SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
First Union Real Estate Equity and Mortgage Investments
(NAME OF ISSUER)
Shares of Beneficial Interest, $1.00 par value
(TITLE OF CLASS OF SECURITIES)
337400105
(CUSIP NUMBER)
David S. Klafter, Esq.
Gotham Partners Management Co., LLC
110 East 42nd Street
New York, New York 10017
(212) 286-0300
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO
RECEIVE NOTICES AND COMMUNICATIONS)
June 4, 1997
(DATE OF EVENT WHICH REQUIRES FILING OF THIS STATEMENT)
If the filing person has previously filed a statement on Sched-
ule 13G to report the acquisition which is the subject of this
Schedule 13D, and is filing this schedule because of Rule 13d--
1(b)(3) or (4), check the following box [ ].
Check the following box if a fee is being paid with the state-
ment [ ]. (A fee is not required only if the reporting person:
(1) has a previous statement on file reporting beneficial own-
ership of more than five percent of the class of securities
described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of five percent or less
of such class.) (See Rule 13d-7.)
Note: Six copies of this statement, including all exhibits,
should be filed with the Commission. See Rule 13d-1(a) for
other parties to whom copies are to be sent.<PAGE>
SCHEDULE 13D
CUSIP No. 337400105 Page 2 of 9 Pages
------------------------------------------------------------------
1 NAME OF PERSON
GOTHAM PARTNERS, L.P.
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
13-3700768
------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) /x/
(b) / /
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
WC
------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) / /
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
NEW YORK
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7 SOLE VOTING POWER
NUMBER OF 1,897,305 (INCLUDING OPTIONS TO
SHARES PURCHASE 1,183,150 SHARES)
BENEFICIALLY -----------------------------------------
OWNED BY 8 SHARED VOTING POWER
EACH -0-
REPORTING -----------------------------------------
PERSON 9 SOLE DISPOSITIVE POWER
WITH 1,897,305 (INCLUDING OPTIONS TO
PURCHASE 1,183,150 SHARES)
-----------------------------------------
10 SHARED DISPOSITIVE POWER
-0-
------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,897,305 (INCLUDING OPTIONS TO PURCHASE 1,183,150 SHARES)
------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* / /
------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
6.64%
------------------------------------------------------------------
14 TYPE OF PERSON REPORTING*
PN
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*SEE INSTRUCTIONS BEFORE FILLING OUT<PAGE>
SCHEDULE 13D
CUSIP No. 337400105 Page 3 of 9 Pages
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1 NAME OF PERSON
GOTHAM PARTNERS II, L.P.
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
13-3863925
------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) /x/
(b) / /
------------------------------------------------------------------
3 SEC USE ONLY
------------------------------------------------------------------
4 SOURCE OF FUNDS*
WC
------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) / /
------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
NEW YORK
------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF 24,395 (INCLUDING OPTIONS TO
SHARES PURCHASE 16,850 SHARES)
BENEFICIALLY -----------------------------------------
OWNED BY 8 SHARED VOTING POWER
EACH -0-
REPORTING -----------------------------------------
PERSON 9 SOLE DISPOSITIVE POWER
WITH 24,395 (INCLUDING OPTIONS TO
PURCHASE 16,850 SHARES)
-----------------------------------------
10 SHARED DISPOSITIVE POWER
-0-
------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
24,395 (INCLUDING OPTIONS TO PURCHASE 16,850 SHARES)
------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* / /
------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0.09%
------------------------------------------------------------------
14 TYPE OF PERSON REPORTING*
PN
------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT<PAGE>
Page 4 of 9 Pages
1. SECURITY AND ISSUER
This statement on Schedule 13D (the "Statement") re-
lates to the shares of Beneficial Interest, par value $1.00 per
share (the "Shares"), of First Union Real Estate Equity and
Mortgage Investments, an Ohio business trust (the "Company").
The principal executive offices of the Company are located at
55 Public Square, Suite 1900, Cleveland, Ohio 44113-1937.
ITEM 2. IDENTITY AND BACKGROUND
This Statement is being filed by Gotham Partners,
L.P., a New York limited partnership ("Gotham"), and Gotham
Partners II, L.P., a New York limited partnership ("Gotham II"
and together with Gotham, the "Reporting Persons"). Each of
Gotham and Gotham II was formed to engage in the buying and
selling of securities for investment for its own account.
Section H Partners, L.P., a New York limited partner-
ship ("Section H"), is the sole general partner of Gotham and
Gotham II. Karenina Corp., a New York corporation
("Karenina"), and DPB Corp., a New York corporation ("DPB"),
are the sole general partners of Section H. Karenina is wholly
owned by Mr. William A. Ackman. DPB is wholly owned by Mr.
David P. Berkowitz. Messrs. Ackman and Berkowitz are citizens
of the United States of America, and their principal occupation
is managing the affairs of Karenina and DPB, respectively, and
through such entities the affairs of Section H, Gotham and
Gotham II. The business address of each of Gotham, Gotham II,
Section H, Karenina, DPB and Messrs. Ackman and Berkowitz is
110 East 42nd Street, 18th Floor, New York, New York 10017.
During the last five years, none of Gotham, Gotham
II, Section H, Karenina, DPB, Mr. Ackman or Berkowitz (i) has
been convicted in a criminal proceeding (excluding traffic vio-
lations or similar misdemeanors), or (ii) has been a party to a
civil proceeding of a judicial or administrative body of compe-
tent jurisdiction and as a result of such proceeding was or is
subject to a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject
to, federal or state securities laws or finding any violation
with respect to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
The aggregate purchase price of the Shares and the
Options (as defined below) purchased by Gotham was $14,034,225
and the aggregate purchase price of the Shares and the Options
purchased by Gotham II was $163,693. All of the funds required
for these purchases were obtained from the general funds of
Gotham and Gotham II, respectively.<PAGE>
Page 5 of 9 Pages
ITEM 4. PURPOSE OF THE TRANSACTION
The Reporting Persons acquired the Shares and Options
for investment purposes, and for the reasons set forth in the
following paragraphs. In general, the Reporting Persons pursue
an investment objective that seeks capital appreciation. In
pursuing this investment objective, the Reporting Persons
analyze and evaluate the performance of securities owned by them,
including the Shares and the Options, and the operations, capital
structure and markets of companies in which they invest, including
the Company, on a continuous basis through analysis of documentation
on and discussions with knowledgeable industry and market observers
and with representatives of such companies (often at the invitation
of management).
The Reporting Persons believe that the Company has significant
unrealized equity potential which can be realized if the Company
is able to execute a substantial number of sizable acquisitions of
real-estate-intensive operating businesses at attractive prices.
The Reporting Persons are concerned that existing management may
not have the requisite background and experience to implement such
a value-maximizing strategy. The Reporting Persons are concerned
that the Company's management, over the past eight months, has
raised equity capital in a manner which has been unnecessarily
dilutive to existing shareholders of the Company.
Each Reporting Person will continuously assess the
Company's business, financial condition, results of operations
and prospects, general economic conditions, the securities mar-
kets in general and those for the Company's securities in par-
ticular, other developments and other investment opportunities.
Depending on such assessments, and based on, among other rea-
sons, the matters set forth in the preceding paragraph, the
Reporting Persons may seek to actively influence the management
and affairs of the Company, including, without limitation, by
making proposals and taking other actions as to, among other
things, new management for the Company, a new slate of directors,
an extraordinary corporate transaction such as a merger or
reorganization, modification of the Company's Declaration of
Trust or By-laws, or other similar or related matters.
In addition, one or more of the Reporting Persons may
acquire additional Shares or Options or may determine to sell or
otherwise dispose of all or some of its holdings of Shares or
Options. Such actions, and any action of the nature referred to
in the preceding sentence, will depend upon a variety of factors,
including, without limitation, current and anticipated future
trading prices for such common stock, the financial condition,
results of operations and prospects of the Company, alternative
investment opportunities, general economic financial market and
industry conditions, and future actions of the Company and its
management.
Except as set forth above, none of the Reporting Per-
sons has any plans or proposals which would relate to or result
in any of the matters set forth in items (a) through (j) of
Item 4 of Schedule 13D.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
(a) Gotham owns 1,897,305 Shares (including Options
to purchase 1,183,150 Shares as described below) as of the date<PAGE>
Page 6 of 9 Pages
of this Statement, representing an aggregate of approximately
6.64% of the outstanding Shares of the Company. The percentage
used in the immediately preceding sentence is calculated based
upon 27,134,169 outstanding Shares, as reported in the
Company's Prospectus, dated May 28, 1997. Gotham II owns 24,395
Shares (including Options to purchase 16,850 Shares as de-
scribed below) as of the date of this Statement, representing
an aggregate of approximately 0.09% of the outstanding Shares
of the Company. The percentage used in the immediately preced-
ing sentence is calculated based upon 27,134,169 outstanding
Shares, as reported in the Company's Prospectus, dated May 28,
1997. None of Section H, Karenina, DPB, Mr. Ackman or Mr.
Berkowitz beneficially own any Shares (other than the Shares
beneficially owned by Gotham and Gotham II).
As noted above, Gotham owns Options to purchase
1,183,150 Shares and Gotham II owns Options to purchase 16,850
Shares (the "Options"). The Options are pursuant to agreements
entered into on June 4, 1997 with Bankers Trust Company and
J.P. Morgan Securities Inc., each of which is attached hereto
as an Exhibit and specifically incorporated herein by refer-
ence, and the description herein of each such agreement is
qualified in its entirety by reference thereto.
(b) Each of Gotham and Gotham II has sole power to
vote and to dispose of all of the Shares beneficially owned by
it, other than the Shares represented by Options, as to which
Gotham and Gotham II will have such power at such time, if
ever, as the Options are exercised and the underlying Shares
actually acquired by Gotham and Gotham II.
(c) The table below sets forth information with re-
spect to all purchases and sales of Shares and Options by
Gotham and Gotham II. Except as otherwise noted, in each case,
the transactions as to Shares were effected in open-market
transactions on the New York Stock Exchange, the transactions
as to Options were private transactions in accordance with the
agreements attached hereto as Exhibits, and the price per Share
or Option includes commissions.<PAGE>
Page 7 of 9 Pages
Gotham
Number of Shares Price per Share
Date Purchased/(Sold) or Option
12/24/96 690,000(1) $ 3.38000
2/03/97 493,150(2) $ 4.31635
4/11/97 6,410 $13.36730
4/14/97 157,810 $13.90610
4/25/97 56,500 $13.72260
4/29/97 55,000 $13.80000
4/30/97 30,930 $13.79480
5/01/97 39,700 $13.58150
5/06/97 40,000 $13.56000
5/29/97 127,680 $12.79760
5/30/97 77,585 $12.78330
6/02/97 23,740 $13.05000
6/10/97 98,800 $13.31000
Gotham II
Number of Shares Price per Share
Date Purchased/(Sold) or Option
12/24/96 10,000(3) $3.38000
2/03/97 6,850(4) $4.31635
4/11/97 90 $13.36733
4/14/97 2,190 $13.90610
4/30/97 370 $13.79481
5/29/97 1,520 $12.79760
5/30/97 915 $12.78330
6/02/97 1,260 $13.05000
6/10/97 1,200 $13.31000
Except as described above, none of Gotham, Gotham II,
Section H, Karenina, DPB, Mr. Ackman or Mr. Berkowitz has ef-
fected any transactions in the securities of the Company during
the past sixty days.
(d) and (e). Not applicable.
--------------------------
(1) Currently exercisable options to purchase 690,000 Shares
at $8.80 per Share.
(2) Currently exercisable options to purchase 493,150 Shares
at $10.80 per Share.
(3) Currently exercisable options to purchase 10,000 Shares at
$8.80 per Share.
(4) Currently exercisable options to purchase 6,850 Shares at
$10.80 per Share.<PAGE>
Page 8 of 9 Pages
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATION-
SHIPS WITH RESPECT TO SECURITIES OF THE ISSUER.
Except as described above, none of Gotham, Gotham II,
Section H, Karenina, DPB, Mr. Ackman or Mr. Berkowitz is a
party to any contract, arrangement, understanding or relation-
ship with respect to any securities of the Company, including
but not limited to transfer or voting of any of the securities,
finder's fees, joint ventures, loan or option agreements, puts
or calls, guarantees of profits, divisions of profit or losses
or the giving or withholding of proxies.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
The following exhibits are being filed with this
Schedule:
1. A written agreement relating to the filing of
joint acquisition statements as required by Rule 13d-1(f)(1)
promulgated under the Securities Exchange Act of 1934, as
amended.
2. Letter Agreement, dated as of January 24, 1997,
by and between Gotham Partners, L.P. and J.P. Morgan Securities
Inc. as agent for Morgan Guaranty Trust Company of New York, as
supplemented by Letter Agreement, dated as of June 10, 1997, by
and between Gotham Partners, L.P. and J.P. Morgan Securities
Inc. as agent for Morgan Guaranty Trust Company of New York.
3. Letter Agreement, dated as of January 24, 1997,
by and between Gotham Partners II, L.P. and J.P. Morgan Securi-
ties Inc. as agent for Morgan Guaranty Trust Company of New
York, as supplemented by Letter Agreement, dated as of June 10,
1997, by and between Gotham Partners II, L.P. and J.P. Morgan
Securities Inc. as agent for Morgan Guaranty Trust Company of
New York.
4. Option Agreement, dated as of January 29, 1997,
by and between Gotham Partners, L.P. and Bankers Trust Company,
as amended and restated by Option Agreement, dated as of Janu-
ary 29, 1997, by and between Gotham Partners, L.P. and Bankers
Trust Company (reflecting First Transaction Amendment, dated as
of June 4, 1997).
5. Option Agreement, dated as of January 29, 1997,
by and between Gotham Partners II, L.P. and Bankers Trust Com-
pany, as amended and restated by Option Agreement, dated as of
January 29, 1997, by and between Gotham Partners II, L.P. and
Bankers Trust Company (reflecting First Transaction Amendment,
dated as of June 4, 1997).<PAGE>
Page 9 of 9 Pages
After reasonable inquiry and to the best of our
knowledge and belief, the undersigned certify that the informa-
tion set forth in this statement is true, complete and correct.
June 16, 1997
GOTHAM PARTNERS, L.P.
By: SECTION H PARTNERS, L.P.,
its general partner
By: KARENINA CORP.,
a general partner
By: /s/ William A. Ackman
William A. Ackman
President
GOTHAM PARTNERS II, L.P.
By: SECTION H PARTNERS, L.P.,
its general partner
By: KARENINA CORPORATION,
a general partner
By: /s/ William A. Ackman
William A. Ackman
President
EXHIBIT 1
JOINT ACQUISITION STATEMENT
PURSUANT TO RULE 13d-1(f)1
The undersigned acknowledge and agree that the foregoing state-
ment on Schedule 13D, as amended, is filed on behalf of each of
the undersigned and that all subsequent amendments to this
statement on Schedule 13D, as amended, shall be filed on behalf
of each of the undersigned without the necessity of filing ad-
ditional joint acquisition statements. The undersigned ac-
knowledge that each shall be responsible for the timely filing
of such amendments, and for the completeness and accuracy of
the information concerning him or it contained therein, but
shall not be responsible for the completeness and accuracy of
the information concerning the other, except to the extent that
he or it knows or has reason to believe that such information
is inaccurate.
DATED: June 16, 1997
GOTHAM PARTNERS, L.P.
By: SECTION H PARTNERS, L.P.,
its general partner
By: KARENINA CORP.,
a general partner
By: /s/ William A. Ackman
William A. Ackman
President
GOTHAM PARTNERS II, L.P.
By: SECTION H PARTNERS, L.P.,
its general partner
By: KARENINA CORPORATION,
a general partner
By: /s/ William A. Ackman
William A. Ackman
President
Exhibit 2
JPMORGAN
Morgan Guaranty
Trust Company of
New York
P.O. Box 161
60 Victoria Embankment
London EC4Y OJP
Direct: 0171-325-4050
Operator: 0171-600-2300
Fax: 0171-325-8205
January 24, 1997
Gotham Partners, L.P.
110 East 42nd Street
18th Floor
New York, NY 10017
Att: Bill Ackman
Reference: 529518
Re: Equity Single Stock Option Transaction
The purpose of this letter is to confirm the terms and
conditions of the equity single stock option transaction (the
"Transaction") entered into between us on 19th December, 1996
(the "Trade Date"). This Confirmation shall replace any previ-
ous letter and shall serve as the final documentation for this
Transaction.
This Confirmation evidences a complete binding agreement
between the Parties (as defined hereof) as to the terms of the
Transaction to which this Confirmation relates. The parties
agree to incorporate by reference the 1994 ISDA Equity Option
Definitions (as published by the International Swaps and De-
rivatives Association, Inc.) (the "1994 Definitions"). Any
reference in the 1994 Definitions to a Share Transaction shall
be deemed to be a reference to a Share Transaction which is to
be settled by payment of cash for the purpose of this Confirma-
tion.
1. All provisions set forth in the 1994 ISDA Equity Option
Definitions shall govern this confirmation except as expressly
modified below. In the event of any inconsistency between the
1994 Definitions and this Confirmation, this Confirmation will
prevail for the purpose of this Transaction. It is our inten-
tion to have this Confirmation serve as the final documentation
for this trade and accordingly, no letter Confirmation will
follow.
A subsidiary of Incorporated with Limited Liability
J.P. Morgan & Co. in the State of New York, USA
Incorporated
1
Member of the Securities and Futures
January 24, 1997 Authority and of the Investment
12:29 PM Management Regulatory Organization
Ref: 529518<PAGE>
JPMORGAN
2. The terms of the Transaction to which this Confirmation
relates are as follows:
(1) Parties
(a) MORGAN GUARANTY TRUST COMPANY OF NEW YORK.
("Morgan")
(b) GOTHAM PARTNERS, L.P.
("the Counterparty")
(2) General Terms
"Effective Date": 19 December, 1996.
"Expiration Date": 22 December, 1997.
"Expiration Time" means the Valuation Time.
"Option Style": American Option.
"Option Type": Call.
"Seller": Morgan.
"Buyer": the Counterparty.
"Exchange(s)": The New York Stock Exchange.
"Related Exchange": the principal options exchange
for options contracts related to the Shares.
(3) Procedure for Exercise
"Automatic Exercise": applicable.
"Commencement Date": 19 December, 1996.
"Latest Exercise Time" means 2:00 P.M. New York Time.
"Multiple Exercise": not applicable.
(4) Premium Payment
The Buyer shall pay to the Seller an amount equal to
the Premium on the Premium Payment Date as follows:
(i) "Premium": USD 2,332,200.00.
(ii) "Premium per Option": USD 3.38.
(iii) "Premium Payment Date": 23 December, 1996.
2
January 24, 1997 12:29 PM
Ref: 529518<PAGE>
JPMORGAN
(5) Cash Settlement
On the Cash Settlement Payment Date, the Seller shall pay
the Buyer an amount in USD as determined by the Calculation
Agent in accordance with the following formula (the "Cash Set-
tlement Amount"), provided that if the Cash Settlement Amount
is equal to zero, no amount will be so payable:
Cash Number Option Strike Price
Settlement = of Options x Entitlement x Differential
Amount
(a) "Share" means the First Union Real Estate
Investments (the "Issuer") common stock (the
"Shares").
(b) "Strike Price": 8.80.
(c) "Number of Options": 690,000.00.
(d) "Option Entitlement": one Share per Option.
(e) "Settlement Currency": USD.
(f) "Settlement Price" means the level of the Share
at the Valuation Time on the Valuation Date.
(g) "Strike Price Differential" means a number equal
to the greater of (A) the excess of the Settlement
Price over the Strike Price and (B) zero.
(h) "Cash Settlement Payment Date": two Currency
Business Days immediately following the Valuation
Date.
(6) Valuation Terms
(a) "Valuation Date" means the Exercise Date, unless
a Market Disruption Event occurs on such day, in
which case subsection 2(6)(c) shall apply.
(b) "Valuation Time" means the close of trading on
the Exchange.
(c) Adjustment following a Market Disruption Event.
(i) If there is a Market Disruption Event on
the original date that, but for the Market Dis-
ruption Event, would have been the Valuation Date
then in that case the Valuation Date shall be the
first succeeding Exchange Business Day on which
there is no Market Disruption Event.
(ii) If there is a Market Disruption Event on
each of the five Exchange Business Days immedi-
ately following the original date that, but for
the Market Disruption Event, would have been the
Valuation Date then in that case, (i) that fifth
Exchange Business Day shall be deemed to be the
Valuation Date notwithstanding the Market Dis-
ruption Event, and (ii) the Calculation Agent
shall determine the level of the Share as of the
Valuation Time on that fifth Exchange Business
Day.
(iii) "Market Disruption Event" means in rela-
tion to any Valuation Date as determined by the
Calculation Agent, the occurrence or existence on
any Exchange Business Day during the one-half
hour period that ends at the Valuation Time of
any suspension of or limitation imposed on trad-
ing on (i) the Exchange or (ii) any Related
Exchange in options contracts on the Shares,
provided that a limitation on the hours and num-
ber of days of trading resulting from a change in
3
January 24, 1997 12:29 PM
Ref: 529518<PAGE>
JPMORGAN
the regular business hours of the Exchange (or
the Related Exchange) will not constitute a
Market Disruption Event.
(iv) Notice of Market Disruption Event. The
Calculation Agent shall as soon as practicable
(and in no event later than the next Exchange
Business Day) notify the other party of the
existence of a Market Disruption Event on any
Exchange Business Day which would have been a
Valuation Date, but for the occurrence of such
Market Disruption Event.
(d) Adjustments following a Potential Adjustment
Event or an Extraordinary Event.
(i) Terms. All the terms used in this sub-
section 2(6)(d) but not defined herein shall
have the meaning therefore set forth in the 1994
ISDA Equity Option Definitions (as published by
the International Swaps and Derivatives Associa-
tion, Inc.) (the "1994 Definitions").
(ii) Meaning of a Potential Adjustment Event and
an Extraordinary Event. The occurrence of a
Potential Adjustment Event or an Extraordinary
Event including Merger Event, Nationalization or
Insolvency all within the meaning of Article 10
of the 1994 Definitions or other events having
in the determination of the Calculation Agent, a
diluting or concentrative effect on the theo-
retical value of the underlying Shares of this
Transaction shall trigger a Calculation Agent
Adjustment within the meaning of Article 10 sub-
section 10.1(c) of the 1994 Definitions.
(iii) Adjustment. If there is a Potential
Adjustment Event or an Extraordinary Event on
the original date that, but for the occurrence
of a Potential Adjustment Event or an Extraordi-
nary Event would have been the Valuation Date,
then in that case (i) the Valuation Date shall
be the Business Day on which the Calculation
Agent shall determine the level of the Share as
specified in subsection 2(6)(d)(ii) and (ii) the
Calculation Agent shall determine the level of
the Share as of such Business Day.
(e) Adjustment following Corrections to Shares. If
the level of the Share published on a given day and
used or to be used by the Calculation Agent to deter-
mine the initial or/and final value of the underlying
equity is subsequently corrected and the correction
published by the Exchange within 30 days of the
original announcement, either party may notify the
other party of (A) that correction and (B) the amount
that is payable as a result of that correction. If
not later than 30 days after publication of that cor-
rection a party gives notice that an amount is so
payable, the party that originally either received or
retained such amount shall, not later than three Cur-
rency Business Days after the effectiveness of that
notice, pay to the other party that amount, together
with interest on that amount at a rate per annum
equal to the cost (without proof or evidence of any
actual cost) to the other party (as certified by it)
of funding that amount from the period from and in-
cluding the day on which a payment originally was (or
was not) made to, but excluding, the day of payment
of the refund or payment resulting from that correc-
tion.
3. "Calculation Agent" means Morgan, the determinations and
calculations of which shall be binding in the absence of mani-
fest error.
4
January 24, 1997 12:29 PM
Ref: 529518<PAGE>
JPMORGAN
4. Accounts Details:
(a) Account for payments to Morgan:
Pay: Morgan Guaranty Trust Co. of
NY, New York
Favour: Morgan Guaranty Trust Co. of
NY, London
A/C No. 670-07-054
Further A/C: 10005035
(b) Account for payments to the Counterparty: Please
advise.
5. Offices
(1) The Office of Morgan for the Transaction is:
Morgan Guaranty Trust Company of New York
London Branch
P.O. Box 161
60 Victoria Embankment
London EC4Y 0JP
Attention: MGT EDG Middle Office
Telex: 8954804
Answer back: JPM
Telecopy No.: (0171) 325-8205
Telephone No.: (0171) 325-4050
(2) The Office of the Counterparty for the Transaction
is:
Gotham Partners LP
110 East 42nd Street
18th Floor
New York, NY 10017
Attention: Bill Ackman
Telex:
Answer back:
Telecopy No.: 286-1133
Telephone No.: 286-0300
5
January 24, 1997 12:29 PM
Ref: 529518<PAGE>
JPMORGAN
6. Other provisions
No Reliance, etc. Each party represents that (i) it is enter-
ing into the Transaction evidenced hereby as principal (and not
as agent or in any other capacity); (ii) the other party is not
acting as a fiduciary for it; (iii) it is not relying upon any
representations except those expressly set forth in the Agree-
ment or this Confirmation; (iv) it has consulted with its own
legal, regulatory, tax, business, investment, financial, and
accounting advisers to the extent it has deemed necessary, and
it has made its own investment, hedging, and trading decisions
based upon its own judgement and upon any advice from such ad-
visers as it has deemed necessary and not upon any view ex-
pressed by the other party; and (v) it is entering into this
Transaction with a full understanding of the terms, conditions
and risks thereof and it is capable of and willing to assume
those risks.
7. Representations. Each party hereby represents to the
other party as follows:
(a) Status. It is duly organised and validly existing under
the laws of the jurisdiction or its organisation or incorpora-
tion and, if relevant under such laws, in good standing;
(b) Powers. It has the power to execute and deliver this Con-
firmation and to perform its obligations under this Transaction
and has taken all necessary action to authorise such execution,
delivery and performance;
(c) No Violation or Conflict. Such execution, delivery and
performance do not violate or conflict with any law applicable
to it, any provision of its constitutional documents, any order
or judgement of any court of other agency or government appli-
cable to it or any of its assets or any contractual restriction
binding on or affecting it or any of its assets;
(d) Consents. All governmental and other consents that are
required to have been obtained by it with respect to this
Transaction have been obtained and are in full force and effect
and all conditions of any such consents have been complied
with; and
(e) Obligations Binding. Its obligations under this Transac-
tion constitute its legal, valid and binding obligations, en-
forceable in accordance with their respective terms (subject to
applicable bankruptcy, reorganisation, insolvency, moratorium
or similar laws affecting creditors' rights generally and sub-
ject, as to enforceability, to equitable principles of general
application (regardless of whether enforcement is sought in a
proceeding in equity or at law)).
8. Events of Default. The occurrence at any time with
respect to a party of any of the following events constitutes
an event of default (an "Event of Default") with respect to
such party:
(a) Misrepresentation. A representation contained herein
proves to have been incorrect or misleading in any material
respect when made;
(b) Bankruptcy. A party (i) is dissolved (other than pursuant
to a consolidation, amalgamation or merger); (ii) becomes in-
solvent or is unable to pay its debts or fails or admits in
writing its inability generally to pay its debts as they become
due; (iii) makes a general assignment, arrangement or composi-
tion with or for the benefit of its creditors; (iv) institutes
or has instituted against it a proceeding seeking a judgement of
insolvency or bankruptcy or any other relief under any bank-
ruptcy or insolvency law or other similar law affecting credi-
tors' rights, or a petition is presented for its winding-up or
liquidation, and, in the case of any such proceeding or petition
instituted or presented against it, such proceeding or petition
(A) results in a judgement of insolvency or bankruptcy or the
entry of an order for relief or the making of an order for the
winding-up or liquidation of the party or (B) is not dismissed,
discharged, stayed or restrained in each case within 30 days of
the institution or presentation thereof; (v) has a resolution
passed for its winding-up, official management or liquidation
(other than pursuant to a consolidation, amalgamation or
6
January 24, 1997 12:29 PM
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JPMORGAN
merger); (vi) seeks or becomes subject to the appointment of an
administrator, provisional liquidator, conservator, receiver,
trustee, custodian or other similar official for it or for all
or substantially all its assets; (vii) has a secured party take
possession of all or substantially all its assets or has a
distress, execution, attachment, sequestration or other legal
process levied, enforced or sued on or against all or
substantially all its assets and such secured party maintains
possession, or any such process is not dismissed, discharged,
stayed or restrained, in each case within 30 days thereafter;
(viii) causes or is subject to any event with respect to it
which, under the applicable laws of any jurisdiction, has an
analogous effect to any of the events specified in clauses (i)
to (vii) (inclusive); or (ix) takes any action in furtherance
of, or indicating its consent to, approval of, or acquiescence
in, any of the foregoing acts; and
(c) Merger Without Assumption. The party consolidates or
amalgamates with, or merges with or into, or transfers all or
substantially all its assets, to, another entity and, at the
time of such consolidation, amalgamation, merger or transfer
the resulting, surviving or transferee entity fails to assume
all the obligations of such party under this Transaction to
which it or its predecessor was a party by operation of law or
pursuant to an agreement reasonably satisfactory to the other
party to this Transaction.
