owner in a particular case, all Leases shall be in the Owner's name
but executed by Manager as managing agent for Owner.
4.3 LEASE FORMS. All Leases entered into after the date hereof (but not the
renewal, extension, expansion, amendment, modification or supplement of any
Leases existing as of the date hereof) shall be on the form approved by Owner
unless Owner shall otherwise consent in writing; provided, however, that Manager
shall have the right (i) to use the form required by any national or regional
tenant if reasonably necessary to conclude the transaction and is customary in
the market and (ii) to make any modifications from the form approved by Owner to
the extent such changes are reasonably necessary to conclude the transaction and
are customary in the market, so long as such modifications, do not significantly
affect Owner's material rights and obligations under the Lease and conform in
all material respects to the
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leasing guidelines approved by Owner. Owner hereby approves the forms of lease
and license agreements attached hereto as EXHIBIT D and EXHIBIT E, respectively.
4.4 ADVERTISING. Manager shall coordinate all advertising, promotions and
marketing affecting the Property. All such advertising and marketing shall be
prepared by Manager in accordance with the Approved Budget, the Permitted
Variance Range or the Variance Exclusions. From time to time upon Manager's
request and to the extent funds are unavailable in the Operating Account, Owner
shall remit to Manager Owner's contribution to merchants' association,
promotional or marketing fund as required under the Leases. Any advertising or
promotional materials for the Property that utilizes the name "General Motors"
or "GMAC" or any variant thereof shall be subject to the prior approval of GMAC.
4.5 LEASING EXPENSES. Owner shall reimburse Manager for all reasonable
out-of-pocket expenses of Manager, if any, directly related to negotiating
Leases for space in the Property, including, without limitation, all reasonable
attorneys' fees and expenses, costs of postage, telephone, mailings,
presentations, reports, renting plans, descriptive brochures and other leasing
materials.
4.6 LEASING COMMISSIONS.
(a) INITIAL LEASES AND RENEWALS AND EXTENSIONS.
(i) During the term of this Agreement, and thereafter as herein
provided, Owner shall pay Manager a commission (a "COMMISSION") with
respect to each Lease of all or any portion of the Property equal to
(1) four and one-half percent (4.5%) of the entire Base Rent
(hereinafter defined) payable over the term (exclusive of any period
covered by any un-exercised renewal or extension option) for any Lease
entered into during the term of this Agreement or any Lease entered
into after the termination or expiration of this Agreement if such
post termination or expiration Lease is entered into pursuant to the
terms of SECTION 1.7 hereof and (2) in the case of negotiated renewal
or extension (as opposed to a renewal or extension by the applicable
lessee pursuant to the its exercise of a renewal or extension option
granted in the applicable Lease that does not require the negotiation
of the terms of such renewal or extension option), three percent (3%)
of the entire Base Rent payable over the period covered by the renewed
or extended term (exclusive of any period covered by any un-exercised
renewal or extension option) of any Lease existing as of the date
hereof or any Lease entered into during the term of this Agreement or
any Lease entered into after the termination or expiration of this
Agreement if such post termination or expiration Lease is entered into
pursuant to the terms of SECTION 1.7 hereof, all whether such renewal
or extension occurs during the term hereof, during the period
described in SECTION 1.7 hereof or thereafter, each to the extent such
Lease under this clause (2) contains an option of extension or
renewal. Commissions
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shall be paid at the times and in the manner set forth in SECTION
4.6(b) or (c) hereof.
(ii) The term "BASE RENT", when used herein, shall be defined to
mean the entire rent or consideration payable by a tenant under any
applicable Lease during the initial term of such Lease, including
fixed and specified increases in such rent or consideration, less: (1)
all credits and payments allowed or made to or for the benefit of such
tenant other than for construction of its space, specifically provided
for in any applicable Lease, including, but not limited to: (A)
Commissions paid to brokers unaffiliated with Owner in connection with
the applicable Lease; (B) rent abatements; (C) "take-over" payments
with respect to space formerly occupied by such tenant; and (D) rent
payable under the Lease which is attributable to operating costs,
insurance expenses, real estate taxes or the consumer price index or
another inflationary index; (2) late payment charges; (3) percentage
rentals; (4) security deposits; (5) extra services or supplies
furnished or constructed by or for the Owner and reimbursed to the
Owner by such tenant by way of additional rental or other payment
pursuant to a Lease or separate agreement; (6) rent allocated to
payment for gas, water, electricity, telephone service, heat, air
conditioning or any equipment associated therewith except to the
extent that payment of any such items is covered in the initial
expense stop stipulated in a Lease; (7) moving allowances; and (8)
rental payments upon a continuation of tenancy on a statutory or
month-to-month basis. The aforesaid deductions shall be allocated over
the entire term of any such Lease and shall not include any extension
or renewal term.
(b) PAYMENT OF COMMISSION FOR RENEWALS AND EXTENSIONS.
(i) If a Lease gives the tenant an option of renewal or extension
and in the event the tenant exercises any option of renewal or
extension during the term of the Lease or any extension or renewal
thereof, a Commission for such renewal or extension calculated
pursuant to SECTION 4.6(a) will be paid by the Owner to Manager based
upon the extended or additional period.
(ii) Any such Commissions shall be due and payable in full within
thirty (30) days of the commencement of any renewal or extension term.
For any exercise of Lease extension or renewal after expiration or
termination of this Agreement, the Owner shall promptly notify the
Manager in writing of such exercise and the terms thereof. The Owner's
obligation to pay such Commission for such Leases shall survive the
expiration or termination of this Agreement.
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(c) PAYMENT OF COMMISSIONS FOR INITIAL LEASES.
(i) All Commissions due to Manager and to any cooperating broker
pursuant to this Agreement shall, except as provided in SECTION 4.6(b)
hereof, be payable on the following terms: (1) one half (1/2) of the
Commission shall be paid within thirty (30) days after execution by
any tenant which is binding upon such tenant (and acceptance by Owner,
if not within pre-approved guidelines); and (2) the balance of the
Commission shall be paid within thirty (30) days after the last to
occur of (i) any such tenant has taken possession of the demised
premises, (ii) if rent is payable in the first (1st) month, commenced
paying rent, (iii) any security then required by the Lease is
deposited or delivered to Owner, (iv) the term of the Lease has
commenced and (v) any consents or subordination, non-disturbance and
attornment agreements then required by the Lease have been given or
delivered by the tenant to the appropriate parties.
