UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 10)
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)
Stephen Fraidin, P.C.
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10004
(212) 859-8140
- ----------------------------------------------------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
January 20, 1998
------------------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G
to report the acquisition which is the subject of this Schedule 13D,
and is filing this schedule because of Rule 13d-1(b)(3) or (4), check
the following box |_|.
Check the following box if a fee is being paid with the statement |_|.
(A fee is not required only if the reporting person: (1) has a
previous statement on file reporting beneficial ownership of more than
five percent of the class of securities described in Item 1; and (2)
has filed no amendment subsequent 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.
*The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class
of securities, and for any subsequent amendment containing information
which would alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not
be deemed to be "filed" for the purpose of Section 18 of the
Securities Exchange Act of 1934 ("Act") or otherwise subject to the
liabilities of that section of the Act but shall be subject to all
other provisions of the Act (however, see the Notes).
SEC1746(12-91)
SCHEDULE 13D
CUSIP No. 337400105 Page 2 of 6 Pages
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Gotham Partners, L.P.
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, U.S.A.
NUMBER OF 7 SOLE VOTING POWER
2,491,451 Shares (including an option to purchase
493,150 Shares)
SHARES
BENEFICIALLY 8 SHARED VOTING POWER
0
OWNED BY EACH
REPORTING 9 SOLE DISPOSITIVE POWER
2,491,451 Shares (including an option to purchase
493,150 Shares)
PERSON WITH
10 SHARED DISPOSITIVE POWER
0
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,491,451 Shares (including an option to purchase 493,150 Shares)
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) [ ]
EXCLUDES CERTAIN SHARES*
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
8.85%
14 TYPE OF REPORTING PERSON*
PN
*SEE INSTRUCTIONS
SCHEDULE 13D
CUSIP No. 337400105 Page 3 of 6 Pages
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Gotham Partners II, L.P.
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, U.S.A.
NUMBER OF 7 SOLE VOTING POWER
30,449 Shares (including an option to purchase
6,850 Shares)
SHARES
BENEFICIALLY 8 SHARED VOTING POWER
0
OWNED BY EACH
REPORTING 9 SOLE DISPOSITIVE POWER
30,449 Shares (including an option to purchase
6,850 Shares)
PERSON WITH
10 SHARED DISPOSITIVE POWER
0
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
30,449 Shares (including an option to purchase 6,850 Shares)
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) [ ]
EXCLUDES CERTAIN SHARES*
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0.11%
14 TYPE OF REPORTING PERSON*
PN
*SEE INSTRUCTIONS
This Amendment No. 10 amends and supplements the Statement on
Schedule 13D (the "Schedule 13D") relating to the shares of Beneficial
Interest, par value $1.00 per share ("Shares"), of First Union Real
Estate Equity and Mortgage Investments, an Ohio business trust (the
"Company") previously filed by Gotham Partners, L.P. ("Gotham") and
Gotham Partners II, L.P. ("Gotham II" and together with Gotham, the
"Reporting Persons"), both New York limited partnerships. Capitalized
terms used and not defined in this Amendment have the meanings set
forth in the Schedule 13D.
Except as specifically provided herein, this Amendment does not
modify any of the information previously reported on the Schedule 13D.
Item 4 is hereby amended to add the following information:
"Item 4. Purpose of the Transaction
On January 20, 1998, Gotham sent a letter (the "Gotham Letter")
to the Secretary of the Company responding to and referencing the
notice sent to Gotham by the Secretary of the Company on January 16,
1998 (the "Company Notice"). The Company Notice related to Gotham's
notice to the Company of a proposal to expand the size of the
Company's Board of Trustees (the "Board of Trustees") and of the
nomination of nine persons for election to the three existing seats
and the six new seats on the Board of Trustees that will be filled at
the 1998 Annual Meeting of Beneficiaries of the Company. The Gotham
Letter is attached as Exhibit 10 hereto and incorporated herein by
this reference. The Company Notice is attached as Exhibit 11 hereto
and incorporated herein by this reference.
On January 20, 1998, Alexander R. Sussman of Fried, Frank,
Harris, Shriver & Jacobson, special counsel to the Reporting Persons,
and David C. Weiner of Hahn Loeser & Parks, co-counsel, sent a letter
to Frances Floriano Goins of Squire, Sanders & Dempsey L.L.P., outside
counsel to the Company, relating to the Company Notice. A copy of such
letter is attached as Exhibit 12 hereto and incorporated herein by
this reference.
On January 20, 1998, counsel for the Reporting Persons submitted
a Notice of Removal to the United States District Court for the
Northern District of Ohio, Eastern Division relating to the Complaint
for Preliminary Injunction, Permanent Injunction and Declaratory
Relief, submitted by the Company to the Court of Common Pleas,
Cuyahoga County, Ohio on January 16, 1998 (the "Company Complaint").
Such Notice of Removal is attached as Exhibit 13 hereto and
incorporated herein by this reference. The Company Complaint is
included as an exhibit to the Notice of Removal.
On January 20, 1998, counsel for the Reporting Persons submitted
a Notice of Filing and Notice of Removal in the Court of Common Pleas,
Cuyahoga County, Ohio relating to the Company Complaint. Such Notice
of Filing and Notice of Removal is attached hereto as Exhibit 14 and
incorporated herein by this reference.
On January 20, 1998, counsel for the Reporting Persons submitted
an Answer and Counterclaims in the United States District Court for
the Northern District of Ohio, Eastern Division relating to the
Company Complaint. Such Answer and Counterclaims is attached as
Exhibit 15 hereto and incorporated herein by this reference."
Item 7 is hereby amended to add the following information:
"Item 7. Material to be Filed as Exhibits
10. Letter, dated January 20, 1998, from Gotham to the Secretary
of the Company.
11. Letter, dated January 16, 1998, from the Secretary of the
Company to Gotham.
12. Letter from Alexander R. Sussman and David C. Weiner to
Frances Floriano Goins.
13. Notice of Removal submitted to the United States District
Court for the Northern District of Ohio, Eastern Division by counsel
for the Reporting Persons on January 20, 1998.
14. Notice of Filing and Notice of Removal submitted to the Court
of Common Pleas, Cuyahoga County, Ohio by counsel for the Reporting
Persons on January 20, 1998.
15. Answer and Counterclaims submitted to the United States
District Court for the Northern District of Ohio, Eastern Division by
counsel for the Reporting Persons on January 20, 1998."
After reasonable inquiry and to the best of our knowledge and
belief, the undersigned certify that the information set forth in this
statement is true, complete and correct.
January 20, 1998
GOTHAM PARTNERS, L.P.
By: Section H Partners, L.P.,
its general partner
By: Karenina Corporation,
a general partner of Section H Partners, L.P.
By: /s/ William A. Ackman
-------------------------------
William A. Ackman
President
By: DPB Corporation,
a general partner of Section H Partners, L.P.
By: /s/ David P. Berkowitz
-------------------------------
David P. Berkowitz
President
GOTHAM PARTNERS II, L.P.
By: Section H Partners, L.P.,
its general partner
By: Karenina Corporation,
a general partner of Section H Partners, L.P.
By: /s/ William A. Ackman
-------------------------------
William A. Ackman
President
By: DPB Corporation,
a general partner of Section H Partners, L.P.
By: /s/ David P. Berkowitz
-------------------------------
David P. Berkowitz
President
EXHIBIT 10
Gotham Partners, L.P.
110 East 42nd Street, 18th Floor
New York, New York 10017
January 20, 1998
VIA FAX & OVERNIGHT MAIL
Paul F. Levin, Esq.
Secretary
First Union Real Estate Equity
and Mortgage Investments
55 Public Square, Suite 1900
Cleveland, Ohio 44113-1937
Dear Mr. Levin:
In response to your letter notice to Gotham Partners, L.P.,
dated January 16, 1998, we note that your purported notice is
defective and ineffectual in at least three respects. First, your
letter notice states that, "As provided in Article I, Section 7(d) of
the By-Laws, Gotham's notice must set forth as to each nomination and
proposal" certain information; but Section 7(d) has no such
requirement. Second, the Board of Trustees has failed to identify, as
required by Article I, Section 7(d) of the By-Laws, the "material
respect" in which Gotham Partners, L.P.'s notice of nominations and
proposal, dated January 8, 1998 (the "Notice"), allegedly does not
satisfy the information requirements of Section 7(c). Third, Gotham
Partners, L.P.'s notice did respond to the requirements of Section
7(c) and, therefore, your quoting those requirements in your letter is
inadequate to allow Gotham Partners, L.P. to correct any alleged
deficiency.
Notwithstanding the foregoing and without waiving any of our
rights, we hereby provide First Union Real Estate Equity and Mortgage
Investments ("First Union"), the following information:
1. Gotham Partners II, L.P., is known by Gotham Partners,
L.P. to support its nominations and proposal.
2. The address of Gotham Partners II, L.P. is 110 East 42nd
Street, 18th Floor, New York, New York 10017.
3. Gotham Partners II, L.P. is the owner of 23,599 shares of
Beneficial Interest of the Company, par value $1.00 per share (the
"Shares"), and holds an option to acquire 6,850 Shares.
4. Other than through its ownership of Shares described in
item 3, Gotham Partners II, L.P. has no financial interest in the
proposal referred to above.
5. Gotham Partners, L.P. does not have knowledge of any
other beneficiary of the First Union supporting its nominations or
proposal as of the date of the Notice.
The foregoing is hereby incorporated by reference and made a
part of the notice.
Gotham Partners, L.P. believes that its Notice satisfies the
requirements of the Declaration of Trust and By-Laws of First Union,
including without limitation the informational requirements of Article
I, Section 7(c) of the By-Laws of First Union. If this does not
comport with the understanding of First Union, we expect that you will
provide immediate notice of that position. If First Union does not
comply with the preceding sentence and attempts to omit the proposal
or any of the nominations made by Gotham Partners, L.P., from
consideration at the 1998 Annual Meeting of the Beneficiaries of First
Union (or any special meeting of Beneficiaries of First Union called
in lieu thereof), we intend to pursue all of our rights and remedies.
Please direct all future correspondence relating to this
matter to both of our litigation counsel, Alexander R. Sussman at
Fried, Frank, Harris, Shriver & Jacobson, One New York Plaza, New
York, New York 10004, and David C. Weiner at Hahn, Loeser & Park LLP,
3300 BP America Building, 200 Public Square, Cleveland, Ohio
44114-2301.
Very truly yours,
GOTHAM PARTNERS, L.P.
By: Section H Partners, L.P., its general partner
By: Karenina Corporation,
a general partner of Section H Partners, L.P.
By: /s/ William A. Ackman
--------------------------------
William A. Ackman
President
By: DPB Corporation,
a general partner of Section H Partners, L.P.
By: /s/ David P. Berkowitz
--------------------------------
David P. Berkowitz
President
CC: Frances Floriano Goins, Esq.
EXHIBIT 11
First Union Real Estate Equity and Mortgage Investments
January 16, 1998
SENT VIA TELECOPIER
AND FEDERAL EXPRESS
Gotham Partners, L.P.
110 East 42nd Street
New York, New York 10017
Attn: Mr. David P. Berkowitz
Mr. William A. Ackman
Gentlemen:
The Board of Trustees (the "Board") of First Union Real
Estate Equity and Mortgage Investments (the "Trust") has received your
notice dated January 8, 1998 (the "Notice"), and, pursuant to Article
I, Section 7(d) of the By-Laws of the Trust, hereby gives notice to
Gotham Partners, L.P. that the Notice does not satisfy the
informational requirements of such Section and is therefore deficient.
Because Gotham's Notice is deficient, the proposal and nominations
contained in such Notice cannot be presented for action at the 1998
Annual Meeting of Beneficiaries of the Trust (the "Annual Meeting").
However, Gotham may provide curative information to the Secretary of
the Trust within five (5) days from the date hereof.
As provided in Article I, Section 7(d) of the By-Laws,
Gotham's Notice must set forth as to each nomination or proposal (i)
the name and address of, and the class and number of shares of the
Trust's capital shares which are beneficially owned by, any other
beneficiaries of the Trust known by Gotham to be supporting such
nomination or proposal on the date of the Notice and (ii) any
financial interest of any such beneficiaries in such proposal.
This notice addresses only those deficiencies in the Notice
that are capable of being cured. The Trust does not waive any other
requirements of the Declaration of Trust or By-Laws of the Trust or
any deficiencies that are not curable. The Board reserves the right to
omit from consideration at the Annual Meeting any proposal or
nomination that has not been properly made.
Sincerely,
/s/ Paul F. Levin
Paul F. Levin
Secretary
EXHIBIT 12
[LETTERHEAD OF FRIED, FRANK, HARRIS, SHRIVER & JACOBSON]
212-859-8005
January 20, 1998 (FAX: 212-859-8585)
VIA FAX & HAND DELIVERY
Frances Floriano Goins, Esq.
Squire, Sanders & Dempsey L.L.P.
4900 Key Tower
127 Public Square
Cleveland, Ohio 44114-1304
Dear Ms. Floriano Goins:
We are special counsel to Gotham Partners, L.P. ("Gotham I")
and Gotham Partners II, L.P. ("Gotham II"). (Gotham I and Gotham II,
collectively, are the "Gotham Partnerships"). Together with
co-counsel, David Weiner of Hahn, Loeser & Parks, we are writing to
urge your client, First Union Real Estate Equity and Mortgage
Investments ("First Union"), to desist from entrenchment tactics and
harassing litigation in responding to Gotham I's nominations and
proposal to be voted upon at First Union's upcoming Annual Meeting.
Gotham I seeks to give First Union Beneficiaries/stockholders a choice
about the company's future management, business direction and value
maximization strategy, by allowing stockholders the option to vote for
Gotham I's nominations and proposal. At a minimum, it is obviously in
the interest of First Union and all of its stockholders to avoid
unnecessary and wasteful costs and burdens during the forthcoming
proxy contest. We believe the contest should be decided in a
businesslike manner, with free stockholder choice, full disclosure,
and a vote on the merits of the Trustee candidates and their plans for
First Union.
Any disputes between the parties should be resolved without
litigation. If there is to be litigation, however, it should come
after the April 14 Annual Meeting and stockholder vote, in order to
avoid costly distraction during the proxy contest and premature
judicial consideration of issues that may be mooted by the outcome of
the contest. Accordingly, we are making the following demands and
taking the following actions:
1. As the first order of business, First Union's purported
"notice of deficiency" with respect to Gotham I's notice, dated
January 8, 1998 of Gotham I's nominations and proposal pursuant to
Article I, Section 7 of First Union's By-Laws ("Gotham I's Notice"),
must be resolved immediately. Despite Gotham I's express request on
page 2 of Gotham I's Notice that any questions be addressed to Mr.
Sussman, the "notice of deficiency" was sent by Paul Levin, First
Union's Secretary, in a letter to Gotham I, dated January 16, 1998,
and was referenced in a lawsuit filed on that date, without any prior
communication to Gotham I or to Mr. Sussman.
We are enclosing a copy of Gotham I's letter response, dated
as of today, to Mr. Levin's unexplained statement that Gotham I's
Notice "does not satisfy the informational requirements of [First
Union's By-Laws] and is therefore deficient." As Gotham I's letter
explains, Mr. Levin's purported notice was defective and ineffectual.
Moreover, we believe that Gotham I's Notice was in full compliance
with the Trust and By-Laws as well as the informational requirements
of Article I, Section 7(c) of the By-Laws. In any case, any
information that was not provided was immaterial and any purported
deficiency was similarly immaterial and did not require any further
response.
According to Mr. Levin's letter, "Gotham may provide
curative information to the Secretary of the Trust within five (5)
days from the date hereof [January 16, 1998]." Since the cure period
ends tomorrow Wednesday, January 21, 1998, we require that you advise
us by 2:00 p.m. today whether the Notice, as amended, is deemed
effective and not deficient by First Union. If you cannot so advise me
by that time, we ask that you be available this afternoon at 2:00 p.m.
to join us in a conference call with the federal court (see Point 3
below), so that we may arrange for a hearing to be held at the Court's
convenience tomorrow, Wednesday, January 21, 1998. At such hearing we
plan to petition the Court for appropriate relief to protect the
Gotham Partnerships from any claim that the informational requirements
of First Union's By-Laws have not timely been met.