9. Early Termination.
(a) Right to Terminate Following Event of Default. If at any
time an Event of Default with respect to a party (the "Default-
ing Party") has occurred and is then continuing, the other
party (the "Non-defaulting Party") may, by not more than 20
days notice to the Defaulting Party specifying the relevant
Event of Default, designate a day not earlier than the day such
notice is effective as an Early Termination Date in respect of
this Transaction. Upon the effectiveness of notice designating
an Early Termination Date, the obligations of the parties to
make any further payments or deliveries under this Transaction
will terminate, but without prejudice to the other provisions
of this Confirmation. The amount, if any, payable in respect
of an Early Termination Date shall be determined by the Non-
defaulting Party pursuant to Section 9(b).
(b) Calculations.
(i) Statement. Following the occurrence of an Early
Termination Date, the Calculation Agent will make the cal-
culations contemplated by Section 9(c) and will provide to
each of the parties a statement (A) showing in reasonable
detail, such calculations (including all relevant quota-
tions) and (B) giving details of the relevant account to
which any payment due to it under Section 9(c) is to be
made. In the absence of written confirmation of a quota-
tion obtained in determining a Market Quotation, from the
source providing such quotation, the records of the Calcu-
lation Agent will be conclusive evidence of the existence
and accuracy of such quotation.
(ii) Due Date. The amount calculated as being payable
under Section 9(c) will be due on the day that notice of
the amount payable is effective. Such amount will be paid
together with (to the extent permitted under applicable
law) interest thereon from (and including) the relevant
Early Termination Date to (but excluding) the date such
amount is paid at the Default Rate. Such amount will be
calculated on the basis of the daily compounding and the
actual number of days elapsed.
(iii) Default Rate. A rate per annum equal to the cost
(without proof or evidence of any actual cost) to the rel-
evant payee (as certified by it) if it were to fund or of
funding the relevant amount plus 1% per annum.
(iv) Market Quotation. With respect to this Transaction
and a party making the determination, an amount determined
on the basis of quotations from Reference Market-makers.
Each quotation will be for an amount, if any, that would
be paid to such party (expressed as a negative number) or
by such party (expressed as a positive number) in consid-
eration of an agreement between such party and the quoting
Reference Market-maker and subject to such documentation
as they may in good faith agree, with the relevant Early
Termination Date as the date of commencement of such
agreement, that would have the effect of preserving for
such party the economic equivalent of the obligations of
the parties under the Transaction that would, but for the
occurrence of the relevant Early Termination
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January 24, 1997 12:29 PM
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JPMORGAN
Date, have been required after such date. For purposes of
this Transaction, Unpaid Amounts are to be excluded but,
without limitation, any payment or delivery that would,
but for the relevant Early Termination Date, have been re-
quired (assuming satisfaction of each condition precedent)
after that Early Termination Date is to be included. The
party making the determination (or its agent) will request
each Reference Market-maker to provide its quotation to
the extent practicable as of the same time (without regard
to different time zones) on the relevant Early Termination
Date (or, if an Early Termination Date is deemed to occur,
as of a time as soon thereafter as practicable). The time
as of which such quotations are to be obtained will be
selected in good faith by the party making the determina-
tion. If more than three such quotations are provided,
the Market Quotation will be the arithmetic mean of the
quotations, expressed in the currency of the Transaction
without regard to the quotations having the highest and
lowest values. If exactly three such quotations are pro-
vided, the Market Quotation will be the quotation remain-
ing after disregarding the quotations having the highest
and lowest values. If fewer than three quotations are
provided, it will be deemed that the Market Quotation in
respect of the Transaction cannot be determined in which
case the Market Quotation shall be determined on the basis
of Loss. For purposes hereof, "Unpaid Amounts" with re-
spect to a party means the amounts that became payable to
such party on or prior to the Early Termination Date and
which remain unpaid at such Early Termination Date.
(v) Reference Market-makers. Four leading dealers in the
relevant market for transactions of this type selected by
the party determining a Market Quotation in good faith (i)
from among dealers of the highest credit standing which
satisfy all the criteria that such party applies generally
at the time in deciding whether to offer or to make an
extension of credit and (ii) to the extent practicable,
from among such dealers having an office in the same city.
(vi) Loss. With respect to this Transaction and a party,
an amount that party reasonably determines in good faith
to be the total losses and costs (or gain, in which case
expressed as a negative number) in connection with this
Transaction, as the case may be, including any loss of
bargain, cost of funding or, at the election of such party
but without duplication, loss or cost incurred as a result
of its terminating, liquidating, obtaining or re-
establishing any hedge or related trading position (or any
gain resulting from any of them).
(c) Payments on Early Termination. If notice is given desig-
nating an Early Termination Date, the Defaulting Party will pay
to the Non-defaulting Party, if a positive number, the sum of
the Market Quotation, the Unpaid Amounts owing to the Default-
ing Party and the Unpaid Amounts owing to the Non-defaulting
Party. If such amount is a negative number, the Non-defaulting
Party will pay the absolute value of that amount to the De-
faulting Party. The amount, if any, payable in respect of an
Early Termination Date will be subject to any set-off, offset,
combination of accounts, right of retention or withholding or
similar right or requirement to which the payer of an amount
hereunder is entitled or subject (whether arising under this
Transaction, another contract, applicable law or otherwise)
that is exercised by, or imposed on, such payer. The parties
agree that the amount recoverable hereunder are a reasonable
pre-estimate of loss and not a penalty. Such amounts are pay-
able for the loss of bargain and the loss of protection against
future risks and except as otherwise provided in this Confirma-
tion neither party will be entitled to recover any additional
damages as a consequence of such losses.
10. Expenses. If an Event of Default has occurred, the
Defaulting Party will, on demand, indemnify and hold harmless
the Non-defaulting, Party for and against all reasonable out-
of-pocket expenses, including legal fees and any stamp, regis-
tration, documentation or other similar tax, incurred by the
Non-defaulting Party by reason of the enforcement and protec-
tion of its rights under this Transaction or by reason of the
early termination of this Transaction, including, but not lim-
ited to costs of collection.
11. Jurisdiction. With respect to any suit, action or pro-
ceedings relating to this Transaction ("Proceedings"), each
party irrevocably submits to the jurisdiction of the courts of
the State of New York and the United States District Court
located in the Borough of Manhattan in New York City
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January 24, 1997 12:29 PM
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JPMORGAN
and waives any objection which it may have at any time to the
laying of venue of any Proceedings brought in any such court,
waives any claim that such Proceedings have been brought in an
inconvenient forum and further waives the right to object, with
respect to such Proceedings, that such court does not have
jurisdiction over such party. The taking of Proceedings in a
United States jurisdiction shall not preclude the taking of
Proceedings in any other jurisdiction, whether concurrently or
not, to the extent permitted by the law of such other jurisdic-
tion.
12. No Deduction. All payments under this Transaction shall
be made without any deduction or withholding for or on account
of any present or future tax, levy, impost, duty, charge,
assessment or fee of any nature (including interest, penalties,
and additions thereto) that is imposed by any government or
taxing authority in respect of any payment under this Transac-
tion.
13. Payments. Payments under this Transaction shall be made
on the due date for value on that date in the place of the
account specified herein, in freely transferable funds and in
the manner customary for payments in the required currency.
Where settlement is by delivery (that is, other than by pay-
ment), such delivery will be made for receipt on the due date
in the manner customary for the relevant obligation unless oth-
erwise specified herein.
14. Transfer. This Confirmation shall be binding upon and
inure to the benefit of the parties and their respective suc-
cessors and permitted assigns. If this Confirmation specifies
that a party shall act through a particular office for the pur-
poses of this Confirmation, such office may not be changed
without the prior written consent of the other party except to
another office in the same tax and legal jurisdiction. Neither
the rights nor obligations of a party hereunder may be assigned
without the prior written consent of the other party; provided,
however, that the Buyer may, with the consent of Morgan (such
consent not to be unreasonably withheld) assign its rights and
obligations to any financial institution which makes the repre-
sentations contained in Section 7 hereof. Any such assignment
or transfer by Morgan shall be fully effective to transfer all
the transferred rights and obligations of Morgan upon notice to
the other party.
15. Governing Law. This Confirmation will be governed by and
construed in accordance with the laws of the State of New York
(without reference to choice of law doctrine).
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JPMORGAN
Please confirm your agreement to be bound by the terms of the
foregoing by executing the copy of this Confirmation enclosed
for that purpose and returning it to us.
Very truly yours,
J.P. MORGAN SECURITIES INC.
AS AGENT FOR MORGAN GUARANTY
TRUST COMPANY OF NEW YORK
By: /s/ Adam Green
Name: Adam Green
Vice President
Accepted and confirmed as of
the date first above written by
GOTHAM PARTNERS LP
By: /s/ David P. Berkowitz
Name: David P. Berkowitz
Title: President of DPB Corp.,
or GP of Section H
Partners, LP, the GP
of Gotham Partners, LP
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January 24, 1997 12:29 PM
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JPMORGAN
Morgan Guaranty
Trust Company of
New York
P.O. Box 161
60 Victoria Embankment
London EC4Y OJP
Direct: 0171-325-4050
Operator: 0171-600-2300
Fax: 0171-325-8205
June 10, 1997
Gotham Partners, L.P.
110 East 42nd Street
18th Floor
New York, NY 10017
Att: Bill Ackman
Reference: 529518
RE: EQUITY SHARE OPTION TRANSACTION-AMENDMENT
The purpose of this letter is to confirm the terms and
conditions of the equity single stock option transaction (the
"Transaction") entered into between us on 19th December, 1996
(the "Trade Date"). This Confirmation shall replace any previ-
ous letter and shall serve as the final documentation for this
Transaction.
This Confirmation evidences a complete binding agreement
between the Parties (as defined hereof) as to the terms of the
Transaction to which this Confirmation relates. The parties
agree to incorporate by reference the 1994 ISDA Equity Option
Definitions (as published by the International Swaps and De-
rivatives Association, Inc.) (the "1994 Definitions").
1. All provisions set forth in the 1994 ISDA Equity Option
Definitions shall govern this confirmation except as expressly
modified below. In the event of any inconsistency between the
1994 Definitions and this Confirmation, this Confirmation will
prevail for the purpose of this Transaction. It is our inten-
tion to have this Confirmation serve as the final documentation
for this trade and accordingly, no letter Confirmation will
follow.
A subsidiary of Incorporated with Limited Liability in
J.P. Morgan & Co. the State of New York, USA
Incorporated Member of the Securities and Futures
Authority and of the Investment
Management Regulatory Organization
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June 10, 1997
5:20 PM
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JPMORGAN
2. The terms of the Transaction to which this Confirmation
relates are as follows:
(1) Parties
(a) MORGAN GUARANTY TRUST COMPANY OF NEW YORK
("Morgan")
(b) GOTHAM PARTNERS, L.P.
("the Counterparty")
(2) General Terms
"Effective Date": December 19, 1996.
"Expiration Date": December 22, 1997.
"Expiration Time" means the Valuation Time.
"Option Style": American.
"Option Type": Call.
"Seller": Morgan.
"Buyer": the Counterparty.
"Exchange": the New York Stock Exchange.
"Related Exchange(s)": the principal options
exchange for option contracts on the Shares.
"Clearance System": the Clearance System used by the
Exchange.
(3) Procedure for Exercise
"Automatic Exercise": applicable.
"Commencement Date": December 19, 1996.
"Latest Exercise Time" means 2 hours prior to the
Valuation Time.
"Multiple Exercise": inapplicable.
(4) Payments
Premium Payment
The Buyer shall pay to the Seller an amount equal to the
Premium on the Premium Payment Date as follows:
(i) "Premium": USD 2,332,200.00.
(ii) "Premium per Option": USD 3.38.
(iii) "Premium Payment Date": December 23, 1996.
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JPMORGAN
(5) Physical Settlement
Upon the exercise by the Buyer of this Transaction
pursuant to the provisions of Exercise in Section 2(3) of
this Confirmation, on the Settlement Date the Seller hall
deliver to the Buyer at the account specified hereto and
in the manner customary for the Clearance System, the
Number of Shares to be Delivered against payment of the
Settlement Price by the Buyer to the Seller. Pursuant to
the provision of Assignment in Section 5 hereof, Morgan
may assign the obligation to deliver any securities which
are subject to this Transaction to any of its affiliates.
(i) "Share" means the common stock of First Union
Real Estate Investments (the "Issuer").
(ii) "Strike Price": 8.80.
(iii) "Number of Options": 690,000.00.
(iv) "Option Entitlement": one Share per Option.
(v) "Failure to Deliver": Applicable.
(vi) "Valuation Time" means the close of trading on
the Exchange.
(6) Adjustments
"Method of Adjustment": Calculation Agent
Adjustment.
(7) Extraordinary Events
Consequence of Merger Events:
(i) "Share-for-Share": Calculation Agent Adjust-
ment. Section 10 (1)(c) of the 1994 Definitions
shall be modified as following. Upon the declaration
by the Issuer of a Merger Event pursuant to sections
10(1)(e) and 10(2), the Calculation Agent shall
determine the consequences of such event in respect
of this Transaction and such determination shall be
effective as of the effective date of such declara-
tion. In making such determination, the Calculation
Agent may refer to the general rules and principles
regarding Merger Events on the Options Exchange to
the extent that such reference is reasonably neces-
sary.
(ii) "Share-for-Other": Cancellation and Payment.
(iii) "Share-for-Combined": Calculation Agent
Adjustment. Section 10 (1)(c) of the 1994
Definitions shall be modified as following. Upon the
declaration by the Issuer of a Merger Event pursuant
to sections 10(1)(e) and 10(2), the Calculation Agent
shall determine the consequences of such event in
respect of this Transaction and such determination
shall be effective as of the effective date of such
declaration. In making such determination, the
Calculation Agent may refer to the general rules and
principles regarding Merger Events on the Options
Exchange to the extent that such reference is
reasonably necessary.
(iv) "Options Exchange": the principal options
exchange for option contracts on the Shares.
(8) "Nationalisation or Insolvency": Cancellation and
Payment.
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JPMORGAN
3. "Calculation Agent" means Morgan, the determinations and
calculations of which shall be binding in the absence of mani-
fest error.
4. Accounts Details:
(a) Account for payments to Morgan:
Pay: Morgan Guaranty Trust Co. of NY,
New York
Favour: Morgan Guaranty Trust Co. of NY, London
A/C No: 670-07-054
Further A/C: 10005035
Account for delivery of Shares to Morgan:
DTC No.: 060
J.P. Morgan Securities, Inc.
Att: Ed White
(b) Account for payments to the Counterparty: Please
advise.
Account for delivery of Shares to the Counterparty:
Please advise.
5. Assignment by Morgan
Notwithstanding any other provision in this Confirmation
to the contrary requiring Morgan to purchase, sell, receive or
deliver any shares or other securities to or from the Counter-
party, Morgan may designate any of its affiliates to purchase,
sell, receive or deliver such shares or other securities and
otherwise to perform Morgan's obligations in respect of this
Transaction and any such designee may assume such obligations.
Morgan shall be discharged of its obligations to the Counter-
party to the extent of any such performance.
6. Offices
(1) The Office of Morgan for the Transaction is:
Morgan Guaranty Trust Company Of New York
London Branch
P.O. Box 161
60 Victoria Embankment
London EC4Y 0JP
Attention: MGT EDG Middle Office
Telex: 8954804
Answer back: JPM
For Notices:
Telecopy No.: (212) 648-56504
Telephone No.: (212) 648-2510
(2) The Office of the Counterparty for the Transaction
is:
Gotham Partners LP
110 East 42nd Street
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JPMORGAN
18th Floor
New York, NY 10017
Attention: Bill Ackman
Telex:
Answer back:
Telecopy No.: 286-1133
Telephone No.: 286-0300
7. Representations. Each party hereby represents to the
other party as follows:
(a) Status. It is duly organised and validly existing under
the laws of the jurisdiction or its organisation or incorpora-
tion and, if relevant under such laws, in good standing;
(b) Powers. It has the power to execute and deliver this Con-
firmation and to perform its obligations under this Transaction
and has taken all necessary action to authorise such execution,
delivery and performance;
(c) No Violation or Conflict. Such execution, delivery and
performance do not violate or conflict with any law applicable
to it, any provision of its constitutional documents, any order
or judgement of any court of other agency or government appli-
cable to it or any of its assets or any contractual restriction
binding on or affecting it or any of its assets;
(d) Consents. All governmental and other consents that are
required to have been obtained by it with respect to this
Transaction have been obtained and are in full force and effect
and all conditions of any such consents have been complied
with; and
(e) Obligations Binding. Its obligations under this Transac-
tion constitute its legal, valid and binding obligations, en-
forceable in accordance with their respective terms (subject to
applicable bankruptcy, reorganisation, insolvency, moratorium
or similar laws affecting creditors' rights generally and sub-
ject, as to enforceability, to equitable principles of general
application (regardless of whether enforcement is sought in a
proceeding in equity or at law)).
8. Events of Default. The occurrence at any time with
respect to a party of any of the following events constitutes
an event of default (an "Event of Default") with respect to
such party:
(a) Misrepresentation. A representation contained herein
proves to have been incorrect or misleading in any material
respect when made;
(b) Bankruptcy. A party (i) is dissolved (other than pursuant
to a consolidation, amalgamation or merger); (ii) becomes in-
solvent or is unable to pay its debts or fails or admits in
writing its inability generally to pay its debts as they become
due; (iii) makes a general assignment, arrangement or composi-
tion with or for the benefit of its creditors; (iv) institutes
or has instituted against it a proceeding seeking a judgement
of insolvency or bankruptcy or any other relief under any bank-
ruptcy or insolvency law or other similar law affecting credi-
tors' rights, or a petition is presented for its winding-up or
liquidation, and, in the case of any such proceeding or peti-
tion instituted or presented against it, such proceeding or
petition (A) results in a judgement of insolvency or bankruptcy
or the entry of an order for relief or the making of an order
for the winding-up or liquidation of the party or (B) is not
dismissed, discharged, stayed or restrained in each case within
30 days of the institution or presentation thereof; (v) has a
resolution passed for its winding-up, official management or
liquidation (other than pursuant to a consolidation, amalgama-
tion or merger); (vi) seeks or becomes subject to the appoint-
ment of an administrator, provisional liquidator, conservator,
receiver, trustee, custodian or other similar official for it
or for all or substantially all its assets; (vii) has a secured
party take possession of all or substantially all its assets or
has a distress, execution, attachment, sequestration or other
legal process levied, enforced or sued on or against all or
substantially all its assets and such secured party maintains
possession, or any such
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June 10, 1997
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JPMORGAN
process is not dismissed, discharged, stayed or restrained, in
each case within 30 days thereafter; (viii) causes or is
subject to any event with respect to it which, under the
applicable laws of any jurisdiction, has an analogous effect to
any of the events specified in clauses (i) to (vii)
(inclusive); or (ix) takes any action in furtherance of, or
indicating its consent to, approval of, or acquiescence in, any
of the foregoing acts; and
(c) Merger Without Assumption. The party consolidates or
amalgamates with, or merges with or into, or transfers all or
substantially all its assets, to, another entity and, at the
time of such consolidation, amalgamation, merger or transfer
the resulting, surviving or transferee entity fails to assume
all the obligations of such party under this Transaction to
which it or its predecessor was a party by operation of law or
pursuant to an agreement reasonably satisfactory to the other
party to this Transaction.
9. Early Termination:
(a) Right to Terminate Following Event of Default. If at any
time an Event of Default with respect to a party (the "Default-
ing Party") has occurred and is then continuing, the other
party (the "Non-defaulting Party") may, by not more than 20
days notice to the Defaulting Party specifying the relevant
Event of Default, designate a day not earlier than the day such
notice is effective as an Early Termination Date in respect of
this Transaction. Upon the effectiveness of notice designating
an Early Termination Date, the obligations of the parties to
make any further payments or deliveries under this Transaction
will terminate, but without prejudice to the other provisions
of this Confirmation. The amount, if any, payable in respect
of an Early Termination Date shall be determined by the Non-
defaulting Party pursuant to Section 9(b).
(b) Calculations:
(i) Statement. Following the occurrence of an Early
Termination Date, the Calculation Agent will make the cal-
culations contemplated by Section 9(c) and will provide to
each of the parties a statement (A) showing, in reasonable
detail, such calculations (including all relevant quota-
tions) and (B) giving details of the relevant account to
which any payment due to it under Section 9(c) is to be
made. In the absence of written confirmation of a quota-
tion obtained in determining a Market Quotation, from the
source providing such quotation, the records of the Calcu-
lation Agent will be conclusive evidence of the existence
and accuracy of such quotation.
(ii) Due Date. The amount calculated as being payable
under Section 9(c) will be due on the day that notice of
the amount payable is effective. Such amount will be paid
together with (to the extent permitted under applicable
law) interest thereon from (and including) the relevant
Early Termination Date to (but excluding) the date such
amount is paid at the Default Rate. Such amount will be
calculated on the basis of the daily compounding and the
actual number of days elapsed.
(iii) Default Rate. A rate per annum equal to the cost
(without proof or evidence of any actual cost) to the rel-
evant payee (as certified by it) if it were to fund or of
funding the relevant amount plus 1% per annum.
(iv) Market Quotation. With respect to this Transaction
and a party making the determination, an amount determined
on the basis of quotations from Reference Market-makers.
Each quotation will be for an amount, if any, that would
be paid to such party (expressed as a negative number) or
by such party (expressed as a positive number) in consid-
eration of an agreement between such party and the quoting
Reference Market-maker and subject to such documentation
as they may in good faith agree, with the relevant Early
Termination Date as the date of commencement of such
agreement, that would have the effect of preserving for
such party the economic equivalent of the obligations of
the parties under the Transaction that would, but for the
occurrence of the relevant Early Termination Date, have
been required after such date. For purposes of this
Transaction, Unpaid Amounts are to be excluded but, with-
out limitation, any payment or delivery that would, but
for the relevant Early Termination Date, have been re-
quired (assuming satisfaction of each condition
6
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Ref: 529518<PAGE>
JPMORGAN
precedent) after that Early Termination Date is to be
included. The party making the determination (or its
agent) will request each Reference Market-maker to provide
its quotation to the extent practicable as of the same
time (without regard to different time zones) on the
relevant Early Termination Date (or, if an Early
Termination Date is deemed to occur, as of a time as soon
thereafter as practicable). The time as of which such
quotations are to be obtained will be selected in good
faith by the party making the determination. If more than
three such quotations are provided, the Market Quotation
will be the arithmetic mean of the quotations, expressed
in the currency of the Transaction without regard to the
quotations having the highest and lowest values. If
exactly three such quotations are provided, the Market
Quotation will be the quotation remaining after
disregarding the quotations having the highest and lowest
values. If fewer than three quotations are provided, it
will be deemed that the Market Quotation in respect of the
Transaction cannot be determined in which case the Market
Quotation shall be determined on the basis of Loss. For
purposes hereof, "Unpaid Amounts" with respect to a party
means the amounts that became payable to such party on or
prior to the Early Termination Date and which remain
unpaid at such Early Termination Date.
(v) Reference Market-makers. Four leading dealers in
the relevant market for transactions of this type selected
by the party determining a Market Quotation in good faith
(i) from among dealers of the highest credit standing
which satisfy all the criteria that such party applies
generally at the time in deciding whether to offer or to
make an extension of credit and (ii) to the extent practi-
cable, from among such dealers having an office in the
same city.
(vi) Loss. With respect to this Transaction and a
party, an amount that party reasonably determines in good
faith to be the total losses and costs (or gain, in which
case expressed as a negative number) in connection with
this Transaction, as the case may be, including any loss
of bargain, cost of funding or, at the election of such
party but without duplication, loss or cost incurred as a
result of its terminating, liquidating, obtaining or re-
establishing any hedge or related trading position (or any
gain resulting from any of them).
(c) Payments on Early Termination. If notice is given
designating an Early Termination Date, the Defaulting
Party will pay to the Non-defaulting Party, if a positive
number, the sum of the Market Quotation, the Unpaid
Amounts owing to the Defaulting Party and the Unpaid
Amounts owing to the Non-defaulting Party. If such amount
is a negative number, the Non-defaulting Party will pay
the absolute value of that amount to the Defaulting Party.
The amount, if any, payable in respect of an Early Termi-
nation Date will be subject to any set-off, offset, combi-
nation of accounts, right of retention or withholding or
similar right or requirement to which the payer of an
amount hereunder is entitled or subject (whether arising
under this Transaction, another contract, applicable law
or otherwise) that is exercised by, or imposed on, such
payer. The parties agree that the amount recoverable
hereunder are a reasonable pre-estimate of loss and not a
penalty. Such amounts are payable for the loss of bargain
and the loss of protection against future risks and except
as otherwise provided in this Confirmation neither party
will be entitled to recover any additional damages as a
consequence of such losses.
10. Expenses. If an Event of Default has occurred, the
Defaulting Party will, on demand, indemnify and hold
harmless the Non-defaulting Party for and against all
reasonable out-of-pocket expenses, including legal fees
and any stamp, registration, documentation or other
similar tax, incurred by the Non-defaulting Party by
reason of the enforcement and protection of its rights
under this Transaction or by reason of the early
termination of this Transaction, including, but not lim-
ited to costs of collection.
11. Jurisdiction. With respect to any suit, action or pro-
ceedings relating to this Transaction ("Proceedings"),
each party irrevocably submits to the jurisdiction of the
courts of the State of New York and the United States
District Court located in the Borough of Manhattan in New
York City and waives any objection which it may have at
any time to the laying of venue of any Proceedings
7
June 10, 1997
5:20 PM
Ref: 529518<PAGE>
JPMORGAN
brought in any such court, waives any claim that such
Proceedings have been brought in an inconvenient forum and
further waives the right to object, with respect to such
Proceedings, that such court does not have jurisdiction
over such party. The taking of Proceedings in a United
States jurisdiction shall not preclude the taking of
Proceedings in any other jurisdiction, whether
concurrently or not, to the extent permitted by the law of
such other jurisdiction.
12. No Deduction. All payments under this Transaction shall
be made without any deduction or withholding for or on
account of any present or future tax, levy, impost, duty,
charge, assessment or fee of any nature (including
interest, penalties, and additions thereto) that is
imposed by any government or taxing authority in respect
of any payment under this Transaction.
13. Payments. Payments under this Transaction shall be made
on the due date for value on that date in the place of the
account specified herein, in freely transferable funds and
in the manner customary for payments in the required
currency. Where settlement is by delivery (that is, other
than by payment), such delivery will be made for receipt
on the due date in the manner customary for the relevant
obligation unless otherwise specified herein.
14. Transfer. Neither party may transfer any or all of its
rights or obligations under this Transaction without the
prior written consent of the non-transferring party.
15. Governing Law. This Confirmation will be governed by and
construed in accordance with the laws of the State of New
York (without reference to choice of law doctrine).
16. Amendment. This Amendment shall be governed by, and con-
strued in accordance with the laws of the State of New
York (without reference to the choice of law doctrine).
Upon the execution of this Amendment, this Amendment will
amend, restate and supersede the Equity Single Stock
Option Transaction dated as of December 16, 1996 between
Morgan and the Counterparty.
8
June 10, 1997
5:20 PM
Ref: 529518<PAGE>
JPMORGAN
Please confirm your agreement to be bound by the terms of the
foregoing by executing the copy of this Confirmation enclosed
for that purpose and returning it to us.
Very truly yours,
J.P. MORGAN SECURITIES INC. AS AGENT FOR
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
By:
Name:
Title:
Accepted and confirmed as of
the date first above written
GOTHAM PARTNERS, L.P.