(ii) In the event that a tenant defaults under a Lease for which
Manager is entitled to the balance of its Commission, Owner shall have
no duty to enforce such Lease in order to preserve such Commission. In
the event that a tenant defaults under a Lease for which Manager is
entitled to a Commission prior to the time all of the Commission is
payable pursuant to the foregoing, then all previously paid portions
of such Commission may be retained by Manager but Manager shall not be
entitled to any portion of the Commission not yet paid unless such
default is cured.
(iii) In the event that a tenant has the right during the initial
stated term under a Lease to terminate the Lease for reasons other
than the Owner's default, a Commission shall be computed and paid in
accordance with this Agreement based on the Base Rent allocable to the
period of time, if any, as to which such tenant has no such rights to
terminate the Lease. In the event the Lease is not terminated during
the initial stated term by the tenant, Owner shall pay (at the time
said right to terminate expires or is waived, whichever is sooner) any
unpaid balance of the Commission otherwise due.
(d) COOPERATING BROKERS. Manager agrees to actively solicit the
cooperation of other real estate brokers in finding tenants for space in
the Property. In the event a cooperating broker is involved in securing a
tenant, the Owner shall pay a total Commission equal to one hundred fifty
percent (150%) of the Commission provided for in the provisions of CLAUSES
(a) and (c) of this SECTION 4.6. Manager shall be responsible for
negotiating an acceptable sharing of the total Commission with the
cooperating broker. In no event shall Manager receive more than 100% of the
Commission provided for in the provisions of CLAUSES (a) through (c) of
this SECTION 4.6.
(e) CONSTRUCTION MANAGEMENT FEE. Owner agrees that if Manager shall be
responsible for coordinating the build-out of any tenant space, Manager
shall be entitled
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to a construction management fee equal to ten percent (10%) of the hard
costs of such construction, not to exceed $75,000.00 in any one instance.
ARTICLE 5: PROCEDURE FOR
HANDLING RECEIPTS AND OPERATING CAPITAL
---------------------------------------
Subject to the terms and conditions of the Operating Agreement and the
Acquisition Loan Documents, all funds relating to the management and operation
of the Property shall be administered as follows:
5.1 RECEIPTS. All monies received by Manager for or on behalf of Owner in
connection with the operation and management of the Property shall, within one
(1) business day after receipt, be deposited by Manager in an operating account
(the "Operating Account") established in Owner's name at such bank as directed
by Owner. [As of the date hereof, the Owner owns six other regional malls
(herein, such regional malls, together with other properties acquired in
substitution or replacement thereof, are called the "OTHER PROPERTIES")that are
subject to separate management and leasing agreements with Manager, each of
which agreements are in substantially the same form as this Agreement
(collectively, the "OTHER MANAGEMENT AGREEMENTS"). The Owner agrees that the
Manager may establish one Operating Account for the monies received by Manager
for or on behalf of Owner in connection with the operation and management of the
Property and some or all of the Other Properties in satisfaction of the
requirements of SECTION 5.1 of this Agreement and the applicable Other
Management Agreements.
5.2 DISBURSEMENTS. Owner shall deposit and maintain sufficient funds in the
Operating Account, and Manager shall withdraw and pay from Operating Account,
such amounts at such times as the same are required in connection with the
management and operation of the Property in accordance with the Approved Budget
and the provisions of this Agreement. Manager shall remit to Owner on or after
the twentieth (20th) day of each month during the term hereof, all funds in the
Operating Account except those necessary to pay additional obligations with
respect to this Property and the applicable Other Properties anticipated to come
due prior to the receipt of additional rentals.
5.3 AUTHORIZED SIGNATORIES. Certain designated officers and employees of
Manager, approved by Owner, shall be authorized signatories on the Operating
Account and shall have authority to make withdrawals from the Operating Account
in accordance with the terms hereof. Manager shall, to the extent reasonably
required in writing by Owner, cause all persons who are authorized signatories
or who in any way handle funds for the Property to be bonded, at Manager's
expense, in an amount reasonably designated by Owner.
5.4 SECURITY DEPOSITS. All security deposits of tenants of the Property
shall be maintained under the joint control of Owner and Manager in such manner
as Owner shall approve and as required by the applicable state law.
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ARTICLE 6: ACCOUNTING
---------------------
6.1 BOOKS AND RECORDS. Manager shall maintain a comprehensive system of
office records, books, computer files and data and accounts pertaining to the
Property, which system, records, books, computer files and data and accounts
shall be available for examination, copying and audit by Owner and its agents,
accountants and attorneys during regular business hours. The Owner shall
establish guidelines and procedures for such books and records and Manager shall
maintain such records in accordance with such guidelines and procedures at the
on-site Property management office or at Manager's central office. Manager
shall preserve all records, books, computer files and data and accounts for a
period of three years during the term hereof and at the end of such period shall
deliver or make available to Owner such records, books, computer files and data
and accounts. All such records, books and computer files and data shall be the
property of Owner. Without limiting the generality of this Section, Manager
shall provide reports to Owner as set forth on Exhibit F hereto.
6.2 PERIODIC STATEMENTS: AUDITS.
(a) PERIODIC STATEMENTS. Manager shall timely prepare and deliver to
Owner such monthly, quarterly and/or annual leasing and management reports
and accounting information as and in the manner reasonably required
pursuant to Owner's standard reporting requirements, as may be amended from
time to time.
(b) AUDIT. In the event that Owner requires an audit, the audit shall
be at Owner's expense and the Manager shall cooperate with the auditors.