2. This morning, the Gotham Partnerships have removed First
Union's state court lawsuit to the United States District Court for
the Northern District of Ohio, Eastern Division. Enclosed is a copy of
the Notice of Removal. There is diversity between the parties and any
litigation between First Union and the Gotham Partnerships will be in
the context of a proxy contest with proxy violation claims subject to
the federal court's exclusive jurisdiction.
3. Despite our preference that disputes between the parties
either be resolved without court intervention or subsequent to the
vote at First Union's Annual Meeting, in order to protect the Gotham
Partnerships' rights, we have filed counterclaims in the removed
federal action. We are herewith serving the Answer and Counterclaim
along with our initial discovery requests.
4. As set forth in our federal counterclaims, First Union's
management and Trustees have a fiduciary obligation to act in a manner
consistent with the interests of First Union and its stockholders.
While we have not named any individual counterclaim defendants, we
reserve the Gotham Partnerships' right to do so should any individuals
violate their fiduciary duties to the Trust and its stockholders.
We look forward to hearing from you before 2:00 p.m. today,
as requested above.
Sincerely,
/s/ Alexander R. Sussman /s/ David C. Weiner
- -------------------------- ------------------------
Alexander R. Sussman David C. Weiner
CC: Paul F. Levin, Esq.
EXHIBIT 13
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF OHIO,
EASTERN DIVISION
FIRST UNION REAL ESTATE ) CASE NO. 98CV0105
EQUITY AND MORTGAGE )
INVESTMENTS, ) JUDGE ALDRICH
)
Plaintiff, ) NOTICE OF REMOVAL
) -----------------
)
v. )
)
GOTHAM PARTNERS, L.P. )
)
and )
)
GOTHAM PARTNERS II, L.P., )
)
Defendants. )
NOTICE OF REMOVAL
-----------------
The Defendants, Gotham Partners, L.P. and Gotham Partners
II, L.P., pursuant to 28 U.S.C. ss.ss. 1441 and 1446, respectfully
submit this Notice of Removal from the Court of Common Pleas, Cuyahoga
County, Ohio, to this Court. In support of Removal, Defendants state
as follows:
1. On January 16, 1998, Plaintiff filed a civil action
against Defendants in the Court of Common Pleas, Cuyahoga County,
Ohio, captioned First Union Real Estate Equity and Mortgage
Investments v. Gotham Partners, L.P., et al., Case No. 347063.
2. Defendants became aware of the commencement of the state
court action through a press release issued by Plaintiff on the
afternoon of Friday, January 16, 1998. Defendants obtained a copy of
the complaint on the evening of January 16, 1998. A copy of the
complaint is attached hereto as Exhibit A. This exhibit, to the best
of Defendants' knowledge, constitutes all process, pleadings, and
orders filed and served upon Defendants in this case to date.
3. Plaintiff has at all relevant times been a citizen of the
State of Ohio. (see Compl. Pargraph 1).
4. Defendants are New York limited partnerships with their
principal places of business in New York. Defendants are shareholders
of Plaintiff.
5. The parties possess diverse citizenship within the
meaning of 28 U.S.C. ss. 1332, and the matter in controversy exceeds
the sum or value of $75,000, exclusive of interest and costs.
6. A copy of this notice is being filed concurrently with
the Clerk of the Court of Common Pleas for the County of Cuyahoga,
Ohio, and written notice of removal is being served on counsel for
Plaintiff. 28 U.S.C. ss. 1446(a).
WHEREFORE, Defendants hereby remove this action from the
Court of Common Pleas for Cuyahoga County, Ohio, bearing caption First
Union Real Estate Equity and Mortgage Investments v. Gotham Partners,
L.P., et al., Case No. 347063, to the United States District Court for
the Northern District of Ohio, Eastern Division.
Respectfully submitted,
OF COUNSEL: /s/ Michael J. Garvin
___________________________
David C. Weiner (0013351)
HAHN LOESER & PARKS LLP Michael J. Garvin (0025394)
3300 BP America Building
200 Public Square
Cleveland, Ohio 44114-2301
(216) 621-0150
- and -
OF COUNSEL:
/s/ Alexander R. Sussman
_____________________________
FRIED, FRANK, HARRIS, SHRIVER Alexander R. Sussman(FN1)
& JACOBSON
25th Floor
One New York Plaza
New York, New York 10004-1980
(212) 859-8000
Attorneys for Defendants
[FN]
1. Application to appear pro hac vice being submitted.
</FN>
CERTIFICATE OF SERVICE
----------------------
A copy of the foregoing Notice of Removal was sent by messenger
to Frances Floriano Goins, Squire, Sanders & Dempsey L.L.P., 4900 Key
Tower, 127 Public Square, Cleveland, Ohio 44114-1304, attorneys for
Plaintiff, this 20th day of January, 1998.
/s/ Michael J. Garvin
__________________________________
One of the attorneys for Defendants
<PAGE>
EXHIBIT A
---------
IN THE COURT OF COMMON PLEAS
CUYAHOGA COUNTY, OHIO
FIRST UNION REAL ESTATE EQUITY ) CASE NO. 347063
AND MORTGAGE INVESTMENTS )
55 Public Square, Suite 1900 )
Cleveland, Ohio 44113, )
)
Plaintiff, )
) Judge 307 Timothy J. McGinty
v. )
)
GOTHAM PARTNERS, L.P. ) COMPLAINT FOR PRELIMINARY
110 East 42nd Street ) INJUNCTION, PERMANENT
New York, New York 10017, ) INJUNCTION AND DECLARATORY
) RELIEF
and )
)
GOTHAM PARTNERS II, L.P. )
110 East 42nd Street )
New York, New York 10017 )
)
Defendants. )
For its Complaint for Preliminary Injunction, Permanent
Injunction and Declaratory Relief against Defendants, Gotham Partners,
L.P. and Gotham Partners II, L.P., Plaintiff First Union Real Estate
Equity and Mortgage Investments ("First Union") states as follows:
THE PARTIES
-----------
1. First Union Real Estate Equity and Mortgage Investments
("First Union") is an Ohio unincorporated business trust. First Union
was organized and exists pursuant to the laws of Ohio and a
Declaration of Trust dated August 1, 1961, as amended through July 25,
1986 (the "Declaration of Trust"), as a real estate investment trust
("REIT"), in order to give small investors the ability to participate
in and benefit from professionally managed investments in commercial
real estate. Since its creation in 1961, First Union's principal place
of business has been, and remains, Cleveland, Ohio. The shares of
beneficial interest in First Union are publicly traded, and are held
by numerous small shareholders.
2. Defendant Gotham Partners, L.P. ("Gotham") is a limited
partnership whose principal place of business, on information and
belief, is New York, New York. On information and belief, Gotham owns
approximately 8.85%, or 2,491,451 shares of First Union's shares of
beneficial interest including an option to acquire 493,150 shares.
3. Defendant Gotham Partners II, L.P. ("Gotham II") is a limited
partnership whose principal place of business, on information and
belief, is New York, New York. On information and belief, Gotham II
owns approximately 0.11%, or 30,449 shares of First Union's shares of
beneficial interest including an option to acquire 6,850 shares.
NATURE OF ACTION
----------------
4. This is an action to enjoin Defendants' continued and
threatened violations of their contractual obligations to First Union
and the beneficial owners of its shares pursuant to First Union's
Declaration of Trust and By-Laws. As a prelude to waging a proxy
contest in connection with the upcoming Annual Meeting of First
Union's shareholders, and in violation of various provisions of First
Union's Declaration of Trust and By-Laws, Defendants have attempted to
nominate unqualified persons to sit on First Union's Board of Trustees
and, at the same time, have embarked upon an unlawful scheme
simultaneously to expand and to take control of First Union's Board,
all in violation of Defendants' contractual obligations as
shareholders of First Union.
5. First Union and its shareholders have been, and, absent
injunctive and declaratory relief, will continue to be irreparably
harmed by Defendants' unlawful conduct. Among other things,
Defendants' conduct places First Union and its shareholders at risk of
being taken over by an unlawfully constituted Board of Trustees, with
as many as nine unqualified Trustees.
6. As a practical matter, absent injunctive and declaratory
relief the timing of Defendants' actions will result in the
disenfranchisement of First Union's other shareholders from the
process of electing persons eligible to be seated on First Union's
Board of Trustees.
7. This Court's immediate intervention is necessary and
appropriate, given the proximity of the upcoming Annual Meeting
scheduled for April 14, 1998, and the likelihood of severe and
irreparable harm to First Union and its shareholders if Defendants'
unlawful scheme is allowed to proceed.
FACTS GIVING RISE TO FIRST UNION'S CLAIMS
-----------------------------------------
8. First Union was created in 1961 for the purpose of conducting
business as a REIT, as that term is defined in Section 856 of the
Internal Revenue Code of 1986, as amended (the "Code"). Since its
creation First Union has continually operated in a manner to qualify
as a REIT.
9. REITs are a product of federal tax policy and tax laws.
Congress authorized the creation of REITs in 1960 for the purpose of
allowing small investors to enjoy the benefits of a marketable
interest in a professionally selected and managed portfolio of real
estate properties, without having the income generated by the REIT
properties subject to federal income tax at the entity level. Congress
thus sought, through the REIT mechanism, to allow small investors to
enjoy certain benefits attributable to the ownership of substantial
commercial properties which large and more affluent investors enjoy
from direct investment in real estate or investment in real estate
through other organizational structures.
10. First Union exists pursuant to, and the conduct of its
business and affairs is governed by, the Declaration of Trust, a copy
of which is attached hereto as Exhibit A. The Declaration of Trust is
a contract among First Union, the Board of Trustees, and First Union's
shareholders. Each shareholder of First Union is a party to the
Declaration of Trust.
11. In addition, the share certificate delivered to each
shareholder expressly states that by accepting the certificate the
shareholder agrees to be bound by all the terms and provisions of the
Declaration of Trust. The form of the share certificate, including its
language, is specified in the By-Laws of First Union.
12. As owners of First Union shares of beneficial interest,
Defendants Gotham and Gotham II are parties to, and are contractually
bound by the provisions of the Declaration of Trust.
13. The By-Laws of First Union (the "By-Laws") similarly govern
the contractual relationship between First Union, its Board of
Trustees, and First Union's shareholders. A copy of the By-Laws is
attached to the Declaration of Trust, which is attached hereto as
Exhibit A.
14. The Declaration of Trust vests in First Union's Board of
Trustees the absolute and exclusive power and authority to manage the
Trust and its affairs.
15. The Board of Trustees currently consists of nine (9) Trustees
elected by First Union's shareholders at annual meetings of First
Union's shareholders.
16. Pursuant to Section 8.1 of the Declaration of Trust, the
Board of Trustees is divided into three classes -- Class I, Class II
and Class III -- which classes are required to be as nearly equal in
size as possible. Each class of Trustees currently has three members.
17. Pursuant to Section 8.2 of the Declaration of Trust, only one
class of Trustees is elected by First Union's shareholders in any
given year. As a result, First Union has a "staggered" Board of
Trustees, the purpose of which, among other things, is to provide
continuity of management of the Trust and prevent a majority of the
Board of Trustees from being elected at any given Annual Meeting.
18. First Union's Annual Meeting for 1998 is scheduled to take
place on or about April 14, 1998. Preparation of First Union's proxy
materials for filing with the United States Securities and Exchange
Commission ("SEC") and mailing to shareholders will likely begin
months in advance of the Annual Meeting.
19. On information and belief, Defendants began acquiring First
Union shares in or about December, 1996. On information and belief,
these shares were acquired for the undisclosed purpose of gaining
control of First Union. The means by which Defendants would seek to
achieve this goal were kept secret, however, until on or about January
8, 1998.
20. Indeed, since they began acquiring shares as early as
December, 1996, Defendants have refused to respond to various requests
for information, including First Union's request that Defendants
disclose the identities of their limited partners pursuant to, among
other things, Section 11.7 of the Declaration of Trust and Article VI,
Section 6 of the By-Laws.
21. On or about January 8, 1998, Gotham hand-delivered a letter
to First Union's Secretary and General Counsel (the "January 8, 1998
letter"), a copy of which is attached hereto as Exhibit B.
22. The January 8, 1998 Letter purports to provide notice of the
following actions pursuant to Article I, Section 7 of First Union's
By-Laws:
A. Gotham's nomination of William A. Ackman, David P.
Berkowitz, and James A. Williams for election as Class
II Trustees to First Union's Board of Trustees at First
Union's 1998 Annual Meeting.
B. Gotham's proposal to increase the number of Trustees
constituting the full Board of Trustees by six, and to
elect the six additional Trustees at the 1998 Annual
Meeting (the "Proposal").
C. Gotham's nomination of Daniel Schuchman, Steven S.
Snider, Mary Ann Tighe, Stephen J. Garchik, David S.
Klafter and Daniel J. Altobello for election to the six
newly created positions on First Union's Board of
Trustees.
23. Also on or about January 8, 1998, Defendants publicly
revealed their intention to solicit proxies in support of their
nominees and their Proposal to expand the Board of Trustees in
documents filed with the SEC.
24. As set forth below, Defendants' efforts to nominate persons
to First Union's Board of Trustees and simultaneously to expand the
Board of Trustees and elect six additional Trustees pursuant to their
unlawful Proposal are in breach of the Declaration of Trust, and
reveal Defendants' determination to achieve their objectives by
flaunting their contractual obligations to First Union and its other
shareholders.
25. Section 11.7 of the Declaration of Trust and Article VI,
Section 6 of the By-Laws permit First Union to demand certain
ownership information from its shareholders.
26. First Union demanded that Defendants provide the information
required under Section 11.7 of the Declaration of Trust and Article
VI, Section 6 of the By-Laws as early as mid-1997.
27. Defendants refused to comply with, and have not provided the
information sought in First Union's demand upon Defendants.
28. In addition, Defendants' failure to provide the information
requested of them pursuant to the Declaration of Trust and By-Laws
renders Gotham's purported nomination of persons to serve as Trustees
and the Proposal null and void. Article VI, Section 6, of First
Union's By-Laws plainly provides that ownership of shares in First
Union is conditioned upon the "shareholder" providing definitive
information upon request. Failure by a shareholder to comply with such
a request results in his shares being deemed "Excess Securities."
29. Pursuant to the By-Laws, Excess Securities are not entitled
to voting rights and are not considered to be outstanding for quorum
or voting purposes.
30. Because Defendants' shares were Excess Securities at the time
Gotham made its purported nominations and Proposal, Gotham was not
entitled to propose any matter for consideration at the April 1998
Annual Meeting, and the purported nominations as well as the Proposal
are null and void.
31. First Union has been, and, absent declaratory and injunctive
relief, will continue to be harmed by, Defendants' efforts to have
First Union's shareholders vote upon the purported nominations and
unlawful Proposal at the upcoming meeting of First Union's
shareholders.
32. Article I, Section 7 of the By-Laws likewise requires the
proponents of any proposal for the consideration of shareholders at an
annual meeting to state the name and address of each other shareholder
known to be supporting the nomination and/or proposal, and to disclose
the holdings of those supporters.
33. On information and belief, Defendants have communicated with,
and may have gained the support of other shareholders for their
nominations and the Proposal, but have not disclosed the identities of
those other shareholders to First Union.
34. First Union has been, and, absent declaratory and injunctive
relief, will continue to be harmed by, Defendants' failure to provide
the requested information about persons supporting their purported
nominations and unlawful Proposal.
35. Article I, Section 7 of the By-Laws further requires the
proponents of any proposal to reveal any financial interest they may
have in the proposal.
36. Gotham has failed to disclose the following financial
interests of its purported nominees in violation of the By-Laws:
a. One of Gotham's "nominees," Daniel J. Altobello, is an
executive officer of ONEX Corporation, a vendor of
Imperial Parking, a subsidiary of First Union's
affiliated management company.
b. Daniel J. Altobello is a person controlled by Gotham.
c. ONEX and First Union are parties to a "Put-Call
Agreement," which Agreement is triggered by a change
of control of First Union, to the benefit of ONEX
and/or the nominee.