By:
Name:
Title:
9
June 10, 1997
5:20 PM
Ref: 529518
Exhibit 3
JP MORGAN
Morgan Guaranty
Trust Company of
New York
P.O. Box 161
60 Victoria Embankment
London EC4Y OJP
Direct: 0171-325-4050
Operator: 0171-600-2300
Fax: 0171-325-8205
January 24, 1997
Gotham Partners, L.P.
110 East 42nd Street
18th Floor
New York, NY 10017
Att: Bill Ackman
Reference: 529541
RE: EQUITY SINGLE STOCK OPTION TRANSACTION
The purpose of this letter is to confirm the terms and
conditions of the equity single stock option transaction (the
"Transaction") entered into between us on 19th December, 1996
(the "Trade Date"). This Confirmation shall replace any previ-
ous letter and shall serve as the final documentation for this
Transaction.
This Confirmation evidences a complete binding agreement
between the Parties (as defined hereof) as to the terms of the
Transaction to which this Confirmation relates. The parties
agree to incorporate by reference the 1994 ISDA Equity Option
Definitions (as published by the International Swaps and De-
rivatives Association, Inc.) (the "1994 Definitions"). Any
reference in the 1994 Definitions to a Share Transaction shall
be deemed to be a reference to a Share Transaction which is to
be settled by payment of cash for the purpose of this Confirma-
tion.
1. All provisions set forth in the 1994 ISDA Equity Option
Definitions shall govern this confirmation except as expressly
modified below. In the event of any inconsistency between the
1994 Definitions and this Confirmation, this Confirmation will
prevail for the purpose of this Transaction. It is our inten-
tion to have this Confirmation serve as the final documentation
for this trade and accordingly, no letter Confirmation will
follow.
A subsidiary of Incorporated with Limited Liability
J.P. Morgan & Co. in the State of New York, USA
Incorporated
Member of the Securities and Futures
January 24, 1997 Authority and of the Investment
12:30 PM Management Regulatory Organisation
Ref: 529541<PAGE>
JP MORGAN
2. The terms of the Transaction to which this Confirmation
relates are as follows:
(1) Parties
(a) MORGAN GUARANTY TRUST COMPANY OF NEW YORK.
("Morgan")
(b) GOTHAM PARTNERS II, L.P.
("the Counterparty")
(2) General Terms
"Effective Date": 19 December, 1996.
"Expiration Date": 22 December, 1997.
"Expiration Time" means the Valuation Time.
"Option Style": American Option.
"Option Type": Call.
"Seller": Morgan.
"Buyer": the Counterparty.
"Exchange(s)": The New York Stock Exchange.
"Related Exchange": the principal options exchange
for options contracts related to the Shares.
(3) Procedure for Exercise
"Automatic Exercise": applicable.
"Commencement Date": 19 December, 1996.
"Latest Exercise Time" means 2:00 P.M. New York Time.
"Multiple Exercise": not applicable.
(4) Premium Payment
The Buyer shall pay to the Seller an amount equal to
the Premium on the Premium Payment Date as follows:
(i) "Premium": USD 33,800.00.
(ii) "Premium per Option": USD 3.38.
(iii) "Premium Payment Date": 23 December, 1996.
2
January 24, 1997 12:30 PM
Ref: 529541<PAGE>
JP MORGAN
(5) Cash Settlement
On the Cash Settlement Payment Date, the Seller shall pay
the Buyer an amount in USD as determined by the Calculation
Agent in accordance with the following formula (the "Cash
Settlement Amount"), provided that if the Cash Settlement
Amount is equal to zero, no amount will be so payable:
Cash Number Option Strike Price
Settlement = of Options x Entitlement x Differential
Amount
(a) "Share" means the First Union Real Estate
Investments (the "Issuer") common stock (the
"Shares").
(b) "Strike Price": 8.80.
(c) "Number of Options": 10,000.00.
(d) "Option Entitlement": one Share per Option.
(e) "Settlement Currency": USD.
(f) "Settlement Price" means the level of the Share
at the Valuation Time on the Valuation Date.
(g) "Strike Price Differential" means a number equal
to the greater of (A) the excess of the Settlement
Price over the Strike Price and (B) zero.
(h) "Cash Settlement Payment Date": two Currency
Business Days immediately following the Valuation
Date.
(6) Valuation Terms
(a) "Valuation Date" means the Exercise Date, unless
a Market Disruption Event occurs on any such day, in
which case subsection 2(6)(c) shall apply.
(b) "Valuation Time" means the close of trading on
the Exchange.
(c) Adjustment following a Market Disruption Event.
(i) If there is a Market Disruption Event on
the original date that, but for the Market Dis-
ruption Event, would have been the Valuation
Date then in that case the Valuation Date shall
be the first succeeding Exchange Business Day on
which there is no Market Disruption Event.
(ii) If there is a Market Disruption Event on
each of the five Exchange Business Days immedi-
ately following the original date that, but for
the Market Disruption Event, would have been the
Valuation Date then in that case, (i) that fifth
Exchange Business Day shall be deemed to be the
Valuation Date notwithstanding the Market Dis-
ruption Event, and (ii) the Calculation Agent
shall determine the level of the Share as of the
Valuation Time on that fifth Exchange Business
Day.
(iii) "Market Disruption Event" means in rela-
tion to any Valuation Date as determined by the
Calculation Agent, the occurrence or existence
on any Exchange Business Day during the one-half
hour period that ends at the Valuation Time of
any suspension of or limitation imposed on trad-
ing on (i) the Exchange or (ii) any Related
Exchange in options contracts on the Shares,
provided that a limitation on the hours and num-
ber of days of trading resulting from a change
in
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January 24, 1997 12:30 PM
Ref: 529541<PAGE>
JP MORGAN
the regular business hours of the Exchange (or
the Related Exchange) will not constitute a
Market Disruption Event.
(iv) Notice of Market Disruption Event. The
Calculation Agent shall as soon as practicable
(and in no event later than the next Exchange
Business Day) notify the other party of the
existence of a Market Disruption Event on any
Exchange Business Day which would have been a
Valuation Date, but for the occurrence of such
Market Disruption Event.
(d) Adjustments following a Potential Adjustment
Event or an Extraordinary Event.
(i) Terms. All the terms used in this sub-
section 2(6)(d) but not defined herein shall
have the meaning therefore set forth in the 1994
ISDA Equity Option Definitions (as published by
the International Swaps and Derivatives Associa-
tion, Inc.) (the "1994 Definitions").
(ii) Meaning of a Potential Adjustment Event
and an Extraordinary Event. The occurrence of a
Potential Adjustment Event or an Extraordinary
Event including Merger Event, Nationalization or
Insolvency all within the meaning of Article 10
of the 1994 Definitions or other events having
in the determination of the Calculation Agent, a
diluting or concentrative effect on the theo-
retical value of the underlying Shares of this
Transaction shall trigger a Calculation Agent
Adjustment within the meaning of Article 10 sub-
section 10.1(c) of the 1994 Definitions.
(iii) Adjustment. If there is a Potential
Adjustment Event or an Extraordinary Event on
the original date that, but for the occurrence
of a Potential Adjustment Event or an Extraordi-
nary Event would have been the Valuation Date,
then in that case (i) the Valuation Date shall
be the Business Day on which the Calculation
Agent shall determine the level of the Share as
specified in subsection 2(6)(d)(ii) and (ii) the
Calculation Agent shall determine the level of
the Share as of such Business Day.
(e) Adjustment following Corrections to Shares. If
the level of the Share published on a given day and
used or to be used by the Calculation Agent to deter-
mine the initial or/and final value of the underlying
equity is subsequently corrected and the correction
published by the Exchange within 30 days of the
original announcement, either party may notify the
other party of (A) that correction and (B) the amount
that is payable as a result of that correction. If
not later than 30 days after publication of that cor-
rection a party gives notice that an amount is so
payable, the party that originally either received or
retained such amount shall, not later than three Cur-
rency Business Days after the effectiveness of that
notice, pay to the other party that amount, together
with interest on that amount at a rate per annum
equal to the cost (without proof or evidence of any
actual cost) to the other party (as certified by it)
of funding that amount from the period from and
including the day on which a payment originally was
(or was not) made to, but excluding, the day of pay-
ment of the refund or payment resulting from that
correction.
3. "Calculation Agent" means Morgan, the determinations and
calculations of which shall be binding in the absence of mani-
fest error.
4
January 24, 1997 12:30 PM
Ref: 529541<PAGE>
JP MORGAN
4. Accounts Details:
(a) Account for payments to Morgan:
Pay: Morgan Guaranty Trust Co, of
NY, New York
Favour: Morgan Guaranty Trust Co. of
NY, London
A/C No: 670-07-054
Further A/C: 10005035
(b) Account for payments to the Counterparty: Please
advise.
5. Offices
(1) The Office of Morgan for the Transaction is:
Morgan Guaranty Trust Company of New York
London Branch
P.O. Box 161
60 Victoria Embankment
London EC4Y 0JP
Attention: MGT EDG Middle Office
Telex: 8954804
Answer back: JPM
Telecopy No.: (0171) 325-8205
Telephone No.: (0171) 325-4050
(2) The Office of the Counterparty for the Transaction
is:
Gotham Partners II LP
110 East 42nd Street
18th Floor
New York, NY 10017
Attention: Bill Ackman
Telex:
Answer back:
Telecopy No.: 286-1133
Telephone No.: 286-0300
6. Other provisions
No Reliance, etc. Each party represents that (i) it is enter-
ing into the Transaction evidenced hereby as principal (and not
as agent or in any other capacity); (ii) the other party is not
acting as a fiduciary for it; (iii) it is not relying upon any
representations except those expressly set forth in the Agree-
ment or this Confirmation; (iv) it has consulted with its own
legal, regulatory, tax, business, investment, financial, and
accounting advisers to the extent it has deemed necessary, and
it has made its own investment, hedging, and trading decisions
based upon its own judgement and upon any advice from such ad-
visers as it has deemed necessary and not upon any view ex-
pressed by the other party; and (v) it is entering into this
Transaction with a full understanding of the terms, conditions
and risks thereof and it is capable of and willing to assume
those risks.
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January 24, 1997 12:30 PM
Ref: 529541<PAGE>
JP MORGAN
7. Representations. Each party hereby represents to the
other party as follows:
(a) Status. It is duly organised and validly existing under
the laws of the jurisdiction or its organisation or incorpora-
tion and, if relevant under such laws, in good standing;
(b) Powers. It has the power to execute and deliver this Con-
firmation and to perform its obligations under this Transaction
and has taken all necessary action to authorise such execution,
delivery and performance;
(c) No Violation or Conflict. Such execution, delivery and
performance do not violate or conflict with any law applicable
to it, any provision of its constitutional documents, any order
or judgement of any court of other agency or government appli-
cable to it or any of its assets or any contractual restriction
binding on or affecting it or any of its assets;
(d) Consents. All governmental and other consents that are
required to have been obtained by it with respect to this
Transaction have been obtained and are in full force and effect
and all conditions of any such consents have been complied
with; and
(e) Obligations Binding. Its obligations under this Transac-
tion constitute its legal, valid and binding obligations, en-
forceable in accordance with their respective terms (subject to
applicable bankruptcy, reorganisation, insolvency, moratorium
or similar laws affecting creditors' rights generally and sub-
ject, as to enforceability, to equitable principles of general
application (regardless of whether enforcement is sought in a
proceeding in equity or at law)).
8. Events of Default. The occurrence at any time with
respect to a party of any of the following events constitutes
an event of default (an "Event of Default") with respect to
such party:
(a) Misrepresentation. A representation contained herein
proves to have been incorrect or misleading in any material
respect when made;
(b) Bankruptcy. A party (i) is dissolved (other than pursuant
to a consolidation, amalgamation or merger); (ii) becomes in-
solvent or is unable to pay its debts or fails or admits in
writing its inability generally to pay its debts as they become
due; (iii) makes a general assignment, arrangement or composi-
tion with or for the benefit of its creditors; (iv) institutes
or has instituted against it a proceeding seeking a judgement
of insolvency or bankruptcy or any other relief under any bank-
ruptcy or insolvency law or other similar law affecting credi-
tors' rights, or a petition is presented for its winding-up or
liquidation, and, in the case of any such proceeding or peti-
tion instituted or presented against it, such proceeding or
petition (A) results in a judgement of insolvency or bankruptcy
or the entry of an order for relief or the making of an order
for the winding-up or liquidation of the party or (B) is not
dismissed, discharged, stayed or restrained in each case within
30 days of the institution or presentation thereof; (v) has a
resolution passed for its winding-up, official management or
liquidation (other than pursuant to a consolidation, amalgama-
tion or merger); (vi) seeks or becomes subject to the appoint-
ment of an administrator, provisional liquidator, conservator,
receiver, trustee, custodian or other similar official for it
or for all or substantially all its assets; (vii) has a secured
party take possession of all or substantially all its assets or
has a distress, execution, attachment, sequestration or other
legal process levied, enforced or sued on or against all or
substantially all its assets and such secured party maintains
possession, or any such process is not dismissed, discharged,
stayed or restrained, in each case within 30 days thereafter;
(viii) causes or is subject to any event with respect to it
which, under the applicable laws of any jurisdiction, has an
analogous effect to any of the events specified in clauses (i)
to (vii) (inclusive); or (ix) takes any action in furtherance
of, or indicating its consent to, approval of, or acquiescence
in, any of the foregoing acts; and
(c) Merger Without Assumption. The party consolidates or
amalgamates with, or merges with or into, or transfers all or
substantially all its assets, to, another entity and, at the
time of such consolidation, amalgamation, merger or transfer
the resulting, surviving or transferee entity fails to assume
all the
6
January 24, 1997 12:30 PM
Ref: 529541<PAGE>
JP MORGAN
obligations of such party under this Transaction to which it or
its predecessor was a party by operation of law or pursuant to
an agreement reasonably satisfactory to the other party to this
Transaction.
9. Early Termination.
(a) Right to Terminate Following Event of Default. If at any
time an Event of Default with respect to a party (the "Default-
ing Party") has occurred and is then continuing, the other
party (the "Non-defaulting Party") may, by not more than 20
days notice to the Defaulting Party specifying the relevant
Event of Default, designate a day not earlier than the day such
notice is effective as an Early Termination Date in respect of
this Transaction. Upon the effectiveness of notice designating
an Early Termination Date, the obligations of the parties to
make any further payments or deliveries under this Transaction
will terminate, but without prejudice to the other provisions
of this Confirmation. The amount, if any, payable in respect
of an Early Termination Date shall be determined by the Non-
defaulting Party pursuant to Section 9(b).
(b) Calculations.
(i) Statement. Following the occurrence of an Early
Termination Date, the Calculation Agent will make the cal-
culations contemplated by Section 9(c) and will provide to
each of the parties a statement (A) showing, in reasonable
detail, such calculations (including all relevant quota-
tions) and (B) giving details of the relevant account to
which any payment due to it under Section 9(c) is to be
made. In the absence of written confirmation of a quota-
tion obtained in determining a Market Quotation, from the
source providing such quotation, the records of the Calcu-
lation Agent will be conclusive evidence of the existence
and accuracy of such quotation.
(ii) Due Date. The amount calculated as being payable
under Section 9(c) will be due on the day that notice of
the amount payable is effective. Such amount will be paid
together with (to the extent permitted under applicable
law) interest thereon from (and including) the relevant
Early Termination Date to (but excluding) the date such
amount is paid at the Default Rate. Such amount will be
calculated on the basis of the daily compounding and the
actual number of days elapsed.
(iii) Default Rate. A rate per annum equal to the cost
(without proof or evidence of any actual cost) to the rel-
evant payee (as certified by it) if it were to fund or of
funding the relevant amount plus 1% per annum.
(iv) Market Quotation. With respect to this Transaction
and a party making the determination, an amount determined
on the basis of quotations from Reference Market-makers.
Each quotation will be for an amount, if any, that would
be paid to such party (expressed as a negative number) or
by such party (expressed as a positive number) in consid-
eration of an agreement between such party and the quoting
Reference Market-maker and subject to such documentation
as they may in good faith agree, with the relevant Early
Termination Date as the date of commencement of such
agreement, that would have the effect of preserving for
such party the economic equivalent of the obligations of
the parties under the Transaction that would, but for the
occurrence of the relevant Early Termination Date, have
been required after such date. For purposes of this
Transaction, Unpaid Amounts are to be excluded but, with-
out limitation, any payment or delivery that would, but
for the relevant Early Termination Date, have been re-
quired (assuming satisfaction of each condition precedent)
after that Early Termination Date is to be included. The
party making the determination (or its agent) will request
each Reference Market-maker to provide its quotation to
the extent practicable as of the same time (without regard
to different time zones) on the relevant Early Termination
Date (or, if an Early Termination Date is deemed to occur,
as of a time as soon thereafter as practicable). The time
as of which such quotations are to be obtained will be
selected in good faith by the party making the determina-
tion. If more than three such quotations are provided,
the Market Quotation will be the arithmetic mean of the
quotations, expressed in the currency of the Transaction
without regard to the quotations having the highest and
lowest values. If exactly three such quotations are pro-
vided, the Market Quotation will be the quotation remain-
ing after disregarding the quotations having the highest
and lowest values. If fewer than three quotations are
provided, it will be deemed that the
7
January 24, 1997 12:30 PM
Ref: 529541<PAGE>
JP MORGAN
Market Quotation in respect of the Transaction cannot be
determined in which case the Market Quotation shall be
determined on the basis of Loss. For purposes hereof,
"Unpaid Amounts" with respect to a party means the amounts
that became payable to such party on or prior to the Early
Termination Date and which remain unpaid at such Early
Termination Date.
(v) Reference Market-makers. Four leading dealers in
the relevant market for transactions of this type selected
by the party determining a Market Quotation in good faith
(i) from among dealers of the highest credit standing
which satisfy all the criteria that such party applies
generally at the time in deciding whether to offer or to
make an extension of credit and (ii) to the extent practi-
cable, from among such dealers having an office in the
same city.
(vi) Loss. With respect to this Transaction and a
party, an amount that party reasonably determines in good
faith to be the total losses and costs (or gain, in which
case expressed as a negative number) in connection with
this Transaction, as the case may be, including any loss
of bargain, cost of funding or, at the election of such
party but without duplication, loss or cost incurred as a
result of its terminating, liquidating, obtaining or re-
establishing any hedge or related trading position (or any
gain resulting from any of them).
(c) Payments on Early Termination. If notice is given desig-
nating an Early Termination Date, the Defaulting Party will pay
to the Non-defaulting Party, if a positive number, the sum of
the Market Quotation, the Unpaid Amounts owing to the Default-
ing Party and the Unpaid Amounts owing to the Non-defaulting
Party. If such amount is a negative number, the Non-defaulting
Party will pay the absolute value of that amount to the De-
faulting Party. The amount, if any, payable in respect of an
Early Termination Date will be subject to any set-off, offset,
combination of accounts, right of retention or withholding or
similar right or requirement to which the payer of an amount
hereunder is entitled or subject (whether arising under this
Transaction, another contract, applicable law or otherwise)
that is exercised by, or imposed on, such payer. The parties
agree that the amounts recoverable hereunder are a reasonable
pre-estimate of loss and not a penalty. Such amounts are pay-
able for the loss of bargain and the loss of protection against
future risks and except as otherwise provided in this Confirma-
tion neither party will be entitled to recover any additional
damages as a consequence of such losses.
10. Expenses. If an Event of Default has occurred, the
Defaulting Party will, on demand, indemnify and hold harmless
the Non-defaulting Party for and against all reasonable out-of-
pocket expenses, including legal fees and any stamp, registra-
tion, documentation or other similar tax, incurred by the Non-
defaulting Party by reason of the enforcement and protection of
its rights under this Transaction or by reason of the early
termination of this Transaction, including, but not limited to
costs of collection.
11. Jurisdiction. With respect to any suit, action or pro-
ceedings relating to this Transaction ("Proceedings"), each
party irrevocably submits to the jurisdiction of the courts of
the State of New York and the United States District Court
located in the Borough of Manhattan in New York City and waives
any objection which it may have at any time to the laying of
venue of any Proceedings brought in any such court, waives any
claim that such Proceedings have been brought in an incon-
venient forum and further waives the right to object, with
respect to such Proceedings, that such court does not have
jurisdiction over such party. The taking of Proceedings in a
United States jurisdiction shall not preclude the taking of
Proceedings in any other jurisdiction, whether concurrently or
not, to the extent permitted by the law of such other jurisdic-
tion.
12. No Deduction. All payments under this Transaction shall
be made without any deduction or withholding for or on account
of any present or future tax, levy, impost, duty, charge,
assessment or fee of any nature (including interest, penalties,
and additions thereto) that is imposed by any government or
taxing authority in respect of any payment under this Transac-
tion.
8
January 24, 1997 12:30 PM
Ref: 529541<PAGE>
JP MORGAN
13. Transfer. This Confirmation shall be binding upon and
inure to the benefit of the parties and their respective suc-
cessors and permitted assigns. If this Confirmation specifies
that a party shall act through a particular office for the pur-
poses of this Confirmation, such office may not be changed
without the prior written consent of the other party except to
another office in the same tax and legal jurisdiction. Neither
the rights nor obligations of a party hereunder may be assigned
without the prior written consent of the other party; provided,
however, that the Buyer may, with the consent of Morgan (such
consent not to be unreasonably withheld) assign its rights and
obligations to any financial institution which makes the repre-
sentations contained in Section 7 hereof. Any such assignment
or transfer by Morgan shall be fully effective to transfer all
the transferred rights and obligations of Morgan upon notice to
the other party.
15. Governing Law. This Confirmation will be governed by and
construed in accordance with the laws of the State of New York
(without reference to choice of law doctrine).
9
January 24, 1997 12:30 PM
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JP MORGAN
Please confirm your agreement to be bound by the terms of the
foregoing by executing the copy of this Confirmation enclosed
for that purpose and returning it to us.
Very truly yours,
J.P. MORGAN SECURITIES INC. AS
AGENT FOR MORGAN GUARANTY TRUST
COMPANY OF NEW YORK
By: /s/ Adam Green
Name: Adam Green
Vice President
Accepted and confirmed as of
the date first above written by
GOTHAM PARTNERS II LP
By: /s/ David P. Berkowitz
Name: /s/ David P. Berkowitz
Title: President of DPB Corp.,
a GP of Section H Partners,
LP, the GP of Gotham
Partners II, LP
10
January 24, 1997 12:30 PM
Ref: 529541<PAGE>
JP MORGAN
Morgan Guaranty
Trust Company of
New York
P.O. Box 161
60 Victoria Embankment
London EC4Y OJP
Direct: 0171-325-4050
Operator: 0171-600-2300
Fax: 0171-325-8205
June 10, 1997
Gotham Partners II, L.P.
110 East 42nd Street
18th Floor
New York, NY 10017
Att: Bill Ackman
Reference: 529541
RE: EQUITY SHARE OPTION TRANSACTION-AMENDMENT
The purpose of this letter is to confirm the terms and
conditions of the dequity single stock option transactions (the
"Transaction") entered into between us on 19th December, 1996
(the "Trade Date"). This Confirmation shall replace any
previous letter and shall serve as the final documentation for
this Transaction.
This Confirmation evidences a complete binding agreement
between the Parties (as defined hereof) as to the terms of the
Transaction to which this Confirmation relates. The parties
agree to incorporate by reference the 1994 ISD Equity Option
Definitions (as published by the International Swaps and
Derivatives Association, Inc.)(the "1994 Definitions").
1. All provisions set forth in the 1994 ISDA Equity Option
Definitions shall govern this confirmaion except as expressly
modified below. In the event of any Inconsistency between the
1994 Definitions and this Confirmation, this Confirmation will
prevail for the purpose of this Transaction. It is our inten-
tion to have this Confirmation serve as the final documentation
for this trade and accordingly, no letter Confirmation will
follow.
A subsidiary of Incorporated with Limited Liability
J.P. Morgan & Co. in the State of New York, USA
Incorporated Member of the Securities and Futures
Authority and of the Investment
Management Regulatory Organization
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June 10, 1997
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JP MORGAN
2. The terms of the Transaction to which this Confirmation
relates are as follows:
(1) Parties
(a) MORGAN GUARANTY TRUST COMPANY OF NEW YORK
("Morgan")
(b) GOTHAM PARTNERS II, L.P.
("the Counterparty")
(2) General Terms
"Effective Date": December 19, 1996.
"Expiration Date": December 22, 1997.
"Expiration Time" means the Valuation Time.
"Option Style": American.
"Option Type": Call.
"Seller": Morgan.
"Buyer": the Counterparty.
"Exchange": the New York Stock Exchange.
"Related Exchange(s)": the principal options ex-
change for option contracts on the Shares.
"Clearance System": the Clearance System used by the
Exchange.
(3) Procedure for Exercise
"Automatic Exercise": applicable.
"Commencement Date": December 19, 1996.
"Latest Exercise Time": means 2 hours prior to the
Valuation Time.
"Multiple Exercise": inapplicable.
(4) Payments
Premium Payment
The Buyer shall pay to the Seller an amount equal to
the Premium on the Premium Payment Date as follows:
(i) "Premium": USD 33,800.
(ii) "Premium per Option": USD 3.38.
(iii) "Premium Payment Date": December 23, 1996.
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JP MORGAN
(5) Physical Settlement
Upon the exercise by the Buyer of this Transaction
pursuant to the provisions of Exercise in Section 2(3) of this
Confirmation, on the Settlement Date the Seller shall deliver
to the Buyer at the account specified hereto and in the manner
customary for the Clearance System, the Number of Shares to be
Delivered against payment of the Settlement Price by the Buyer
to the Seller. Pursuant to the provision of Assignment in Sec-
tion 5 hereof. Morgan may assign the obligation to deliver any
securities which are subject to this Transaction to any of its
affiliates.
(i) "Share" means the common stock of First Union
Real Estate Investments (the "Issuer").
(ii) "Strike Price": 8.80.
(iii) "Number of Options": 10,000.00.
(iv) "Option Entitlement": one Share per Option.
(v) "Failure to Deliver": Applicable.
(vi) "Valuation Time" means the close of trading on
the Exchange.
(6) Adjustments
"Method of Adjustment": Calculation Agent Adjust-
ment.
(7) Extraordinary Events
Consequence of Merger Events:
(i) "Share-for-Share": Calculation Agent Adjust-
ment. Section 10(1)(c) of the 1994 Definitions shall
be modified as following. Upon the declaration by
the Issuer of a Merger Event pursuant to sections
10(1)(e) and 10(2), the Calculation Agent shall
determine the consequences of such event in respect
of this Transaction and such determination shall be
effective as of the effective date of such declara-
tion. In making such determination, the Calculation
Agent may refer to the general rules and principles
regarding Merger Events on the Option Exchange to the
extent that such reference is reasonably necessary.
(ii) "Share-for-Other": Cancellation and Payment.
(iii) "Share-for-Combined": Calculation Agent Ad-
justment. Section 10(1)(c) of the 1994 Definitions
shall be modified as following. Upon the declaration
by the issuer of a Merger Event pursuant to sections
10(1)(e) and 10(2), the Calculation Agent shall de-
termine the consequences of such event in respect of
this Transaction and such determination shall be ef-
fective as of the effective date of such declaration.
In making such determination, the Calculation Agent
may refer to the general rules and principles re-
garding Merger Events on the Options Exchange to the
extent that such reference is reasonably necessary.
(iv) "Options Exchange": the principal options ex-
change for option contracts on the Shares.
(8) "Nationalisation or Insolvency": Cancellation and
Payment.
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JP MORGAN
3. "Calculation Agent" means Morgan, the determinations and
calculations of which shall be binding in the absence of mani-
fest error.
4. Accounts Details:
(a) Account for payments to Morgan:
Pay: Morgan Guaranty Trust Co. of NY,
New York
Favour: Morgan Guaranty Trust Co. of
NY, London
A/C No.: 670-07-054
Further A/C: 10005035
Account for delivery of Shares to Morgan:
DTC No.: 060
J.P. Morgan Securities, Inc.
Att: Ed White
(b) Account for payments to the Counterparty.
Please advise.
Account for delivery of Shares to the
Counterparty. Please advise.
5. Assignment by Morgan
Notwithstanding any other provision in this Confirmation
to the contrary requiring Morgan to purchase, sell, receive or
deliver any shares or other securities to or from the Counter-
party, Morgan may designate any of its affiliates to purchase,
sell, receive or deliver such shares or other securities and
otherwise to perform Morgan's obligations in respect of this
Transaction and any such designee may assume such obligations.
Morgan shall be discharged of its obligations to the Counter-
party to the extent of any such performance.