6.3 RETURN OF COMPUTER HARDWARE AND SOFTWARE. Immediately following the
termination of this Agreement by either Owner or Manager, Manager shall return
and/or deliver to Owner, in good condition and working order, all hardware,
software, documentation, backup tapes, signature cartridges and all other
computer hardware and software purchased or otherwise provided by Owner to
Manager for Manager's use during the term of this Agreement. Promptly upon
Owner's request following the termination of this Agreement, Manager shall
deliver to Owner hard copy outputs of information on its computer systems that
relate to the Property, but Manager shall not be required to provide any
computer hardware or software.
ARTICLE 7: INSURANCE
--------------------
7.1 INSURANCE BY OWNER. Owner, at its expense, will obtain and keep in
force any insurance required by any lender with a security interest in the
Property as well as adequate insurance against physical damage (e.g., fire and
extended coverage endorsement, boiler, and machinery) and against liability for
loss, damage, or injury to property or persons which might arise out of the
occupancy, management, operating, or maintenance of the Property. Manager shall
be named as a named insured on all liability insurance policies obtained by
Owner. Owner
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hereby waives, and shall cause its insurer to waive, all rights to subrogation
with respect to losses payable under such policies.
7.2 INSURANCE BY MANAGER. Manager shall obtain the worker's compensation
insurance and fidelity bonds reasonably required by Owner pursuant to the terms
hereof, such worker's compensation insurance to be at Owner's expense as
provided in SECTION 2.4 hereof and such fidelity bonds to be at Manager's
expense as provided in SECTION 2.4 hereof and SECTION 5.3 hereof. In addition,
Manager shall, at its expense which is not reimbursable, obtain and keep in
force, commercial general liability and automobile liability insurance relating
to its activities and those of its employees and agents with respect to the
performance of its obligations under this Agreement. Such insurance shall be
with companies and in an amount reasonably acceptable to Owner. Owner shall be
named as a named insured on such commercial general liability policy. Manager
hereby waives, and shall cause its insurer to waive, all rights to subrogation
with respect to losses payable under such policies.
7.3 LOSS OR DESTRUCTION. Manager agrees (a) to notify Owner and the
insurance carrier promptly after Manager receives notice of any loss, damage or
injury to the Property and (b) to take no action (such as admission of
liability) which might bar Owner from obtaining any protection afforded by any
policy Owner may hold. Manager shall aide and cooperate with Owner in every
reasonable way with respect to such insurance or any loss thereunder. Manager is
authorized to settle on Owner's behalf any and all property damage claims not in
excess of $250,000, which includes authority for the execution of proof of loss,
the adjustment of losses, signing of receipts and the collection of money. If
the claim is greater than $250,000, Manager shall act only with the prior
written approval of Owner. Any money collected by Manager under this SECTION
shall be deposited in the Operating Account.
ARTICLE 8: INDEMNIFICATION
--------------------------
8. 1 GENERAL.
(a) OWNER INDEMNIFICATION. Owner agrees to indemnify, defend and hold
Manager and its partners, officers, employees and agents harmless from any
and all claims, judgments, damages, penalties, fines, costs, expenses,
liabilities (including sums paid in settlement of claims) or losses, direct
or indirect, known or unknown, including without limitation, reasonable
attorneys', consultants' and experts' fees and expenses (collectively,
"LOSSES"), suffered, paid or incurred by Manager (i) in connection with the
performance of its obligations under this Agreement (other than those
arising out of Manager's gross negligence or willful misconduct), (ii) the
matters subject to indemnification as described in SECTION 2.7(a) of this
Agreement, (iii) in connection with action taken by Manager at the request
of Owner or (iv) by reason of Owner's failure or refusal to comply with or
abide by any rule, order, determination, ordinance or law of any federal,
state or municipal authority; excluding, however, in each instance, those
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Losses arising out of Manager's gross negligence or willful misconduct. The
provisions of this paragraph shall survive the termination of this
Agreement.
(b) MANAGER INDEMNIFICATION. Manager hereby agrees to indemnify,
defend and hold Owner and its partners, officers, employees and agents
harmless from any and all Losses arising out of or in any way connected
with any act or omissions of Manager or its employees or agents, which
constitute gross negligence or willful misconduct and that are not taken or
omitted at the direction of Owner; excluding, however, in each instance,
those Losses arising out of Owner's gross negligence or willful misconduct.
The provisions of this paragraph shall survive the termination of this
Agreement.
8.2 ENVIRONMENTAL INDEMNIFICATION. Owner agrees to indemnify, defend and
hold Manager and its partners, officers, employees and agents harmless from any
Losses which are incurred by Manager or arise against Manager during or after
the term of this Agreement from or in any way connected with the presence or
suspected presence of Hazardous Substances (as defined below) existing or
present on, under or about the Property, unless the Hazardous Substances are
present solely as a result of the gross negligence or willful misconduct of
Manager, its officers, employees, or agents. For purposes of this section,
"HAZARDOUS SUBSTANCES" shall mean any hazardous, toxic, radioactive, infectious
or carcinogenic substances, material, gas or waste which is or becomes listed or
regulated by any federal, state or local law or governmental authority or
agency, including, without limitation, petroleum and petroleum products, PCBs,
asbestos, and all substances defined as hazardous materials, hazardous wastes,
hazardous substances or extremely hazardous waste under any federal, state or
local law or regulation.
ARTICLE 9: MISCELLANEOUS PROVISIONS
-----------------------------------
9.1 NOTICES. All notices, waivers, demands, requests, or other
communications required or permitted hereunder shall be in writing and be deemed
to have been properly given, served and received (i) if delivered by messenger,
when delivered, (ii) if mailed, three (3) business days after deposit in the
United States mail, certified or registered, postage prepaid, return receipt
requested, (iii) if telecopied, upon mechanical confirmation of completed
transmission, or (iv) if delivered by reputable overnight express courier,
freight prepaid, the next business day after delivery to such courier; in every
case addressed to the party to be notified as follows:
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To Manager: First Union Management, Inc.
55 Public Square
Suite 1900
Cleveland, Ohio 44113
Attention: Paul F. Levin
General Counsel
Telephone: (216) 781-4030
Facsimile: (216) 781-7364
and
First Union Management, Inc.