37. First Union has been, and absent declaratory and injunctive
relief will continue to be harmed by, Defendants' failure to abide by
their obligation to identify financial interests as required by
Article I, Section 7 of the By-Laws.
38. Section 8.10 of the Declaration of Trust disqualifies any
person from serving as Trustee who owns more than 1% of the securities
of, or is otherwise affiliated with another REIT, or owns more than 1%
of the securities of, or is otherwise affiliated with any other real
estate company that competes with First Union for investments.
39. On information and belief, Defendants and/or their purported
nominees own or are affiliated with such other REITs and/or such
competing entities. Defendants have failed to adequately disclose
these affiliations.
40. First Union has been, and, absent declaratory and injunctive
relief, will continue to be harmed by Defendants' unlawful efforts to
nominate and elect unqualified nominees who are not eligible to be
seated on First Union's Board of Trustees.
41. Section 8.4 of the Declaration of Trust reserves to the
Trustees the right and authority to fill any vacancy on the Board of
Trustees.
42. Defendants' Proposal unlawfully attempts to usurp this
authority from the Trustees by providing for the simultaneous election
of six new Trustees at the April 1998 Annual Meeting.
43. The attempt to pack First Union's Board with six additional
Trustees at the April 1998 Annual Meeting also violates the
Declaration of Trust's provisions providing for a staggered board.
44. Defendants' Proposal violates numerous other provisions of
the Declaration of Trust and By-Laws.
45. First Union has been, and, absent declaratory and injunctive
relief, will continue to be harmed by Defendants' efforts to have
their purported nominees and unlawful Proposal presented to First
Union's shareholders at the April 1998 Annual Meeting.
PUBLIC INTEREST AND IRREPARABLE HARM
------------------------------------
46. Defendant's attempt to increase the size of, and pack the
Board with its agents and affiliates would cause a "change in control"
under certain of First Union's credit and other agreements. Such a
"change in control" would trigger rights of First Union's lenders and
other parties that, if exercised, would cause irreparable damage to
First Union's business and to its shareholders' interests.
47. First Union is a publicly traded company with numerous small
shareholders. These shareholders, First Union, and, indeed, the
investing public, have a significant interest in preserving the
integrity of First Union's Declaration of Trust and the matters to be
put before the April 14, 1998 Annual Meeting.
48. First Union, its shareholders, and the investing public have
a significant interest in preserving the integrity of the contractual
obligations set forth in the Declaration of Trust and By-Laws.
49. First Union, its shareholders, and, indeed, the investing
public have a significant interest in preventing the election of
unqualified Trustees to an unlawfully constituted Board of Directors
which is beholden to the interests of one or two large shareholders.
50. First Union, its shareholders, and, indeed, the investing
public will be irreparably harmed in the absence of the requested
injunctive and declaratory relief.
COUNT I -- DECLARATORY JUDGMENT
-------------------------------
51. First Union incorporates by reference each of the preceding
paragraphs as if set forth fully herein.
52. A real and substantial controversy exists between First Union
and Defendants concerning Defendants' standing to make any proposal to
First Union shareholders at the April 1998 Annual Meeting, the
legality and propriety of Defendants' purported nominations to First
Union's Board of Trustees, and Defendants' Proposal to expand First
Union's Board of Trustees by electing six new Trustees at the April
1998 Annual Meeting.
53. First Union is entitled to a declaration of this Court that
Defendants have violated their contractual obligations in the
Declaration of Trust and By-Laws, and that their purported nominations
of Trustees and Proposal are unlawful, null and void.
COUNT II -- INJUNCTIVE RELIEF
-----------------------------
54. First Union incorporates by reference each of the preceding
paragraphs as if set forth fully herein.
55. On account of the activities of Defendants described herein,
First Union has suffered, and, absent declaratory and injunctive
relief, will continue to suffer irreparable harm for which there is no
adequate remedy at law.
56. The public interest will be served by granting First Union
injunctive relief against Defendants' unlawful conduct.
57. Defendants will not suffer any legally cognizable harm if
they are enjoined from violating their contractual obligations to
First Union and its other shareholders.
58. First Union is entitled to injunctive relief to stop
Defendants from pursuing their unlawful activities and specifically to
enforce Defendants' contractual obligations pursuant to the
Declaration of Trust and By-Laws.
PRAYER FOR RELIEF
-----------------
WHEREFORE, Plaintiff prays:
A. That a preliminary injunction be issued pending final
determination of this cause:
1. Specifically enforcing the Declaration of Trust as to
Defendants' shares and determining them to be Excess Securities
pursuant to, inter alia, Article VI, Section 6 of First Union's
By-Laws, that have no voting rights and may not be considered for
quorum or voting purposes;
2. Declaring Defendants' Proposal and purported nomination
of candidates to sit on First Union's Board of Trustees to be unlawful
and in violation of their contract with First Union and its other
shareholders, and, accordingly, null and void; and
3. Enjoining Defendants, their officers, agents, servants,
employees, and attorneys, and those persons in active concert or
participation with them who receive actual notice of such order, from:
a. violating any of the terms and/or conditions of the
Declaration of Trust and By-Laws, by, among other
things, supporting or soliciting proxies on behalf of
the Proposal set forth in the January 8, 1998 letter;
b. violating any of the terms and/or conditions of the
Declaration of Trust and By-Laws by, among other
things, supporting or soliciting proxies on behalf of
Defendants' slate of nominees for the First Union Board
of Trustees, and in particular, for unqualified
nominees of their choosing; and
c. violating any other term or condition of the Declaration
of Trust and By-Laws.
B. That upon final determination of this cause said preliminary
injunction be made permanent.
C. That the Court grant Plaintiff its costs herein and such
further relief as may be just and proper.
Respectfully submitted,
/s/ Frances Floriano Goins
--------------------------------
Frances Floriano Goins (0018631)
George M. von Mehren (0001001)
Roger M. Gold (0055905)
SQUIRE, SANDERS & DEMPSEY L.L.P.
4900 Key Tower
127 Public Square
Cleveland, Ohio 44114-1304
(216) 479-8500
James P. Murphy (0003874)
SQUIRE, SANDERS & DEMPSEY L.L.P.
1201 Pennsylvania Avenue N.W.
P.O. Box 407
Washington, D.C. 20044
(202) 626-6600
Attorneys for Plaintiff
First Union Real Estate Equity
and Mortgage Investments
FIRST UNION REAL ESTATE EQUITY
AND MORTGAGE INVESTMENTS
AMENDED DECLARATION OF TRUST
(AS AMENDED THROUGH JULY 25, 1986)
TABLE OF CONTENTS
-----------------
ARTICLE I NAME OF TRUST - TITLE TO TRUST PROPERTY
Section 1.1 Name of Trust 5
Section 1.2 Title of Trust 5
Section 1.3 Purposes of Trust 5
ARTICLE II POWERS AND AUTHORITY OF TRUSTEES
Section 2.1 General 6
Section 2.2 Power to Acquire, Hold and Dispose of Real Estate
and Personal Property 6
Section 2.3 Power to Acquire, Hold and Dispose of Securities 6
Section 2.4 Name In Which Title Held 7
Section 2.5 Power to Borrow, Mortgage and Pledge 7
Section 2.6 Power to Lend and Invest 7
Section 2.7 Power to Pay Taxes 7
Section 2.8 Power to Transfer Trust to Corporation 7
Section 2.9 Power as to Securities 8
Section 2.10 Power to Delegate 8
Section 2.11 General Power to Enforce and Collect Securities 8
Section 2.12 Power to Incur Expenses, Appoint and Employ
Officers and Agents 8
Section 2.13 Power to Endorse and Guarantee 9
Section 2.14 Power as to Bank Deposits 9
Section 2.15 Power to Determine Capital and Income 9
Section 2.16 Power to Value Trust Property and Keep Books 9
Section 2.17 Power to Solicit Proxies, etc 9
ARTICLE III LIMITATIONS OF LIABILITY OF BENEFICIARIES, TRUSTEES & OTHERS
Section 3.1 No Personal Liability of Beneficiaries 9
Section 3.2 Trustee's Liability Other Than to the Trust of
Beneficiary 10
Section 3.3 Trustee's Liability to Trust and Beneficiaries -
Indemnification and Reimbursement - Bond and
Security 10
Section 3.4 No implied Covenants or Obligations to be Read
Into this Instrument; Trustees' Right to Rely on
Investment Advisers and Counsel and Accountants;
General Right to Rely 11
ARTICLE IV SHARES OF BENEFICIAL INTEREST
Section 4.1 Shares $1 Par Value; Non-Assessable and Not
Limited In Number 11
Section 4.2 Share Certificate 12
Section 4.3 Issue of Shares 12
Section 4.4 Trustees Right to Own Shares 12
Section 4.5 Indemnification of Underwriters 13
ARTICLE V RECORD AND TRANSFER OF SHARES
Section 5.1 Register of Shares - Record Owners 13
Section 5.2 Transfer Agents and Registrars 13
Section 5.3 Deposit of Certificates with Transfer Agents 13
Section 5.4 Transfer on Records of Trust 13
Section 5.5 Transfer by Operation of Law 14
Section 5.6 Joint Owners of Shares 14
Section 5.7 Duty of Trustees In Share Transfers 14
Section 5.8 Lost Certificates 14
Section 5.9 Regulations on Transfer 14
ARTICLE VI CHARACTERISTICS OF SHARES
Section 6.1 Trustees In Complete Control 15
Section 6.2 Trust Not Affected by Death of Beneficiary 15
Section 6.3 Shares Held by Trust 15
ARTICLE VII MEETINGS OF BENEFICIARIES
Section 7.1 Annual and Special Meetings Call 15
Section 7.2 Notice of Meetings 15
Section 7.3 Beneficiaries Cannot Bind Trustees 16
Section 7.4 Closing Transfer Books - Record Date 16
Section 7.5 Voting 16
Section 7.6 Report at Annual Meeting 16
Section 7.7 Inspection of Records 16
ARTICLE VII TRUSTEES
Section 8.1 Number of Trustees 16
Section 8.2 Election of Trustees; Terms of Officer 17
Section 8.3 Resignation and Removal 17
Section 8.4 Filling Vacancy 17
Section 8.5 Trust Continues 18
Section 8.6 Trustees' Meetings and Action 18
Section 8.7 Trustees' Compensation 18
Section 8.8 By-Laws of Trust 18
Section 8.9 Executive Committee 18
Section 8.10 Trustee's Other Business Activities 19
ARTICLE IX DISTRIBUTIONS TO BENEFICIARIES
Section 9.1 Trustees May Make Distributions 19
Section 9.2 Retained Amounts 19
Section 9.3 Information to Beneficiaries 19
ARTICLE X AMENDMENT TO TRUST
Section 10.1 Amendment 19
ARTICLE XI MISCELLANEOUS
Section 1.11 Failure to Qualify as Real Estate Investment Trust 20
Section 11.2 Laws of Ohio Government 20
Section 11.3 Counterparts 20
Section 11.4 Certifications 20
Section 11.5 Recording 21
Section 11.6 Annual Financial Statements 21
Section 11.7 Information on Share Ownership 21
Section 11.8 Fiscal Year 24
Section 11.9 Notices 24
Section 11.10 Contingent Powers of Beneficiaries 22
Section 11.11 Investment Policy 22
Section 11.12 Notices on Distributions 23
Section 11.13 Transactions with Interested Parties 24
Section 11.14 Advisers 24
Section 11.15 Limitation on Expenses 24
Section 11.16 Appraisals 24
Section 11.17 Prohibited Investments 25
Section 11.18 Prohibited Activities 25
Section 11.19 No Power to Disqualify Trust as a Real Estate
Investment Trust 25
Section 11.20 Purpose of Article and Section Headings 25
Section 11.21 Controlling Effect of Article XI 25
Section 11.22 Trustees' Power to Incur Indebtedness and Other
Obligations/Limitations 25
Section 11.23 Trustees' Power to Invest in New Buildings and
Partnerships, Joint Ventures and Unimproved Land
for New Buildings 26
Section 11.24 Trustees' Power to Invest in Real Estate Mortgages
and in Certain Evidences of Indebtedness 27
Section 11.25 Options Respecting Trust Securities 27
Section 11.26 Authority of Trustees to Authorize Additional
Restrictions 27
ARTICLE XII DURATION OF THE TRUST
Section 12.1 Term of Trust 27
Section 12.2 Sale of All Trust Property 28
Section 12.3 Liquidation 28
FIRST UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS
AMENDED DECLARATION OF TRUST
(As amended through July 25, 1986)
==============================================================================
BY THIS AMENDED DECLARATION OF TRUST, effective July 25, 1986,
amending the Amended Declaration of Trust made August 1, 1961, and
thereafter amended from time to time through April 10, 1984 (said
Amended Declaration of Trust, as heretofore and hereby amended, being
referred to herein as "this Declaration") by such persons as may from
time to time be Trustees:
The Trustees of First Union Real Estate Equity and Mortgage
Investments hereby agree and declare that they will hold all property
of every type and description which they have acquired or may
hereafter acquire as such Trustees, together with the proceeds thereof
and the rents an other income therefrom, IN TRUST, on the terms and
conditions set forth in this Declaration, for the benefit of the
holders from time to time of the certificates representing the shares
of beneficial interest in the Trust property issued by the Trust.
Where the context permits, "Beneficiaries" shall mean the record
holders from time to time of shares of beneficial interest in the
Trust property, "Trustees" or "Trust" shall mean Otes Bennett, Jr.,
Leigh Carter, Allen H. Ford, George J. Grabner, William E. Conway,
William A. Parker, Jr., Donald S. Schofield, Richard N. Thielen and E.
Bradley Jones, and any successor or additional trustees who shall be
appointed and duly qualify, so long as they shall continue as such
duly qualified trustees, and said terms shall refer to such persons in
their capacity as trustees and not in their individual capacities and
shall not include the officers, agents, representatives or
Beneficiaries of the Trust, and "Trust Property" shall mean the
property from time to time subject to this Declaration.
ARTICLE I
NAME OF TRUST - TITLE TO TRUST PROPERTY
- ---------------------------------------
SECTION 1.1. NAME OF THE TRUST.
The name of this Trust shall be: "First Union Real Estate Equity and
Mortgage Investments" and, so far as may be practicable, the business
of the Trust shall be conducted in that name, the trade name "First
Union", or such other trade name as the Trustees may adopt in order
to satisfy governmental regulation. The Trustees may make and execute
deeds, mortgages, leases, contracts, and other instruments, acquire,
mortgage, lease, convey and transfer real or personal property, and
sue and be sued under any of the aforesaid names.
SECTION 1.2 TITLE TO TRUST PROPERTY.
Legal title to all Trust property shall be vested in the Trustees, and
held by and transferred to the Trustees, except as provided in Section
2.4 or elsewhere herein.
SECTION 1.3. PURPOSES OF TRUST.
Notwithstanding anything to the contrary contained in this Declaration
of Trust, the purposes of the Trust hereby created shall be to
purchase, acquire, hold, improve, lease, sell or mortgage or otherwise
encumber real property or real and personal property or interests in
real or personal property, to receive the income, interest, rents and
profits thereof, and to reinvest them or distribute them, in
accordance with the provisions of this Declaration of Trust, to the
holders of beneficial interests in the Trust.
ARTICLE II
POWERS AND AUTHORITY OF TRUSTEES
- --------------------------------
SECTION 2.1. GENERAL.
The Trustees shall have, without prior or further authorization,
absolute and exclusive power, control and authority over the Trust
property held by them at any time hereunder, over the management and
disposition thereof, and over the management and conduct of the
business of the Trust to the same extent as if the Trustees were the
sole owners of such property and business in their own right, free
from any power of control on the part of the Beneficiaries, subject
only to the limitations herein expressly stated. No person (the word
"person" whenever used in this Declaration, except where the context
otherwise requires, shall be deemed to mean any individual,
individuals, association, trust, partnership, corporation, or other
entity) shall in any event be bound to see to the application of any
money or property paid to or delivered to the Trustees or their
authorized representative. No investment or reinvestment of the Trust
property hereunder shall be deemed improper because of its speculative
character, whether or not the same be producing income or be of the
kind commonly regarded by law as proper investments for trust funds,
or because a greater proportion of the Trust property is invested
therein that is usual for trustees.