6. Offices
(1) The Office of Morgan for the Transaction is:
Morgan Guaranty Trust Company of New York
London Branch
P.O. Box 161
60 Victoria Embankment
London EC4Y 0JP
Attention: MGT EDG Middle Office
Telex: 8954804
Answer back: JPM
For Notices:
Telecopy No.: (212) 648-56504
Telephone No.: (212) 648-2510
(2) The Office of the Counterparty for the
Transaction is:
Gotham Partners II LP
110 East 42nd Street
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June 10, 1997
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Ref: 529541<PAGE>
JP MORGAN
18th Floor
New York, NY 10017
Attention: Bill Ackman
Telex:
Answer back:
Telecopy No.: 286-1133
Telephone No.: 286-0300
7. Representations. Each party hereby represents to the
other party as follows:
(a) Status. It is duly organised and validly existing under
the laws of the jurisdiction or its organisation or incorpora-
tion and, if relevant under such laws, in good standing;
(b) Powers. It has the power to execute and deliver this Con-
firmation and to perform its obligations under the Transaction
and has taken all necessary action to authorise such execution,
delivery and performance;
(c) No Violation or Conflict. Such execution, delivery and
performance do not violate or conflict with any law applicable
to it, any provision of its constitutional documents, any order
or judgement of any court of other agency or government ap-
plicable to it or any of its assets or any contractual restric-
tion binding on or affecting it or any of its assets;
(d) Consents. All governmental and other consents that are
required to have been obtained by it with respect to this
Transaction have been obtained and are in full force and effect
and all conditions of any such consents have been complied
with; and
(e) Obligations Binding. Its obligations under this Transac-
tion constitute its legal, valid and binding obligations, en-
forceable in accordance with their respective terms (subject to
applicable bankruptcy, reorganisation, insolvency, moratorium
or similar laws affecting creditors' rights generally and sub-
ject, as to enforceability, to equitable principles of general
application (regardless of whether enforcement is sought in a
proceeding in equity or at law)).
8. Events of Default. The occurrence at any time with re-
spect to a party of any of the following events constitutes an
event of default (an "Event of Default") with respect to such
party:
(a) Misrepresentation. A representation contained herein
proven to have been incorrect or misleading in any material
respect when made;
(b) Bankruptcy. A party (i) is dissolved (other than pursuant
to a consolidation, amalgamation or merger); (ii) becomes in-
solvent or is unable to pay its debts or fails or admits in
writing its inability generally to pay its debts as they become
due; (iii) makes a general assignment, arrangement or composi-
tion with or for the benefit of its creditors; (iv) institutes
or has instituted against it a proceeding seeking a judgement
of insolvency or bankruptcy or any other relief under any bank-
ruptcy or insolvency law or other similar law affecting credi-
tors' rights, or a petition is presented for its winding-up or
liquidation, and, in the case of any such proceeding or peti-
tion instituted or presented against it, such proceeding or
petition (A) results in a judgement of insolvency or bankruptcy
or the entry of an order for relief or the making of an order
for the winding-up or liquidation of the party or (B) is not
dismissed, discharged, stayed or restrained in each case within
30 days of the institution or presentation thereof; (v) has a
resolution passed for its winding-up, official management or
liquidation (other than pursuant to a consolidation, amal-
gamation or merger); (vi) seeks or becomes subject to the ap-
pointment of an administrator, provisional liquidator, conser-
vator, receiver, trustee, custodian or other similar official
for it or for all or substantially all its assets; (vii) has a
secured party take possession of all or substantially all its
assets or has a distress execution, attachment, sequestration
or other legal process levied, enforced or sued on or against
all or substantially all its assets and such secured party
maintains possession, or any such
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June 10, 1997
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JP MORGAN
process is not dismissed, discharged, stayed or restrained, in
each case within 30 days thereafter; (viii) causes or is subject
to any event with respect to it which, under the applicable
laws of any jurisdiction, has an analogous effect to any of the
events specified in clauses (i) to (vii) (inclusive); or (ix)
takes any action in furtherance of, or indicating its consent
to, approval of, or acquiescence in, any of the foregoing acts;
and
(c) Merger without Assumption. The party consolidates or
amalgamates with, or merges with or into, or transfers all or
substantially all its assets, to, another entity and, at the
time of such consolidation, amalgamation, merger or transfer
the resulting, surviving or transferee entity fails to assume
all the obligations of such party under this Transaction to
which it or its predecessor was a party by operation of law or
pursuant to an agreement reasonably satisfactory to the other
party to this Transaction.
9. Early Termination:
(a) Right to Terminate Following Event of Default. If at any
time an Event of Default with respect to a party (the "Default-
ing Party") has occurred and is then continuing, the other
party (the "Non-defaulting Party") may, by not more than 20
days notice to the Defaulting Party specifying the relevant
Event of Default, designate a day not earlier than the day such
notice is effective as an Early Termination Date in respect of
this Transaction. Upon the effectiveness of notice designating
an Early Termination Date, the obligations of the parties to
make any further payments or deliveries under this Transaction
will terminate, but without prejudice to the other provisions
of this Confirmation. The amount, if any, payable in respect
of an Early Termination Date shall be determined by the Non-
defaulting Party pursuant to Section 9(b)
(b) Calculations:
(i) Statement. Following the occurrence of an Early
Termination Date, the Calculation Agent will make the cal-
culations contemplated by Section 9(c) and will provide to
each of the parties a statement (A) showing, in reasonable
detail, such calculations (including all relevant quota-
tions) and (B) giving details of the relevant account to
which any payment due to it under Section 9(c) is to be
made. In the absence of written confirmation of a quota-
tion obtained in determining a Market Quotation, from the
source providing such quotation, the records of the Calcu-
lation Agent will be conclusive evidence of the existence
and accuracy of such quotation.
(ii) Due Date. The amount calculated as being payable
under Section 9(c) will be due on the day that notice of
the amount payable is effective. Such amount will be paid
together with (to the extent permitted under applicable
law) interest thereon from (and including) the relevant
Early Termination Date to (but excluding) the date such
amount is paid at the Default Rate. Such amount will be
calculated on the basis of the daily compounding and the
actual number of days elapsed.
(iii) Default Rate. A rate per annum equal to the cost
(without proof or evidence of any actual cost) to the
relevant payee (as certified by it) if it were to fund or
of funding the relevant amount plus 1% per annum.
(iv) Market Quotation. With respect to this Transaction
and a party making the determination, an amount determined
on the basis of quotations from Reference Market-makers.
Each quotation will be for an amount, if any, that would
be paid to such party (expressed as a negative number) or
by such party (expressed as a positive number) in consid-
eration of an agreement between such party and the quoting
Reference Market-maker and subject to such documentation
as they may in good faith agree, with the relevant Early
Termination Date as the date of commencement of such
agreement, that would have the affect of preserving for
such party the economic equivalent of the obligations of
the parties under the Transaction that would, but for the
occurrence of the relevant Early Termination Date, have
been required after such date. For purposes of this
Transaction, Unpaid Amounts are to be excluded but, with-
out limitation, any payment or delivery that would, but
for the relevant Early Termination Date, have been re-
quired (assuming satisfaction of each condition
6
June 10, 1997
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JP MORGAN
precedent) after that Early Termination Date is to be
included. The party making the determination (or its
agent) will request each Reference Market-maker to provide
its quotation to the extent practicable as of the same
time (without regard to different time zones) on the
relevant Early Termination Date (or, if an Early
Termination Date is deemed to occur, as of a time as soon
thereafter as practicable). The time as of which such
quotations are to be obtained will be selected in good
faith by the party making the determination. If more than
three such quotations are provided, the Market Quotation
will be the arithmetic mean of the quotations, expressed
in the currency of the Transaction without regard to the
quotations having the highest and lowest values. If
exactly three such quotations are provided, the Market
quotation will be the quotation remaining after
disregarding the quotations having the highest and lowest
values. If fewer than three quotations are provided, it
will be deemed that the Market Quotation in respect of the
Transaction cannot be determined in which case the Market
Quotation shall be determined on the basis of Loss. For
purposes hereof, "Unpaid Amounts" with respect to a party
means the amounts that became payable to such party on or
prior to the Early Termination Date and which remain
unpaid at such Early Termination Date.
(v) Reference Market-makers. Four leading dealers in
the relevant market for transactions of this type selected
by the party determining a Market Quotation in good faith
(i) from among dealers of the highest credit standing
which satisfy all the criteria that such party applies
generally at the time in deciding whether to offer or to
make an extension of credit and (ii) to the extent practi-
cable, from among such dealers having an office in the
same city.
(vi) Loss. With respect to this Transaction and a
party, an amount that party reasonably determines in good
faith to be the total losses and costs (or gain, in which
case expressed as a negative number) in connection with
this Transaction, as the case may be, including any loss
of bargain, cost of funding or, at the election of such
party but without duplication, loss or cost incurred as a
result of its terminating, liquidating, obtaining or re-
establishing any hedge or related trading position (or any
gain resulting from any of them).
(c) Payments on Early Termination. If notice is given
designating an Early Termination Date, the Defaulting
Party will pay to the Non-defaulting Party, if a positive
number, the sum of the Market Quotation, the Unpaid
Amounts owing to the Defaulting Party and the Unpaid
Amounts owing to the Non-defaulting Party. If such amount
is a negative number, the Non-defaulting Party will pay
the absolute value of that amount to the Defaulting Party.
The amount, if any, payable in respect of an Early Termi-
nation Date will be subject to any set-off, offset, combi-
nation of accounts, right of retention or withholding or
similar right or requirement to which the payor of an
amount hereunder is entitled or subject (whether arising
under this Transaction, another contract, applicable law
or otherwise) that is exercised by, or imposed on, such
payor. The parties agree that the amount recoverable
hereunder are a reasonable pre-estimate of loss and not a
penalty. Such amounts are payable for the loss of bargain
and the loss of protection against future risks and except
as otherwise provided in this Confirmation neither party
will be entitled to recover any additional damages as a
consequence of such losses.
10. Expenses. If an Event of Default has occurred, the De-
faulting Party will, on demand, indemnify and hold harm-
less the Non-defaulting Party for and against all reason-
able out-of-pocket expenses, including legal fees and any
stamp, registration, documentation or other similar tax,
incurred by the Non-defaulting Party by reason of the en-
forcement and protection of its rights under this Transac-
tion or by reason of the early termination of this Trans-
action, including, but not limited to costs of collection.
11. Jurisdiction. With respect to any suit, action or pro-
ceedings relating to this Transaction ("Proceedings"),
each party irrevocably submits to the jurisdiction of the
courts of the State of New York and the United States Dis-
trict Court located in the Borough of Manhattan in New
York City and waives any objection which it may have at
any time to the laying of venue of any Proceedings
7
June 10, 1997
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JP MORGAN
brought in any such court, waives any claim that such
Proceedings have been brought in an inconvenient forum and
further waives the right to object, with respect to such
Proceedings, that such court does not have jurisdiction
over such party. The taking of Proceedings in a United
States jurisdiction shall not preclude the taking of
Proceedings in any other jurisdiction, whether
concurrently or not, to the extent permitted by the law of
such other jurisdiction.
12. No Deduction. All payments under this Transaction shall
be made without any deduction or withholding for or on
account of any present or future tax, levy, import, duty,
charge, assessment or fee of any nature (including inter-
est, penalties, and additions thereto) that is imposed by
any government or taxing authority in respect of any pay-
ment under this Transaction.
13. Payments. Payments under this Transaction shall be made
on the due date for value on that date in the place of the
account specified herein, in freely transferable funds and
in the manner customary for payments in the required cur-
rency. Where settlement is by delivery (that is, other
than by payment), such delivery will be made for receipt
on the due date in the manner customary for the relevant
obligation unless otherwise specified herein.
14. Transfer. Neither party may transfer any or all of its
rights or obligations under this Transaction without the
prior written consent of the non-transferring party.
15. Governing Law. This confirmation will be governed by and
construed in accordance with the laws of the State of New
York (without reference to choice of law doctrine).
16. Amendment. This Amendment shall be governed by, and con-
strued in accordance with the laws of the State of New
York (without reference to the choice of law doctrine).
Upon the execution of this Amendment, this Amendment will
amend, restate and supersede the Equity Single Stock Op-
tion Transaction dated as of December 16, 1996 between
Morgan and the Counterparty.
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5:20 PM
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JP MORGAN
Please confirm your agreement to be bound by the terms of the
foregoing by executing the copy of this Confirmation enclosed
for that purpose and returning it to us.
Very truly yours,
J.P. MORGAN SECURITIES INC. AS AGENT FOR
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
By:
Name:
Title:
Accepted and confirmed as of
the date first above written
GOTHAM PARTNERS II, L.P.
By:
Name:
Title:
9
June 10, 1997
5:20 PM
Ref: 529541
Exhibit 4
BT REFERENCE NO.: NY-4912
THIS OPTION AGREEMENT (the "Agreement") dated as of Janu-
ary 29, 1997 is made by and between GOTHAM PARTNERS, L.P. (the
"Buyer") and BANKERS TRUST COMPANY, LONDON BRANCH, (the "Seller"
or "BTCO").
1. PURPOSE; PAYMENTS
(a) In consideration of the payment by the Buyer to the
Seller of a Premium (all capitalized terms used herein without
definition shall have the respective meanings assigned to such
terms in Section 2) of USD 2,128,608.00 for value February 3,
1997 (to Seller's Account specified below), the Seller hereby
grants to the Buyer a cash-settled call option (the "Option")
with respect to 493,150 shares (the "Shares") of the common
stock ("Stock") of First Union Real Estate Investments (the
"Issuer"). The Option is exercisable by the Buyer between the
hours of 9:00 A.M. and 12:00 P.M., New York City time, on any
Business Day during the Exercise Period upon notice given in
writing, or telephonically, confirmed in writing, to the
Seller. The Seller shall deem this Option to have been auto-
matically exercised on the Expiration Date if the Option is
"in-the-money" (as defined below) at the close of trading on
the Stock Exchange, unless the Seller receives notification to
the contrary from the Buyer before 1:00 P.M., New York City
time on the Expiration Date. For purposes of this Option, the
Option shall be deemed "in-the-money" if, at the time of the
determination, the Valuation Price exceeds the Exercise Price.
(b) Upon exercise of this Option, the Seller shall pay to
the Buyer an amount (the "Settlement Amount") equal to the pro-
duct of (1) the excess, if any, of the Valuation Price over the
Exercise Price and (2) the number of Shares. Settlement of
this Option shall be by cash payment only, and the Settlement
Amount shall be due and payable on the date (the "Settlement
Date") which is three Banking Days after the Exercise Date.
2. DEFINITIONS
"Banking Day" shall mean any day which is both (1) a day
other than a Saturday, Sunday or other day on which banks in
New York or London are authorized or required under applicable
law to remain closed and (2) an Exchange Business Day.
"Buyers Account" shall mean the account of Gotham Part-
ners, L.P. which account details are to be provided by the
Buyer to the Seller in writing as soon as possible as the
Seller will otherwise be unable to make any payments to Buyer.
"Calculation Agent" shall mean BTCO.
"Exchange Business Day" shall mean a day other than a Sat-
urday or Sunday on which exchanges are open for the trading of
securities in New York and for the trading of options or
futures relating to the Stock in Chicago.
"Expiration Date" shall mean February 13, 1998.
"Exercise Date" shall mean the day, during the Exercise
Period, if any, on which the Option is or is deemed exercised.
1<PAGE>
BT REFERENCE NO.: NY-4912
"Exercise Period" shall mean the period from and including
January 29, 1997 to and including the Expiration Date.
"Exercise Price" shall mean $10.80, subject to adjustment
as specified in Section 6.
"Premium" shall mean the amount specified in Section 1(a)
hereof as payable by the Buyer to the Seller as Consideration
for this Option.
"Seller's Termination Amount" shall have the meaning
specified in Exhibit A.
"Settlement Date" shall have the meaning set forth in Sec-
tion 1(b).
"Stock Exchange" shall mean the New York Stock Exchange.
"U.S. Dollar" and "$" shall mean the lawful currency of
the United States of America.
"Valuation Dates" means each of the first ten Banking Days
during the Valuation Period on which there is no Market Disrup-
tion Event, subject to the provisions of Section 7 hereof.
"Valuation Period" means (i) with respect to any Exercise
Date up to, and including the 10th Exchange Business Day prior
to the Expiration Date, each of the ten (10) Exchange Business
Days from and including that Exercise Date, and (ii) with
respect to any other Exercise Date, each of the ten (10)
Exchange Business Days prior to and including the Expiration
Date.
"Valuation Price" shall mean the arithmetic average or the
closing price for one share of Stock (as determined by the Cal-
culation Agent), as calculated and published by the Stock
Exchange, on each of the Valuation Dates.
3. REPRESENTATIONS AND WARRANTIES
(a) The Seller hereby represents and warrants to the
Buyer as follows:
(i) it is a corporation duly organized and validly
existing under the laws of the jurisdiction of its incorpora-
tion;
(ii) neither the execution and delivery of this
Agreement, nor the consummation of the transactions contem-
plated hereby, nor the performance of its obligations hereunder
violates (i) any law, regulation, decree or other legal re-
striction applicable to it, (ii) its charter, by-laws or other
constitutional documents or (iii) any material instrument or
agreement to which it or any of its assets is subject or by
which it is bound;
(iii) there is no legal requirement of any govern-
mental authority (including any requirement to make any decla-
ration, filing or registration or to obtain any consent,
approval, license or order) which is necessary to be met in
connection with its execution, delivery or performance of this
Agreement (any such legal requirement being herein called a
"Legal Requirement");
(iv) this Agreement has been duly authorized,
executed and delivered on its behalf and constitutes its legal,
valid and binding obligation, enforceable against it in accor-
dance with its terms
2<PAGE>
BT REFERENCE NO.: NY-4912
except as such enforceability may be limited by bankruptcy,
insolvency or other laws of general applicability relating to
or affecting the rights of creditors and by general equitable
principles;
(v) no Event of Default (as defined in Section 5),
and no condition, event or act which with notice or the lapse
of time, or both, would constitute an Event of Default has
occurred and is continuing or will occur by reason of its
entering into or performing its obligations under this Agree-
ment; and
(vi) it is not on the date of execution of this
Agreement required to deduct or withhold any Taxes (as defined
in Section 8) with respect to any payment which is or could be
required to be made by it pursuant to this Agreement.
(b) The Buyer represents and warrants to the Seller as
follows:
(i) it is a sophisticated institutional investor
and is purchasing the Option for its own account for investment
and not with a view to any distribution or any other disposi-
tion thereof;
(ii) in the normal course of its business, the
Buyer invests in and purchases securities similar to the
Option;
(iii) the Buyer has had access to such information
concerning the Option and the Seller as it has requested and
has such knowledge and experience as to be able to evaluate the
merits and risks of purchasing the Option;
4. COVENANTS
The Seller hereby covenants and agrees that it will use
reasonable efforts to comply in all material respects with all
Legal Requirements which may arise from time to time after the
date of the Agreement if failure so to comply would materially
impair its ability to perform its obligations under this Agree-
ment.
5. EVENTS OF DEFAULT
(a) Each of the following events shall constitute an
Event of Default:
(i) the Seller shall fail to pay when due any
amount due and owing under this Agreement and such failure
shall continue for three Banking Days after receipt of notice
of such failure from the Buyer;
(ii) the Seller shall fail to perform, observe or
comply with any other term, covenant, condition or provision
contained in this Agreement and such failure shall continue for
30 days after receipt of notice of such failure from the Buyer;
(iii) any representation or warranty of the Seller
shall prove to have been incorrect or misleading in any mate-
rial respect when made or repeated or deemed to have been made
or repeated;
(iv) the occurrence of any event of default in
respect of the Seller under any other option agreement with the
Buyer or any affiliates of the Buyer;
3<PAGE>
BT REFERENCE NO.: NY-4912
(v) (1) the occurrence or existence of any event
or condition in respect of the Seller under one or more agree-
ments or instruments relating to indebtedness for borrowed
money (excluding obligations in respect of deposits received in
the ordinary course of business) in an aggregate amount of not
less than 3% of the Seller's stockholders' equity as at the end
of its last fiscal year (the "Threshold Amount") which has
resulted in such indebtedness becoming, or becoming capable at
such time of being declared, due and payable under such agree-
ments or instruments, before it would otherwise have been due
and payable or (2) the failure by such party to make one or
more payments at maturity in an aggregate amount of not less
than the Threshold Amount under such agreements or instruments
(after giving effect to any applicable grace period);
(vi) the Seller (1) is dissolved; (2) becomes
insolvent or fails or is unable or admits in writing its
inability generally to pay its debts as they become due; (3)
makes a general assignment, arrangement or composition with or
for the benefit of its creditors; (4) institutes or has insti-
tuted against it a proceeding seeking a judgment of insolvency
or bankruptcy or any other relief under any bankruptcy or
insolvency law or other similar law affecting creditors'
rights, or a petition is presented for the winding-up or liqui-
dation of the party and, in the case of any such proceeding or
petition instituted or presented against it, such proceeding or
petition (A) results in a judgment of insolvency or liquidation
of the party or (B) is not dismissed, discharged, stayed or
restrained in each case within 30 days of the institution or
presentation thereof; (5) has a resolution passed for its
winding-up or liquidation; (6) seeks or becomes subject to the
appointment of an administrator, receiver, trustee, custodian
or other similar official for it or for all or substantially
all its assets (regardless of how brief such appointment may
be, or whether any obligations are promptly assumed by another
entity or whether any other event described in this clause (6)
has occurred and is continuing); (7) any event occurs with
respect to the Seller which, under the applicable laws of any
jurisdiction, has an analogous effect to any of the events
specified in clauses (1) to (6) (inclusive); or (8) takes any
action in furtherance of, or indicating its consent to, ap-
proval of, or acquiescence in, any of the foregoing acts; other
than in the case of clause (1) or (5) or, to the extent it
relates to those clauses, clause (8), for the purpose of a con-
solidation, amalgamation or merger which would not constitute
an event described in (vii) below; or
(vii) the Seller consolidates or amalgamates with,
or merges with or transfers all or substantially all its assets
to, another entity and (1) at the time of such consolidation,
amalgamation, merger or transfer the resulting, surviving or
transferee entity fails to assume all the obligations of the
Seller under this Agreement by operation of law or pursuant to
an agreement reasonably satisfactory to the Buyer or (2) the
creditworthiness of the resulting, surviving or transferee
entity is materially weaker than that of the Seller immediately
prior to the taking of such action.
(b) If any Event of Default shall have occurred and be
continuing, the Buyer shall have the right to terminate this
Agreement by the giving of a notice declaring such termination
and specifying the Banking Day on which such early termination
shall occur (the "Early Termination Date"). Notwithstanding
the foregoing, if an Event of Default specified in clause (vi)
of Section 5(a) shall have occurred, the date of the occurrence
of such Event of Default shall be deemed to be an Early Termi-
nation Date without any action or notice from the Buyer.
(c) If this Agreement shall have been terminated pursuant
to the provisions of Section 5(b), on the Early Termination
Date (or, in the case of the deeming of an Early Termination
Date pursuant to the last sentence of Section 5(b), on demand
thereafter) the Seller shall pay to the Buyer the Seller's Ter-
mination Amount determined as set forth in Exhibit A plus any
amounts then due and payable hereunder by the Seller to the
Buyer (with interest as provided in Section 12, if applicable).
4<PAGE>
BT REFERENCE NO.: NY-4912
(d) The parties agree that the amounts recoverable pursu-
ant to Section 5(c) are reasonable pre-estimates of loss and
are not penalties. Such amounts are payable as liquidated dam-
ages for the loss of a bargain and the loss of protection
against future risks and, without prejudice to the rights and
remedies of either party in respect of any other breach of this
Agreement or as otherwise specified herein, the Buyer shall not
be entitled to recover any additional damages hereunder as a
consequence of such losses.
(e) The Seller shall indemnify and hold harmless the
Buyer on demand from and against all legal fees and other out-
of-pocket expenses incurred by the Buyer in enforcing its
rights hereunder or as the result of the occurrence of an Early
Termination Date.
6. ORDINARY CASH DIVIDEND AND ANTI-DILUTION ADJUSTMENTS
All adjustments to be made by the Calculation Agent pursuant to
these Ordinary Cash Dividend and Anti-Dilution Adjustments pro-
visions will be subject to agreement by Buyer. In the event
that Buyer disagrees with any such adjustment (and notifies the
Seller of such disagreement on or before the relevant Exercise
Date), each of the Buyer and Seller will select a Reference
Market-maker to act as alternate Calculation Agent with respect
to such adjustment and each of those alternate Calculation
Agents will, independently of Buyer and Seller, select a third
Reference Market-maker to act as alternate Calculation Agent
with respect to such adjustment and the joint determination of
these three alternate Calculation Agents with respect to such
adjustment shall be binding in the absence of manifest error.
"Reference Market-maker" means a leading dealer in the
relevant market selected by a party from among dealers of
the highest credit standing which satisfy all the criteria
that such party applies generally at the time in deciding
whether to offer or to make an extension of credit.
In the event that, with respect to an Exercise Date, more than
one of the events described below has occurred during the
period from the Trade Date through, and including, the relevant
Exercise Date, the settlement terms of this Transaction shall
be adjusted as necessary to preserve the economic equivalent of
this Transaction including, without limitation, these adjust-
ment provisions, as it existed immediately prior to the occur-
rence of such events.
(a) Ordinary Cash Dividend Adjustments
On the Exercise Date, the Exercise Price shall be subject
to adjustment as follows:
If, Aggregate Dividends for the relevant Dividend
Period is greater than or equal to the relevant Divi-
dend Strike, the Exercise Price shall be decreased by
an amount equal to the Aggregate Dividend minus the
Dividend Strike.
If, Aggregate Dividends for the relevant Dividend
Period is less than the relevant Dividend Strike, the
Exercise Price shall be increased by an amount equal
to the Dividend Strike minus the Aggregate Dividend.
"DIVIDEND STRIKE" means, with respect to the
Exercise Date, the Dividend Strike specified in
the table below for period in which the Exercise
Date occurs:
5<PAGE>
BT REFERENCE NO.: NY-4912
EXERCISE DATE
DIVIDEND FROM, BUT TO, AND
STRIKE EXCLUDING INCLUDING
$0.11 1/29/97 5/15/97
$0.22 5/15/97 8/15/97
$0.33 8/15/97 11/15/97
$0.44 11/15/97 2/2/98
"AGGREGATE DIVIDENDS" means, with respect to the
Dividend Period, the amount equal to the sum of
the USD values of all ordinary cash dividends
per share which are declared by the issuer dur-
ing the Dividend Period, provided that an ex-
dividend date with respect to such shares occurs
during the Dividend Period.
"DIVIDEND PERIOD" means, with respect to the
Exercise Date, the period from, but excluding,
the Trade Date to, and including the Exercise
Date.
(b) Anti-Dilution Adjustments
The Exercise Price, the Dividend Strike, and the number of
Shares subject to this Option shall be subject to adjustment as
follows:
(a) If prior to the Exercise Date any adjustment is made
by the Options Clearing Corporation or its successors ("OCC")
in the terms of outstanding OCC-issued options ("OCC Options")
on the Stock, an equivalent adjustment shall be made by the
Calculation Agent in the terms of this Option. Except as pro-
vided below, no adjustment shall be made in the terms of this
Option for any event that does not result in an adjustment to
the terms of such outstanding OCC Options. Without limiting
the generality of the foregoing, other than pursuant to the
Ordinary Cash Dividend Adjustments provision above, NO ADJUST-
MENT SHALL BE MADE IN THE TERMS OF THIS OPTION FOR ORDINARY
CASH DIVIDENDS. For indicative purposes, a summary of the
terms under which adjustments may be made by the OCC as in
effect on the date hereof is set forth below:
(i) Whenever there is a stock dividend, stock dis-
tribution, stock split, reverse stock split, rights offering,
distribution, reorganization, recapitalization, reclassifica-
tion, extraordinary cash dividend or similar event in respect
of the Stock, or a merger, consolidation, dissolution or liqui-
dation of the Issuer, the number of option contracts, the unit
of trading, the exercise price and the underlying amount of
Stock, or any of them, with respect to all outstanding option
contracts open for trading in the Stock may be adjusted.