55 Public Square
Suite 1900
Cleveland, Ohio 44113
Attention: John J. Dee
Chief Accounting Officer
Telephone: (216) 781-4030
Facsimile: (216) 781-7467
To Owner: Southwest Shopping Center Co. II, L.L.C.
55 Public Square
Suite 1900
Cleveland, Ohio 44113
Attention: Paul F. Levin
General Counsel
Telephone: (216) 781-4030
Facsimile: (216) 781-7364
with a copy to: Mayer, Brown & Platt
190 South LaSalle Street
Chicago, Illinois 60603
Attention: Robert E. Gordon, Esq.
Telephone: (312) 782-0600
Facsimile: (312) 701-7711
or to such other address(es) or addressee(s) as any party entitled to receive
notice hereunder shall designate to the others in the manner provided herein for
the service of notices. Rejection or refusal to accept or inability to deliver
because of changed address or because no notice of changed address was given,
shall be deemed receipt.
9.2 SUBORDINATION. (a) Owner and Manager agree that this Agreement is
subordinate to any mortgages or trust deeds held by or for any bank, insurance
company or other lending institution that may now or hereafter be placed upon
the Property. The preceding sentence shall
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<PAGE> 19
not be interpreted to enlarge the duties of Manager hereunder or to diminish the
rights of Manager hereunder, the sole purpose of the preceding sentence being to
indicate the agreement of Owner and Manager that a foreclosure of any such
mortgage or trust deed shall terminate this Agreement in accordance with the
provisions of SECTION 1.5 hereof (but shall not release the then accrued
obligations of the parties hereunder or those obligations of the parties
hereunder that survive the termination of this Agreement).
(b) Manager agrees that the terms of this Agreement are subject to any
contrary terms set forth in any written agreement between Manager and the holder
of such lien.
9.3 SEVERABILITY. If any term, covenant or condition of this Agreement or
the application thereof to any person or circumstance shall, to any extent, be
held to be invalid or unenforceable, the remainder of this Agreement, or the
application of such term, covenant or condition to persons or circumstances
other than those as to which it is held invalid or unenforceable, shall not be
affected thereby, and each term, covenant or condition of this Agreement shall
be valid and shall be enforced to the fullest extent permitted by law.
9.4 NO JOINT VENTURE OR PARTNERSHIP. Owner and Manager hereby renounce the
existence of any joint venture or partnership between them and agree that
nothing contained herein or in any document executed in connection herewith
shall be construed as making Manager and Owner joint venturers or partners.
9.5 MODIFICATION. TERMINATION. This Agreement may be amended or modified
only by a written instrument executed by Manager and Owner.
9.6 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject maker hereof.
9.7 ARTICLE AND SECTION HEADINGS. Article and Section headings contained in
this Agreement are for reference only and shall not be deemed to have any
substantive effect or to limit or define the provisions contained herein.
9.8 SUCCESSORS AND ASSIGNS. This Agreement shall be binding on the parties
hereto, and their successors and permitted assigns. Manager may not assign or
otherwise transfer its interest hereunder without the prior written consent of
Owner, which consent may be withheld in Owner's sole discretion. This Agreement
is freely assignable by Owner.
9.9 GOVERNING LAW. This Agreement shall be construed in accordance with the
internal laws of the state in which the Property is located.
9.10 COUNTERPARTS. This Agreement may be executed in several counterparts,
each of which shall be deemed to be an original, but all of which shall
constitute one and the same instrument.
18
<PAGE> 20
9.11 ATTORNEY'S FEES. In the event of any controversy, claim or action
being filed between the parties respecting this Agreement or in connection with
the Property the prevailing party shall be entitled to recover reasonable
attorney's fees, costs and expenses, whether or not such controversy was
litigated or prosecuted to judgment.
9.12 MANAGER'S OFFICE. Owner shall provide a reasonable and appropriate
space within the Property, rent free, to serve as Manager's on-site office.
Owner shall fully furnish and equip the same and shall pay all direct costs of
operating said on-site office, including utilities, telephone and office
supplies. Manager's right to occupy such space shall be pursuant to a license
granted under this Agreement and shall terminate simultaneously with the
termination of this Agreement. Manager shall use such office only for the
performance by Manager of its duties and responsibilities hereunder.
9.13 CONFIDENTIALITY. Except for information generally available to the
public from sources other than the Manager, Manager shall not disclose to third
parties unaffiliated with itself or the members of Owner any proprietary
information concerning the Property, including without limitation, information
concerning Property income and expenses. Notwithstanding the restrictions of the
immediately preceding sentence, Manager may disclose proprietary information
concerning the Property to its employees, agents, attorneys, accountants and
other consultants, or as required by legal, administrative or regulatory
requirements.
19
<PAGE> 21
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered as
of the date first above written.
SOUTHWEST SHOPPING CENTERS CO. II,
L.L.C., a Delaware limited liability company
By: First SW II, L.L.C., a Delaware limited
liability company, its manager
By: First Southwest II, Inc., a Delaware
corporation, its manager
By:
---------------------------------
Steven M. Edelman
Vice President
MANAGER:
FIRST UNION MANAGEMENT, INC.,
a Delaware corporation
By:
-----------------------------------------
Name: Joseph W. Kearney
------------------------------------
Title: ASST. VICE PRESIDENT,
-----------------------------------
RETAIL OPERATIONS
-----------------------------------
20
<PAGE> 1
Exhibit 99.6
JOINDER AGREEMENT
THIS JOINDER AGREEMENT (the "Agreement") is made and entered into as of
this 26 day of September, 1996, by and between FIRST UNION REAL ESTATE EQUITY
AND MORTGAGE INVESTMENTS, an Ohio business trust ("First Union"), and SOUTHWEST
SHOPPING CENTERS CO. I, L.L.C., a Delaware limited liability company
("Southwest"), for the benefit of MARATHON U.S. REALTIES, INC., a Delaware
corporation, and CENTRIXX REALTY HOLDINGS LIMITED, a Canadian corporation
(collectively hereinafter referred to as "Seller").