The Trustees shall have all powers necessary, convenient or
appropriate to effectuate the purposes of the Trust and may take any
action which they may deem necessary or desirable to that end,
although such matters or things are not herein specifically mentioned.
Any determination of the purposes of the Trust made by the Trustees in
good faith shall be conclusive. In construing the provisions of this
Declaration, the presumption shall be in favor of the grant of owners
to the Trustees.
Without restricting or limiting the generality of the foregoing, such
powers of the Trustees shall include the powers enumerated below in
this Declaration; provided however, that the powers granted in this
Declaration are subject to and limited by the provisions of Article XI
hereof.
SECTION 2.2. POWER TO ACQUIRE, HOLD AND DISPOSE OF REAL AND PERSONAL
PROPERTY.
The Trustees shall have power for such consideration and on such terms
and conditions as they may deem proper, through the issuance of shares
of beneficial interest in the Trust property or through the issuance
of notes, debentures, bonds, or other obligations of the Trust, for
cash, or otherwise, to purchase or acquire, to hold, manage, improve,
lease (including building leases, part of the consideration for which
is the building on or adding to the premises by the lessee) for any
term, whether or not extending beyond the possible termination of the
Trust, to rent, convey, sell, option, exchange, mortgage (with or
without power of sale), release, partition, or otherwise deal in
personal property or in real estate of any type and description,
including fee, leasehold, mortgage, ground rent and any other type of
interest therein, and/or buildings and structures and tangible
personal property of any type and description situated thereon or
elsewhere, to adjust boundaries and grant or obtain easements or
options with or without consideration, and to erect, construct, alter,
repair, demolish or otherwise physically affect any buildings or
structures of any type or description.
SECTION 2.3. POWER TO ACQUIRE, HOLD AND DISPOSE OF SECURITIES.
The Trustees shall have power, for such consideration and on such
terms and conditions as they may deem proper, through the issuance of
shares of beneficial interest in the Trust property, through the
issuance of notes, debentures, bonds, or other obligations or
securities of the Trust, for cash, or otherwise to acquire, and to
hold, sell, exchange, pledge, collect and pay, stocks, bonds, notes,
certificates of indebtedness, debentures, mortgages (first or
otherwise), bank acceptances, drafts, certificates of interest,
securities, obligations, and in general any property or rights (legal
or equitable) owned, held, created, or issued by or representing an
interest in any corporation, business trust (including the business
trust created by these presents), trust, partnership, or other
organization whether domestic or foreign, any individual, the United
States of America or any of the several states or territories or any
political subdivisions or agencies thereof, or foreign governments or
political subdivisions thereof.
SECTION 2.4. NAME IN WHICH TITLE HELD.
The Trustees shall have power to cause legal title to (or evidences of
title to) any property of this Trust to be held in the name of the
Trust, of one or more of the Trustees or of any other person, on such
terms, in such manner, and with such powers as the Trustees hereunder
may determine and without disclosure that the Trustees are interested
therein).
SECTION 2.5. POWER TO BORROW, MORTGAGE AND PLEDGE.
The Trustees shall have power to borrow money for the purposes of this
Trust, to give notes, debentures, bonds, and other negotiable or
nonnegotiable instruments of this Trust therefor, to enter into other
obligations on behalf of the Trust, and to mortgage and pledge the
real and personal property of this Trust or any part thereof to secure
any of the foregoing.
SECTION 2.6. POWER TO LEND AND INVEST.
The Trustees shall have power to lend money (other than to
Beneficiaries, officers, employees, or Trustees of the Trust) and to
invest and reinvest any funds of the Trust as they shall deem wise;
and to create a reserve fund or reserve funds for such purposes as the
Trustees deem advisable and invest or reinvest the same in such manner
as they may deem best.
SECTION 2.7. POWER TO PAY TAXES.
The Trustees shall have power to pay all taxes or assessments, of
whatever kind or nature, imposed upon or against the Trustees
individually or collectively in connection with the Trust property, or
upon or against the Trust property or any part thereof; and for any of
the foregoing purposes to make such returns and do all such other acts
and things as may be deemed by the Trustees as necessary or desirable.
SECTION 2.8. POWER TO TRANSFER TRUST TO CORPORATION.
The Trustees, with the approval of the holders of a majority of the
shares then outstanding, shall have power to cause to be organized or
assist in organizing under the laws of any jurisdiction a corporation
or corporations or any other trust, association, or other organization
to take over the Trust property or any part or parts thereof or to
carry on any business in which this Trust shall directly or indirectly
have any interest, and to sell, convey, and transfer the Trust
property or any part or parts thereof to any such corporation, trust,
association, or organization in exchange for the shares or securities
thereof or otherwise, and to lend money to, subscribe for the shares
or securities of, and enter into any contracts with any such
corporation, trust, association or organization, or any corporation,
trust, partnership, association, or organization in which this Trust
holds or is about to acquire shares or any other interest.
Provided, however, that no transfer of substantially all of the Trust
property shall be made to any corporation, trust, association, or
other organization if the Federal Income Tax benefits equivalent to
those available under Sections 856 to 858 of the Internal Revenue Code
to "real estate investment trust" which receive and distribute the
income from such property would not be available to such transferee.
SECTION 2.9. POWER AS TO SECURITIES.
The Trustees shall have power to exercise all the rights, powers, and
privileges appertaining to the ownership of all or any securities
forming part of the Trust property to the same extent that an
individual might, and, without limiting the generality of the
foregoing, to vote, or give any consent, request, or notice, or waive
any notice, either in person or by proxy or power of attorney, with or
without power of substitution, to one or more persons, which proxies
and powers of attorney may be for meetings or action generally or for
any particular meetings or action, and may include the exercise of
discretionary powers.
SECTION 2.10. POWER TO DELEGATE.
Except as otherwise provided herein, the Trustees shall have power to
delegate from time to time to such one or more of their number, or to
such other person or persons as the Trustees may deem appropriate, the
doing of such things and the execution of such deeds or other
instruments either in the names of all the Trustees or as the Trust's
agents, officers, employees, attorneys or representatives, as the
Trustees may from time to time deem expedient.
SECTION 2.11. GENERAL POWER TO ENFORCE AND COLLECT SECURITIES.
The Trustees shall have power to collect, sue for, receive and receipt
for all sums of money coming due to this Trust, to consent to the
extension of the time for payment of, to waive defaults in respect of,
or to consent to the renewal of any bonds or other securities or
obligations, and to engage or intervene in, prosecute, defend,
compound, compromise, abandon or adjust, by arbitration or otherwise,
any actions, suits, proceedings, disputes, claims, demands, or things
relating to the Trust property; to be parties to reorganizations and
to transfer to and deposit with any corporation, committee, voting
trustees, or other persons, any stocks, shares, or bonds, or other
securities or obligations of any corporation, trust, association, or
other organization, the securities of which form a part of the Trust
property, for the purposes of any reorganization of any such
corporation, trust, association, or other organization, or otherwise
to participate in any arrangement for enforcing or protecting the
interests of the Trustees as the owners or holders of such stocks,
shares, bonds, or other securities or obligations and to pay any
assessment levied in connection with such reorganization or
arrangements; and to give time with or without security for the
payment or delivery of any debts or property and to execute and enter
into releases, agreements, and other instruments; and to pay or
satisfy any debts or claims upon evidence that the Trustees think
sufficient.
SECTION 2.12. POWER TO INCUR EXPENSES, APPOINT AND EMPLOY OFFICERS AND
AGENTS.
The Trustees shall have power to incur and pay from the Trust
property, or reimburse other for payments made in connection with, any
charges or expenses which, in the opinion of the Trustees, are
necessary or incidental to, or proper for the organizing or financing
of the Trust or for the carrying out of any of the purposes of the
Trust without regard to whether such charges or expenses are for
services rendered before or after the execution of this Declaration
and without regard to any interest of any Trustee in such payment; to
employ such clerical assistance as they deem necessary to the
transaction of the business of the Trust; to appoint, engage, or
employ officers and other persons, firms or corporations, including
consultants, accountants, technical, financial, real estate or
investment advisers or managers, attorneys, real estate agents or
brokers, corporate fiduciaries, depositories, transfer agents for the
transfer of shares in the Trust, registrars, underwriters, investment
bankers, or others for the sale of shares or securities of, or
financing of, the Trust; and to fix their titles, duties, periods of
employment and compensation. The same persons may be employed in
multiple capacities and may receive compensation from the Trust in as
many capacities as they may be engaged or employed by the Trust, and
the Trustees, or any of them, may be the persons, or be interested in
the persons, so employed.
SECTION 2.13. POWER TO ENDORSE AND GUARANTEE.
The Trustees shall have power to endorse or guarantee the payment of
any notes or other obligations of any person; to make contracts of
guaranty or suretyship, or enter into other obligations therefor; and
to mortgage and pledge the real and personal property of the Trust or
any part thereof to secure any or all of such obligations provided
that no such endorsement, guaranty, or suretyship shall relate to the
individual obligation of any officer, employee or Trustee of the
Trust.
SECTION 2.14. POWER AS TO BANK DEPOSITS.
The Trustees shall have power to deposit any moneys or securities
included in the Trust property with any one or more banks, trust
companies, or other banking institutions deemed by the Trustees to be
responsible, without regard to whether such accounts will earn
interest, such moneys or securities to be subject to withdrawal on
notice or upon demand and in such manner as the Trustees may
determine, and the Trustees shall have no responsibility for any loss
which may occur by reason of the failure of the person with whom the
moneys or securities have been deposited properly to account for the
moneys or securities so deposited.
SECTION 2.15. POWER TO DETERMINE CAPITAL AND INCOME.
The Trustees shall have power to determine conclusively whether any
monies, securities, or other properties of the Trust are for the
purposes of the Trust to be considered as capital or income and in
what manner any expenses or disbursements are to be borne as between
capital and income whether or not in the absence of the provision such
moneys, securities, or other properties would be regarded as capital
or as income and whether or not in the absence of this provision such
expense or disbursement would ordinarily be charged to capital or to
income.
SECTION 2.16. POWER TO VALUE TRUST PROPERTY AND KEEP BOOKS.
The Trustees shall have power from time to time to determine
conclusively the value of, and to revalue, any of the real estate,
securities, or other properties of this Trust and any services,
securities, property or other consideration hereafter to be acquired
by this Trust in accordance with such appraisals or other information
as they deem satisfactory, and in accordance with methods of valuation
consistently applied; and to keep the books of the Trust and render
reports to the Beneficiaries of the Trust on the basis of the figures
so adopted.
SECTION 2.17. POWER TO SOLICIT PROXIES ETC.
The Trustees shall have power to solicit proxies of the Beneficiaries,
to adopt and use a seal, and to determine the fiscal year of the Trust
and the method or form in which its accounts shall be kept and to
change from time to time the fiscal year or method or form of
accounts.
ARTICLE III
LIMITATIONS OF LIABILITY OF BENEFICIARIES, TRUSTEES AND OTHERS
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SECTION 3.1. NO PERSONAL LIABILITY OF BENEFICIARIES.
No Beneficiary of this Trust shall be held to any personal liability
whatsoever, in tort, contract or otherwise, in connection with Trust
property or the affairs of this Trust, nor shall any Beneficiary be
liable to assessment in connection therewith. The Trustees shall have
no power to bind the Beneficiaries personally, and all persons shall
look solely to the Trust property for satisfaction of claims of any
nature arising in connection with Trust property or the affairs of
this Trust, whether founded upon any debt, demand, judgment, decree or
obligation of any nature whatsoever against or incurred by the Trust,
or by the Trustees, or by any officer, employee, or agent thereof.
The Trustees shall maintain such insurance against possible liability
on the part of the Trust and on the part of the Beneficiaries and any
officers or Trustees of the Trust in the course of trust business as
the Trustees in their sole discretion deem to be appropriate to
protect the Trust property, the Beneficiaries and the officer. or
Trustees of the trust
In every written order, contract, bond, note, mortgage, instrument or
obligation given or executed by the Trustees or with their authority,
the Trustees shall cause to be inserted a provision that the
Beneficiaries shall not be personally liable and that the other party
shall look solely to the property of the Trust for the payment of any
claim thereunder. The omission, however, of such provision from any
such document or instrument shall not affect the validity thereof or
render the Beneficiaries personally liable thereon, nor shall the
Trustees or any officer, employee or agent of the Trust be liable for
such omission, nor shall such omission in any way affect any right of
the Trustees or Beneficiaries to indemnification from the Trust
property.
SECTION 3.2. TRUSTEE'S LIABILITY OTHER THAN TO THE TRUST OR
BENEFICIARY.
No Trustee, officer, employee or agent of this Trust shall be held to
any personal liability whatsoever, in tort, contract or otherwise, to
others than the Trust or the Beneficiaries in connection with Trust
property or the affairs of this Trust; and all such persons shall look
solely to the Trust property for satisfaction of claims of any nature
arising in connection with Trust property or the affairs of this
Trust. If the Trustees, as Trustees, are made parties to any suit or
proceedings to enforce any such obligation or liability, they shall
not on account thereof be held to any personal liability.
SECTION 3.3 TRUSTEE'S LIABILITY TO TRUST AND BENEFICIARIES -
INDEMNIFICATION AND EXPENSE -- BOND AND SECURITY.
No Trustee, officer, employee or agent of this Trust shall be
personally liable for any act or omission of any other Trustee
(including without limitation the failure to compel in any way any
former or acting or future Trustee to redress any breach of trust),
officer, employee or agent. Except for such of his own acts as
constitute bad faith, willful misfeasance, or willful disregard of his
duties, and except as otherwise prohibited by law, each Trustee,
officer, employee or agent of the Trust shall be indemnified and held
harmless from and against, and reimbursed for any and all loss, cost,
liability, obligation and amounts paid in settlement incurred in
connection with any threatened, pending or completed action, suit,
arbitration or proceeding whether civil, criminal, administrative or
investigative (including, without limitation, any action brought by or
in the right of the Trust), arising out of or in connection with Trust
property or the affairs of the Trust or which he may suffer because he
is or was or consented to become a Trustee, officer, employee or agent
of the Trust or is or was serving at the request of the Trust as a
trustee, director, officer, employee or agent of another corporation
or enterprise.
The rights accruing to any person under these provisions shall not
exclude any other right to which he may be lawfully entitled, nor
shall anything contained herein restrict the right of this Trust to
indemnify or reimburse such Trustee, officer, employee or agent in any
proper case even though not specifically provided for herein, nor
shall anything contained herein restrict such rights of a Trustee to
contribution as may be available under applicable law. The Trustees
may make advance payments in connection with indemnification under
this section provided that the indemnified Trustee, officer, employee
or agent of the Trust shall have given a written undertaking to repay
such amount in the event that it is ultimately determined that he is
not entitled to such indemnification for such amounts under applicable
law, this Declaration of Trust, any agreement entered into pursuant to
this Section 3.3 or otherwise.
In order to carry out the intent and purposes of this section, and to
assure the Trust's performance of its obligations hereunder, the Trust
shall have the power to enter into agreements with Trustees, officers,
employees or agents designated by the Trustees, without specific
approval thereof by the shareholders of this Trust. The terms of any
such agreements need not be identical to the terms of any other such
agreement and any such agreement which had been entered into may
subsequently be amended or changed by mutual agreement of the parties
thereto, without specific approval thereof by the shareholders of the
Trust.
The Trust shall have the power to dedicate the assets of the Trust to
establish arrangements for funding its indemnification obligations
under this section, including but not limited to depositing assets in
trust funds, obtaining bank letters of credit in favor of indemnified
persons or entities, establishing specific reserve accounts and
otherwise funding special self-insurance arrangements for these
purposes.