(ii) All adjustments are made by the Securities
Committee of the OCC. The Securities Committee determines
whether to make adjustments to reflect particular events in
respect of the Stock, and the nature and extent of any such
adjustment, based on its judgement as to what is appropriate
for the protection of investors and the public interest, taking
into account such factors as fairness to holders and writers of
option contracts on the Stock, the maintenance of a fair and
orderly market in options on the Stock, consistency of inter-
pretation and practice, efficiency of exercise settlement pro-
cedures and the coordination with other clearing agencies of
the clearance and settlement of transactions in the Stock.
6<PAGE>
BT REFERENCE NO.: NY-4912
(iii) In the case of a stock dividend, stock distri-
bution or stock split whereby one or more whole numbers of
shares are issued with respect to each outstanding share, each
option contract covering that share shall be increased by the
same number of additional option contracts as the number of
shares issued with respect to each share, the exercise price
per share in effect immediately prior to such event shall be
proportionately reduced, and the unit of trading shall remain
the same.
(iv) In the case of a stock dividend, stock distri-
bution or stock split whereby other than a whole number of
shares is issued in respect of each outstanding share, the
exercise price in effect immediately
prior to such event shall be proportionately reduced, and con-
versely, in the case of a reverse stock split or combination of
shares, the exercise price in effect immediately prior to such
event shall be proportionately increased. Whenever the exer-
cise price with respect to an option contract has been reduced
or increased, the unit of trading shall be proportionately
increased or reduced, as the case may be.
(v) In the case of any distribution made with
respect to shares, other than cash dividends and other than
distributions for which adjustments are provided in subsections
(iii) or (iv) above, if an adjustment is determined by the
Securities Committee to be appropriate, (i) the exercise price
in effect immediately prior to such event shall be reduced by
the value per share of the distributed property, in which event
the unit of trading shall not be adjusted, or (ii) the unit of
trading in effect immediately prior to such event shall be
adjusted so as to include the amount of property distributed
with respect to the number of shares represented by such unit
of trading, in which event the exercise price shall not be
adjusted.
(vi) In the case of any event for which adjustment
is not provided in any of the foregoing paragraphs, the Securi-
ties Committee may make such adjustments, if any, it determines
to be reasonable under the circumstances.
(vii) Adjustments shall as a general rule become
effective on the "ex-date" established by the principal stock
exchange or market on which the Shares are open for trading.
(viii) All adjustments of the exercise price of an
outstanding option contract shall be rounded to the nearest 1/8
of a dollar, and all adjustments of the unit of trading shall
be rounded down to eliminate any fraction, and if the unit of
trading is rounded down to eliminate a fraction, the adjusted
exercise price shall be further adjusted, to the nearest 1/8 of
a dollar, to reflect any diminution in the value of the option
contract resulting from the elimination of the fraction.
(b) If at any time prior to the Exercise Date there shall
be no outstanding OCC Options on Stock, and an event shall
occur for which an adjustment might have been required under
the By-laws, Rules and stated policies of OCC applicable to the
adjustment of OCC Options, as described above (the "OCC Adjust-
ment Rules"), the Calculation Agent shall determine, in its
sole discretion, but applying the principles set forth in the
OCC Adjustment Rules then in effect, whether to adjust the
terms of this Option, and the nature of any such adjustment.
(c) The Calculation Agent shall notify the Buyer/Seller
of any adjustment pursuant to this Section 6 and the date of
its effectiveness.
(d) The Calculation Agent is not obligated to verify
whether the prerequisites for an adjustment pursuant to this
Section 6 exist or whether such adjustment has been correctly
calculated or
7<PAGE>
BT REFERENCE NO.: NY-4912
whether the date of effectiveness has been correctly fixed.
In this connection, the Calculation Agent does not assume any
liability of any nature.
(e) Upon the consummation of a Merger Event in respect of
the Shares (as defined below), the Calculation Agent shall make
such adjustments (including, without limitation, cancelation
and payment) to this Option as it, in its sole discretion,
deems appropriate. "Merger Event" means, in respect of the
Shares, as of the date upon which holders become bound to
transfer such Shares held by them, any (i) reclassification or
change of such Shares (other than a change in par value, if
any, as a result of a subdivision or combination), (ii) con-
solidation, amalgamation or merger of the issuer of the rel-
evant Shares with or into another corporation (other than a
consolidation, amalgamation or merger in which that issuer of
Shares is the continuing corporation and which does not result
in any such reclassification or change of Shares) or (iii)
other takeover offer for such Shares that results in a transfer
of all such Shares (other than the Shares owned or controlled
by the offeror) on or before the Expiration Date.
7. VALUATION; MARKET DISRUPTION EVENTS
(a) If, in the opinion of the Calculation Agent, a Market
Disruption Event (as defined below) has occurred and is con-
tinuing on any Banking Day during the Valuation Period, then
such day shall not be deemed to be a Valuation Date; provided,
however, that if there have been five such days on which Market
Disruption Events have occurred, then, notwithstanding such
Market Disruption Event, such day shall be deemed to be a Valu-
ation Date and the Calculation Agent shall determine the price
of one Share as of the normal closing time for the Stock
Exchange to be the price announced at such time by the Stock
Exchange (or, if trading in the Shares has been materially lim-
ited, its good faith estimate of the closing price for one
Share on the Stock Exchange that would have prevailed on such
date but for the Market Disruption Event). The Calculation
Agent shall use its reasonable efforts to give notice to the
Seller and the Buyer that a Market Disruption Event has
occurred.
(b) "Market Disruption Event" means the occurrence or
continuance on any Exchange Business Day of any suspension of
or limitation imposed on trading (by reason of movements in
price exceeding limits permitted by the relevant exchange or
otherwise) (i) on the Stock Exchange, in the Shares or securi-
ties generally or (ii) on the primary options exchange on which
options on the Shares are traded, in such options, in each case
if, in the determination of the Calculation Agent, such suspen-
sion or limitation is material.
8. TAXATION; ILLEGALITY
(a) All payments hereunder shall be made free and clear
of and without deduction or withholding for any Taxes (as here-
inafter defined) whatsoever. If applicable law should require
that any payment due from the Seller hereunder be subject to
withholding with respect to any Taxes whatsoever, the Seller
will, to the full extent then permitted by law, pay (i) the
full amount of such Taxes required to be deducted or withheld
(including the full amount required to be deducted or withheld
from any additional amounts paid pursuant to this Section 8(a))
and (ii) such additional amounts as may be necessary in order
that every net payment to the Buyer of all amounts due and
owing hereunder will not be less than the full amount the Buyer
would have received had no such deduction or withholding been
required. The Seller will furnish to the Buyer within 30 days
after the date on which the payment of any Taxes is due pursu-
ant to applicable law a written statement or other evidence
sufficient to document the fact and amount of withholding by
the Seller. As used in this Section 8, "Taxes" means any
present or future taxes, levies, duties, charges, fees, deduc-
tions or witholdings of any nature now or hereafter
8<PAGE>
BT REFERENCE NO.: NY-4912
imposed, levied, collected, withheld or assessed by any taxing
authority whatsoever and all interest penalties and other similar
liabilities with respect thereto, other than (A) taxes in respect
of the overall net income of the payee imposed by the jurisdic-
tion in which its principal office is located or the jurisdic-
tion in which the relevant payment is received or (B) taxes
imposed as a result of such recipient being or having been a
citizen or resident of the jurisdiction of the government or
taxing authority imposing such tax, or being or having been
organized, present or engaged in a trade or business in such
jurisdiction, or having or having had a permanent establishment
or fixed place of business in such jurisdiction, but excluding
a connection arising solely from such recipient having
executed, delivered, performed its obligations or received a
payment under, or enforced, this Agreement or any similar
agreement with the Seller.
(b) In the event that the Seller (i) is obligated at any
time to make any payment of additional amounts pursuant to this
Section 8 or (ii) shall have determined that its performance
under this Agreement shall have become unlawful in whole or in
part as a result of compliance in good faith by the Seller with
any applicable present or future law, rule, regulation, judg-
ment, order or directive of any governmental, administrative,
legislative or judicial authority, then the Seller shall give
notice thereof to the Buyer, and the parties hereto shall
thereupon promptly negotiate in good faith with a view to find-
ing a satisfactory alternative method of payment or performance
to avoid such illegality or such payment of additional amounts.
If at the end of a period of 30 days after the giving of such
notice (or such shorter period as may be reasonable under the
circumstances then prevailing) the parties have not agreed upon
such a satisfactory alternative method, either party may termi-
nate this Agreement within 30 days thereafter by designating an
Early Termination Date and otherwise following the procedures
for termination set forth in Section 5.
(c) If either party is required at any time to execute
any form of document in order for payments to it hereunder to
qualify for exemption from withholding tax or for withholding
tax at a reduced rate, such party shall execute such form or
document and deliver it on demand to the party required to make
such payments.
9. PAYMENT IN U.S. DOLLARS
It is of the essence of this Agreement that the payments
required hereunder be made in U.S. Dollars. The obligation of
either party to make each payment in U.S. Dollars shall not be
discharged or satisfied by any tender, or any recovery pursuant
to any judgment, which is expressed in or converted into any
other currency until and except to the extent such tender or
recovery shall result in the actual receipt by the other party
in U.S. Dollars of the amount expressed to be payable hereun-
der. The obligation of either party to make payments in U.S.
Dollars shall be enforceable as an alternative or additional
cause of action for the purpose of recovery in U.S. Dollars of
the amount (if any) by which such actual receipt shall fall
short of the full amount of U.S. Dollars required to be paid
hereunder and shall not be affected by judgment being obtained
for any other sums due under this Agreement.
10. JURISDICTION; SERVICE OF PROCESS; IMMUNITY
(a) With respect to any suit, action or proceedings
relating to this Agreement ("Proceedings"), each party irrevo-
cably submits to the non-exclusive jurisdiction of the courts
of the State of New York and the United States District Court
located in the Borough of Manhattan in New York City and waives
any objection which it may have at any time to the laying of
venue of any Proceedings brought in any such court, waives any
claim that such Proceedings have been brought in an inconvenient
9<PAGE>
BT REFERENCE NO.: NY-4912
forum and further waives the right to object, with respect to
such Proceedings, that such court does not have jurisdiction
over such party. Nothing in this Agreement precludes either
party from bringing Proceedings in any other jurisdiction nor
will the bringing of Proceedings in any one or more
jurisdictions preclude the bringing of Proceedings in any other
jurisdiction.
(b) Each party confirms, if it does not have a place of
business in New York, that it has irrevocably appointed a pro-
cess agent in New York to receive, for it and on its behalf,
service of process in any Proceedings, and will provide evi-
dence of such appointment on request. If for any reason the
party's process agent is unable to act as such, such party will
promptly notify the other party and within 30 days appoint a
substitute process agent acceptable to the other party. The
parties irrevocably consent to service of process in the manner
provided for notices in Section 14. Nothing in this Agreement
will affect the right of either party to serve process in any
other manner permitted by law.
(c) Each party irrevocably waives, to the fullest extent
permitted by applicable law, with respect to itself and its
revenues and assets (irrespective of their use or intended
use), all immunity on the grounds of sovereignty or other simi-
lar grounds from (i) suit, (ii) jurisdiction of any court,
(iii) relief by way of injunction, order for specific perfor-
mance; or for recovery of property, (iv) attachment of its
assets (whether before or after judgment) and (v) execution or
enforcement of any judgment to which it or its revenues or
assets might otherwise be entitled in any Proceedings in the
courts of any jurisdiction and irrevocably agrees, to the
extent permitted by applicable law, that it will not claim any
such immunity in any Proceedings.
11. DATES; COMPUTATIONS
(a) Whenever the Exercise Date would in accordance with
the terms hereof otherwise occur on a day which is not an
Exchange Business Day, such date shall be postponed to the next
succeeding Exchange Business Day.
(b) All percentages calculated pursuant to this Agreement
shall, if necessary, be rounded upwards to the next higher one
hundred thousandth of a percentage point and all currency
amounts will be rounded to the nearest whole currency unit
(with 1/2 of such unit being rounded up).
12. PAYMENTS
All payments to be made by the Seller hereunder shall be
made without offset or counterclaim in immediately available
funds by wire transfer to the account specified pursuant to
Section 14 below. Computations hereunder shall be on the basis
of a year of 360 days for the actual number of days elapsed.
Any amount not paid when due hereunder shall be payable on
demand and, to the extent permitted by law, will bear interest
from the due date until paid at a rate per annum which shall be
1% in excess of the Buyer's cost of funding such amount, as
certified by the Buyer.
13. ASSIGNMENT
This Confirmation shall be binding upon and inure to the
parties and their respective successors and permitted assigns.
Neither the rights nor obligations of a party hereunder may be
assigned without the prior written consent of the other party;
provided that Buyer may, with the prior consent of BTCO (such
consent not to be unreasonably withheld), assign its rights and
obligations to any financial institution which makes the repre-
sentations contained in Section 1(b)(i-iv) and Section
i(b)(vii-viii) hereof; provided further that BTCO may at any
time, without consent being required, assign its rights, duties
and obligations in respect of this Transaction to any affiliate
of BTCO (the rights, duties and
10<PAGE>
BT REFERENCE NO.: NY-4912
obligations so assigned to be guaranteed by BTCO). Any such
assignment or transfer by BTCO shall be fully effective to
transfer all the transferred rights and obligations of BTCO upon
notice to Buyer.
14. NOTICES
Notices hereunder shall be in writing and may be given by
personal delivery, by mail or by telex, effective upon receipt
(if given by personal delivery), five days after mailing, first
class postage pre-paid (if given by mail), or one Banking Day
after dispatch (if given by telex), addressed to the recipient
as follows or to such other address as the relevant party shall
have advised the other in writing:
- If to BTCO:
Bankers Trust Company
1 Bankers Trust Plaza
130 Liberty Street
New York, NY 10006
Attention: Equity Operations
Fax No.: (212) 250-1467
- If to the Buyer:
Gotham Partners, L.P.
Attention: Bill Ackman, David Berkowitz
Fax No.: 212-286-1133
15. AMENDMENTS
No amendment or waiver of any provision of this Agreement
nor consent to any departure therefrom by either party shall in
any event be effective unless the same shall be in writing and
signed by the other party, and then any such waiver or consent
shall be effective only in the specific instance and for the
specific purpose for which given and only for the specific time
period, if any, contemplated therein.
11<PAGE>
BT REFERENCE NO.: NY-4912
16. NON-WAIVER OF RIGHTS
No failure or delay by either party in exercising any
right, power or privilege hereunder shall operate as a waiver
and any explicit waiver of any breach of this Agreement shall
be without prejudice to any rights of such party to any other
or further breach.
17. COUNTERPARTS
This Agreement may be executed in counterparts, which
taken together shall be deemed to constitute one and the same
agreement.
18. GOVERNING LAW
This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without ref-
erence to choice of law doctrine.
IN WITNESS WHEREOF, the parties have caused this Agreement
to be executed by their respective representatives as of the
date specified in the first sentence above.
BANKERS TRUST COMPANY, LONDON
BRANCH
By: /s/ Tarana Oommen
Name: Tarana Oommen
Title: Vice President
GOTHAM PARTNERS, L.P.
By Section M Partners, L.P.
By Karenina Corp.
By: /s/ William A. Ackman
Name: William A. Ackman
Title: President
12<PAGE>
BT REFERENCE NO.: NY-4912
EXHIBIT A
SELLER'S TERMINATION AMOUNT
"Seller's Termination Amount" means the amount in U.S.
Dollars equal to the arithmetic mean of the respective on-time
all-in fees (including documentation costs) communicated to the
Buyer not more than two Banking Days before an Early Termina-
tion Date (or, in the case of the deeming of an Early Termina-
tion Date pursuant to the last sentence of Section 5(b), on the
earliest practicable Banking Day following such deemed Early
Termination Date) by each of four leading commercial banks or
investment banking firms in London or New York selected in good
faith by the Buyer as the fee, payable on or as of such Early
Termination Date, as the case may be, that it would charge to
assume as of such Early Termination Date all of the obligations
of the Seller under this Option Agreement that would become due
and payable after such Early Termination Date (assuming that
this Option Agreement were to continue in effect until the
Exercise Date and that no Early Termination Date had occurred)
provided, however, that if any one such entity fails so to com-
municate such a fee, the Buyer is not required to seek another
such entity to obtain a quote and "Seller's Termination Amount"
shall be determined on the basis of the fee or fees so communi-
cated to the Buyer by the other three entities. In the event
that less than three such entities are able to provide such
quotes or that the "Seller's Termination Amount" cannot other-
wise be determined in accordance with the preceding sentence,
"Seller's Termination Amount" shall mean such amount, computed
in good faith by the Buyer, as may be required to compensate
the Buyer for any losses, costs and expenses whatsoever that
the Buyer may incur as a result of the early termination of
this Option Agreement.
13<PAGE>
GOTHAM PARTNERS, L.P.
First Transaction Amendment
BT Transaction Reference No.: NY-4912
Dear Sir/Madam:
The purpose of this letter is to set forth the terms and condi-
tions of the First Transaction Amendment (the "Amendment")
dated as of June 4, 1997 which has been agreed to between
Gotham Partners, L.P. (the "Counterparty") and Bankers Trust
Company, London Branch. This Amendment relates to the above-
referenced transaction with an Expiration Date of February 13,
1998 (the "Amended Transaction").
In consideration of the mutual benefits to be derived from this
Amendment, BT and the Counterparty have agreed to amend the
above-referenced transaction to provide for physical settlement
of the underlying shares, to delete the 10-day averaging period
at maturity and to change the Expiration Date to February 2,
1998.
As specifically modified by this Amendment, all of the terms
and provisions of the Amended Transaction are hereby reaffirmed
and shall remain in full force and effect.
If the foregoing correctly states your understanding of these
matters, please indicate your agreement to this Amendment by
signing and returning the attached Confirmation which amends
and restates the terms of the Transaction to reflect the
changes set forth in this Amendment.
Yours Truly,
Bankers Trust Company, London Branch
By: _______________________
Name:
Title:
DATE: June 4, 1997
TO: GOTHAM PARTNERS, L.P.
ATTENTION: Bill Ackman
FAX: 212 286-1133<PAGE>
FROM: BANKERS TRUST COMPANY, London Branch
FAX: 212 250-1467
BT REF: NY-4912 (as amended and restated to reflect the
changes specified in the First Transaction Amendment
dated as of June 4, 1997)
RE: Equity Derivative Transaction
As specifically modified by this Amendment, all of the terms
and provisions of the Amended Transaction and the Master Agree-
ment are hereby reaffirmed and shall remain in full force and
effect.
THIS OPTION AGREEMENT (the "Agreement") dated as of January 29,
1997 is made by and between GOTHAM PARTNERS, L.P. (the "Buyer")
and BANKERS TRUST COMPANY, London Branch, (the "Seller" or
"BTCO").
1. Purpose; Payments
(a) In consideration of the payment by the Buyer to the
Seller of a Premium (all capitalized terms used herein without
definition shall have the respective meanings assigned to such
terms in Section 2) of USD 2,128,608.00 for value February 3,
1997 (to Seller's Account specified below), the Seller hereby
grants to the Buyer a physically-settled call option (the
"Option") with respect to 493,150 shares (the "Shares") of the
common stock ("Stock") of First Union Real Estate Investments
(the "Issuer"). The Option is exercisable by the Buyer between
the hours of 9:00 A.M. and 12:00 P.M., New York City time, on
any Business Day during the Exercise Period upon notice given
in writing, or telephonically, confirmed in writing, to the
Seller.
(b) Upon exercise of this Option, Seller will deliver or
cause to be delivered to Buyer on the third Exchange Business
Day (the Settlement Date) a number of Shares (and the documen-
tation necessary to evidence transfer of legal and beneficial
ownership of such Shares) equal the number of Shares specified
in paragraph 1(a) above in accordance with the instructions
delivered with the notice of exercise against payment by Buyer
on the Settlement Date, in immediately available funds, of an
amount equal to the product of the number of Shares to be
delivered on such Settlement Date and the Exercise Price.
2. Definitions
"Banking Day" shall mean any day which is both (1) a day
other than a Saturday, Sunday or other day on which banks in
New York or London are authorized or required under applicable
law to remain closed and (2) an Exchange Business Day.
Buyers Account shall mean the account of Gotham Partners,
L.P. which account details are to be provided by the Buyer to
the Seller in writing as soon as possible as the Seller will
otherwise be unable to make any payments to Buyer.
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"Calculation Agent" shall mean BTCO.
"Exchange Business Day" shall mean a day other than a
Saturday or Sunday on which exchanges are open for the trading
of securities in New York and for the trading of options or
futures relating to the Stock in Chicago.
"Expiration Date" shall mean February 2, 1998.
Exercise Date shall mean the day, during the Exercise
Period, if any, on which the Option is or is deemed exercised.
Exercise Period shall mean the period from and including
January 29, 1997 to and including the Expiration Date.
"Exercise Price" shall mean $10.80, subject to adjustment
as specified in Section 6.
"Premium" shall mean the amount specified in Section 1(a)
hereof as payable by the Buyer to the Seller as Consideration
for this Option.
"Seller's Termination Amount" shall have the meaning
specified in Exhibit A.
"Settlement Date" shall have the meaning set forth in Sec-
tion 1(b).
"Stock Exchange" shall mean the New York Stock Exchange.
"U.S. Dollar" and "$" shall mean the lawful currency of
the United States of America.
3. Representations and Warranties
(a) The Seller hereby represents and warrants to the
Buyer as follows:
(i) it is a corporation duly organized and validly
existing under the laws of the jurisdiction of its incorpora-
tion;
(ii) neither the execution and delivery of this Agree-
ment, nor the consummation of the transactions contemplated
hereby, nor the performance of its obligations hereunder vio-
lates (i) any law, regulation, decree or other legal restric-
tion applicable to it, (ii) its charter, by-laws or other con-
stitutional documents or (iii) any material instrument or
agreement to which it or any of its assets is subject or by
which it is bound;
(iii) there is no legal requirement of any governmental
authority (including any requirement to make any declaration,
filing or registration or to obtain any consent, approval,
license or order) which is necessary to be met in connection
with its execution, delivery or performance of this Agreement
(any such legal requirement being herein called a "Legal
Requirement");
(iv) this Agreement has been duly authorized, executed
and delivered on its behalf and constitutes its legal, valid
and binding obligation, enforceable against it in accordance
with its terms except as such enforceability may be limited by
bankruptcy, insolvency or other laws of general applicability
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relating to or affecting the rights of creditors and by general
equitable principles;
(v) no Event of Default (as defined in Section 5), and
no condition, event or act which with notice or the lapse of
time, or both, would constitute an Event of Default has
occurred and is continuing or will occur by reason of its
entering into or performing its obligations under this Agree-
ment; and
(vi) it is not on the date of execution of this Agree-
ment required to deduct or withhold any Taxes (as defined in
Section 8) with respect to any payment which is or could be
required to be made by it pursuant to this Agreement.
(b) The Buyer represents and warrants to the Seller as
follows:
(i) it is a sophisticated institutional investor and is
purchasing the Option for its own account for investment and
not with a view to any distribution or any other disposition
thereof;
(ii) in the normal course of its business, the Buyer
invests in and purchases securities similar to the Option;
(iii) the Buyer has had access to such information con-
cerning the Option and the Seller as it has requested and has
such knowledge and experience as to be able to evaluate the
merits and risks of purchasing the Option;
4. Covenants
The Seller hereby covenants and agrees that it will use
reasonable efforts to comply in all material respects with all
Legal Requirements which may arise from time to time after the
date of the Agreement if failure so to comply would materially
impair its ability to perform its obligations under this Agree-
ment.
5. Events of Default
(a) Each of the following events shall constitute an
Event of Default:
(i) the Seller shall fail to pay when due any amount
due and owing under this Agreement and such failure shall con-
tinue for three Banking Days after receipt of notice of such
failure from the Buyer;
(ii) the Seller shall fail to perform, observe or comply
with any other term, covenant, condition or provision contained
in this Agreement and such failure shall continue for 30 days
after receipt of notice of such failure from the Buyer;
(iii) any representation or warranty of the Seller shall
prove to have been incorrect or misleading in any material
respect when made or repeated or deemed to have been made or
repeated;
(iv) the occurrence of any event of default in respect
of the Seller under any other option agreement with the Buyer
or any affiliate of the Buyer;
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(v) (1) the occurrence or existence of any event or
condition in respect of the Seller under one or more agreements
or instruments relating to indebtedness for borrowed money (ex-
cluding obligations in respect of deposits received in the
ordinary course of business) in an aggregate amount of not less
than 3% of the Seller's stockholders' equity as at the end of
its last fiscal year (the "Threshold Amount") which has re-
sulted in such indebtedness becoming, or becoming capable at
such time of being declared, due and payable under such agree-
ments or instruments, before it would otherwise have been due
and payable or (2) the failure by such party to make one or
more payments at maturity in an aggregate amount of not less
than the Threshold Amount under such agreements or instruments
(after giving effect to any applicable grace period);
(vi) the Seller (1) is dissolved; (2) becomes insolvent
or fails or is unable or admits in writing its inability gener-
ally to pay its debts as they become due; (3) makes a general
assignment, arrangement or composition with or for the benefit
of its creditors; (4) institutes or has instituted against it a
proceeding seeking a judgment of insolvency or bankruptcy or
any other relief under any bankruptcy or insolvency law or
other similar law affecting creditors' rights, or a petition is
presented for the winding-up or liquidation of the party and,
in the case of any such proceeding or petition instituted or
presented against it, such proceeding or petition (A) results
in a judgment of insolvency or liquidation of the party or (B)
is not dismissed, discharged, stayed or restrained in each case
within 30 days of the institution or presentation thereof; (5)
has a resolution passed for its winding-up or liquidation; (6)
seeks or becomes subject to the appointment of an administra-
tor, receiver, trustee, custodian or other similar official for
it or for all or substantially all its assets (regardless of
how brief such appointment may be, or whether any obligations
are promptly assumed by another entity or whether any other
event described in this clause (6) has occurred and is continu-
ing); (7) any event occurs with respect to the Seller which,
under the applicable laws of any jurisdiction, has an analogous
effect to any of the events specified in clauses (1) to (6)
(inclusive); or (8) takes any action in furtherance of, or in-
dicating its consent to, approval of, or acquiescence in, any
of the foregoing acts; other than in the case of clause (1) or
(5) or, to the extent it relates to those clauses, clause (8),
for the purpose of a consolidation, amalgamation or merger
which would not constitute an event described in (vii) below;
or
(vii) the Seller consolidates or amalgamates with, or
merges with or transfers all or substantially all its assets
to, another entity and (1) at the time of such consolidation,
amalgamation, merger or transfer the resulting, surviving or
transferee entity fails to assume all the obligations of the
Seller under this Agreement by operation of law or pursuant to
an agreement reasonably satisfactory to the Buyer or (2) the
creditworthiness of the resulting, surviving or transferee en-
tity is materially weaker than that of the Seller immediately
prior to the taking of such action.
(b) If any Event of Default shall have occurred and be
continuing, the Buyer shall have the right to terminate this
Agreement by the giving of a notice declaring such termination
and specifying the Banking Day on which such early termination
shall occur (the "Early Termination Date"). Notwithstanding
the foregoing, if an Event of Default specified in clause (vi)
of Section 5(a) shall have occurred, the date of the occurrence
of such Event of Default shall
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be deemed to be an Early Termination Date without any action or
notice from the Buyer.
(c) If this Agreement shall have been terminated pursuant
to the provisions of Section 5(b), on the Early Termination
Date (or, in the case of the deeming of an Early Termination
Date pursuant to the last sentence of Section 5(b), on demand
thereafter) the Seller shall pay to the Buyer the Seller's Ter-
mination Amount determined as set forth in Exhibit A plus any
amounts then due and payable hereunder by the Seller to the
Buyer (with interest as provided in Section 12, if applicable).
(d) The parties agree that the amounts recoverable pursu-
ant to Section 5(c) are reasonable pre-estimates of loss and
are not penalties. Such amounts are payable as liquidated dam-
ages for the loss of a bargain and the loss of protection
against future risks and, without prejudice to the rights and
remedies of either party in respect of any other breach of this
Agreement or as otherwise specified herein, the Buyer shall not
be entitled to recover any additional damages hereunder as a
consequence of such losses.
(e) The Seller shall indemnify and hold harmless the
Buyer on demand from and against all legal fees and other out-
of-pocket expenses incurred by the Buyer in enforcing its
rights hereunder or as the result of the occurrence of an Early
Termination Date.