RECITALS
A. Seller and First Union have entered into that certain Purchase and
Sale Agreement dated as of June 12, 1996, as amended by that certain Amendment
to Purchase and Sale Agreement dated as of August 12, 1996 (said Purchase and
Sale Agreement, as amended, is hereinafter referred to as the "Purchase
Agreement"). Capitalized terms not specifically defined herein shall have the
same meanings as set forth in the Purchase Agreement.
B. Pursuant to Section 6.5 of the Agreement, First Union may elect to
have title to any one or more Properties conveyed to any one or more nominees,
provided that any such nominee agrees in writing to be bound by the terms and
conditions of the Purchase Agreement as they relate to the particular Property.
C. First Union has elected to direct Seller to transfer title to
Pecanland Mall to Southwest, and Southwest desires to join and be bound by, the
rights, duties, obligations, covenants and liabilities of First Union under the
terms and conditions of the Purchase Agreement with respect to Pecanland Mall.
NOW, THEREFORE, in consideration of the recitals set forth above, which
are made a part of this Agreement, the mutual covenants hereinafter contained
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
1. Southwest, for the benefit of Seller, hereby joins in and agrees to
be bound by all of the rights, duties, obligations, covenants and liabilities of
First Union under the terms and conditions of the Purchase Agreement as they
relate to Pecanland Mall.
2. First Union agrees for the benefit of Seller that nothing contained
in this Agreement shall release First Union from any of its obligations or
liabilities under the terms of the Purchase Agreement.
<PAGE> 2
3. For purposes of any notices to be given to Southwest, the following
address shall be used:
Southwest Shopping Centers Co. I, L.L.C.
c/o First Southwest I, Inc.
55 Public Square, Suite 1900
Cleveland, Ohio 44113
Attn: Paul F. Levin
4. This Agreement shall be binding upon and shall inure to the benefit
of First Union, Southwest, and their respective legal representatives,
successors and assigns. This Agreement shall also inure to the benefit of Seller
and its legal representatives, successors and assigns.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
the day and year first above written.
FIRST UNION REAL ESTATE EQUITY SOUTHWEST SHOPPING CENTERS
AND MORTGAGE INVESTMENTS, CO. I, L.L.C., a Delaware limited
an Ohio business trust liability company
By: FIRST UNION SOUTHWEST
L.L.C., a Delaware limited liability
company, its manager
By:/s/ James C. Mastandrea
------------------------------
Name:
-------------------------
Title: Chairman, President, By: FIRST SOUTHWEST I,
Chief Executive Officer INC., a Delaware
and Chief Financial corporation, its manager
Officer
------------------------ By:/s/ James C. Mastandrea
-----------------------
James C. Mastandrea
President and Chief
Executive Officer
2
<PAGE> 1
Exhibit 99.7
JOINDER AGREEMENT
THIS JOINDER AGREEMENT (the "Agreement") is made and entered into as of
this 26 day of September, 1996, by and between FIRST UNION REAL ESTATE EQUITY
AND MORTGAGE INVESTMENTS, an Ohio business trust ("First Union"), and SOUTHWEST
SHOPPING CENTERS CO. II, L.L.C., a Delaware limited liability company
("Southwest"), for the benefit of MARATHON U.S. REALTIES, INC., a Delaware
corporation, and CENTRIXX REALTY HOLDINGS LIMITED, a Canadian corporation
(collectively hereinafter referred to as "Seller").
RECITALS
A. Seller and First Union have entered into that certain Purchase and
Sale Agreement dated as of June 12, 1996, as amended by that certain Amendment
to Purchase and Sale Agreement dated as of August 12, 1996 (said Purchase and
Sale Agreement, as amended, is hereinafter referred to as the "Purchase
Agreement"). Capitalized terms not specifically defined herein shall have the
same meanings as set forth in the Purchase Agreement.
B. Pursuant to Section 6.5 of the Agreement, First Union may elect to
have title to any one or more Properties conveyed to any one or more nominees,
provided that any such nominee agrees in writing to be bound by the terms and
conditions of the Purchase Agreement as they relate to the particular Property.
C. First Union has elected to direct Seller to transfer title to
Alexandria Mall, Brazos Mall, Killeen Mall, Mesilla Valley Mall, Park Plaza,
Shawnee Mall and Villa Linda Mall (such malls are hereinafter referred to as the
"Transferred Malls") to Southwest, and Southwest desires to join and be bound
by, the rights, duties, obligations, covenants and liabilities of First Union
under the terms and conditions of the Purchase Agreement with respect to the
Transferred Malls.
NOW, THEREFORE, in consideration of the recitals set forth above, which
are made a part of this Agreement, the mutual covenants hereinafter contained
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
1. Southwest, for the benefit of Seller, hereby joins in and agrees to
be bound by all of the rights, duties, obligations, covenants and liabilities of
First Union under the terms and conditions of the Purchase Agreement as they
relate to the Transferred Malls.
2. First Union agrees for the benefit of Seller that nothing contained
in this Agreement shall release First Union from any of its obligations or
liabilities under the terms of the Purchase Agreement.
<PAGE> 2
3. For purposes of any notices to be given to Southwest, the following
address shall be used:
Southwest Shopping Centers Co. II, L.L.C.
c/o First Southwest II, Inc.
55 Public Square, Suite 1900
Cleveland, Ohio 44113
Attn: Paul F. Levin
4. This Agreement shall be binding upon and shall inure to the benefit
of First Union, Southwest, and their respective legal representatives,
successors and assigns. This Agreement shall also inure to the benefit of Seller
and its legal representatives, successors and assigns.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
the day and year first above written.
FIRST UNION REAL ESTATE EQUITY SOUTHWEST SHOPPING CENTERS
AND MORTGAGE INVESTMENTS, CO.I, L.L.C., a Delaware limited liability
an Ohio business trust company
By: FIRST SW II, L.L.C.,
a Delaware limited liability company,
its manager
By:/s/ James C. Mastandrea
------------------------------
Name:_________________________
By: First Southwest II, Inc., a
Title: Chairman, President, Delaware corporation, its
Chief Executive Officer manager
and Chief Financial
Officer By:/s/ James C. Mastandrea
----------------------- -------------------------
James C. Mastandrea,
President and Chief
Executive Officer
2
<PAGE> 1
Exhibit 99.8
JOINDER AGREEMENT
THIS JOINDER AGREEMENT (the "Agreement") is made and entered into as of
this 26 day of September, 1996, by and between FIRST UNION REAL ESTATE EQUITY
AND MORTGAGE INVESTMENTS, an Ohio business trust ("First Union"), and TEMPLE
SHOPPING CENTER CO., L.L.C., a Delaware limited liability company ("TSC"), for
the benefit of MARATHON U.S. REALTIES, INC., a Delaware corporation, and
CENTRIXX REALTY HOLDINGS LIMITED, a Canadian corporation (collectively
hereinafter referred to as "Seller").