No Trustee shall be obligated to give any bond or surety or other
security for the performance of any of his duties.
SECTION 3.4. NO IMPLIED COVENANTS OR OBLIGATIONS TO BE READ INTO THIS
INSTRUMENT; TRUSTEES' RIGHT TO RELY ON INVESTMENT ADVISERS AND COUNSEL
AND ACCOUNTANTS.
GENERAL RIGHT TO RELY.
Without in any respect relieving the Trustees of this Trust from
liability for bad faith, willful misfeasance, negligence, or willful
disregard of their duties, it is expressly agreed that
(1) The duties and obligations of the Trustees shall be determined
solely by the express provisions of this instrument and the Trustees
shall not be liable except for the performance of such duties and
obligations as are specifically set forth in this instrument and no
implied duties or obligations shall be read into this instrument, and
(2) The Trustees are authorized to rely conclusively, as to the truth
of the statements and the correctness of the opinions and facts
expressed therein, upon any opinion or statements furnished to the
trustees by the Trust's investment advisers. The Trustees of this
trust shall not incur any personal liability whatsoever for their
reliance on such opinions and statements and/or any action or lack of
action based on such opinions or statements.
(3) The Trustees may consult with counsel and independent public
accountants selected by the Trustees and the opinion of such counsel
or independent public accountants shall be full and complete
authorization and protection in respect of any action taken or
suffered by the Trustees in accordance with or based on the opinion of
such counsel or independent public accountants.
(4) The Trustees shall incur no personal liability whatsoever in
acting upon any demand, notice, request, opinion, consent, waiver,
certificate, document, statement of facts or instrument believed by
them to be genuine or to have been signed or presented by the proper
persons or properly or duly made.
ARTICLE IV
SHARES OF BENEFICIAL INTEREST
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SECTION 4.1. SHARES $1 PAR VALUE; NON-ASSESSABLE AND NOT LIMITED IN
NUMBER.
Beneficial interest in the Trust property shall be divided into and
represented by shares issued to Beneficiaries hereunder which shares
shall be of $1 par value. All such shares shall be non-assessable and
non-redeemable and shall be of the same class with equal voting,
distribution, liquidation and other rights. There shall be no limit on
the number of shares which the Trust as authorized to issue. The
Trustees shall initially issue 1,060,000 shares for such
consideration, not less than par value, and on such terms as may be
determined by the persons designated in this Declaration as original
Trustees. Certificates for the initial shares shall be in the form
provided in the By-Laws and shall be signed on behalf of the Trust by
the facsimile signature of the two original Trustees and shall be
countersigned by the Transfer Agent and Registrar. The Transfer Agent
for the shares shall be The Union Commerce Bank, of Cleveland, Ohio,
and the Registrar shall be The Cleveland Trust Company, Cleveland,
Ohio, or such other persons as may be appointed by the Trustees.
SECTION 4.2. SHARES CERTIFICATES.
Every Beneficiary shall be entitled to receive a transferable
certificate, in such form as the Trustees shall from time to time
approve, specifying the number of shares of beneficial interest in the
Trust property held by him. The certificates in the form so approved
shall be treated as negotiable, and title thereto and to the shares
represented thereby shall be transferred by delivery thereof endorsed
either in blank or to a specified person by the person appearing by
the certificate to be the owner of the shares represented thereby or
by delivery of the certificate and of a separate document containing
either a written assignment of the certificate or a power of attorney
to sell, assign or transfer the certificate or the shares represented
thereby, which separate document is signed by the person appearing by
the certificate to be the owner of the shares represented thereby, and
which assignment or power of attorney is either in blank or to a
specified person. Unless otherwise determined by the Trustees, such
certificates shall be signed, manually or by facsimile, by one or more
of the Trustees or officers of this Trust designated for that purpose
from time to time by the Trustees by instrument in writing filed with
the transfer agent and registrar, if any, and shall be countersigned
by a transfer agent, and registered by a registrar, if any. mere shall
be filed with each transfer agent and registrar, if any, a certified
copy of the form of certificate so approved by the Trustees, and such
form shall continue to be used unless and until the Trustees approve
some other form. In case any one or more officers or Trustees of this
Trust who shall have signed certificates shall cease to be such
Trustees or officers before the certificates so signed shall have been
actually issued, such certificates may nevertheless be issued with the
same effect as though the persons who signed such certificates had not
ceased to be such officers or Trustees of this Trust. The Trustees may
in their discretion authorize certificates to be signed or
authenticated by the facsimile signature of the Trustees or officers
who are authorized to sign such certificates; provided that any
certificate signed or authenticated by the facsimile signature of an
officer or Trustee shall not be valid unless countersigned by a
transfer agent and registered by a registrar, if any.
SECTION 4.3. ISSUE OF SHARES.
The Trustees in their discretion may from time to time without vote of
the Beneficiaries issue shares of this Trust, in addition to the then
issued and outstanding shares and shares, if any, held in the
treasury, to such party or parties and for such property or
consideration, at such time or times, and on such terms as the
Trustees may deem best, and may in such manner acquire other assets
(real, personal, or mixed) and businesses, and no prior offering
thereof to any Beneficiaries need be made.
SECTION 4.4. TRUSTEES RIGHT TO OWN SHARES.
A Trustee may acquire, hold or dispose of shares in the Trust for his
individual account or the account of another and may exercise all
rights of a Beneficiary to the same extent as though he were not
Trustee
SECTION 4.5. INDEMNIFICATION OF UNDERWRITERS.
Without in any way limiting the generality of the other applicable
provisions of this Declaration, it is expressly understood that the
Trustees shall have power in connection with the sale of shares or
securities of the Trust, to indemnify and save harmless, or to obtain
insurance to indemnify and save harmless, any underwriter, dealer or
other participant in the purchase or distribution of securities of the
Trust (including persons in whom a Trustee or officer has an
interest), in respect of such matters, in such amounts and for such
periods of time as the Trustees shall, in their sole discretion,
determine to be necessary or desirable.
ARTICLE V
RECORD AND TRANSFER OF SHARES
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SECTION 5.1. REGISTER OF SHARES - RECORD OWNERS.
A register shall be kept by or on behalf of the Trustees, under the
direction of the Trustees, which shall contain the names and addresses
of the Beneficiaries and the number of shares held by them
respectively and the numbers of the certificates representing the same
and a record of all transfers thereof. Only Beneficiaries whose
certificates are so recorded shall be entitled to vote or to receive
dividends or otherwise to exercise or enjoy the rights of
Beneficiaries. No Beneficiary shall be entitled to receive payment of
any dividend, nor to have notice given to him as herein provided,
until he has given his address to a transfer agent or such other
officer or agent of the Trustees as shall keep the said register for
entry thereon. The persons in whose names the shares are registered
pursuant to this Section 5.1 shall be deemed the absolute owners
thereof, and, until a transfer is effected on the books of the Trust,
the Trustees shall not be affected by any notice, actual or
constructive, of any transfer and the Trustees may treat the persons
in whose names shares stand of record as the absolute owners thereof
for all purposes.
SECTION 5.2. TRANSFER AGENTS AND REGISTRARS.
The Trustees shall have power to employ in any city a transfer agent
or transfer agents, and if they so determine a registrar or
registrars. The transfer agent or transfer agents may keep the
register of the Trust and record therein the original issues and
transfers, if any, of the said shares and countersign certificates of
shares issued to the persons entitled to the same.
SECTION 5.3. DEPOSIT OF CERTIFICATES WITH TRANSFER AGENTS.
Signed certificates for shares in blank may be deposited with any
transfer agent of this Trust, to be used by the transfer agent in
accordance with authority conferred upon it as occasion may require,
and in so doing the signers of such certificates shall not be
responsible for any loss resulting therefrom.
SECTION 5.4. TRANSFER ON RECORDS OF TRUST.
Shares shall be transferable on the records of the Trust (other than
by operation of law) only by the record holder thereof or by his agent
hereunto duly authorized in writing, upon delivery to the Trustees or
a transfer agent of this Trust of the certificate or certificates
therefor, properly endorsed or accompanied by duly executed instrument
or instruments of transfer, together with such evidence of the
genuineness of each such endorsement, execution and authorization and
of other matters as may reasonably be required. Upon such delivery the
transfer shall be recorded on the register of the Trust and a new
certificate for the shares so transferred shall be issued to the
transferee, and in case of a transfer of only a part of the shares
represented by any certificate a new certificate for the residue
thereof shall be issued to the transferor. But until such record is
made, the Beneficiary of record shall be deemed to be the holder of
such shares for all purposes hereof, and neither the Trustees nor any
transfer agent or registrar nor any officer or agent of this Trust
shall be affected by any notice of the proposed transfer.
SECTION 5.5. TRANSFER BY OPERATION OF LAW.
Any person becoming entitled to any shares in consequence of the
death, bankruptcy or insolvency of any Beneficiary, or otherwise by
operation of law, shall be recorded as the holder of the said shares
and receive a new certificate for the same upon production of the
proper evidence thereof and delivery of the existing certificate to
the Trustees or a transfer agent of this Trust. But until such record
is made, the Beneficiary of record shall be deemed to be the holder of
such shares for all purposes hereof and neither the Trustees nor any
transfer agent or registrar nor any officer or agent of this Trust
shall be affected by any notice of such death, bankruptcy, or
insolvency.
SECTION 5.6. JOINT OWNERS OF SHARES.
The Trustees may treat two or more persons holding any share as joint
tenants of the entire interest therein unless their ownership is
expressly otherwise recorded on the register of the Trust, but no
entry shall be made in the register or in any certificate that any
person is in any other manner entitled to any future, limited or
contingent interest in any share; provided, however, that any person
recorded as a holder of any share may, subject to the provisions
hereinafter contained, be described in the register or in any
certificate as a fiduciary of any kind and any customary words may be
added to the description of the holder to identify the nature of such
fiduciary relationship.
SECTION 5.7 DUTY OF TRUSTEES IN SHARE TRANSFERS.
The Trustees shall not, nor shall the Beneficiaries, or any officer,
transfer agent or other agent of this Trust or of the Trustees, be
bound to see the execution of any trust, express, implied or
constructive, or of any charge, pledge, or equity to which any of the
shares in the Trust or any interests therein are subject, or to
ascertain or inquire whether any sale or transfer of any such shares
or interest therein by any Beneficiary or his personal representatives
is authorized by such trust, charge, pledge, or equity, or to
recognize any person as having any interest therein except for the
person recorded as such Beneficiary. The receipt of the person in
whose name any share is recorded, or, if such share is recorded in the
name of more than one person, the receipt of any such persons shall be
a sufficient discharge for all dividends and other money and for all
shares, bonds, obligations and other property payable, issuable, or
deliverable in respect of such shares and from all liability to see to
the application thereof.
SECTION 5.8. LOST CERTIFICATES.
In case of the loss, mutilation or destruction of any certificate for
shares hereunder, the Trustees may issue or cause to be issued a new
certificate on such terms as they may see fit.
SECTION 5.9. REGULATIONS ON TRANSFER.
The Trustees may from time to time adopt such regulations as they see
fit relating to issue, transfer, recording and registry of shares and
the effects thereof, the issuance or prohibition of fractional shares,
the use of scrip in place of fractional shares and the Trustees, by
provision in the By-Laws may restrict or regulate issuance or transfer
of shares in such manner as they, with advice of counsel, shall deem
advisable to prevent disqualification of the Trust for taxation as a
real estate investment trust under the Internal Revenue Code and the
regulations (proposed or in effect) thereunder; provided that the
Trustees shall not amend or waive Article VI, Section 6 of the By-Laws
of the Trust unless either (i) action is taken to so amend or waive by
at least 70% of the Trustees then in office or (ii) action is taken by
a majority but less then 70% of such Trustees and such action is
approved by the holders of at least 70% of the outstanding shares.
ARTICLE VI
CHARACTERISTICS OF SHARES
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SECTION 6.1. TRUSTEES IN COMPLETE CONTROL.
The ownership of the Trust property of every description and the right
to conduct the affairs of the Trust are vested exclusively in the
Trustees, and the Beneficiaries shall have no legal title to the Trust
property, their interest being equitable only and limited to the
beneficial interest conferred by their shares issued hereunder, and
they shall have no right to call for any partition or division of any
property, profits, rights, or interests of the Trust.
SECTION 6.2. TRUST NOT AFFECTED BY DEATH OF BENEFICIARY.
The death of a Beneficiary during the continuance of this Trust shall
not terminate the Trust nor give his or her legal representative a
right to an accounting or to take any action in the courts or
otherwise against other Beneficiaries or the Trustees or the property
held hereunder, but shall simply entitle the legal representatives of
the deceased Beneficiary to demand and receive a new certificate
representing shares of beneficial interest in the Trust in place of
the certificate held by the deceased Beneficiary, and upon the
acceptance of which such legal representatives shall succeed to all
the rights of the deceased Beneficiary under the Trust.
SECTION 6.3. SHARES HELD BY TRUST.
Shares issued hereunder and purchased or otherwise acquired by the
Trustees for the account of the Trust shall be canceled.
ARTICLE VII
MEETINGS OF BENEFICIARIES
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SECTION 7.1. ANNUAL AND SPECIAL MEETINGS CALL.
Annual meetings of the Beneficiaries shall be held at 2:00 P.M.
Eastern Standard Time on the second Tuesday of the fourth month
following the end of each fiscal year at such place as the Trustees
may from time to time decide. Special meetings of the Beneficiaries
may be called at any time and place when ordered by a majority of the
Trustees, or upon the written request of the holders of one-quarter of
the outstanding shares, specifying the purpose or purposes for which
such meeting is called. If for any reason the annual meeting of the
Beneficiaries as herein provided for shall be omitted, a special
meeting of the Beneficiaries may subsequently be held in lieu thereof
and the business of the annual meeting may be transacted thereat.
SECTION 7.2. NOTICE OF MEETINGS.
Notice of all annual and special meetings of the Beneficiaries shall
be given by a Trustee or other officer by mail to each Beneficiary at
his address as recorded in the register of the Trust, mailed at least
ten days before the meeting. No business shall be transacted at any
special meeting of Beneficiaries unless notice of such business has
been given in the call for the meeting. Any adjourned meeting may be
held as adjourned without further notice. The holders of shares
entitling them to exercise a majority of the voting power of the Trust
present in person or by proxy shall constitute a quorum for any annual
or special meeting of Beneficiaries.
SECTION 7.3. BENEFICIARIES CANNOT BIND TRUSTEES.
Except as provided in Articles VIII, X, and XI, no action taken by the
Beneficiaries at any meeting shall in any way bind the Trustees.
SECTION 7.4. CLOSING TRANSFER BOOKS - RECORD DATE.
For the purpose of determining the Beneficiaries who are entitled to
receive notice of, or to vote at, a meeting of Beneficiaries, or to
receive payment of any dividend or distribution, or to receive or
exercise rights of purchase of or subscription for, or exchange or
conversion of, shares or other securities, the Trustees may from time
to time close the transfer books for such period not exceeding twenty
days as the Trustees may determine; or, without closing the transfer
books, the Trustees may fix a record date, which shall not be earlier
than the date on which the record date is fixed and shall not be more
than sixty days preceding the date of the meeting of the Beneficiaries
or the date fixed for the payment of any dividend or distribution, or
the date for the receipt or exercise of rights, as the case may be, as
the record date for determination of the Beneficiaries who are
entitled to such notice or to vote at such meeting or to receive
payment of such dividend or distribution or to receive or exercise
such rights, and any Beneficiary who was a Beneficiary at the time so
fixed shall be entitled to such notice or to vote at such meeting or
any adjournment thereof, or to receive such dividend or distribution
or to receive or exercise such rights even though he has since that
date disposed of his shares, and no Beneficiary becoming such after
such date shall be entitled to such notice, vote, dividend,
distribution or rights.
SECTION 7.5. VOTING.