6. Ordinary Cash Dividend and Anti-Dilution Adjustments
All adjustments to be made by the Calculation Agent pursu-
ant to these Ordinary Cash Dividend and Anti-Dilution Adjust-
ments provisions will be subject to agreement by Buyer. In the
event that Buyer disagrees with any such adjustment (and noti-
fies the Seller of such disagreement on or before the relevant
Exercise Date), each of the Buyer and Seller will select a Ref-
erence Market-maker to act as alternate Calculation Agent with
respect to such adjustment and each of those alternate Calcula-
tion Agents will, independently of Buyer and Seller, select a
third Reference Market-maker to act as alternate Calculation
Agent with respect to such adjustment and the joint determina-
tion of these three alternate Calculation Agents with respect
to such adjustment shall be binding in the absence of manifest
error.
Reference Market-maker means a leading dealer in the
relevant market selected by a party from among dealers of the
highest credit standing which satisfy all the criteria that
such party applies generally at the time in deciding whether to
offer or to make an extension of credit.
In the event that, with respect to an Exercise Date, more
than one of the events described below has occurred during the
period from the Trade Date through, and including, the relevant
Exercise Date, the settlement terms of this Transaction shall
be adjusted as necessary to preserve the economic equivalent of
this Transaction including, without limitation, these adjust-
ment provisions, as it existed immediately prior to the occur-
rence of such events.
(a) Ordinary Cash Dividend Adjustments
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On the Exercise Date, the Exercise Price shall be
subject to adjustment as follows:
If, Aggregate Dividends for the relevant Dividend
Period is greater than or equal to the relevant Dividend
Strike, the Exercise Price shall be decreased by an amount
equal to the Aggregate Dividend minus the Dividend Strike.
If, Aggregate Dividends for the relevant Dividend
Period is less than the relevant Dividend Strike, the Exercise
Price shall be increased by an amount equal to the Dividend
Strike minus the Aggregate Dividend.
Dividend Strike means, with respect to the Exercise
Date, the Dividend Strike specified in the table below for
period in which the Exercise Date occurs:
EXERCISE DATE
DIVIDEND FROM, BUT TO, AND
STRIKE EXCLUDING INCLUDING
$0.11 1/29/97 5/15/97
$0.22 5/15/97 8/15/97
$0.33 8/15/97 11/15/97
$0.44 11/15/97 2/2/98
Aggregate Dividends means, with respect to the Divi-
dend Period, the amount equal to the sum of the USD values of
all ordinary cash dividends per share which are declared by the
issuer during the Dividend Period, provided that an ex-dividend
date with respect to such shares occurs during the Dividend
Period.
Dividend Period means, with respect to the Exercise
Date, the period from, but excluding, the Trade Date to, and
including the Exercise Date.
(b) Anti-Dilution Adjustments
The Exercise Price, the Dividend Strike, and the
number of Shares subject to this Option shall be subject to
adjustment as follows:
a) If prior to the Exercise Date any adjustment is
made by the Options Clearing Corporation or its successors
("OCC") in the terms of outstanding OCC-issued options ("OCC
Options") on the Stock, an equivalent adjustment shall be made
by the Calculation Agent in the terms of this Option. Except
as provided below, no adjustment shall be made in the terms of
this Option for any event that does not result in an adjustment
to the terms of such outstanding OCC Options. Without limiting
the generality of the foregoing, other than pursuant to the
Ordinary Cash Dividend Adjustments provision above, NO
ADJUSTMENT SHALL BE MADE IN THE TERMS OF THIS OPTION FOR
ORDINARY CASH DIVIDENDS. For indicative purposes, a summary of
the terms under which adjustments may be made by the OCC as in
effect on the date hereof is set forth below:
(i) Whenever there is a stock dividend, stock
distribution, stock split, reverse stock split, rights
offering, distribution, reorganization, recapitalization,
reclassification, extraordinary cash dividend or similar event
in respect of the Stock, or a merger, consolidation,
dissolution or liquidation of the Issuer, the number of option
contracts, the unit of trading,
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the exercise price and the underlying amount of Stock, or any
of them, with respect to all outstanding option contracts open
for trading in the Stock may be adjusted.
(ii) All adjustments are made by the Securities
Committee of the OCC. The Securities Committee determines
whether to make adjustments to reflect particular events in
respect of the Stock, and the nature and extent of any such
adjustment, based on its judgment as to what is appropriate for
the protection of investors and the public interest, taking
into account such factors as fairness to holders and writers of
option contracts on the Stock, the maintenance of a fair and
orderly market in options on the Stock, consistency of
interpretation and practice, efficiency of exercise settlement
procedures and the coordination with other clearing agencies of
the clearance and settlement of transactions in the Stock.
(iii) In the case of a stock dividend, stock
distribution or stock split whereby one or more whole numbers
of shares are issued with respect to each outstanding share,
each option contract covering that share shall be increased by
the same number of additional option contracts as the number of
shares issued with respect to each share, the exercise price
per share in effect immediately prior to such event shall be
proportionately reduced, and the unit of trading shall remain
the same.
(iv) In the case of a stock dividend, stock
distribution or stock split whereby other than a whole number
of shares is issued in respect of each outstanding share, the
exercise price in effect immediately
prior to such event shall be proportionately reduced, and
conversely, in the case of a reverse stock split or combination
of shares, the exercise price in effect immediately prior to
such event shall be proportionately increased. Whenever the
exercise price with respect to an option contract has been
reduced or increased, the unit of trading shall be
proportionately increased or reduced, as the case may be.
(v) In the case of any distribution made with
respect to shares, other than cash dividends and other than
distributions for which adjustments are provided in subsections
(iii) or (iv) above, if an adjustment is determined by the
Securities Committee to be appropriate, (i) the exercise price
in effect immediately prior to such event shall be reduced by
the value per share of the distributed property, in which event
the unit of trading shall not be adjusted, or (ii) the unit of
trading in effect immediately prior to such event shall be
adjusted so as to include the amount of property distributed
with respect to the number of shares represented by such unit
of trading, in which event the exercise price shall not be
adjusted.
(vi) In the case of any event for which adjustment
is not provided in any of the foregoing paragraphs, the
Securities Committee may make such adjustments, if any, it
determines to be reasonable under the circumstances.
(vii) Adjustments shall as a general rule become
effective on the "ex-date" established by the principal stock
exchange or market on which the Shares are open for trading.
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(viii) All adjustments of the exercise price of an
outstanding option contract shall be rounded to the nearest 1/8
of a dollar, and all adjustments of the unit of trading shall
be rounded down to eliminate any fraction, and if the unit of
trading is rounded down to eliminate a fraction, the adjusted
exercise price shall be further adjusted, to the nearest 1/8 of
a dollar, to reflect any diminution in the value of the option
contract resulting from the elimination of the fraction.
(b) If at any time prior to the Exercise Date there shall
be no outstanding OCC Options on Stock, and an event shall
occur for which an adjustment might have been required under
the By-laws, Rules and stated policies of OCC applicable to the
adjustment of OCC Options, as described above (the "OCC
Adjustment Rules"), the Calculation Agent shall determine, in
its sole discretion, but applying the principles set forth in
the OCC Adjustment Rules then in effect, whether to adjust the
terms of this Option, and the nature of any such adjustment.
(c) The Calculation Agent shall notify the Buyer/Seller
of any adjustment pursuant to this Section 6 and the date of
its effectiveness.
(d) The Calculation Agent is not obligated to verify
whether the prerequisites for an adjustment pursuant to this
Section 6 exist or whether such adjustment has been correctly
calculated or whether the date of effectiveness has been
correctly fixed. In this connection, the Calculation Agent
does not assume any liability of any nature.
(e) Upon the consummation of a Merger Event in respect of
the Shares (as defined below), the Calculation Agent shall make
such adjustments (including, without limitation, cancellation
and payment) to this Option as it, in its sole discretion,
deems appropriate. "Merger Event" means, in respect of the
Shares, as of the date upon which holders become bound to
transfer such Shares held by them, any (i) reclassification or
change of such Shares (other than a change in par value, if
any, as a result of a subdivision or combination), (ii)
consolidation, amalgamation or merger of the issuer of the
relevant Shares with or into another corporation (other than a
consolidation, amalgamation or merger in which that issuer of
Shares is the continuing corporation and which does not result
in any such reclassification or change of Shares) or (iii)
other takeover offer for such Shares that results in a transfer
of all such Shares (other than the Shares owned or controlled
by the offeror) on or before the Expiration Date.
7. Valuation; Market Disruption Events
(a) If, in the opinion of the Calculation Agent, a Market
Disruption Event (as defined below) has occurred and is
continuing on any Banking Day during the Valuation Period, then
such day shall not be deemed to be a Valuation Date; provided,
however, that if there have been five such days on which Market
Disruption Events have occurred, then, notwithstanding such
Market Disruption Event, such day shall be deemed to be a
Valuation Date and the Calculation Agent shall determine the
price of one Share as of the normal closing time for the Stock
Exchange to be the price announced at such time by the Stock
Exchange (or, if trading in the Shares has been materially
limited, its good faith estimate of the closing price for one
Share on the Stock Exchange that would
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have prevailed on such date but for the Market Disruption
Event). The Calculation Agent shall use its reasonable efforts
to give notice to the Seller and the Buyer that a Market
Disruption Event has occurred.
(b) "Market Disruption Event" means the occurrence or
continuance on any Exchange Business Day of any suspension of
or limitation imposed on trading (by reason of movements in
price exceeding limits permitted by the relevant exchange or
otherwise) (i) on the Stock Exchange, in the Shares or
securities generally or (ii) on the primary options exchange on
which options on the Shares are traded, in such options, in
each case if, in the determination of the Calculation Agent,
such suspension or limitation is material.
8. Taxation; Illegality
(a) All payments hereunder shall be made free and clear
of and without deduction or withholding for any Taxes (as
hereinafter defined) whatsoever. If applicable law should
require that any payment due from the Seller hereunder be
subject to withholding with respect to any Taxes whatsoever,
the Seller will, to the full extent then permitted by law, pay
(i) the full amount of such Taxes required to be deducted or
withheld (including the full amount required to be deducted or
withheld from any additional amounts paid pursuant to this
Section 8(a)) and (ii) such additional amounts as may be
necessary in order that every net payment to the Buyer of all
amounts due and owing hereunder will not be less than the full
amount the Buyer would have received had no such deduction or
withholding been required. The Seller will furnish to the
Buyer within 30 days after the date on which the payment of any
Taxes is due pursuant to applicable law a written statement or
other evidence sufficient to document the fact and amount of
withholding by the Seller. As used in this Section 8, "Taxes"
means any present or future taxes, levies, duties, charges,
fees, deductions or withholdings of any nature now or hereafter
imposed, levied, collected, withheld or assessed by any taxing
authority whatsoever and all interest penalties and other
similar liabilities with respect thereto, other than (A) taxes
in respect of the overall net income of the payee imposed by
the jurisdiction in which its principal office is located or
the jurisdiction in which the relevant payment is received or
(B) taxes imposed as a result of such recipient being or having
been a citizen or resident of the jurisdiction of the
government or taxing authority imposing such tax, or being or
having been organized, present or engaged in a trade or
business in such jurisdiction, or having or having had a
permanent establishment or fixed place of business in such
jurisdiction, but excluding a connection arising solely from
such recipient having executed, delivered, performed its
obligations or received a payment under, or enforced, this
Agreement or any similar agreement with the Seller.
(b) In the event that the Seller (i) is obligated at any
time to make any payment of additional amounts pursuant to this
Section 8 or (ii) shall have determined that its performance
under this Agreement shall have become unlawful in whole or in
part as a result of compliance in good faith by the Seller with
any applicable present or future law, rule, regulation,
judgment, order or directive of any governmental,
administrative, legislative or judicial authority, then the
Seller shall give notice thereof to the Buyer, and the parties
hereto shall thereupon promptly negotiate in good faith with a
view to
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finding a satisfactory alternative method of payment or
performance to avoid such illegality or such payment of
additional amounts. If at the end of a period of 30 days after
the giving of such notice (or such shorter period as may be
reasonable under the circumstances then prevailing) the parties
have not agreed upon such a satisfactory alternative method,
either party may terminate this Agreement within 30 days
thereafter by designating an Early Termination Date and
otherwise following the procedures for termination set forth in
Section 5.
(c) If either party is required at any time to execute
any form of document in order for payments to it hereunder to
qualify for exemption from withholding tax or for withholding
tax at a reduced rate, such party shall execute such form or
document and deliver it on demand to the party required to make
such payments.
9. Payment in U.S. Dollars
It is of the essence of this Agreement that the payments
required hereunder be made in U.S. Dollars. The obligation of
either party to make each payment in U.S. Dollars shall not be
discharged or satisfied by any tender, or any recovery pursuant
to any judgment, which is expressed in or converted into any
other currency until and except to the extent such tender or
recovery shall result in the actual receipt by the other party
in U.S. Dollars of the amount expressed to be payable
hereunder. The obligation of either party to make payments in
U.S. Dollars shall be enforceable as an alternative or
additional cause of action for the purpose of recovery in U.S.
Dollars of the amount (if any) by which such actual receipt
shall fall short of the full amount of U.S. Dollars required to
be paid hereunder and shall not be affected by judgment being
obtained for any other sums due under this Agreement.
10. Jurisdiction; Service of Process; Immunity
(a) With respect to any suit, action or proceedings
relating to this Agreement ("Proceedings"), each party
irrevocably submits to the non-exclusive jurisdiction of the
courts of the State of New York and the United States District
Court located in the Borough of Manhattan in New York City and
waives any objection which it may have at any time to the
laying of venue of any Proceedings brought in any such court,
waives any claim that such Proceedings have been brought in an
inconvenient forum and further waives the right to object, with
respect to such Proceedings, that such court does not have
jurisdiction over such party. Nothing in this Agreement
precludes either party from bringing Proceedings in any other
jurisdiction nor will the bringing of Proceedings in any one or
more jurisdictions preclude the bringing of Proceedings in any
other jurisdiction.
(b) Each party confirms, if it does not have a place of
business in New York, that it has irrevocably appointed a
process agent in New York to receive, for it and on its behalf,
service of process in any Proceedings, and will provide
evidence of such appointment on request. If for any reason the
party's process agent is unable to act as such, such party will
promptly notify the other party and within 30 days appoint a
substitute process agent acceptable to the other party. The
parties irrevocably consent to service of process in the manner
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provided for notices in Section 14. Nothing in this Agreement
will affect the right of either party to serve process in any
other manner permitted by law.
(c) Each party irrevocably waives, to the fullest extent
permitted by applicable law, with respect to itself and its
revenues and assets (irrespective of their use or intended
use), all immunity on the grounds of sovereignty or other
similar grounds from (i) suit, (ii) jurisdiction of any court,
(iii) relief by way of injunction, order for specific
performance; or for recovery of property, (iv) attachment of
its assets (whether before or after judgment) and (v) execution
or enforcement of any judgment to which it or its revenues or
assets might otherwise be entitled in any Proceedings in the
courts of any jurisdiction and irrevocably agrees, to the
extent permitted by applicable law, that it will not claim any
such immunity in any Proceedings.
11. Dates; Computations
(a) Whenever the Exercise Date would in accordance with
the terms hereof otherwise occur on a day which is not an
Exchange Business Day, such date shall be postponed to the next
succeeding Exchange Business Day.
(b) All percentages calculated pursuant to this Agreement
shall, if necessary, be rounded upwards to the next higher one
hundred thousandth of a percentage point and all currency
amounts will be rounded to the nearest whole currency unit
(with 1/2 of such unit being rounded up).
12. Payments
All payments to be made by the Seller hereunder shall be
made without offset or counterclaim in immediately available
funds by wire transfer to the account specified pursuant to
Section 14 below. Computations hereunder shall be on the basis
of a year of 360 days for the actual number of days elapsed.
Any amount not paid when due hereunder shall be payable on
demand and, to the extent permitted by law, will bear interest
from the due date until paid at a rate per annum which shall be
1% in excess of the Buyer's cost of funding such amount, as
certified by the Buyer.
13. Assignment
This Confirmation shall be binding upon and inure to the
parties and their respective successors and permitted assigns.
Neither the rights nor obligations of a party hereunder may be
assigned without the prior written consent of the other party;
provided that Buyer may, with the prior consent of BTCO (such
consent not to be unreasonably withheld), assign its rights and
obligations to any financial institution which makes the
representations contained in Section 1(b)(i-iv) and Section
1(b)(vii-viii) hereof; provided further that BTCO may at any
time, without consent being required, assign its rights, duties
and obligations in respect of this Transaction to any affiliate
of BTCO (the rights, duties and obligations so assigned to be
guaranteed by BTCO). Any such assignment or transfer by BTCO
shall be fully effective to transfer all the transferred rights
and obligations of BTCO upon notice to Buyer.
-12-<PAGE>
14. Notices
Notices hereunder shall be in writing and may be given by
personal delivery, by mail or by telex, effective upon receipt
(if given by personal delivery), five days after mailing, first
class postage pre-paid (if given by mail), or one Banking Day
after dispatch (if given by telex), addressed to the recipient
as follows or to such other address as the relevant party shall
have advised the other in writing:
- If to BTCO:
Bankers Trust Company
1 Bankers Trust Plaza
130 Liberty Street
New York, NY 10006
Attention: Equity Operations
Fax No.: (212) 250-1467
- If to the Buyer:
Gotham Partners, L.P.
Attention: Bill Ackman, David Berkowitz
Fax No.: 212-286-1133
15. Amendments
No amendment or waiver of any provision of this Agreement
nor consent to any departure therefrom by either party shall in
any event be effective unless the same shall be in writing and
signed by the other party, and then any such waiver or consent
shall be effective only in the specific instance and for the
specific purpose for which given and only for the specific time
period, if any, contemplated therein.
16. Non-Waiver of Rights
No failure or delay by either party in exercising any
right, power or privilege hereunder shall operate as a waiver
and any explicit waiver of any breach of this Agreement shall
be without prejudice to any rights of such party to any other
or further breach.
17. Counterparts
This Agreement may be executed in counterparts, which
taken together shall be deemed to constitute one and the same
agreement.
18. Governing Law
-13-<PAGE>
This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without
reference to choice of law doctrine.
19. Performance by Designee
In the event that BTCO is required to purchase, sell,
receive or deliver any shares or other securities in accordance
with the terms of this Transaction, BTCO may designate any BTCO
Affiliate to exercise such rights and/or to perform such
obligations, as the case may be, in place of BTCO. Buyer need
not be notified of such designation. Upon performance of any
such obligation by any such designee, BTCO shall be discharged
of its obligations to Buyer to the extent of such performance.
In the event any such designee of BTCO fails to perform any
such obligation, BTCO shall remain liable for such non-
performance provided, however, that Buyer hereby waives the
equitable remedy of specific performance by BTCO of any such
purchase, sale, receipt or delivery obligation.
IN WITNESS WHEREOF, the parties have caused this Agreement
to be executed by their respective representatives as of the
date specified in the first sentence above.
BANKERS TRUST COMPANY, London Branch
By:
Name:
Title:
GOTHAM PARTNERS, L.P.
By:
Name:
Title:
Exhibit A
SELLER'S TERMINATION AMOUNT
"Seller's Termination Amount" means the amount in U.S.
Dollars equal to the arithmetic mean of the respective one-time
all-in fees (including documentation costs) communicated to the
Buyer not more than two Banking Days before an Early
Termination Date (or, in the case of the deeming of an Early
Termination Date pursuant to the last sentence of Section 5(b),
on the earliest practicable Banking Day following such deemed
Early Termination Date) by each of four leading commercial
banks or investment banking firms in London or New York
-14-<PAGE>
selected in good faith by the Buyer as the fee, payable on or
as of such Early Termination Date, as the case may be, that it
would charge to assume as of such Early Termination Date all of
the obligations of the Seller under this Option Agreement that
would become due and payable after such Early Termination Date
(assuming that this Option Agreement were to continue in effect
until the Exercise Date and that no Early Termination Date had
occurred) provided, however, that if any one such entity fails
so to communicate such a fee, the Buyer is not required to seek
another such entity to obtain a quote and "Seller's Termination
Amount" shall be determined on the basis of the fee or fees so
communicated to the Buyer by the other three entities. In the
event that less than three such entities are able to provide
such quotes or that the "Seller's Termination Amount" cannot
otherwise be determined in accordance with the preceding
sentence, "Seller's Termination Amount" shall mean such amount,
computed in good faith by the Buyer, as may be required to
compensate the Buyer for any losses, costs and expenses
whatsoever that the Buyer may incur as a result of the early
termination of this Option Agreement.
-15-
Exhibit 5
BT REFERENCE NO.: NY-4913
THIS OPTION AGREEMENT (the "Agreement") dated as of Janu-
ary 29,1997 is made by and between GOTHAM PARTNERS II, L.P.
(the "Buyer") and BANKERS TRUST COMPANY, LONDON BRANCH, (the
"Seller" or "BTCO").
1. PURPOSE; PAYMENTS
(a) In consideration of the payment by the Buyer to the
Seller of a Premium (all capitalized terms used herein without
definition shall have the respective meanings assigned to such
terms in Section 2) of USD 29,567.00 for value February 3, 1997
(to Seller's Account specified below), the Seller hereby grants
to the Buyer a cash-settled call option (the "Option") with
respect to 6,850 shares (the "Shares") of the common stock
("Stock") of First Union Real Estate Investments (the
"Issuer"). The Option is exercisable by the Buyer between the
hours of 9;00 A.M. and 12:00 P.M., New York City time, on any
Business Day during the Exercise Period upon notice given in
writing, or telephonically, confirmed in writing, to the
Seller. The Seller shall deem this Option to have been auto-
matically exercised on the Expiration Date if the Option is
"in-the-money" (as defined below) at the close of trading on
the Stock Exchange, unless the Seller receives notification to
the contrary from the Buyer before 1:00 P.M., New York City
time on the Expiration Date. For purposes of this Option, the
Option shall be deemed "in-the-money" if, at the time of the
determination, the Valuation Price exceeds the Exercise Price.
(b) Upon exercise of this Option, the Seller shall pay to
the Buyer an amount (the "Settlement Amount") equal to the pro-
duct of (1) the excess, if any, of the Valuation Price over the
Exercise Price and (2) the number of Shares. Settlement of
this Option shall be by cash payment only, and the Settlement
Amount shall be due and payable on the date (the "Settlement
Date") which is three Banking Days after the Exercise Date.
2. DEFINITIONS
"Banking Day" shall mean any day which is both (1) a day
other than a Saturday, Sunday or other day on which banks in
New York or London are authorized or required under applicable
law to remain closed and (2) an Exchange Business Day.
"Buyers Account" shall mean the account of Gotham Partners
II, L.P. which account details are to be provided by the Buyer
to the Seller in writing as soon as possible as the Seller will
otherwise be unable to make any payments to Buyer.
"Calculation Agent" shall mean BTCO.
"Exchange Business Day" shall mean a day other than a Sat-
urday or Sunday on which exchanges are open for the trading of
securities in New York and for the trading of options or
futures relating to the Stock in Chicago.
"Expiration Date" shall mean February 13, 1998.
"Exercise Date" shall mean the day, during the Exercise
Period, if any, on which the Option is or is deemed exercised.
1<PAGE>
BT REFERENCE NO.: NY-4913
"Exercise Period" shall mean the period from and including
January 29, 1997 to and including the Expiration Date.
"Exercise Price" shall mean $10.80, subject to adjustment
as specified in Section 6.
"Premium" shall mean the amount specified in Section 1(a)
hereof as payable by the Buyer to the Seller as Consideration
for this Option.
"Seller's Termination Amount" shall have the meaning
specified in Exhibit A.
"Settlement Date" shall have the meaning set forth in Sec-
tion 1(b).
"Stock Exchange" shall mean the New York Stock Exchange.
"U.S. Dollar" and "$" shall mean the lawful currency of
the United States of America.
"Valuation Dates" means each of the first ten Banking Days
during the Valuation Period on which there is no Market Disrup-
tion Event, subject to the provisions of Section 7 hereof.
"Valuation Period" means (i) with respect to any Exercise
Date up to, and including the 10th Exchange Business Day prior
to the Expiration Date, each of the ten (10) Exchange Business
Days from and including that Exercise Date, and (ii) with
respect to any other Exercise Date, each of the ten (10)
Exchange Business Days prior to and including the Expiration
Date.
"Valuation Price" shall mean the arithmetic average or the
closing price for one share of Stock (as determined by the Cal-
culation Agent), as calculated and published by the Stock
Exchange, on each of the Valuation Dates.
3. REPRESENTATIONS AND WARRANTIES
(a) The Seller hereby represents and warrants to the
Buyer as follows:
(i) it is a corporation duly organized and validly
existing under the laws of the jurisdiction of its incorpora-
tion;
(ii) neither the execution and delivery of this
Agreement, nor the consummation of the transactions contem-
plated hereby, nor the performance of its obligations hereunder
violates (i) any law, regulation, decree or other legal re-
striction applicable to it, (ii) its charter, by-laws or other
constitutional documents or (iii) any material instrument or
agreement to which it or any of its assets is subject or by
which it is bound;
(iii) there is no legal requirement of any govern-
mental authority (including any requirement to make any decla-
ration, filing or registration or to obtain any consent,
approval, license or order) which is necessary to be met in
connection with its execution, delivery or performance of this
Agreement (any such legal requirement being herein called a
"Legal Requirement");
(iv) this Agreement has been duly authorized, exe-
cuted and delivered on its behalf and constitutes its legal,
valid and binding obligation, enforceable against it in accor-
dance with its terms
2<PAGE>
BT REFERENCE NO.: NY-4913
except as such enforceability may be limited by bankruptcy,
insolvency or other laws of general applicability relating to
or affecting the rights of creditors and by general equitable
principles;
(v) no Event of Default (as defined in Section 5),
and no condition, event or act which with notice or the lapse
of time, or both, would constitute an Event of Default has
occurred and is continuing or will occur by reason of its
entering into or performing its obligations under this Agree-
ment; and
(vi) it is not on the date of execution of this
Agreement required to deduct or withhold any Taxes (as defined
in Section 8) with respect to any payment which is or could be
required to be made by it pursuant to this Agreement.
(b) The Buyer represents and warrants to the Seller as
follows:
(i) it is a sophisticated institutional investor
and is purchasing the Option for its own account for investment
and not with a view to any distribution or any other disposi-
tion thereof;
(ii) in the normal course of its business, the
Buyer invests in and purchases securities similar to the
Option;
(iii) the Buyer has had access to such information
concerning the Option and the Seller as it has requested and
has such knowledge and experience as to be able to evaluate the
merits and risks of purchasing the Option;
4. COVENANTS
The Seller hereby covenants and agrees that it will use
reasonable efforts to comply in all material respects with all
Legal Requirements which may arise from time to time after the
date of the Agreement if failure so to comply would materially
impair its ability to perform its obligations under this Agree-
ment.
5. EVENTS OF DEFAULT
(a) Each of the following events shall constitute an
Event of Default:
(i) the Seller shall fail to pay when due any
amount due and owing under this Agreement and such failure
shall continue for three Banking Days after receipt of notice
of such failure from the Buyer;
(ii) the Seller shall fail to perform, observe or
comply with any other term, covenant, condition or provision
contained in this Agreement and such failure shall continue for
30 days after receipt of notice of such failure from the Buyer;
(iii) any representation or warranty of the Seller
shall prove to have been incorrect or misleading in any mate-
rial respect when made or repeated or deemed to have been made
or repeated;
(iv) the occurrence of any event of default in
respect of the Seller under any other option agreement with the
Buyer or any affiliates of the Buyer;
3<PAGE>
BT REFERENCE NO.: NY-4913
(v) (1) the occurrence or existence of any event
or condition in respect of the Seller under one or more agree-
ments or instruments relating to indebtedness for borrowed
money (excluding obligations in respect of deposits received in
the ordinary course of business) in an aggregate amount of not
less than 3% of the Seller's stockholders' equity as at the end
of its last fiscal year (the "Threshold Amount") which has
resulted in such indebtedness becoming, or becoming capable at
such time of being declared, due and payable under such agree-
ments or instruments, before it would otherwise have been due
and payable or (2) the failure by such party to make one or
more payments at maturity in an aggregate amount of not less
than the Threshold Amount under such agreements or instruments
(after giving effect to any applicable grace period);
(vi) the Seller (1) is dissolved; (2) becomes
insolvent or fails or is unable or admits in writing its
inability generally to pay its debts as they become due; (3)
makes a general assignment, arrangement or composition with or
for the benefit of its creditors; (4) institutes or has insti-
tuted against it a proceeding seeking a judgment of insolvency
or bankruptcy or any other relief under any bankruptcy or in-
solvency law or other similar law affecting creditors' rights,
or a petition is presented for the winding-up or liquidation of
the party and, in the case of any such proceeding or petition
instituted or presented against it, such proceeding or petition
(A) results in a judgment of insolvency or liquidation of the
party or (B) is not dismissed, discharged, stayed or restrained
in each case within 30 days of the institution or presentation
thereof; (5) has a resolution passed for its winding-up or
liquidation; (6) seeks or becomes subject to the appointment of
an administrator, receiver, trustee, custodian or other similar
official for it or for all or substantially all its assets
(regardless of how brief such appointment may be, or whether
any obligations are promptly assumed by another entity or
whether any other event described in this clause (6) has
occurred and is continuing); (7) any event occurs with respect
to the Seller which, under the applicable laws of any jurisdic-
tion, has an analogous effect to any of the events specified in
clauses (1) to (6) (inclusive); or (8) takes any action in fur-
therance of, or indicating its consent to, approval of, or
acquiescence in, any of the foregoing acts; other than in the
case of clause (1) or (5) or, to the extent it relates to those
clauses, clause (8), for the purpose of a consolidation, amal-
gamation or merger which would not constitute an event
described in (vii) below; or
(vii) the Seller consolidates or amalgamates with,
or merges with or transfers all or substantially all its assets
to, another entity and (1) at the time of such consolidation,
amalgamation, merger or transfer the resulting, surviving or
transferee entity fails to assume all the obligations of the
Seller under this Agreement by operation of law or pursuant to
an agreement reasonably satisfactory to the Buyer or (2) the
creditworthiness of the resulting, surviving or transferee
entity is materially weaker than that of the Seller immediately
prior to the taking of such action.