RECITALS
A. Seller and First Union have entered into that certain Purchase and
Sale Agreement dated as of June 12, 1996, as amended by that certain Amendment
to Purchase and Sale Agreement dated as of August 12, 1996 (said Purchase and
Sale Agreement, as amended, is hereinafter referred to as the "Purchase
Agreement"). Capitalized terms not specifically defined herein shall have the
same meanings as set forth in the Purchase Agreement.
B. Pursuant to Section 6.5 of the Agreement, First Union may elect to
have title to any one or more Properties conveyed to any one or more nominees,
provided that any such nominee agrees in writing to be bound by the terms and
conditions of the Purchase Agreement as they relate to the particular Property.
C. First Union has elected to direct Seller to transfer the Temple
Interest to TSC, and TSC desires to join and be bound by, the rights, duties,
obligations, covenants and liabilities of First Union under the terms and
conditions of the Purchase Agreement with respect to the Temple Interest, the
Temple Partnership Agreement and Temple Mall.
NOW, THEREFORE, in consideration of the recitals set forth above, which
are made a part of this Agreement, the mutual covenants hereinafter contained
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
1. TSC, for the benefit of Seller, hereby joins in and agrees to be
bound by all of the rights, duties, obligations, covenants and liabilities of
First Union under the terms and conditions of the Purchase Agreement as they
relate to the Temple Interest, the Temple Partnership Agreement and Temple Mall.
2. First Union agrees for the benefit of Seller that nothing contained
in this Agreement shall release First Union from any of its obligations or
liabilities under the terms of the Purchase Agreement.
<PAGE> 2
3. For purposes of any notices to be given to TSC, the following
address shall be used:
Temple Shopping Center Co. I, L.L.C.
c/o First Southwest I, Inc.
55 Public Square, Suite 1900
Cleveland, Ohio 44113
Attn: Paul F. Levin
4. This Agreement shall be binding upon and shall inure to the benefit
of First Union, TSC, and their respective legal representatives, successors and
assigns. This Agreement shall also inure to the benefit of Seller and its legal
representatives, successors and assigns.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
day and year first above written.
FIRST UNION REAL ESTATE EQUITY TEMPLE SHOPPING CENTER CO.,
AND MORTGAGE INVESTMENTS, L.L.C., a Delaware limited liability company
an Ohio business trust
By: FIRST UNION SOUTHWEST L.L.C.,
a Delaware limited liability company,
its designated managing member
By:/s/ James C. Mastandrea
------------------------------
Name:------------------------- By: FIRST SOUTHWEST I, Inc.,
Title: Chairman, President, a Delaware corporation,
Chief Executive Officer its manager
and Chief Financial
Officer By:/s/ James C. Mastandrea
----------------------- ---------------------------
James C. Mastandrea,
President and Chief
Executive Officer
2
<PAGE> 1
Exhibit 99.9
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (the "Agreement") is dated as of September 26,
1996, by and among MARATHON U.S. REALTIES, INC., a Delaware corporation
("MUSRI"), FIRST UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS, an Ohio
business trust ("First Union"), SOUTHWEST SHOPPING CENTERS CO. I, L.L.C., a
Delaware limited liability company ("Southwest") and FIRST AMERICAN TITLE
INSURANCE COMPANY ("First American").
RECITALS:
WHEREAS, MUSRI and First Union have entered into that certain Purchase
and Sale Agreement dated as of June 12, 1996, as amended by that certain
Amendment to Purchase and Sale Agreement dated as of August 12, 1996, as amended
from time to time (said Purchase and Sale Agreement as amended is hereinafter
referred to as the "Purchase Agreement");
WHEREAS, the consent of TIAA (as defined in the Purchase Agreement) has
not yet been obtained by MUSRI in accordance with the terms of the Purchase
Agreement;
WHEREAS, pursuant to the terms of the Purchase Agreement, the Mall
Assets (as defined in the Purchase Agreement) with respect to Pecanland Mall (as
defined in the Purchase Agreement) are to be excluded from the Property to be
transferred under the terms of the Purchase Agreement; and
WHEREAS, the parties have agreed to escrow all documents and the
allocated portion of the Purchase Price (as defined in the Purchase Agreement)
pursuant to the terms of this Agreement, pending receipt of the TIAA consent.
NOW, THEREFORE, in consideration of the terms and conditions contained
in the Purchase Agreement and this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. The fully executed documents transferring the Mall Assets with
respect to Pecanland Mall, as set forth on Schedule 1, shall be deposited in
escrow with First American. MUSRI, First Union and Southwest acknowledge that
they have approved the title commitment and pro forma attached hereto as
Schedule 3 and all other required deliveries and matters set forth in the
Purchase Agreement with respect to Pecanland Mall. MUSRI shall arrange from time
to time for an extension of the title commitment so that it shall not lapse
prior to the first to occur of the expiration or termination of this Agreement
or the Disbursement Date.
2. The net amount of the allocated portion of the Purchase Price with
respect to Pecanland Mall in the amount of $4,188,193.20, in accordance with the
terms of the Closing Statement attached hereto as Schedule 2 (the "Net Purchase
Price"), shall be deposited in escrow with First American. The Net Purchase
Price shall be invested by First American in 7-day U.S. Treasury Bills, or as
otherwise directed by MUSRI and First Union, and all interest accrued shall be
paid to MUSRI in the event that the deposits are disbursed in accordance with
Paragraph 4 of this Agreement, or shall be paid to First Union in the event that
the deposits are disbursed in accordance
<PAGE> 2
with Paragraph 6 of this Agreement. Notwithstanding the foregoing sentence, the
provisions of Section 7.4(b) of the Purchase Agreement shall continue to be
applicable to Pecanland Mall.