At any meeting of the Beneficiaries, any holder of shares entitled to
vote thereat may vote in person or by proxy. Only Beneficiaries of
record shall be entitled to vote. When any share is held jointly by
several persons, any one of them may vote at any meeting in person or
by proxy in respect of such share, but if more than one of them shall
be present at such meeting in person or by proxy, and such joint
owners or their proxies so present disagree as to any vote to be cast,
no vote shall be received in respect of such share. If any such holder
of a share is a minor and subject to guardianship or is subject to the
legal control of any other person as regards the charge or management
of such share, he may vote by his guardian or such other person
appointed or having such control, and such vote may be given in person
or by proxy.
SECTION 7.6 REPORT AT ANNUAL MEETING.
At each annual meeting of the Beneficiaries the Trustees shall make a
report upon the affairs of the Trust and upon its business and
operations, together with a statement of its financial standing as
shown by the books of account of the Trust.
SECTION 7.7. INSPECTION OF RECORDS.
Beneficiaries shall have the right, at reasonable times during
business hours and for proper purposes to inspect the records and
books of account of the Trust and the records of the meetings of the
Beneficiaries and Trustees.
ARTICLE VII
TRUSTEES
SECTION 8.1. NUMBER OF TRUSTEES.
The number of Trustees shall be not less than three nor more than
fifteen, as from time to time determined at annual or special meetings
of the Beneficiaries by affirmative vote of the holders of a majority
of the shares represented and entitled to vote at such meetings.
Trustees shall be divided into three classes, to be known as Class I,
Class II and Class III. The classes shall be nearly equal in size as
possible. In case of any increase or decrease in the number of
Trustees the additional or remaining Trustees, as the case may be,
shall be distributed among such classes as nearly equally as possible.
A decrease in the number of Trustees shall not shorten the term of any
Trustee then in office.
A Trustee may be any individual (who is a citizen of the United States
and not a minor) or a corporation. Whenever there shall be a vacancy,
until such a vacancy is filled, the continuing or surviving Trustee or
Trustees then in office shall have all the powers granted to the
Trustees and discharge all the duties imposed upon the Trustees by
this Declaration. A majority of the Trustees shall not be affiliated
with an adviser of the Trust or any organization affiliated with an
adviser of the Trust. The term "majority of the Trustees" whenever
used herein shall include one Trustee if only one Trustee is at the
time in office regardless of the fixed number of trusteeships.
SECTION 8.2. ELECTION OF TRUSTEES; TERMS OF OFFICE.
The term of office for each Trustee shall be three years and the
members of one class of Trustees shall be elected annually to serve
for such term; except that, initially or whenever necessary, a Trustee
may be elected for a shorter term in order to provide for a proper
rotation of Trustees. A Trustee shall hold office until the Annual
Meeting of Shareholders coinciding with the termination of the term of
the class of Trustees to which he was elected and until his successor
shall be elected and qualified or until his earlier resignation,
removal from office or death.
At any meeting of the Beneficiaries at which Trustees are to be
elected, only persons nominated as candidates by Beneficiaries
entitled to vote at such meeting shall be eligible for election as
Trustees. me election as Trustee of a person who, at the time of his
election, fails to meet the qualifications for Trustees specified in
this Declaration of Trust shall, unless within thirty days thereafter
such person meets such qualifications, be null and void and the
vacancy in the number of Trustees so created may be filled by the
Trustees as provided in Section 8.4 hereof.
At all elections of Trustees the candidates receiving the greatest
number of votes shall be elected.
SECTION 8.3. RESIGNATION AND REMOVAL.
Any Trustee may resign his trust in instrument in writing signed by
him and delivered or mailed to the other Trustees at the principal
office of the Trust, and such resignation shall take effect
immediately or at a later date according to the terms of the
instrument. Any Trustee may be removed at any time by written
instrument signed by all the other Trustees specifying the date when
such removal shall become effective; provided, however, that such
removal shall not be effective until approved by affirmative vote of
the holders of a majority of the shares present or represented and
entitled to vote at a duly held meeting of the Beneficiaries call for
the purpose.
Any Trustee may also be removed by affirmative vote for his removal
cast by a majority of Trustees then in office if such Trustee does not
meet the qualifications for Trustees specified in this Declaration of
Trust for more than thirty (30) consecutive days during his term of
office.
SECTION 8.4. FILLING VACANCY.
In case a vacancy in the number of Trustees shall occur, the remaining
Trustees, though less than a majority of the whole authorized number
of Trustees, may, by a vote of a majority of their number, fill any
vacancy in the Board of Trustees for the unexpired term of the Trustee
whose office has become vacant. No appointment or election of a
Trustee, other than reelection, shall become effective until the
person so appointed or elected shall have signed this Declaration and
an instrument bearing the acceptance of the person so appointed shall
have been acknowledged by one or more of the existing Trustees and
recorded in the manner provided in Section 11.5 hereof. Hereupon the
Trust property shall vest in the new Trustee jointly with the
continuing Trustee or Trustees without further act or conveyance.
SECTION 8.5. TRUST CONTINUES.
The death, resignation, incompetency or removal of any one or more of
the Trustees shall not operate to annul the Trust or to revoke any
existing agency created pursuant to the terms of this Declaration or
invalidate any action theretofore taken by the Trustees.
SECTION 8.6. TRUSTEES' MEETINGS AND ACTION.
The Trustees may act with or without a meeting. Meetings of the
Trustees shall be called and held as provided in the By-Laws. Notice
of any meetings may be waived by any Trustee either before or after
such meeting. The concurrence of all the Trustees shall not be
necessary for the validity of any action taken by them, but a decision
expressed in a vote passed at a meeting by a majority of the Trustees
present, or expressed in writing signed by a majority of the Trustees
without a meeting, shall constitute the action of the Trustees and
have the same effect as if assented to by all. At any meeting a
majority of the Trustees shall constitute a quorum. Any deed,
mortgage, lease or other instrument or writing executed by any Trustee
or officer of the Trust shall be valid and binding upon the Trustees
and upon the Trust if such Trustee or officer acted under authority
granted by the Trustees by a vote or writing passed or signed as above
provided.
In the event that any Trustee or Trustees shall notify the other
Trustees in writing that they do not wish to participate in the
approval or disapproval of any particular matter presented to the
Trustees, a majority of the other Trustees shall have authority to act
for the Trust with respect to such matter.
SECTION 8.7. TRUSTEES' COMPENSATION.
The Trustees shall receive reasonable compensation for their services
as Trustees and officers hereunder as fixed by the Trustees.
SECTION 8.8. BY-LAWS OF TRUST.
The By-Laws shall be as set forth in Exhibit A attached to this
Declaration. The Trustees may from time to time amend or repeal said
By-Laws which may, among other things, provide for the conduct of
their business, define the duties of the officers, agents, employees
and representatives and provide for their appointment, number and
qualification, fix the time, place and notice of meetings of the
Trustees, provide for the form of certificates representing shares of
beneficial interest and regulate or restrict issuance or transfer of
shares as provided in Section 5.9 of this Declaration.
SECTION 8.9. EXECUTIVE COMMITTEE.
The Trustees, acting unanimously, may appoint from among their own
number an executive committee of two or more persons to whom they,
acting unanimously, may delegate such of the powers herein given to
the Trustees as they may deem expedient, except as herein otherwise
provided.
SECTION 8.10. TRUSTEE'S OTHER BUSINESS ACTIVITIES.
Each Trustee may, from time to time, for his own account engage in, or
directly or indirectly be interested in, business activities of the
types conducted or to be conducted by the Trust; provided, however,
that any person who owns, directly or indirectly, more than one
percent 1% of the securities of, or acts as an officer, trustee,
director, employee of or consultant for, or is otherwise affiliated
with or controlled by, any real estate investment trust, or any other
real estate company (a) that competes with the Trust for investments,
(b) that is a major supplier of services to the Trust, or (c) in which
the Trust has a significant financial interest, or any person who is
an agent of, or is otherwise affiliated with or controlled by any such
person, shall not be qualified to serve as a Trustee.
ARTICLE IX
DISTRIBUTIONS TO BENEFICIARIES
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SECTION 9.1. TRUSTEES MAY MAKE DISTRIBUTIONS.
The Trustees may from time to time distribute ratably among the
Beneficiaries such proportion of the cash available from operations of
the Trust, net profits, surplus (including paid-in surplus) or capital
or assets of the Trust as they may deem proper, and such distribution
may be made in cash or in property (including any type of obligation
of the Trust or any assets thereof); and the Trustees may distribute
ratably among the Beneficiaries additional shares issuable hereunder
in such manner and on such terms as the Trustees may deem proper. In
making such distributions the Trustees shall be guided by the
requirements for qualification of the Trust as a "real estate
investment trust" under provisions of the Internal Revenue Code, as
now enacted or as may hereafter be amended from time to time, but
nevertheless the amount of all distributions and the time of
declaration and payment thereof shall be wholly in the discretion of
the Trustees, as shall also the determination of what constitutes cash
available from operations of the Trust, net profits or surplus. Such
distributions may be among the Beneficiaries of record at the time of
declaring a distribution or among the Beneficiaries of record at such
other date (not more than thirty days prior to payment of such
distribution) as the Trustees shall determine.
SECTION 9.2. RETAINED AMOUNTS.
The Trustees may always retain from the net profits or cash receipts
such amount as they may deem necessary to pay the debts or expenses of
the Trust or to meet obligations of the Trust, or as they may deem
desirable to use in the conduct of its affairs or to retain for future
requirements or extensions of the business.
SECTION 9.3 INFORMATION TO BENEFICIARIES.
The Trust shall furnish to the Beneficiaries from time to time such
statements, certificates or other information as is then required by
the law, or regulation thereunder, applicable to a "real estate
investment trust" qualifying as such under the Internal Revenue Code.
ARTICLE X
AMENDMENT OF TRUST
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SECTION 10.1. AMENDMENT.
At any time when no shares in the Trust are outstanding, the Trustees
may amend any provisions of this Declaration. A certificate signed by
a majority of the Trustees, setting forth such amendment and reciting
that it was duly adopted by the Trustees, or a copy of the Declaration
as amended executed by a majority of the Trustees, shall be recorded
as provided in Section 11.5 hereof and lodged among the records of the
Trust and shall be conclusive evidence of such amendment
At any time when shares in the Trust are outstanding, the Trustees may
amend the Declaration in any particular, except with respect to the
liability of beneficiaries, with the approval of the owners of a
majority of all the shares in the Trust, in writing or by vote at a
meeting of the Beneficiaries, provided that the notice of the meeting
shall have set forth the nature of the proposed amendment. A
certificate signed by a majority of the Trustees setting forth an
amendment and reciting that it was duly adopted by the Trustees and
approved as aforesaid, or a copy of the Declaration as amended
executed by a majority of the Trustees, shall be recorded as provided
in Section 11.5 hereof and lodged among the records of the Trust and
shall be conclusive evidence of such amendment.
Notwithstanding the foregoing (and notwithstanding the fact that some
lesser percentage may be permitted by Law), the approval of the owners
of at least 70% of the outstanding shares of the Trust shall be
required to amend or repeal Sections 5.9, 8.1, 8.2, 8.4, 11.19, 12.2
and this Section 10.1 of this Declaration unless at least 70% of the
Trustees have voted to amend or repeal such sections, in which event
the approval of the owners of only a majority of the outstanding
shares shall be required.
ARTICLE XI
MISCELLANEOUS
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SECTION 11.1. FAILURE TO QUALIFY AS REAL ESTATE INVESTMENT TRUST.
The failure of the Trust to qualify as a "real estate investment
trust" under the Internal Revenue Code shall not render the Trustees
liable to the Beneficiaries or to any other person or in any manner
operate to annul the Trust.
SECTION 11.2. LAWS OF OHIO GOVERN.
This instrument is executed by the Trustees and delivered in the State
of Ohio and with reference to the laws thereof, and the rights of all
parties and the construction and effect of every provision hereof
shall be subject to and construed according to the laws of said State.
me Trust will not, in dealing with any Trustee, investment adviser,
officer or employee of the Trust enter into any transactions contrary
to the obligations imposed upon trustees by courts of equity of the
State of Ohio.
SECTION 11.3. COUNTERPARTS.
This Declaration may be simultaneously executed in several
counterparts, each of which so executed shall be deemed to be an
original, and such counterparts, together, shall constitute but one
and the same instrument, which shall be sufficiently evidenced by any
such original counterpart.
SECTION 11.4. CERTIFICATIONS.
Any certificate signed by a person (who according to the records of
the Trust appears to be a Trustee hereunder) concerning the number or
identity of Trustees or Beneficiaries, showing that the execution of
any instrument or writing has been duly authorized, showing the form
of any vote passed at a meeting of Trustees or Beneficiaries, the fact
that the number of Trustees or Beneficiaries present at any meeting or
executing any written instrument satisfied the requirements of this
Declaration of Trust, the form of any by-laws adopted by or the
identity of any officer appointed by the Trustees or the existence or
non-existence of any fact or facts which in any manner relate to the
affairs of the Trust shall be conclusive evidence as to the matters so
certified in favor of any person dealing with the Trustees, or any one
or more of them, and the successors of such person.
SECTION 11.5. RECORDING.
This Declaration of Trust, any amendment thereof, evidence of any
change of Trustees and of the By-Laws and amendments thereto, and
evidence of effectiveness of Section 11.10 shall, and any other
matters relating to the Trust or its officers, Trustees or powers may
be recorded with the Trust's Transfer Agent or such other bank or
trust company as the Trustees shall from time to time designate.
Anyone dealing with the Trust may rely conclusively upon such
recording and instruments so recorded, and on any certificate of the
kind described in Section 11.4 hereof which is signed by a person who
according to such recording appears to be a Trustee hereunder.
SECTION 11.6. ANNUAL FINANCIAL STATEMENTS.
The Trustees shall cause to be prepared for each fiscal year of the
Trust an annual report consisting of a detailed statement of the
activities of the Trust during each such fiscal year and a balance
sheet and a statement of income and surplus of the Trust, which
financial statement shall contain an opinion thereon of an independent
certified accountant or independent public accountant based on an
examination of the records and books of account of the Trust made in
accordance with generally accepted auditing procedures. A copy of such
annual report shall be delivered to each Beneficiary hereunder within
ninety days after the close of the period covered by the report and
prior to the annual meeting of Beneficiaries for the next fiscal year
following the close of such period. A manually signed copy of the
report shall also be filed with the Trustees. In addition, the
Trustees shall cause to be prepared and delivered to Beneficiaries
hereunder interim financial reports, at least quarterly containing a
current balance sheet which may be unaudited.
SECTION 11.7. INFORMATION ON SHARE OWNERSHIP.
Every Beneficiary shall be obligated to furnish to the Trustees upon
demand a written statement disclosing the actual and constructive (as
the terms "actual" and "constructive" are defined for purposes of the
"real estate investment trust" provisions in the Internal Revenue Code
and the regulations proposed or in effect thereunder) ownership of the
shares registered in the name of such Beneficiary. A list of the
Beneficiaries failing or refusing to comply in whole or in part with a
demand of the Trustees for such written statement shall be maintained
by the Trustees as part of the records of the Trust. The Trustees may
establish such requirements as to furnishing of information as to
actual or constructive ownership of shares as they may from time to
time deem advisable and may, under provision in the By-Laws, condition
the issuance of certificates and registration of ownership of shares
in the name of any person upon the furnishing of such information and
on such information showing that issuance of the certificate and
registration of such person as a Beneficiary will not, in the opinion
of counsel for the Trust, result in the Trust becoming disqualified
for taxation as a real estate investment trust under the Internal
Revenue Code.
SECTION 11.8. FISCAL YEAR.
The Trustees may establish a fiscal year and from time to time alter
or change the same.
SECTION 11.9. NOTICES.
Notices delivered or sent by mail to any Beneficiary at his last
address of record as shown by the register of the Trust shall be
deemed properly delivered and be binding upon all parties.
SECTION 11.10. CONTINGENT POWERS OF BENEFICIARIES.