(b) If any Event of Default shall have occurred and be
continuing, the Buyer shall have the right to terminate this
Agreement by the giving of a notice declaring such termination
and specifying the Banking Day on which such early termination
shall occur (the "Early Termination Date"). Notwithstanding
the foregoing, if an Event of Default specified in clause (vi)
of Section 5(a) shall have occurred, the date of the occurrence
of such Event of Default shall be deemed to be an Early Termi-
nation Date without any action or notice from the Buyer.
(c) If this Agreement shall have been terminated pursuant
to the provisions of Section 5(b), on the Early Termination
Date (or, in the case of the deeming of an Early Termination
Date pursuant to the last sentence of Section 5(b), on demand
thereafter) the Seller shall pay to the Buyer the Seller's Ter-
mination Amount determined as set forth in Exhibit A plus any
amounts then due and payable hereunder by the Seller to the
Buyer (with interest as provided in Section 12, if applicable).
4<PAGE>
BT REFERENCE NO.: NY-4913
(d) The parties agree that the amounts recoverable pursu-
ant to Section 5(c) are reasonable pre-estimates of loss and
are not penalties. Such amounts are payable as liquidated dam-
ages for the loss of a bargain and the loss of protection
against future risks and, without prejudice to the rights and
remedies of either party in respect of any other breach of this
Agreement or as otherwise specified herein, the Buyer shall not
be entitled to recover any additional damages hereunder as a
consequence of such losses.
(e) The Seller shall indemnify and hold harmless the
Buyer on demand from and against all legal fees and other out-
of-pocket expenses incurred by the Buyer in enforcing its
rights hereunder or as the result of the occurrence of an Early
Termination Date.
6. ORDINARY CASH DIVIDEND AND ANTI-DILUTION ADJUSTMENTS
All adjustments to be made by the Calculation Agent pursuant to
these Ordinary Cash Dividend and Anti-Dilution Adjustments pro-
visions will be subject to agreement by Buyer. In the event
that Buyer disagrees with any such adjustment (and notifies the
Seller of such disagreement on or before the relevant Exercise
Date), each of the Buyer and Seller will select a Reference
Market-maker to act as alternate Calculation Agent with respect
to such adjustment and each of those alternate Calculation
Agents will, independently of Buyer and Seller, select a third
Reference Market-maker to act as alternate Calculation Agent
with respect to such adjustment and the joint determination of
these three alternate Calculation Agents with respect to such
adjustment shall be binding in the absence of manifest error.
"Reference Market-maker" means a leading dealer in the
relevant market selected by a party from among dealers of
the highest credit standing which satisfy all the criteria
that such party applies generally at the time in deciding
whether to offer or to make an extension of credit.
In the event that, with respect to an Exercise Date, more than
one of the events described below has occurred during the
period from the Trade Date through, and including, the relevant
Exercise Date, the settlement terms of this Transaction shall
be adjusted as necessary to preserve the economic equivalent of
this Transaction including, without limitation, these adjust-
ment provisions, as it existed immediately prior to the occur-
rence of such events.
(a) Ordinary Cash Dividend Adjustments
On the Exercise Date, the Exercise Price shall be subject
to adjustment as follows:
If, Aggregate Dividends for the relevant Dividend
Period is greater than or equal to the relevant Divi-
dend Strike, the Exercise Price shall be decreased by
an amount equal to the Aggregate Dividend minus the
Dividend Strike,
If, Aggregate Dividends for the relevant Dividend
Period is less than the relevant Dividend Strike, the
Exercise Price shall be increased by an amount equal
to the Dividend Strike minus the Aggregate Dividend.
"DIVIDEND STRIKE" means, with respect to the
Exercise Date, the Dividend Strike specified in
the table below for period in which the Exercise
Date occurs:
5<PAGE>
BT REFERENCE NO.: NY-4913
EXERCISE DATE
DIVIDEND FROM, BUT TO, AND
STRIKE EXCLUDING INCLUDING
$0.11 1/29/97 5/16/97
$0.22 5/15/97 8/15/97
$0.33 8/15/97 11/15/97
$0.44 11/15/97 2/2/98
"AGGREGATE DIVIDENDS" means, with respect to the
Dividend Period, the amount equal to the sum of
the USD values of all ordinary cash dividends
per share which are declared by the issuer dur-
ing the Dividend Period, provided that an ex-
dividend date with respect to such shares occurs
during the Dividend Period.
"DIVIDEND PERIOD" means, with respect to the
Exercise Date, the period from, but excluding,
the Trade Date to, and including the Exercise
Date.
(b) Anti-Dilution Adjustments
The Exercise Price, the Dividend Strike, and the number of
Shares subject to this Option shall be subject to adjustment as
follows:
(a) If prior to the Exercise Date any adjustment is made
by the Options Clearing Corporation or its successors ("OCC")
in the terms of outstanding OCC-issued options ("OCC Options")
on the Stock, an equivalent adjustment shall be made by the
Calculation Agent in the terms of this Option. Except as pro-
vided below, no adjustment shall be made in the terms of this
Option for any event that does not result in an adjustment to
the terms of such outstanding OCC Options. Without limiting
the generality of the foregoing, other than pursuant to the
Ordinary Cash Dividend Adjustments provision above, NO ADJUST-
MENT SHALL BE MADE IN THE TERMS OF THIS OPTION FOR ORDINARY
CASH DIVIDENDS. For indicative purposes, a summary of the terms
under which adjustments may be made by the OCC as in effect on
the date hereof is set forth below:
(i) Whenever there is a stock dividend, stock dis-
tribution, stock split, reverse stock split, rights offering,
distribution, reorganization, recapitalization, reclassifica-
tion, extraordinary cash dividend or similar event in respect
of the Stock, or a merger, consolidation, dissolution or liqui-
dation of the Issuer, the number of option contracts, the unit
of trading, the exercise price and the underlying amount of
Stock, or any of them, with respect to all outstanding option
contracts open for trading in the Stock may be adjusted.
(ii) All adjustments are made by the Securities
Committee of the OCC. The Securities Committee determines
whether to make adjustments to reflect particular events in
respect of the Stock, and the nature and extent of any such
adjustment, based on its judgement as to what is appropriate
for the protection of investors and the public interest, taking
into account such factors as fairness to holders and writers of
option contracts on the Stock, the maintenance of a fair and
orderly market in options on the Stock, consistency of inter-
pretation and practice, efficiency of exercise settlement pro-
cedures and the coordination with other clearing agencies of
the clearance and settlement of transactions in the Stock.
6<PAGE>
BT REFERENCE NO.: NY-4913
(iii) In the case of a stock dividend, stock distri-
bution or stock split whereby one or more whole numbers of
shares are issued with respect to each outstanding share, each
option contract covering that share shall be increased by the
same number of additional option contracts as the number of
shares issued with respect to each share, the exercise price
per share in effect immediately prior to such event shall be
proportionately reduced, and the unit of trading shall remain
the same.
(iv) In the case of a stock dividend, stock distri-
bution or stock split whereby other than a whole number of
shares is issued in respect of each outstanding share, the
exercise price in effect immediately prior to such event shall
be proportionately reduced, and conversely, in the case of a
reverse stock split or combination of shares, the exercise
price in effect immediately prior to such event shall be pro-
portionately increased. Whenever the exercise price with
respect to an option contract has been reduced or increased,
the unit of trading shall be proportionately increased or
reduced, as the case may be.
(v) In the case of any distribution made with
respect to shares, other than cash dividends and other than
distributions for which adjustments are provided in subsections
(iii) or (iv) above, if an adjustment is determined by the
Securities Committee to be appropriate, (i) the exercise price
in effect immediately prior to such event shall be reduced by
the value per share of the distributed property, in which event
the unit of trading shall not be adjusted, or (ii) the unit of
trading in effect immediately prior to such event shall be
adjusted so as to include the amount of property distributed
with respect to the number of shares represented by such unit
of trading, in which event the exercise price shall not be
adjusted.
(vi) In the case of any event for which adjustment
is not provided in any of the foregoing paragraphs, the Securi-
ties Committee may make such adjustments, if any, it determines
to be reasonable under the circumstances.
(vii) Adjustments shall as a general rule become
effective on the "ex-date" established by the principal stock
exchange or market on which the Shares are open for trading.
(viii) All adjustments of the exercise price of an
outstanding option contract shall be rounded to the nearest 1/8
of a dollar, and all adjustments of the unit of trading shall
be rounded down to eliminate any fraction, and if the unit of
trading is rounded down to eliminate a fraction, the adjusted
exercise price shall be further adjusted, to the nearest 1/8 of
a dollar, to reflect any diminution in the value of the option
contract resulting from the elimination of the fraction.
(b) If at any time prior to the Exercise Date there shall
be no outstanding OCC Options on Stock, and an event shall
occur for which an adjustment might have been required under
the By-laws, Rules and stated policies of OCC applicable to the
adjustment of OCC Options, as described above (the "OCC Adjust-
ment Rules"), the Calculation Agent shall determine, in its
sole discretion, but applying the principles set forth in the
OCC Adjustment Rules then in effect, whether to adjust the
terms of this Option, and the nature of any such adjustment.
(c) The Calculation Agent shall notify the Buyer/Seller
of any adjustment pursuant to this Section 6 and the date of
its effectiveness.
(d) The Calculation Agent is not obligated to verify
whether the prerequisites for an adjustment pursuant to this
Section 6 exist or whether such adjustment has been correctly
calculated or
7<PAGE>
BT REFERENCE NO.: NY-4913
whether the date of effectiveness has been correctly fixed. In
this connection, the Calculation Agent does not assume any
liability of any nature.
(e) Upon the consummation of a Merger Event in respect of
the Shares (as defined below), the Calculation Agent shall make
such adjustments (including, without limitation, cancelation
and payment) to this Option as it, in its sole discretion,
deems appropriate. "Merger Event" means, in respect of the
Shares, as of the date upon which holders become bound to
transfer such Shares held by them, any (i) reclassification or
change of such Shares (other than a change in par value, if
any, as a result of a subdivision or combination), (ii) con-
solidation, amalgamation or merger of the issuer of the rel-
evant Shares with or into another corporation (other than a
consolidation, amalgamation or merger in which that issuer of
Shares is the continuing corporation and which does not result
in any such reclassification or change of Shares) or (iii)
other takeover offer for such Shares that results in a transfer
of all such Shares (other than the Shares owned or controlled
by the offeror) on or before the Expiration Date.
7. VALUATION; MARKET DISRUPTION EVENTS
(a) If, in the opinion of the Calculation Agent, a Market
Disruption Event (as defined below) has occurred and is con-
tinuing on any Banking Day during the Valuation Period, then
such day shall not be deemed to be a Valuation Date provided,
however, that if there have been five such days on which Market
Disruption Events have occurred, then, notwithstanding such
Market Disruption Event, such day shall be deemed to be a Valu-
ation Date and the Calculation Agent shall determine the price
of one Share as of the normal closing time for the Stock
Exchange to be the price announced at such time by the Stock
Exchange (or, if trading in the Shares has been materially lim-
ited, its good faith estimate of the closing price for one
Share on the Stock Exchange that would have prevailed on such
date but for the Market Disruption Event). The Calculation
Agent shall use its reasonable efforts to give notice to the
Seller and the Buyer that a Market Disruption Event has
occurred.
(b) "Market Disruption Event" means the occurrence or
continuance on any Exchange Business Day of any suspension of
or limitation imposed on trading (by reason of movements in
price exceeding limits permitted by the relevant exchange or
otherwise) (i) on the Stock Exchange, in the Shares or securi-
ties generally or (ii) on the primary options exchange on which
options on the Shares are traded, in such options, in each case
if, in the determination of the Calculation Agent, such suspen-
sion or limitation is material.
8. TAXATION; ILLEGALITY
(a) All payments hereunder shall be made free and clear
of and without deduction or withholding for any Taxes (as here-
inafter defined) whatsoever. If applicable law should require
that any payment due from the Seller hereunder be subject to
withholding with respect to any Taxes whatsoever, the Seller
will, to the full extent then permitted by law, pay (i) the
full amount of such Taxes required to be deducted or withheld
(including the full amount required to be deducted or withheld
from any additional amounts paid pursuant to this Section 8(a))
and (ii) such additional amounts as may be necessary in order
that every net payment to the Buyer of all amounts due and
owing hereunder will not be less than the full amount the Buyer
would have received had no such deduction or withholding been
required. The Seller will furnish to the Buyer within 30 days
after the date on which the payment of any Taxes is due pursu-
ant to applicable law a written statement or other evidence
sufficient to document the fact and amount of withholding by
the Seller. As used in this Section 8, "Taxes" means any
present or future taxes, levies, duties, charges, fees, deduc-
tions or witholdings of any nature now or hereafter
8<PAGE>
BT REFERENCE NO.: NY-4913
imposed, levied, collected, withheld or assessed by any taxing
authority whatsoever and all interest penalties and other similar
liabilities with respect thereto, other than (A) taxes in respect
of the overall net income of the payee imposed by the jurisdic-
tion in which its principal office is located or the jurisdic-
tion in which the relevant payment is received or (B) taxes
imposed as a result of such recipient being or having been a
citizen or resident of the jurisdiction of the government or
taxing authority imposing such tax, or being or having been
organized, present or engaged in a trade or business in such
jurisdiction, or having or having had a permanent establishment
or fixed place of business in such jurisdiction, but excluding
a connection arising solely from such recipient having exe-
cuted, delivered, performed its obligations or received a pay-
ment under, or enforced, this Agreement or any similar agree-
ment with the Seller.
(b) In the event that the Seller (i) is obligated at any
time to make any payment of additional amounts pursuant to this
Section 8 or (ii) shall have determined that its performance
under this Agreement shall have become unlawful in whole or in
part as a result of compliance in good faith by the Seller with
any applicable present or future law, rule, regulation, judg-
ment, order or directive of any governmental, administrative,
legislative or judicial authority, then the Seller shall give
notice thereof to the Buyer, and the parties hereto shall
thereupon promptly negotiate in good faith with a view to find-
ing a satisfactory alternative method of payment or performance
to avoid such illegality or such payment of additional amounts.
If at the end of a period of 30 days after the giving of such
notice (or such shorter period as may be reasonable under the
circumstances then prevailing) the parties have not agreed upon
such a satisfactory alternative method, either party may termi-
nate this Agreement within 30 days thereafter by designating an
Early Termination Date and otherwise following the procedures
for termination set forth in Section 5.
(c) If either party is required at any time to execute
any form of document in order for payments to it hereunder to
qualify for exemption from withholding tax or for withholding
tax at a reduced rate, such party shall execute such form or
document and deliver it on demand to the party required to make
such payments.
9. PAYMENT IN U.S. DOLLARS
It is of the essence of this Agreement that the payments
required hereunder be made in U.S. Dollars. The obligation of
either party to make each payment in U.S. Dollars shall not be
discharged or satisfied by any tender, or any recovery pursuant
to any judgment, which is expressed in or converted into any
other currency until and except to the extent such tender or
recovery shall result in the actual receipt by the other party
in U.S. Dollars of the amount expressed to be payable hereun-
der. The obligation of either party to make payments in U.S.
Dollars shall be enforceable as an alternative or additional
cause of action for the purpose of recovery in U.S. Dollars of
the amount (if any) by which such actual receipt shall fall
short of the full amount of U.S. Dollars required to be paid
hereunder and shall not be affected by judgment being obtained
for any other sums due under this Agreement.
10. JURISDICTION; SERVICE OF PROCESS; IMMUNITY
(a) With respect to any suit, action or proceedings
relating to this Agreement ("Proceedings"), each party irrevo-
cably submits to the non-exclusive jurisdiction of the courts
of the State of New York and the United States District Court
located in the Borough of Manhattan in New York City and waives
any objection which it may have at any time to the laying of
venue of any Proceedings brought in any such court, waives any
claim that such Proceedings have been brought in an inconve-
nient
9<PAGE>
BT REFERENCE NO.: NY-4913
forum and further waives the right to object, with respect to
such Proceedings, that such court does not have jurisdiction
over such party. Nothing in this Agreement precludes either
party from bringing Proceedings in any other jurisdiction nor
will the bringing of Proceedings in any one or more juris-
dictions preclude the bringing of Proceedings in any other
jurisdiction.
(b) Each party confirms, if it does not have a place of
business in New York, that it has irrevocably appointed a pro-
cess agent in New York to receive, for it and on its behalf,
service of process in any Proceedings, and will provide evi-
dence of such appointment on request. If for any reason the
party's process agent is unable to act as such, such party will
promptly notify the other party and within 30 days appoint a
substitute process agent acceptable to the other party. The
parties irrevocably consent to service of process in the
manner provided for notices in Section 14. Nothing in this
Agreement will affect the right of either party to serve pro-
cess in any other manner permitted by law.
(c) Each party irrevocably waives, to the fullest extent
permitted by applicable law, with respect to itself and its
revenues and assets (irrespective of their use or intended
use), all immunity on the grounds of sovereignty or other simi-
lar grounds from (i) suit, (ii) jurisdiction of any court,
(iii) relief by way of injunction, order for specific perfor-
mance; or for recovery of property, (iv) attachment of its
assets (whether before or after judgment) and (v) execution or
enforcement of any judgment to which it or its revenues or
assets might otherwise be entitled in any Proceedings in the
courts of any jurisdiction and irrevocably agrees, to the
extent permitted by applicable law, that it will not claim any
such immunity in any Proceedings.
11. DATES; COMPUTATIONS
(a) Whenever the Exercise Date would in accordance with
the terms hereof otherwise occur on a day which is not an
Exchange Business Day, such date shall be postponed to the next
succeeding Exchange Business Day.
(b) All percentages calculated pursuant to this Agreement
shall, if necessary, be rounded upwards to the next higher one
hundred thousandth of a percentage point and all currency
amounts will be rounded to the nearest whole currency unit
(with 1/2 of such unit being rounded up).
12. PAYMENTS
All payments to be made by the Seller hereunder shall be
made without offset or counterclaim in immediately available
funds by wire transfer to the account specified pursuant to
Section 14 below. Computations hereunder shall be on the basis
of a year of 360 days for the actual number of days elapsed.
Any amount not paid when due hereunder shall be payable on
demand and, to the extent permitted by law, will bear interest
from the due date until paid at a rate per annum which shall be
I% in excess of the Buyer's cost of funding such amount, as
certified by the Buyer.
13. ASSIGNMENT
This Confirmation shall be binding upon and inure to the
parties and their respective successors and permitted assigns.
Neither the rights nor obligations of a party hereunder may be
assigned without the prior written consent of the other party;
provided that Buyer may, with the prior consent of BTCO (such
consent not to be unreasonably withheld), assign its rights and
obligations to any financial institution which makes the repre-
sentations contained in Section 1(b)(i-iv) and Section
1(b)(vii-viii) hereof; provided further that BTCO may at any
time, without consent being required, assign its rights, duties
and obligations in respect of this Transaction to any affiliate
of BTCO (the rights, duties and
10<PAGE>
BT REFERENCE NO.: NY-4913
obligations so assigned to be guaranteed by BTCO). Any such
assignment or transfer by BTCO shall be fully effective to
transfer all the transferred rights and obligations of BTCO
upon notice to Buyer.
14. NOTICES
Notices hereunder shall be in writing and may be given by
personal delivery, by mail or by telex, effective upon receipt
(if given by personal delivery), five days after mailing, first
class postage pre-paid (if given by mail), or one Banking Day
after dispatch (if given by telex), addressed to the recipient
as follows or to such other address as the relevant party shall
have advised the other in writing:
- If to BTCO:
Bankers Trust Company
1 Bankers Trust Plaza
130 Liberty Street
New York, NY 10006
Attention: Equity Operations
Fax No.: (212) 250-1467
- If to the Buyer:
Gotham Partners, L.P.
Attention: Bill Ackman, David Berkowitz
Fax No.: 212-286-1133
15. AMENDMENTS
No amendment or waiver of any provision of this Agreement
nor consent to any departure therefrom by either party shall in
any event be effective unless the same shall be in writing and
signed by the other party, and then any such waiver or consent
shall be effective only in the specific instance and for the
specific purpose for which given and only for the specific time
period, if any, contemplated therein.
11<PAGE>
BT REFERENCE NO.: NY-4913
16. NON-WAIVER OF RIGHTS
No failure or delay by either party in exercising any
right, power or privilege hereunder shall operate as a waiver
and any explicit waiver of any breach of this Agreement shall
be without prejudice to any rights of such party to any other
or further breach.
17. COUNTERPART
This Agreement may be executed in counterparts, which
taken together shall be deemed to constitute one and the same
agreement.
18. GOVERNING LAW
This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without ref-
erence to choice of law doctrine.
IN WITNESS WHEREOF, the parties have caused this Agreement
to be executed by their respective representatives as of the
date specified in the first sentence above.
BANKERS TRUST COMPANY, LONDON
BRANCH
By: /s/ Tarana Oommen
Name: Tarana Oommen
Title: Vice President
GOTHAM PARTNERS II, L.P.
By Section M Partners, L.P.
By Karenina Corp.
By: /s/ William A. Ackman
Name: William A. Ackman
Title: President
12<PAGE>
BT REFERENCE NO.: NY-4913
EXHIBIT A
SELLER'S TERMINATION AMOUNT
"Seller's Termination Amount" means the amount in U.S.
Dollars equal to the arithmetic mean of the respective one-time
all-in fees (including documentation costs) communicated to the
Buyer not more than two Banking Days before an Early Termina-
tion Date (or, in the case of the deeming of an Early Termina-
tion Date pursuant to the last sentence of Section 5(b), on the
earliest practicable Banking Day following such deemed Early
Termination Date) by each of four leading commercial banks or
investment banking firms in London or New York selected in good
faith by the Buyer as the fee, payable on or as of such Early
Termination Date, as the case may be, that it would charge to
assume as of such Early Termination Date all of the obligations
of the Seller under this Option Agreement that would become due
and payable after such Early Termination Date (assuming that
this Option Agreement were to continue in effect until the
Exercise Date and that no Early Termination Date had occurred)
provided, however, that if any one such entity fails so to com-
municate such a fee, the Buyer is not required to seek another
such entity to obtain a quote and "Seller's Termination Amount"
shall be determined on the basis of the fee or fees so communi-
cated to the Buyer by the other three entities. In the event
that less than three such entities are able to provide such
quotes or that the "Seller's Termination Amount" cannot other-
wise be determined in accordance with the preceding sentence,
"Seller's Termination Amount" shall mean such amount, computed
in good faith by the Buyer, as may be required to compensate
the Buyer for any losses, costs and expenses whatsoever that
the Buyer may incur as a result of the early termination of
this Option Agreement.
13<PAGE>
GOTHAM PARTNERS, L.P.
First Transaction Amendment
BT Transaction Reference No.: NY-4913
Dear Sir/Madam:
The purpose of this letter is to set forth the terms and condi-
tions of the First Transaction Amendment (the "Amendment")
dated as of June 4, 1997 which has been agreed to between
Gotham Partners II, L.P. (the "Counterparty") and Bankers Trust
Company, London Branch. This Amendment relates to the above-
referenced transaction with an Expiration Date of February 13,
1998 (the "Amended Transaction").
In consideration of the mutual benefits to be derived from this
Amendment, BT and the Counterparty have agreed to amend the
above-referenced transaction to provide for physical settlement
of the underlying shares, to delete the 10-day averaging period
at maturity and to change the Expiration Date to February 2,
1998.
As specifically modified by this Amendment, all of the terms
and provisions of the Amended Transaction are hereby reaffirmed
and shall remain in full force and effect.
If the foregoing correctly states your understanding of these
matters, please indicate your agreement to this Amendment by
signing and returning the attached Confirmation which amends
and restates the terms of the Transaction to reflect the
changes set forth in this Amendment.
Yours Truly,
Bankers Trust Company, London Branch<PAGE>
By: _______________________
Name:
Title:
DATE: June 4, 1997
TO: GOTHAM PARTNERS, L.P.
ATTENTION: Bill Ackman
FAX: 212 286-1133
FROM: BANKERS TRUST COMPANY, London Branch
FAX: 212 250-1467
BT REF: NY-4913 (as amended and restated to reflect the
changes specified in the First Transaction Amendment
dated as of June 4, 1997)
RE: Equity Derivative Transaction
As specifically modified by this Amendment, all of the terms
and provisions of the Amended Transaction and the Master Agree-
ment are hereby reaffirmed and shall remain in full force and
effect.
THIS OPTION AGREEMENT (the "Agreement") dated as of January 29,
1997 is made by and between GOTHAM PARTNERS II, L.P. (the
"Buyer") and BANKERS TRUST COMPANY, London Branch, (the
"Seller" or "BTCO").
1. Purpose; Payments
(a) In consideration of the payment by the Buyer to the
Seller of a Premium (all capitalized terms used herein without
definition shall have the respective meanings assigned to such
terms in Section 2) of USD 29,567.00 for value February 3, 1997
(to Seller's Account specified below), the Seller hereby grants
to the Buyer a physically-settled call option (the "Option")
with respect to 6,850 shares (the "Shares") of the common stock
("Stock") of First Union Real Estate Investments (the
"Issuer"). The Option is exercisable by the Buyer between the
hours of 9:00 A.M. and 12:00 P.M., New York City time, on any
Business Day during the Exercise Period upon notice given in
writing, or telephonically, confirmed in writing, to the
Seller.
(b) Upon exercise of this Option, Seller will deliver or
cause to be delivered to Buyer on the third Exchange Business
Day (the Settlement Date) a number of Shares (and the documen-
tation necessary to evidence transfer of legal and beneficial
ownership of such Shares) equal the number of Shares specified
in paragraph 1(a) above in accordance with the instructions
delivered with the notice of exercise against payment by Buyer
on the Settlement Date, in immediately available funds, of an
amount equal to the product of the number of Shares to be
delivered on such Settlement Date and the Exercise Price.
-2-<PAGE>
2. Definitions
"Banking Day" shall mean any day which is both (1) a day
other than a Saturday, Sunday or other day on which banks in
New York or London are authorized or required under applicable
law to remain closed and (2) an Exchange Business Day.
Buyers Account shall mean the account of Gotham Partners
II, L.P. which account details are to be provided by the Buyer
to the Seller in writing as soon as possible as the Seller will
otherwise be unable to make any payments to Buyer.
"Calculation Agent" shall mean BTCO.
"Exchange Business Day" shall mean a day other than a
Saturday or Sunday on which exchanges are open for the trading
of securities in New York and for the trading of options or
futures relating to the Stock in Chicago.
"Expiration Date" shall mean February 2, 1998.
Exercise Date shall mean the day, during the Exercise
Period, if any, on which the Option is or is deemed exercised.
Exercise Period shall mean the period from and including
January 29, 1997 to and including the Expiration Date.
"Exercise Price" shall mean $10.80, subject to adjustment
as specified in Section 6.