3. Upon receipt by First American of a consent, assumption and release
document from TIAA (the "Consent") acceptable to MUSRI and First Union, pursuant
to which (a) TIAA consents to the transfer of the Mall Assets with respect to
Pecanland Mall, (b) Southwest assumes the obligations under the terms of the
Pecanland Loan (as defined in the Purchase Agreement), (c) TIAA releases MUSRI
under the terms of the Pecanland Loan, and (d) provided that there shall be no
change in the status of title to Pecanland Mall from that reflected in the title
commitment and pro forma attached hereto as Schedule 3 that has not been
approved in advance by First Union or been caused by any action of First Union
or Southwest, MUSRI and Southwest shall deliver to First American written notice
of their approval of the Consent (the "Consent Approval"). Any fees, expenses,
title charges or other consideration required by TIAA shall be paid by MUSRI.
Notwithstanding the foregoing, the Consent shall be deemed acceptable to MUSRI
if it provides for a release of MUSRI with respect to obligations under the loan
documents evidencing the Pecanland Loan prior to the date of execution thereof
by TIAA and Southwest delivers to MUSRI on or before execution thereof by TIAA,
an indemnification agreement reasonably acceptable to MUSRI indemnifying MUSRI
against obligations under the loan documents evidencing the Pecanland Loan
subsequent to the date of execution of the Consent by TIAA.
4. Upon receipt of the Consent Approval, First American is hereby
authorized and directed to record those documents noted on Schedule 1 as
documents for recording, to deliver two (2) execution copies of the remaining
documents noted on Schedule 1 to First Union, with two (2) execution copies
thereof to MUSRI and to disburse the Net Purchase Price less the disbursements
set out on Schedule 2 to MUSRI. The date upon which such disbursement occurs is
hereinafter referred to as the "Disbursement Date."
5. MUSRI, First Union and Southwest agree that notwithstanding the date
of recording of the deed conveying Pecanland Mall, the proration date and Cutoff
Date (as defined in the Purchase Agreement) with respect to Pecanland Mall shall
be the date of this Agreement.
6. In the event that the Consent has not been obtained within six (6)
months after the date of this Agreement, subject to the extension rights set
forth below, this Agreement shall terminate without any notice to any party and
thereupon the Act of Sale with respect to Pecanland Mall shall be returned to
MUSRI, the fully executed documents transferring the Mall Assets with respect to
Pecanland Mall, as set forth on Schedule 1, shall be destroyed by First American
and the Net Purchase Price shall be returned to First Union. Notwithstanding the
foregoing, at the expiration of the foregoing six (6) month period, First Union
shall have the right, exercisable by written notice to MUSRI, to extend this
Agreement for an additional period of six (6) months, and thereafter at the
expiration of said foregoing six (6) month extension First Union shall have the
right, exercisable by written notice to MUSRI, to extend this Agreement for a
second additional period of six (6) months. In addition, the parties may, by
written notice to First American, further extend the term of this Agreement for
such additional period as the parties agree. Further notwithstanding anything to
the contrary contained in this Agreement, in the event that MUSRI at any time
receives a notice of default from TIAA, which notice relates to any alleged
default relating to the transactions
2
<PAGE> 3
contemplated by this Agreement, this Agreement shall terminate on or before the
earlier to occur of (a) the expiration date of the cure period set forth in any
such notice or (b) any applicable notice and cure period under the documents
evidencing the Pecanland Loan. The termination of this Agreement as provided in
this Paragraph 6 shall not affect the rights and obligations of MUSRI, First
Union and Southwest under the Purchase Agreement, including, without limitation,
under Paragraph 3.3 thereof. Notwithstanding the foregoing, First Union may by
written notice to MUSRI, given not less than thirty (30) days prior to the
effective date of the termination, terminate this Agreement, including its
management rights and obligations, and to terminate the provisions of Section
3.3 of the Purchase Agreement if First Union determines that it is not fruitful
to continue pursuing the consent of TIAA to a Consent acceptable to First Union.
7. From the date of this Agreement until the Disbursement Date,
Pecanland Mall shall be managed by First Union Management, Inc. ("FUMI") in
accordance with the terms of this Paragraph 7, and in accordance with the terms
of the documents evidencing the Pecanland Loan, and in accordance with property
management standards applicable to similar properties in similar metropolitan
areas. In addition, in the event that the Consent has not been obtained within
fourteen (14) days after the date of this Agreement, the parties shall negotiate
in good faith the terms and conditions of a management and leasing agreement,
which terms and conditions shall include the management and leasing fee
arrangement set forth in this Paragraph 7, and authority for FUMI to execute
leases upon the same approval procedures as were applicable to MUSRI under
Section 8.2 of the Purchase Agreement. All revenue collected by FUMI or
Southwest during the term of this Agreement with respect to Pecanland Mall, as
determined in accordance with generally accepted accounting principles
consistently applied (the "Revenue") from the date of this Agreement until the
Disbursement Date shall be paid at the direction of FUMI for the benefit of
Southwest. During the term of this Agreement all expenses with respect to
Pecanland Mall, including, without limitation, the debt service under the
Pecanland Loan (collectively hereinafter referred to as the "Expenses"), shall
be paid by FUMI from the Revenue. Within fifteen (15) days after the end of each
month during the term of this Agreement, FUMI shall provide written statements
to MUSRI setting forth the Revenue and Expenses for the prior month. In the
event that this Agreement is terminated as set forth in Paragraph 6 of this
Agreement, the Revenue less the Expenses, and net of the Management Fee (as
hereinafter defined) shall be paid by FUMI to MUSRI within five (5) business
days after such termination. As used herein, the term "Management Fee" shall
mean a fee paid to FUMI for FUMI's services in connection with management and
leasing of the Pecanland Mall equal to 4% per month of gross revenues and
leasing fees payable at $3.00 per square foot on new leases and $1.00 per square
foot for renewal leases, prorated on a per diem basis from the date of this
Agreement until the Disbursement Date.