If, in the opinion of counsel for the Trust delivered to the Trustees,
this Declaration may contain the follow provision without causing the
Beneficiaries to be personally liable for the obligations of the Trust
and without impairing the right of the Trust to continue to do
business or own property under the applicable laws in the states in
which it is at the time doing business, and without preventing the
Trust from qualifying as a "real estate investment trust" under the
Internal Revenue Code as amended and the Regulations thereunder, then
such provision shall be deemed to be included in this Declaration and
to be controlling over any inconsistent provision. Upon the delivery
of any such opinion of counsel, the Trustees shall cause an instrument
in writing, setting forth such delivery and the effectiveness of this
Section 11.10 to be acknowledged by one or more of the Trustees and
recorded as provided in Section 11.5 hereof.
This Declaration may be amended or altered, except as to the exemption
from personal liability of Trustees and Beneficiaries and the
prohibition of assessments upon Beneficiaries, at any meeting of the
Beneficiaries called for the purpose by the affirmative vote of the
holders of not less than three-fourths of the shares entitled to vote
at the meeting.
Prior to each annual meeting of the Beneficiaries the Trustees shall
request the opinion of counsel for the Trust whether, under the
applicable laws in the states in which the Trust is then doing
business or owns property, this Declaration of Trust may contain the
foregoing provision without causing the Beneficiaries to be personally
liable for the obligations of the Trust, without impairing the right
of the Trust to continue to do business under the laws of such states,
and without preventing the Trust from qualifying as a "real estate
investment trust" under the Internal Revenue Code as amended and the
Regulations thereunder.
SECTION 11.11. INVESTMENT POLICY.
The initial investment of the Trust shall consist of the Union
Commerce Building which shall be subject to a net lease to The Union
Commerce Bank on the terms described in Registration Statement File
Number 2-18814, as from time to time amended, and exhibits thereto
filed with the Securities and Exchange Commission. The Trustees in
office are authorized in their sole discretion to determine the final
terms of purchase of said property and lease of the same and to effect
such purchase and lease for the Trust.
After the initial investment, the Trustees shall be guided by the
following investment policy:
Investments by the Trust shall be directed primarily to the
acquisition and holding of income-producing real estate used for
industrial, commercial, or multiple family residential purposes.
Special emphasis is to be given to favorably located properties which
may be subjected to a net lease to a single tenant which has
sufficient resources to give substantial security to its rental
commitments under such net lease and which would itself occupy the
premises or would sublet rental space. Investments by the Trust may
also include properties which offer opportunities for a higher, but
less secure, return. In general, the Trust will not invest in
unimproved real property or in leaseholds on which permanent buildings
have not been completed and will confine its investments in industrial
property to those which can be leased on a long term basis to a
financially responsible single tenant.
The Trust will purchase properties for long term investment and will
not engage in short term sales and purchases unless the nature of
particular properties indicates special reasons for believing that the
proceeds of their sale might better be invested in other properties.
The Trust may engage in mortgage financing of its acquisitions where
the same appears feasible and advantageous, and may pledge the
individual properties so acquired or its other properties under such
mortgages. However, the Trust will not borrow maximum percentages of
purchase prices or take any other steps which would give the Trust
securities a high leverage.
The Trust will generally use, as a charge against its income, straight
line depreciation based on its best estimate of the useful life of
each property. If in particular cases the use of accelerated
depreciation appears advisable, the Trust may use that method in
particular cases. The Trust policy regarding depreciation and sales of
property may in the future be affected by changes in the laws and
regulations of the United States and its political subdivisions,
particularly those relating to federal income taxes, and such policy
may be adjusted in the light of any such changes.
The Trust will not engage in underwriting securities of other issuers,
will not invest substantially in securities of other issuers for the
purpose of exercising control or in securities of or interests in
persons primarily engaged in real estate activities, will not make
loans to other persons, and will not invest in real estate mortgages;
provided, however, that this paragraph shall not apply to or prevent
investment in shares (or transferable certificates of beneficial
interest) in other real estate investment trusts which meet the
requirements of Part II of Subchapter M of Chapter I of Subtitle A of
the Internal Revenue Code, or other securities the holdings of which
would not disqualify the Trust as a real estate investment trust under
said Part II
The Trust may from time to time borrow money on a short term basis in
addition to long term mortgage financing. Ordinarily the Trust will
acquire investments for cash with or without mortgage financing. If it
seems advisable, however, future acquisitions may be financed in whole
or in part, by the issuance of shares or senior securities which may
or may not be convertible and may or may not be accompanied by share
purchase warrants. The Trust may also pay for investments by
exchanging properties.
United States Government obligations, Ohio bank accounts, and state or
municipal obligations may be held as a means of providing liquid
assets for contingencies and future investment, but any such
investment will be on a temporary basis, will not be in amounts which
would in the opinion of counsel for the Trust disqualify the Trust
for treatment as a "real estate investment trust" under the Internal
Revenue Code and Regulations (proposed or in effect) thereunder, and
will not be of a type which would in the opinion of counsel for the
Trust prevent exemption of the shares from the Ohio Intangibles Tax.
There is to be no restriction on the portion of the Trust's assets
which may be invested in any particular type of real estate or in any
single property. Generally, investment in assets other than real
estate will not at any time exceed 10% of the Trust's.
The Trust may make investments in any state of the United States and
any other jurisdiction where, in the opinion of counsel for the Trust,
the Trust may legally operate without affecting the limited liability
of the shareholders except in respect to tort claims, contract claims
where shareholder liability is not negated, claims for taxes and
certain statutory liabilities.
SECTION 11.12. NOTICES ON DISTRIBUTIONS.
All distributions to beneficiaries shall be accompanied by a written
statement advising of the sources of funds or properties so
distributed. In case there is any doubt as to such source the
communication may so state, and, in such event, a further statement
shall be mailed to Beneficiaries not later than sixty (60) days after
the close of the fiscal year of the Trust in which the distribution
was made. Such statements may be based on the figures shown by the
books of account of the Trust.
SECTION 11.13. TRANSACTIONS WITH INTERESTED PARTIES.
No Trustee, officer or adviser of the Trust, or any person affiliated
with any such persons, shall sell any property or assets to the Trust
or purchase any property or assets from the Trust, directly or
indirectly, nor shall any such person receive any commission or any
other remuneration, directly or indirectly, in connection with the
purchase or sale of Trust assets, except pursuant to transactions that
are fair and reasonable to the shareholders of the Trust and that
relate to: (a) the acquisition by the Trust of federally insured or
guaranteed mortgages at prices not exceeding the currently quoted
prices at which the Federal National Mortgage Association is
purchasing comparable mortgages; (b) the acquisitions of other
mortgages on terms no less favorable than similar transactions
involving unaffiliated parties; or (c) the acquisition by the Trust of
other property at prices not exceeding the fair value thereof as
determined by independent appraisal. All such transactions and all
other transactions in which any such persons have any direct or
indirect interest shall be approved by a majority of the Trustees,
including a majority of the independent Trustees. If the Trust has an
adviser, all commissions or remuneration received by any such persons
in connection with any such transactions shall be deducted from the
advisory fee.
SECTION 11.14. ADVISERS.
Subject to the provisions of this Declaration, the Trustees may employ
any person, firm or corporation as adviser. Any advisory contract
shall be for a period not longer than one year. Any such advisory
contract shall provide that it may be terminated at any time, without
penalty, by the Trustees or by the holders of majority of the
outstanding shares of beneficial interest upon not less than 60 days'
written notice to the adviser.
SECTION 11.15. LIMITATION ON EXPENSES.
The aggregate annual expenses of every character paid or incurred by
the Trust, excluding interest, taxes, expenses in connection with the
issuance of securities, shareholder relations, acquisition, operation,
maintenance, protection and disposition of Trust properties, but
including advisory fees and mortgage servicing fees and all other
expenses, shall not exceed the greater of: (a) l-1/2% of the average
net assets at cost before deducting depreciation reserves, less total
liabilities, calculated at least quarterly on a basis consistently
applied; or (b) 25% of the net income of the Trust, excluding
provision for depreciation and realized capital gains and losses and
extraordinary items, and before deducting advisory and servicing fees
and expenses, calculated at least quarterly on a basis consistently
applied; but in no event shall aggregate annual expenses exceed 1-1/2%
of the total invested assets of the Trust. If the Trust has an
adviser, the adviser shall reimburse the Trust for the amount by which
aggregate annual expenses paid or incurred by the Trust as defined
herein exceed the amounts herein provided.
SECTION 11.16. APPRAISALS.
The consideration paid for real property acquired by the Trust after
its initial investment in the Union Commerce Building shall be based
upon the value of the property to the Trust as determined by the
Trustees on the basis of a real estate appraisal prepared by a
qualified, disinterested, independent appraiser.
SECTION 11.17. PROHIBITED INVESTMENTS.
The Trust shall not invest in (a) mortgages, land contracts,
unimproved real property which in the aggregate exceed 5% of its gross
assets, as shown on its books at the time of such investment (b) real
property subject to a mortgage other than an insurance company, bank
or institutional tender and then only if, on the basis of independent
appraisal, the unpaid balance of such mortgage does not exceed 2/3 of
the fair market value, (c) securities in any company holding
investments or engaging in activities prohibited by this Declaration
for this Trust, or (d) commodities.
SECTION 11.18. PROHIBITED ACTIVITIES.
The Trust shall not do any of the following: (a) engage in any short
sale, borrow unsecured more than 8% of its net worth or encumber any
of its real property for more than 2/3 of the fair market value of
such property as shown by independent appraisal, (b) engage in trading
activities, (c) issue more than one class of securities or securities
redeemable at the option of the holder, except that the Trust may
issue securities evidencing borrowing secured by real estate not in
excess of 2/3 of the value of such security as determined by
independent appraisal, (d) engage in distribution of securities issued
by others, or (e) issue warrants, options, or similar evidence of a
right to buy Trust securities other than to all shareholders ratably.
SECTION 11.19. NO POWER TO DISQUALIFY TRUST AS A REAL ESTATE
INVESTMENT TRUST.
No Trustee and no Beneficiary shall take any action which would cause
the Trust to abandon its purpose of providing an investment vehicle
for numerous shareholders with small holdings or which would, in the
opinion of counsel for the Trust, furnished prior to such action,
prevent the Trust from qualifying or continuing to qualify as a "real
estate investment trust" under the Internal Revenue Code and the
Regulations (proposed or in effect) thereunder unless either (i) 70%
or more of the Trustees then in office have recommended such action
and holders of at least a majority of the outstanding shares have
voted to approve such action or (ii) at least a majority but less than
70% of such Trustees have recommended such action and holders of 70%
or more of the outstanding shares have voted to approve such action.
No Beneficiary shall have any power to control the Trustees or the
affairs of this Trust, or to exercise any voting or approval powers,
if such powers would at the time in the opinion of counsel for the
Trust (a) prevent the Beneficiaries from being free from personal
liability for the obligations of the Trust under any applicable law,
or (b) cause the Trust to be an illegal or invalid organization under
the law of any jurisdiction in which it owns property or does
business.
SECTION 11.20. PURPOSE OF ARTICLE AND SECTION HEADINGS.
The Article and Section headings inserted in this Declaration are for
convenience of reference and are not to be taken or affect the
meaning, construction, or effect of any provision hereof.
SECTION 11.21. CONTROLLING EFFECT OF ARTICLE XI.
The provisions of this Article XI shall be controlling in all respects
over any other provisions of this Declaration.
SECTION 11.22. TRUSTEES' POWER TO INCUR INDEBTEDNESS AND OTHER
OBLIGATIONS - LIMITATIONS THEREON.
Notwithstanding anything to the contrary in this Declaration of Trust,
the Trustees may issue, assume, incur or secure Indebtedness or shares
or other securities of any class or classes which may or may not have
preferences or restrictions not applicable to "Shares of Beneficial
Interest, $1 Par Value" subject only to the limitations of clause (b)
of this Section 11.22. The terms of Indebtedness and shares or other
securities shall be determined by the Trustees at or before incurring
or issuing the same and may include any terms deemed advisable by the
Trustees including, but not limited to, dividend or interest rates,
dividend restrictions and priorities, conversion rights and prices,
voting rights, redemption rights and prices, maturity dates,
provisions for acceleration of maturity, rights on liquidation,
subordination provisions, sinking fund provisions, remedies on default
and other provisions. The obligations of the Trust under Indebtedness
or shares or other securities may be secured in any manner determined
by the Trustees. All or part of the properties of the Trust may be
subjected to, or may be acquired subject to, mortgage or pledge to
secure Indebtedness (within the limitations on the same provided in
this Section 11.22) without regard to the extent of the encumbrance in
relation to the value of the individual properties.
The Trustees shall not without the same shareholder approval that
would be required for amendment of this Declaration of Trust, issue,
assume or incur Indebtedness:
(a) if, immediately after issuing, assuming or incurring the same, the
outstanding Indebtedness would exceed 83-1/3% of the value of the
assets of the Trust, which shall be conclusively deemed to be that
determined by the Trustees except that in connection with any issue of
bonds or debentures representing a debt of more than 10% of the book
value of the assets of the Trust before deducting depreciation, the
value of the land and buildings of the Trust shall be as determined by
an independent appraiser chosen by the Trustees
(b) unless the existing cash flow of the Trust, or the reasonably
projected future cash flow of the Trust, excluding extraordinary
items, is sufficient to cover the interest on the Indebtedness.
As used in this Section 11.22, "Indebtedness" means all liabilities
which would be included as liabilities in accordance with generally
accepted accounting principles in effect at February 12,1974, but not
including items constituting" Shareholders' Equity and reserve.
Compliance with the 83-1/3% limitation in this Section 11.22 may be
determined at any time by a national accounting firm designated by the
Trustees and such determination shall be conclusive. In making such
determination the accounting firm may rely upon certificates of the
Chairman or Secretary of the Trust or appraisers or other experts as
to factual matters or as to the determination of fair value of the
assets of the Trust by the Trustees and, as to legal matters, said
accounting firm may rely upon the opinion of counsel for the Trust.
SECTION 11.23. TRUSTEES' POWER TO INVEST IN NEW BUILDINGS AND
PARTNERSHIPS, JOINT VENTURES AND UNIMPROVED LAND FOR NEW BUILDINGS.
Notwithstanding anything to the contrary contained in this Declaration
of Trust, the Trustees shall have power to acquire an interest or
interests in improved or unimproved real estate or leaseholds or in
partnerships, joint ventures, corporations or other associations
owning improved or unimproved real estate or leaseholds and having as
their principal purpose the development of real estate into
income producing property; provided, however, that, (a) the Trustees
shall not have power to make such investment in such unimproved
property or in such partnership, joint venture, corporation, or other
association owning unimproved property, unless such unimproved
property is acquired or held for purposes of development into
income producing property within a reasonable period of time or is
acquired or held incidental to income producing property and (b) the
Trustees shall have no power to make such investment in a partnership,
joint venture or similar association unless the Trust shall have
received an opinion of counsel to the effect that the Trust will not
be liable for the obligations or liabilities of the partnership, joint
venture or similar association and that the investment will not result
in disqualification of the Trust as a real estate investment trust
under the Internal Revenue Code.
In connection with the incurring of indebtedness or issue of
securities, and notwithstanding provisions of Section 10.1, the
Trustees, without shareholder approval, may impose any restrictions
which they deem advisable on the powers granted by Section 11.23 and
may make such restrictions part of the Declaration of Trust.
SECTION 11.24. TRUSTEES' POWER TO INVEST IN REAL ESTATE MORTGAGES AND
IN CERTAIN EVIDENCES OF INDEBTEDNESS.
Notwithstanding anything to the contrary contained in this Declaration
of Trust, the Trustees shall have the power (a) to invest in real
estate mortgages without limitation as to amount and (b) in addition
to those temporary investments authorized by the ninth paragraph of
Section 11.11 hereof to invest in or acquire and hold evidences of
indebtedness having a period remaining to maturity, at the time of
investment or acquisition, of not more than two (2) years. Investment
in or acquisition of evidences of indebtedness is authorized hereunder
only in the amounts which would not in the opinion of counsel of the
Trust disqualify the Trust for treatment as a "real estate investment
trust" under the Internal Revenue Code and Regulations (proposed or in
effect) thereunder. The Trustees are hereby empowered, whether by
amendment to this Section by action of the Trustees or otherwise, to
place limitations on the authorizations set forth in the first
sentence hereof if in their judgment such limitations are necessary or
desirable in connection with the incurring of indebtedness or issuance
of securities by the Trust, or in connection with qualification by the
Trust to do business in any state. To the extent that this provision
is inconsistent with the other terms of this Declaration of Trust,
including without limitation Sections 11.11 (Investment Policy) and
11.17 (Prohibited Investments), and Article X (Amendment of Trust),
this provision shall prevail.