"Premium" shall mean the amount specified in Section 1(a)
hereof as payable by the Buyer to the Seller as Consideration
for this Option.
"Seller's Termination Amount" shall have the meaning
specified in Exhibit A.
"Settlement Date" shall have the meaning set forth in Sec-
tion 1(b).
"Stock Exchange" shall mean the New York Stock Exchange.
"U.S. Dollar" and "$" shall mean the lawful currency of
the United States of America.
3. Representations and Warranties
(a) The Seller hereby represents and warrants to the
Buyer as follows:
(i) it is a corporation duly organized and validly
existing under the laws of the jurisdiction of its incorpora-
tion;
(ii) neither the execution and delivery of this Agree-
ment, nor the consummation of the transactions contemplated
hereby, nor the performance of its obligations hereunder vio-
lates (i) any law, regulation, decree or other legal restric-
tion applicable to it, (ii) its charter, by-laws or other
-3-<PAGE>
constitutional documents or (iii) any material instrument or
agreement to which it or any of its assets is subject or by
which it is bound;
(iii) there is no legal requirement of any governmental
authority (including any requirement to make any declaration,
filing or registration or to obtain any consent, approval,
license or order) which is necessary to be met in connection
with its execution, delivery or performance of this Agreement
(any such legal requirement being herein called a "Legal Re-
quirement");
(iv) this Agreement has been duly authorized, executed
and delivered on its behalf and constitutes its legal, valid
and binding obligation, enforceable against it in accordance
with its terms except as such enforceability may be limited by
bankruptcy, insolvency or other laws of general applicability
relating to or affecting the rights of creditors and by general
equitable principles;
(v) no Event of Default (as defined in Section 5), and
no condition, event or act which with notice or the lapse of
time, or both, would constitute an Event of Default has oc-
curred and is continuing or will occur by reason of its enter-
ing into or performing its obligations under this Agreement;
and
(vi) it is not on the date of execution of this Agree-
ment required to deduct or withhold any Taxes (as defined in
Section 8) with respect to any payment which is or could be
required to be made by it pursuant to this Agreement.
(b) The Buyer represents and warrants to the Seller as
follows:
(i) it is a sophisticated institutional investor and is
purchasing the Option for its own account for investment and
not with a view to any distribution or any other disposition
thereof;
(ii) in the normal course of its business, the Buyer
invests in and purchases securities similar to the Option;
(iii) the Buyer has had access to such information con-
cerning the Option and the Seller as it has requested and has
such knowledge and experience as to be able to evaluate the
merits and risks of purchasing the Option;
4. Covenants
The Seller hereby covenants and agrees that it will use
reasonable efforts to comply in all material respects with all
Legal Requirements which may arise from time to time after the
date of the Agreement if failure so to comply would materially
impair its ability to perform its obligations under this Agree-
ment.
5. Events of Default
(a) Each of the following events shall constitute an
Event of Default:
-4-<PAGE>
(i) the Seller shall fail to pay when due any amount
due and owing under this Agreement and such failure shall con-
tinue for three Banking Days after receipt of notice of such
failure from the Buyer;
(ii) the Seller shall fail to perform, observe or comply
with any other term, covenant, condition or provision contained
in this Agreement and such failure shall continue for 30 days
after receipt of notice of such failure from the Buyer;
(iii) any representation or warranty of the Seller shall
prove to have been incorrect or misleading in any material
respect when made or repeated or deemed to have been made or
repeated;
(iv) the occurrence of any event of default in respect
of the Seller under any other option agreement with the Buyer
or any affiliate of the Buyer;
(v) (1) the occurrence or existence of any event or
condition in respect of the Seller under one or more agreements
or instruments relating to indebtedness for borrowed money (ex-
cluding obligations in respect of deposits received in the
ordinary course of business) in an aggregate amount of not less
than 3% of the Seller's stockholders' equity as at the end of
its last fiscal year (the "Threshold Amount") which has re-
sulted in such indebtedness becoming, or becoming capable at
such time of being declared, due and payable under such agree-
ments or instruments, before it would otherwise have been due
and payable or (2) the failure by such party to make one or
more payments at maturity in an aggregate amount of not less
than the Threshold Amount under such agreements or instruments
(after giving effect to any applicable grace period);
(vi) the Seller (1) is dissolved; (2) becomes insolvent
or fails or is unable or admits in writing its inability gener-
ally to pay its debts as they become due; (3) makes a general
assignment, arrangement or composition with or for the benefit
of its creditors; (4) institutes or has instituted against it a
proceeding seeking a judgment of insolvency or bankruptcy or
any other relief under any bankruptcy or insolvency law or
other similar law affecting creditors' rights, or a petition is
presented for the winding-up or liquidation of the party and,
in the case of any such proceeding or petition instituted or
presented against it, such proceeding or petition (A) results
in a judgment of insolvency or liquidation of the party or (B)
is not dismissed, discharged, stayed or restrained in each case
within 30 days of the institution or presentation thereof; (5)
has a resolution passed for its winding-up or liquidation; (6)
seeks or becomes subject to the appointment of an administra-
tor, receiver, trustee, custodian or other similar official for
it or for all or substantially all its assets (regardless of
how brief such appointment may be, or whether any obligations
are promptly assumed by another entity or whether any other
event described in this clause (6) has occurred and is continu-
ing); (7) any event occurs with respect to the Seller which,
under the applicable laws of any jurisdiction, has an analogous
effect to any of the events specified in clauses (1) to (6)
(inclusive); or (8) takes any action in furtherance of, or in-
dicating its consent to, approval of, or acquiescence in, any
of the foregoing acts; other than in the case of clause (1) or
(5) or, to the extent it relates to those clauses, clause (8),
for the purpose of a consolidation, amalgamation or merger
which would not constitute an event described in (vii) below;
or
-5-<PAGE>
(vii) the Seller consolidates or amalgamates with, or
merges with or transfers all or substantially all its assets
to, another entity and (1) at the time of such consolidation,
amalgamation, merger or transfer the resulting, surviving or
transferee entity fails to assume all the obligations of the
Seller under this Agreement by operation of law or pursuant to
an agreement reasonably satisfactory to the Buyer or (2) the
creditworthiness of the resulting, surviving or transferee en-
tity is materially weaker than that of the Seller immediately
prior to the taking of such action.
(b) If any Event of Default shall have occurred and be
continuing, the Buyer shall have the right to terminate this
Agreement by the giving of a notice declaring such termination
and specifying the Banking Day on which such early termination
shall occur (the "Early Termination Date"). Notwithstanding
the foregoing, if an Event of Default specified in clause (vi)
of Section 5(a) shall have occurred, the date of the occurrence
of such Event of Default shall be deemed to be an Early Termi-
nation Date without any action or notice from the Buyer.
(c) If this Agreement shall have been terminated pursuant
to the provisions of Section 5(b), on the Early Termination
Date (or, in the case of the deeming of an Early Termination
Date pursuant to the last sentence of Section 5(b), on demand
thereafter) the Seller shall pay to the Buyer the Seller's Ter-
mination Amount determined as set forth in Exhibit A plus any
amounts then due and payable hereunder by the Seller to the
Buyer (with interest as provided in Section 12, if applicable).
(d) The parties agree that the amounts recoverable pursu-
ant to Section 5(c) are reasonable pre-estimates of loss and
are not penalties. Such amounts are payable as liquidated dam-
ages for the loss of a bargain and the loss of protection
against future risks and, without prejudice to the rights and
remedies of either party in respect of any other breach of this
Agreement or as otherwise specified herein, the Buyer shall not
be entitled to recover any additional damages hereunder as a
consequence of such losses.
(e) The Seller shall indemnify and hold harmless the
Buyer on demand from and against all legal fees and other out-
of-pocket expenses incurred by the Buyer in enforcing its
rights hereunder or as the result of the occurrence of an Early
Termination Date.
6. Ordinary Cash Dividend and Anti-Dilution Adjustments
All adjustments to be made by the Calculation Agent pursu-
ant to these Ordinary Cash Dividend and Anti-Dilution Adjust-
ments provisions will be subject to agreement by Buyer. In the
event that Buyer disagrees with any such adjustment (and noti-
fies the Seller of such disagreement on or before the relevant
Exercise Date), each of the Buyer and Seller will select a Ref-
erence Market-maker to act as alternate Calculation Agent with
respect to such adjustment and each of those alternate Calcula-
tion Agents will, independently of Buyer and Seller, select a
third Reference Market-maker to act as alternate Calculation
Agent with respect to such adjustment and the joint determina-
tion of these three alternate Calculation Agents with respect
to such adjustment shall be binding in the absence of manifest
error.
-6-<PAGE>
Reference Market-maker means a leading dealer in the
relevant market selected by a party from among dealers of the
highest credit standing which satisfy all the criteria that
such party applies generally at the time in deciding whether to
offer or to make an extension of credit.
In the event that, with respect to an Exercise Date, more
than one of the events described below has occurred during the
period from the Trade Date through, and including, the relevant
Exercise Date, the settlement terms of this Transaction shall
be adjusted as necessary to preserve the economic equivalent
of this Transaction including, without limitation, these ad-
justment provisions, as it existed immediately prior to the
occurrence of such events.
(a) Ordinary Cash Dividend Adjustments
On the Exercise Date, the Exercise Price shall be
subject to adjustment as follows:
If, Aggregate Dividends for the relevant Dividend
Period is greater than or equal to the relevant Dividend
Strike, the Exercise Price shall be decreased by an amount
equal to the Aggregate Dividend minus the Dividend Strike.
If, Aggregate Dividends for the relevant Dividend
Period is less than the relevant Dividend Strike, the Exercise
Price shall be increased by an amount equal to the Dividend
Strike minus the Aggregate Dividend.
Dividend Strike means, with respect to the Exercise
Date, the Dividend Strike specified in the table below for
period in which the Exercise Date occurs:
Exercise Date
Dividend From, but To, and
Strike excluding including
$0.11 1/29/97 5/15/97
$0.22 5/15/97 8/15/97
$0.33 8/15/97 11/15/97
$0.44 11/15/97 2/2/98
Aggregate Dividends means, with respect to the Divi-
dend Period, the amount equal to the sum of the USD values of
all ordinary cash dividends per share which are declared by the
issuer during the Dividend Period, provided that an ex-dividend
date with respect to such shares occurs during the Dividend
Period.
Dividend Period means, with respect to the Exercise
Date, the period from, but excluding, the Trade Date to, and
including the Exercise Date.
(b) Anti-Dilution Adjustments
The Exercise Price, the Dividend Strike, and the
number of Shares subject to this Option shall be subject to
adjustment as follows:
a) If prior to the Exercise Date any adjustment is
made by the Options Clearing Corporation or its successors
("OCC") in the terms of outstanding OCC-issued options ("OCC
Options") on the Stock, an equivalent adjustment shall be made
by the Calculation Agent in the terms of this Option. Except
as
-7-<PAGE>
provided below, no adjustment shall be made in the terms of
this Option for any event that does not result in an adjustment
to the terms of such outstanding OCC Options. Without limiting
the generality of the foregoing, other than pursuant to the
Ordinary Cash Dividend Adjustments provision above, NO ADJUST-
MENT SHALL BE MADE IN THE TERMS OF THIS OPTION FOR ORDINARY
CASH DIVIDENDS. For indicative purposes, a summary of the
terms under which adjustments may be made by the OCC as in
effect on the date hereof is set forth below:
(i) Whenever there is a stock dividend, stock dis-
tribution, stock split, reverse stock split, rights offering,
distribution, reorganization, recapitalization, reclassifica-
tion, extraordinary cash dividend or similar event in respect
of the Stock, or a merger, consolidation, dissolution or liqui-
dation of the Issuer, the number of option contracts, the unit
of trading, the exercise price and the underlying amount of
Stock, or any of them, with respect to all outstanding option
contracts open for trading in the Stock may be adjusted.
(ii) All adjustments are made by the Securities
Committee of the OCC. The Securities Committee determines
whether to make adjustments to reflect particular events in
respect of the Stock, and the nature and extent of any such
adjustment, based on its judgment as to what is appropriate for
the protection of investors and the public interest, taking
into account such factors as fairness to holders and writers of
option contracts on the Stock, the maintenance of a fair and
orderly market in options on the Stock, consistency of inter-
pretation and practice, efficiency of exercise settlement pro-
cedures and the coordination with other clearing agencies of
the clearance and settlement of transactions in the Stock.
(iii) In the case of a stock dividend, stock distri-
bution or stock split whereby one or more whole numbers of
shares are issued with respect to each outstanding share, each
option contract covering that share shall be increased by the
same number of additional option contracts as the number of
shares issued with respect to each share, the exercise price
per share in effect immediately prior to such event shall be
proportionately reduced, and the unit of trading shall remain
the same.
(iv) In the case of a stock dividend, stock distri-
bution or stock split whereby other than a whole number of
shares is issued in respect of each outstanding share, the
exercise price in effect immediately
prior to such event shall be proportionately reduced, and con-
versely, in the case of a reverse stock split or combination of
shares, the exercise price in effect immediately prior to such
event shall be proportionately increased. Whenever the exer-
cise price with respect to an option contract has been reduced
or increased, the unit of trading shall be proportionately
increased or reduced, as the case may be.
(v) In the case of any distribution made with
respect to shares, other than cash dividends and other than
distributions for which adjustments are provided in subsections
(iii) or (iv) above, if an adjustment is determined by the
Securities Committee to be appropriate, (i) the exercise price
in effect immediately prior to such event shall be reduced by
the value per share of the distributed property, in which event
the unit of trading shall not be adjusted,
-8-<PAGE>
or (ii) the unit of trading in effect immediately prior to such
event shall be adjusted so as to include the amount of property
distributed with respect to the number of shares represented by
such unit of trading, in which event the exercise price shall
not be adjusted.
(vi) In the case of any event for which adjustment
is not provided in any of the foregoing paragraphs, the Securi-
ties Committee may make such adjustments, if any, it determines
to be reasonable under the circumstances.
(vii) Adjustments shall as a general rule become
effective on the "ex-date" established by the principal stock
exchange or market on which the Shares are open for trading.
(viii) All adjustments of the exercise price of an
outstanding option contract shall be rounded to the nearest 1/8
of a dollar, and all adjustments of the unit of trading shall
be rounded down to eliminate any fraction, and if the unit of
trading is rounded down to eliminate a fraction, the adjusted
exercise price shall be further adjusted, to the nearest 1/8 of
a dollar, to reflect any diminution in the value of the option
contract resulting from the elimination of the fraction.
(b) If at any time prior to the Exercise Date there shall
be no outstanding OCC Options on Stock, and an event shall
occur for which an adjustment might have been required under
the By-laws, Rules and stated policies of OCC applicable to the
adjustment of OCC Options, as described above (the "OCC Adjust-
ment Rules"), the Calculation Agent shall determine, in its
sole discretion, but applying the principles set forth in the
OCC Adjustment Rules then in effect, whether to adjust the
terms of this Option, and the nature of any such adjustment.
(c) The Calculation Agent shall notify the Buyer/Seller
of any adjustment pursuant to this Section 6 and the date of
its effectiveness.
(d) The Calculation Agent is not obligated to verify
whether the prerequisites for an adjustment pursuant to this
Section 6 exist or whether such adjustment has been correctly
calculated or whether the date of effectiveness has been cor-
rectly fixed. In this connection, the Calculation Agent does
not assume any liability of any nature.
(e) Upon the consummation of a Merger Event in respect of
the Shares (as defined below), the Calculation Agent shall make
such adjustments (including, without limitation, cancellation
and payment) to this Option as it, in its sole discretion,
deems appropriate. "Merger Event" means, in respect of the
Shares, as of the date upon which holders become bound to
transfer such Shares held by them, any (i) reclassification or
change of such Shares (other than a change in par value, if
any, as a result of a subdivision or combination), (ii) con-
solidation, amalgamation or merger of the issuer of the rele-
vant Shares with or into another corporation (other than a con-
solidation, amalgamation or merger in which that issuer of
Shares is the continuing corporation and which does not result
in any such reclassification or change of Shares) or (iii)
other takeover offer for such Shares that results in a transfer
of all such Shares (other than the Shares owned or controlled
by the offeror) on or before the Expiration Date.
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7. Valuation; Market Disruption Events
(a) If, in the opinion of the Calculation Agent, a Market
Disruption Event (as defined below) has occurred and is con-
tinuing on any Banking Day during the Valuation Period, then
such day shall not be deemed to be a Valuation Date; provided,
however, that if there have been five such days on which Market
Disruption Events have occurred, then, notwithstanding such
Market Disruption Event, such day shall be deemed to be a Valu-
ation Date and the Calculation Agent shall determine the price
of one Share as of the normal closing time for the Stock Ex-
change to be the price announced at such time by the Stock Ex-
change (or, if trading in the Shares has been materially
limited, its good faith estimate of the closing price for one
Share on the Stock Exchange that would have prevailed on such
date but for the Market Disruption Event). The Calculation
Agent shall use its reasonable efforts to give notice to the
Seller and the Buyer that a Market Disruption Event has oc-
curred.
(b) "Market Disruption Event" means the occurrence or
continuance on any Exchange Business Day of any suspension of
or limitation imposed on trading (by reason of movements in
price exceeding limits permitted by the relevant exchange or
otherwise) (i) on the Stock Exchange, in the Shares or securi-
ties generally or (ii) on the primary options exchange on which
options on the Shares are traded, in such options, in each case
if, in the determination of the Calculation Agent, such suspen-
sion or limitation is material.
8. Taxation; Illegality
(a) All payments hereunder shall be made free and clear
of and without deduction or withholding for any Taxes (as here-
inafter defined) whatsoever. If applicable law should require
that any payment due from the Seller hereunder be subject to
withholding with respect to any Taxes whatsoever, the Seller
will, to the full extent then permitted by law, pay (i) the
full amount of such Taxes required to be deducted or withheld
(including the full amount required to be deducted or withheld
from any additional amounts paid pursuant to this Section 8(a))
and (ii) such additional amounts as may be necessary in order
that every net payment to the Buyer of all amounts due and ow-
ing hereunder will not be less than the full amount the Buyer
would have received had no such deduction or withholding been
required. The Seller will furnish to the Buyer within 30 days
after the date on which the payment of any Taxes is due pursu-
ant to applicable law a written statement or other evidence
sufficient to document the fact and amount of withholding by
the Seller. As used in this Section 8, "Taxes" means any
present or future taxes, levies, duties, charges, fees, deduc-
tions or withholdings of any nature now or hereafter imposed,
levied, collected, withheld or assessed by any taxing authority
whatsoever and all interest penalties and other similar lia-
bilities with respect thereto, other than (A) taxes in respect
of the overall net income of the payee imposed by the jurisdic-
tion in which its principal office is located or the jurisdic-
tion in which the relevant payment is received or (B) taxes
imposed as a result of such recipient being or having been a
citizen or resident of the jurisdiction of the government or
taxing authority imposing such tax, or being or having been
organized, present or engaged in a trade or business in such
jurisdiction, or having or having had a permanent establishment
or fixed place of business in such jurisdiction, but excluding
a connection arising solely from such
-10-<PAGE>
recipient having executed, delivered, performed its obligations
or received a payment under, or enforced, this Agreement or any
similar agreement with the Seller.
(b) In the event that the Seller (i) is obligated at any
time to make any payment of additional amounts pursuant to this
Section 8 or (ii) shall have determined that its performance
under this Agreement shall have become unlawful in whole or in
part as a result of compliance in good faith by the Seller with
any applicable present or future law, rule, regulation, judg-
ment, order or directive of any governmental, administrative,
legislative or judicial authority, then the Seller shall give
notice thereof to the Buyer, and the parties hereto shall
thereupon promptly negotiate in good faith with a view to find-
ing a satisfactory alternative method of payment or performance
to avoid such illegality or such payment of additional amounts.
If at the end of a period of 30 days after the giving of such
notice (or such shorter period as may be reasonable under the
circumstances then prevailing) the parties have not agreed upon
such a satisfactory alternative method, either party may termi-
nate this Agreement within 30 days thereafter by designating an
Early Termination Date and otherwise following the procedures
for termination set forth in Section 5.
(c) If either party is required at any time to execute
any form of document in order for payments to it hereunder to
qualify for exemption from withholding tax or for withholding
tax at a reduced rate, such party shall execute such form or
document and deliver it on demand to the party required to make
such payments.
9. Payment in U.S. Dollars
It is of the essence of this Agreement that the payments
required hereunder be made in U.S. Dollars. The obligation of
either party to make each payment in U.S. Dollars shall not be
discharged or satisfied by any tender, or any recovery pursuant
to any judgment, which is expressed in or converted into any
other currency until and except to the extent such tender or
recovery shall result in the actual receipt by the other party
in U.S. Dollars of the amount expressed to be payable hereun-
der. The obligation of either party to make payments in U.S.
Dollars shall be enforceable as an alternative or additional
cause of action for the purpose of recovery in U.S. Dollars of
the amount (if any) by which such actual receipt shall fall
short of the full amount of U.S. Dollars required to be paid
hereunder and shall not be affected by judgment being obtained
for any other sums due under this Agreement.
10. Jurisdiction; Service of Process; Immunity
(a) With respect to any suit, action or proceedings
relating to this Agreement ("Proceedings"), each party irre-
vocably submits to the non-exclusive jurisdiction of the courts
of the State of New York and the United States District Court
located in the Borough of Manhattan in New York City and waives
any objection which it may have at any time to the laying of
venue of any Proceedings brought in any such court, waives any
claim that such Proceedings have been brought in an inconve-
nient forum and further waives the right to object, with
respect to such Proceedings, that such court does not have
-11-<PAGE>
jurisdiction over such party. Nothing in this Agreement pre-
cludes either party from bringing Proceedings in any other
jurisdiction nor will the bringing of Proceedings in any one or
more jurisdictions preclude the bringing of Proceedings in any
other jurisdiction.
(b) Each party confirms, if it does not have a place of
business in New York, that it has irrevocably appointed a pro-
cess agent in New York to receive, for it and on its behalf,
service of process in any Proceedings, and will provide evi-
dence of such appointment on request. If for any reason the
party's process agent is unable to act as such, such party will
promptly notify the other party and within 30 days appoint a
substitute process agent acceptable to the other party. The
parties irrevocably consent to service of process in the manner
provided for notices in Section 14. Nothing in this Agreement
will affect the right of either party to serve process in any
other manner permitted by law.
(c) Each party irrevocably waives, to the fullest extent
permitted by applicable law, with respect to itself and its
revenues and assets (irrespective of their use or intended
use), all immunity on the grounds of sovereignty or other simi-
lar grounds from (i) suit, (ii) jurisdiction of any court,
(iii) relief by way of injunction, order for specific perfor-
mance; or for recovery of property, (iv) attachment of its
assets (whether before or after judgment) and (v) execution or
enforcement of any judgment to which it or its revenues or
assets might otherwise be entitled in any Proceedings in the
courts of any jurisdiction and irrevocably agrees, to the
extent permitted by applicable law, that it will not claim any
such immunity in any Proceedings.
11. Dates; Computations
(a) Whenever the Exercise Date would in accordance with
the terms hereof otherwise occur on a day which is not an Ex-
change Business Day, such date shall be postponed to the next
succeeding Exchange Business Day.
(b) All percentages calculated pursuant to this Agreement
shall, if necessary, be rounded upwards to the next higher one
hundred thousandth of a percentage point and all currency
amounts will be rounded to the nearest whole currency unit
(with 1/2 of such unit being rounded up).
12. Payments
All payments to be made by the Seller hereunder shall be
made without offset or counterclaim in immediately available
funds by wire transfer to the account specified pursuant to
Section 14 below. Computations hereunder shall be on the basis
of a year of 360 days for the actual number of days elapsed.
Any amount not paid when due hereunder shall be payable on
demand and, to the extent permitted by law, will bear interest
from the due date until paid at a rate per annum which shall be
1% in excess of the Buyer's cost of funding such amount, as
certified by the Buyer.
13. Assignment
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This Confirmation shall be binding upon and inure to the
parties and their respective successors and permitted assigns.
Neither the rights nor obligations of a party hereunder may be
assigned without the prior written consent of the other party;
provided that Buyer may, with the prior consent of BTCO (such
consent not to be unreasonably withheld), assign its rights and
obligations to any financial institution which makes the repre-
sentations contained in Section 1(b)(i-iv) and Section
1(b)(vii-viii) hereof; provided further that BTCO may at any
time, without consent being required, assign its rights, duties
and obligations in respect of this Transaction to any affiliate
of BTCO (the rights, duties and obligations so assigned to be
guaranteed by BTCO). Any such assignment or transfer by BTCO
shall be fully effective to transfer all the transferred rights
and obligations of BTCO upon notice to Buyer.
14. Notices
Notices hereunder shall be in writing and may be given by
personal delivery, by mail or by telex, effective upon receipt
(if given by personal delivery), five days after mailing, first
class postage pre-paid (if given by mail), or one Banking Day
after dispatch (if given by telex), addressed to the recipient
as follows or to such other address as the relevant party shall
have advised the other in writing:
- If to BTCO:
Bankers Trust Company
1 Bankers Trust Plaza
130 Liberty Street
New York, NY 10006
Attention: Equity Operations
Fax No.: (212) 250-1467
- If to the Buyer:
Gotham Partners II, L.P.
Attention: Bill Ackman, David Berkowitz
Fax No.: 212-286-1133
as follows or to such other address as the relevant party shall
have advised the other in writing:
15. Amendments
No amendment or waiver of any provision of this Agreement
nor consent to any departure therefrom by either party shall in
any event be effective unless the same shall be in writing and
signed by the other party, and then any such waiver or consent
shall be effective only in the specific instance and for the
-13-<PAGE>
specific purpose for which given and only for the specific time
period, if any, contemplated therein.
16. Non-Waiver of Rights
No failure or delay by either party in exercising any
right, power or privilege hereunder shall operate as a waiver
and any explicit waiver of any breach of this Agreement shall
be without prejudice to any rights of such party to any other
or further breach.
17. Counterparts
This Agreement may be executed in counterparts, which
taken together shall be deemed to constitute one and the same
agreement.
18. Governing Law
This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without
reference to choice of law doctrine.
19. Performance by Designee
In the event that BTCO is required to purchase, sell,
receive or deliver any shares or other securities in accordance
with the terms of this Transaction, BTCO may designate any BTCO
Affiliate to exercise such rights and/or to perform such obli-
gations, as the case may be, in place of BTCO. Buyer need not
be notified of such designation. Upon performance of any such
obligation by any such designee, BTCO shall be discharged of
its obligations to Buyer to the extent of such performance. In
the event any such designee of BTCO fails to perform any such
obligation, BTCO shall remain liable for such non-performance
provided, however, that Buyer hereby waives the equitable
remedy of specific performance by BTCO of any such purchase,
sale, receipt or delivery obligation.
IN WITNESS WHEREOF, the parties have caused this Agreement
to be executed by their respective representatives as of the
date specified in the first sentence above.
BANKERS TRUST COMPANY, London Branch
By:
Name:
Title:
-14-<PAGE>
GOTHAM PARTNERS II, L.P.
By:
Name:
Title:
Exhibit A
SELLER'S TERMINATION AMOUNT
"Seller's Termination Amount" means the amount in U.S. Dollars
equal to the arithmetic mean of the respective one-time all-in
fees (including documentation costs) communicated to the Buyer
not more than two Banking Days before an Early Termination Date
(or, in the case of the deeming of an Early Termination Date
pursuant to the last sentence of Section 5(b), on the earliest
practicable Banking Day following such deemed Early Termination
Date) by each of four leading commercial banks or investment
banking firms in London or New York selected in good faith by
the Buyer as the fee, payable on or as of such Early
Termination Date, as the case may be, that it would charge to
assume as of such Early Termination Date all of the obligations
of the Seller under this Option Agreement that would become due
and payable after such Early Termination Date (assuming that
this Option Agreement were to continue in effect until the
Exercise Date and that no Early Termination Date had occurred)
provided, however, that if any one such entity fails so to
communicate such a fee, the Buyer is not required to seek
another such entity to obtain a quote and "Seller's Termination
Amount" shall be determined on the basis of the fee or fees so
communicated to the Buyer by the other three entities. In the
event that less than three such entities are able to provide
such quotes or that the "Seller's Termination Amount" cannot
otherwise be determined in accordance with the preceding
sentence, "Seller's Termination Amount" shall mean such amount,
computed in good faith by the Buyer, as may be required to
compensate the Buyer for any losses, costs and expenses
whatsoever that the Buyer may incur as a result of the early
termination of this Option Agreement.
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