8. In the event conflicting demands for disbursement of the escrow
deposits are made, or conflicting notices are served on First American, and such
conflicting demands or notices remain unresolved for fourteen (14) days after
First American has received such conflicting demands or notices and notified the
parties hereto thereof, the parties hereto expressly agree and consent that
First American may at any time thereafter notify all parties, in the manner
required under Paragraph 10 hereof, that First American intends to file an
interpleader action in the United States District Court, Northern District of
Texas (the "Court"). First American shall then promptly file the interpleader
action and deposit the escrow deposits made under Paragraphs 1 and 2 with the
Court.
3
<PAGE> 4
MUSRI and First Union jointly and severally agreed to pay the costs, including
reasonable attorneys' fees, that First American may expend or incur in such
interpleader suit or any other litigation in connection with this Agreement, the
among of such costs to be fixed and judgment therefor to be rendered by the
Court in such suit. Upon the filing of an interpleader action and deposit of all
deposits made under the terms of this Agreement with the Court, First American
shall be fully released and discharged from all obligations imposed on it under
this Agreement.
9. The duties and obligations of First American hereunder shall be
determined solely by the express provisions of this Agreement. First American
shall be entitled to rely and shall be protected in acting in reliance upon any
instructions or directions furnished to it in writing by MUSRI, Southwest or
First Union or pursuant to any provisions of this Agreement. First American may
resign by giving not less than thirty (30) days' written notice to MUSRI,
Southwest and First Union of its intention to do so; provided, however, that
First American shall continue to serve until MUSRI, Southwest and First Union
shall have appointed a successor escrow agent. Similarly, First American may be
removed and replaced following the giving of not less than five (5) days prior
written notice to First American by MUSRI, Southwest and First Union.
10. Any notice, request, demand, instruction or other document to be
given or served hereunder shall be in writing and shall be deemed to be
delivered (a) upon personal delivery to and receipt by the person to whom
delivered (including without limitation delivery to and/or receipt by telecopy),
or (b) four (4) days after deposit in United States registered or certified
mail, return receipt requested, or (c) one (1) business day after deposit with a
nationally recognized overnight express courier for next day delivery, in each
case, addressed to the parties at their respective addresses or telecopy numbers
(as applicable) set forth below:
If to MUSRI:
Marathon Realty Company Limited
200 Wellington Street West
Suite 400
Toronto, Ontario M5V 3C7
Canada
Attention: John E. Beales
Telecopy: (416)348-1902
With a copy to:
Neal, Gerber & Eisenberg
Two N. LaSalle Street
21st Floor
Chicago, Illinois 60602
Attention: Reuben C. Warshawsky
Telecopy: (312)269-1747
4
<PAGE> 5
If to First Union or Southwest:
First Union Real Estate and Mortgage Investments
55 Public Square, Suite 1900
Cleveland, Ohio 44113
Attention: Paul F. Levin
Telecopy: (216)781-7364
With a copy to:
Thompson Hine & Flory P.L.L.
3900 Society Center
127 Public Square
Cleveland, Ohio 44114-1216
Attention: Linda A. Striefsky
Telecopy: (216)566-5800
If to First American:
First American Title Insurance Company
3030 LBJ Freeway
Suite 150
Dallas, Texas 75234
Attention: James B. Shackelford
Telecopy: (972)241-7112
11. Whenever any period of time is specified herein for the taking of
any action or the giving of any notice, the period shall be computed by
excluding the day upon which the period is specified to commence and including
the last day of the period specified. If the last day of the period falls on a
Saturday, Sunday or federal holiday, the period shall be extended to include the
first subsequent day thereafter that is not a Saturday, Sunday or federal
holiday.
12. This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same agreement.
13. None of the parties hereto may make any assignment of this
Agreement or any interest therein without the prior written consent of the other
parties. This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective successors and/or assigns.
14. Except as specifically set forth or referred to herein, nothing
herein expressed or implied is intended or shall be construed to confer upon or
give to any third party any rights or remedies under or by reason of this
Agreement. This Agreement may not be amended or terminated orally but only by an
instrument in writing duly executed by the parties hereto.
5
<PAGE> 6
15. First American shall not be responsible for any loss of principal
or interest due to changes in the market for any securities purchase pursuant to
the terms hereof; for any penalties or loss caused by purchase or sales delays
or the making or redeeming of investments; or for any loss or impairment of
funds while the funds are in the course of collection or while those funds are
on deposit in a financial institution, if such loss or impairment results from
failure, insolvency or suspension of a financial institution.
16. Notwithstanding anything contained herein to the contrary, this
Agreement is made and executed on behalf of First Union, a business trust
organized under the laws of the State of Ohio, by its officer(s) on behalf of
the trustees thereof, and none of the trustees or any additional or successor
trustee hereafter appointed, or any beneficiary, officer, employee or agent of
First Union shall have any liability in his personal or individual capacity, but
instead, all parties shall look solely to the property and assets of First Union
for satisfaction of any losses, claims or damages of any nature in connection
with this Agreement.
17. This Agreement has been made pursuant to and shall be governed by
the laws of the State of Texas.
6
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered on the date first above written.
MARATHON U.S. REALTIES, INC.,
a Delaware corporation
By:/s/ John E. Beales
--------------------
John E. Beales
Vice-President
FIRST UNION REAL ESTATE EQUITY AND
MORTGAGE INVESTMENTS,
By:/s/ James C. Mastandrea
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Name:
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Title: Chairman, President
Chief Executive Officer and
Chief Financial Officer
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SOUTHWEST SHOPPING CENTERS CO. I, L.L.C.,
a Delaware limited liability company
By: FIRST UNION SOUTHWEST L.L.C.,
a Delaware limited liability company,
its manager
By: FIRST SOUTHWEST I, INC.,
a Delaware corporation,
its manager
By:/s/ James C. Mastandrea
------------------------------
James C. Mastandrea
President and Chief Executive
Officer
FIRST AMERICAN TITLE INSURANCE COMPANY
By:
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Name:
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Title:
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