SECTION 11.25. OPTIONS RESPECTING TRUST SECURITIES.
Notwithstanding anything to the contrary contained in this Declaration
of Trust, including without limitation the provisions of subsection
11.18(e) hereof, the Trust may from time to time grant options,
warrants or other rights to purchase securities of the Trust. The
Trustees are hereby empowered, whether by amendment to this Section by
action of the Trustees or otherwise, to place limitations on the
authorizations set forth in the first sentence hereof if in their
judgment such limitations are necessary or desirable in connection
with the incurring of indebtedness or issuance of securities by the
Trust, or in connection with qualification by the Trust to do business
in any state. To the extent that this provision is inconsistent with
the other terms of this Declaration of Trust, including without
limitation, Article X (Amendment of Trust), this provision shall
prevail.
SECTION 11.26. AUTHORITY OF TRUSTEES TO AUTHORIZE ADDITIONAL
RESTRICTIONS.
The Trustees are hereby empowered, by amendment to this Declaration of
Trust without shareholder action, or by agreement or otherwise, to
place limitations on the authority of the Trustees if in their
judgment such limitations are necessary or desirable in connection
with the incurring of indebtedness or issuance of securities by the
Trust or in connection with the Trust's entering into any contract or
agreement or doing business in any state.
ARTICLE XII
DURATION OF THE TRUST
- ---------------------
SECTION 12.1. TERM OF TRUST.
This Trust shall continue without limitation of time, except that (a)
the Trust is subject to termination pursuant to Sections 2.8 or 12.2
or, when applicable, Section 11.10, and (b) in the event that Ohio
Revised Code, Section 2131.08, or any other statute or rule of law
shall provide that the Trust may not continue perpetually, then the
Trust shall continue for the longest period of time permitted by law,
unless sooner terminated as herein provided, and to the extent that
measuring lives in being are required to determine the term of the
Trust, such measuring lives in being shall be the following persons
living at the time of the execution of this Declaration, and the Trust
shall in such event continue until the death of the last survivor of
them plus such maximum additional period of years as is permitted by
law, unless sooner terminated as herein provided: Robert F. Black,
James D. Ireland, Gilbert H. Scribner, Stuart F. Silloway, Russell J.
Olderman and the following:
Karen Fredonia Black Sharron Pendleton Black Elizabeth Harrison Black
Robert Fager Black III Michael Frazer Black Elizabeth Frazer Vehring
Pamela Harrow Vehring Alexander Todd Vehring Tracy Leseure Yeomans
Patricia Yeomans Richard Black Yeomans Jeanne Carol Olderman
Helen Eaton Scribner Nancy Van Dyke Scribner II Wm. Van Dyke Scribner II
William Gilbert Smith Edith Goodrich Kirk Nancy V. D. Kirk
William Douglass Kirk, Jr. Donald Scribner Kirk Robert D. Judson, Jr.
Gilbert Hilton Judson Douglas Stahl Judson Duncan Scribner Judson
Frank Van Dyke Judson Hunter Romeyn Judson Carol Yeomans
Jill Francis Oldernam Virgina Kraft Olderman
SECTION 12.2. SALE OF ALL TRUST PROPERTY.
No merger of the Trust into another entity, no consolidation or
combination of the Trust with one or more other entities, and no sale,
exchange or other disposition (otherwise than by lease or other
arrangement for the Trust's operational and management purposes or by
mortgage, pledge or other financing technique) of more than 50% of the
Trust property or the sale of the whole or any part of the Trust
property for any shares, bonds, or other securities or obligations of
the purchaser as a step in proceedings that would result in the
merger, consolidation, dissolution or termination of the Trust shall
be made without the consent of the holders of at least (i) a majority
of the outstanding shares if at least 70% of the Trustees have
approved such action or (ii) 70% of the outstanding shares if at least
a majority but less than 70% of the Trustees have approved such
action, in either case given at a meeting of the shareholders held for
that purpose; provided that the voting requirements of Section 2.8
shall apply with respect to any merger intended merely to change the
Trust from a trust entity to a corporation and provided further that
no vote of Trust shareholders shall be required with respect to a
merger of the Trust with another entity if the Trust would be the
surviving entity and if, after the transaction, no shareholder would
be in violation of any limitation on share ownership adopted pursuant
to Section 5.9.
SECTION 12.3. LIQUIDATION.
On disposal of the Trust property pursuant to Sections 2.8, 11.10 or
12.2, the Trustees shall make provision for the payment of all
outstanding obligations, taxes and other liabilities, accrued or
contingent, of the Trust, and shall then distribute the remaining
assets of the Trust ratably among the holders of the outstanding
shares. Upon completion of the distribution of such remaining assets,
the Trust shall terminate and the Trustees shall be discharged of any
and all further liabilities and duties hereunder and the right, title
and interest of all parties shall be canceled and discharged. The
powers of the Trustees shall continue until the affairs of the Trust
shall have been wound up and all obligations discharged.
IN WITNESS WHEREOF, the undersigned, being all of the Trustees of
First Union Real Estate Equity and Mortgage Investments, have hereunto
set their hands to this Amended Declaration of Trust this 3rd day of
September, 1986 and hereby certify that the Trustees amended the
Declaration of Trust with the approval of the owners of a majority of
the shares of beneficial interest in the Trust on July 25, 1986, and
that this Amended Declaration of Trust sets forth each and every
provision of this Declaration as amended through July 25, 1986, and
further certify that the Trustees named on the first page of this
Declaration constitute all the present Trustees of the Trust.
/s/ Otes Bennett, Jr. /s/ William E. Conway
---------------------- ----------------------
/s/ Leigh Carter /s/ William A. Parker
----------------- ----------------------
/s/ Allen H. Ford /s/ Richard N. Thielen
------------------ -----------------------
/s/ George J. Grabner /s/ Donald S. Schofield
---------------------- ------------------------
/s/ E. Bradley Jones
--------------------
Signed in the Presence of:
/s/ Glenn Brokaw
----------------
--------------------
Witnesses as to the above signatories
STATE OF OHIO)
)SS:
COUNTY OF CUYAHOGA)
On this 3rd day of September, 1986, before me, Glenn J. Brokaw, Esq.,
the undersigned officer, personally appeared Otes Bennett, Jr., Leigh
Carter, Allen H. Ford, George J. Grabner, James A. Hughes, William A.
Parker, Donald S. Schofield, Richard N. Thielen and Richard B. Tullis,
known to me to be persons whose names were subscribed to the within
instrument and acknowledged that they executed the same for the
purposes and the capacities therein set forth.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
/s/ Glenn J. Brokaw
- -------------------
Glenn J. Brokaw, Vice President,
Secretary and General Counsel
<PAGE>
FIRST UNION REAL ESTATE EQUITY
AND MORTGAGE INVESTMENTS
BY-LAWS
12/01/97
INDEX
PAGE
ARTICLE I MEETING OF BENEFICIARIES
Section 1. Annual Meeting.................................3
Section 2. Special Meetings...............................3
Section 3. Place of Meetings..............................3
Section 4. Notice of Meetings.............................3
Section 5. Procedure at Meetings..........................3
Section 6. Quorum.........................................3
Section 7. Nominations and Beneficiary Business...........3
ARTICLE II TRUSTEES
Section 1. Regular Meetings...............................4
Section 2. Special Meetings...............................5
Section 3. Notice of Meetings.............................5
Section 4. Quorum.........................................5
Section 5. Compensation of Trustees.......................5
Section 6. Committees of the Board of Trustees............5
Section 7. Qualifications of Nominees-Age.................5
ARTICLE III OFFICERS
Section 1. Designation of Officers........................5
Section 2. Tenure of Office...............................6
Section 3. Delegation of Duties...........................6
Section 4. Compensation...................................6
Section 5. Signing Checks and Other Instruments...........6
Section 6. Control By Trustees............................6
ARTICLE IV SHARES IN TRUST
Section 1. Issue of Certificate of Beneficial
Ownership........................................6
ARTICLE V AMENDMENTS
Section 1. Amendment of By-Laws...........................6
ARTICLE VI MISCELLANEOUS PROVISIONS
Section 1. Fiscal Year....................................7
Section 2. Notice and Waiver of Notice....................7
Section 3. Checks for Money...............................7
Section 4. Form of Certificate of Beneficial
Interest.........................................7
Section 5. Regulations on Transfer of Shares to
Prevent Disqualification of the Trust
Under the Internal Revenue Code..................8
Section 6. Restrictions on Issuance and Transfer
Of Securities....................................8
ARTICLE I
MEETING OF BENEFICIARIES
SECTION 1. ANNUAL MEETING.
The annual meeting of the Beneficiaries of the Trust for the
transacting of such business as shall be specified in the notice of
the meeting shall be held as provided in the Declaration of Trust.
SECTION 2. SPECIAL MEETINGS.
Special meetings may be called at any time as provided in the
Declaration of Trust.
SECTION 3. PLACE OF MEETING.
All meetings of the Beneficiaries shall be held at the office of the
Trust in the City of Cleveland in the State of Ohio or at such other
place in the State of Ohio as may be designated, in the case of an
annual meeting, by the Trustees, or, in the case of a special meeting,
by the Trustees calling such meeting or by the person or persons
requesting such meeting pursuant to the Declaration of Trust.
SECTION 4. NOTICE OF MEETINGS.
Written notice of each annual or special meeting of the Beneficiaries,
stating the time, place and purpose thereof shall be given in
accordance with the Declaration of Trust.
SECTION 5. PROCEDURE AT MEETINGS.
At each meeting of the Beneficiaries, the Trustees shall appoint one
of their number or one of the Beneficiaries to preside thereat. The
Trustees shall appoint a Secretary for each such meeting, who shall be
duly sworn to the faithful discharge of his duties and to keep the
minutes of such meeting, which minutes shall be signed and attested by
him and filed with the records of the Trust.
SECTION 6. QUORUM.
A majority of the outstanding shares of the Trust present in person or
by proxy shall constitute a quorum for any annual or special meeting
of Beneficiaries.
SECTION 7. NOMINATIONS AND BENEFICIARY BUSINESS
(a) With respect to any Annual or Special Meeting of Beneficiaries, (a
"Meeting") nominations for election to the Board of Trustees and the
proposal of matters to be considered by the Beneficiaries may be made
only (i) by or at the direction of the Board of Trustees or (ii) by
any Beneficiary who was a Beneficiary of record at the time of the
giving of the notice described in this Section 7 and at the record
date for the Meeting, as defined in the Declaration of Trust, who is
entitled to vote at the Meeting and who complied with the notice
procedures set forth in this Section 7.
(b) For a nomination or proposal to be properly brought before a
Meeting by a Beneficiary, other than a shareholder proposal included
in the Trust's proxy statement pursuant to Rule 14a-8 of the
Securities Exchange Act of 1934, as amended, the Beneficiary must have
given timely notice thereof in writing to the Secretary of the Trust,
and such Beneficiary or his representative must be present in person
at the Meeting. A Beneficiary's notice shall be timely if delivered
to, or mailed and received at, the principal executive offices of the
Trust (i) for an Annual Meeting not less than 90 days nor more than
120 days prior to the anniversary date of the immediately preceding
Annual Meeting of Beneficiaries, or Special Meeting held in lieu
thereof and (ii) for a Special Meeting, not less than 90 days prior to
the date requested for such meeting.
(c) A Beneficiary's notice to the Secretary shall set forth as to each
nomination or proposal the Beneficiary intends to bring before the
Meeting (i) as to any nomination, the name and address of any proposed
nominee, the nominee's business affiliation, the information required
as to nominees by Item 401 of Regulation S-K under the Securities Act
of 1933 and the Securities Exchange Act of 1934, all as may be amended
from time to time, and a certification of the proponent that such
nominee meets all the qualifications for Trustees set forth in the
Declaration of Trust, including, but not limited to, Section 8.10
thereof, (ii) as to any proposal, a brief description of the proposal
desired to be brought before the Meeting, a statement of the reasons
for making such proposal at the Meeting and a certification of the
proponent that the proposal does not conflict with or violate any
provision of the Declaration of Trust, (iii) the name and address, as
they appear on the Trust's share transfer books of the Beneficiary
offering such nomination or proposal and of the beneficial owners (if
any) of the shares registered in such Beneficiary's name and the name
and address of any other Beneficiaries (or beneficial owner of shares)
known by such Beneficiary to be supporting such nomination or proposal
on the date of the Beneficiary's notice, (iv) the class and number of
shares of the Trust's capital shares which are beneficially owned by
the Beneficiary and such beneficial owners (if any) on the date of
such Beneficiary's notice and by any other Beneficiaries known by such
Beneficiary to be supporting such nomination or proposal on the date
of such Beneficiary's notice, and (v) any financial interest of the
Beneficiary or any such beneficial owner in such proposal. Nothing
contained in this Subsection (e) shall be deemed to supersede the
provisions of Section 7.2 of the Declaration of Trust relating to
business that may be transacted at a Special Meeting.
(d) If the Board of Trustees, or a designated committee thereof,
determines that any Beneficiary nomination or proposal was not timely
made in accordance with the provisions of this Section 7, or that any
proposed nominee does not meet the qualifications set forth in the
Declaration of Trust, or that any proposal conflicts with or violates
a provision of the Declaration of Trust, then such nomination or
proposal shall not be presented for action at the Meeting in question.
If the Board of Trustees, or a designated committee thereof,
determines that the information provided in the Beneficiary's notice
does not satisfy the informational requirements of this section in any
material respect, the Secretary of the Trust shall promptly notify
such Beneficiary of the deficiency in the notice. Such Beneficiary
shall have the opportunity to cure such deficiency by providing
additional information to the Secretary within the period of time, not
to exceed five (5) days from the date such deficiency notice is given
to such Beneficiary, determined by the Board or such committee. If the
deficiency is not cured within such period, or if the Board of
Trustees or such committee determines that the additional information
provided by the Beneficiary, together with the information previously
provided, does not satisfy the requirements of this Section 7 in any
material respect, then such nomination or proposal shall not be
presented for action at the Meeting in question.
(e) Notwithstanding the procedure set forth in the preceding
paragraph, if neither the Board of Trustees nor such committee makes a
determination as to the compliance of any Beneficiary nomination or
proposal with the provisions of this Section 7, as set forth above,
the presiding Officer of the Meeting shall determine and declare at
the Meeting whether the Beneficiary nomination or proposal was made in
compliance with the provisions of this Section 7, and if such
presiding Officer determines and declares that such nomination or
proposal was not made in compliance with such provisions, such
nomination or proposal shall not be acted upon at the Meeting.
ARTICLE II
SECTION 1. REGULAR MEETINGS.
Regular meetings of the Trustees may be held at such times and places
within the State of Ohio as may be provided for in resolution adopted
by the Trustees.
SECTION 2. SPECIAL MEETINGS.
Special meetings of the Trustees may be held at any time or place
within the State of Ohio upon call of any two of the Trustees at the
time and place designated in the notice of meeting.
SECTION 3. NOTICE OF MEETINGS.
Notice of each meeting, regular or special, shall be given by mailing
or by sending to each Trustee (addressed to the address last furnished
to the Trust by the Trustee) a letter at least 4 days before the
meeting, or a telegram at least 24 hours before the meeting. Notice of
any special or regular meeting, as provided in the Declaration of
Trust, may be waived in writing or by telegram by any Trustee either
before or after such meeting, and such notice shall be deemed to have
been waived by the Trustees attending such meeting. Except as provided
in Article VI hereof, unless otherwise indicated in the notice
thereof, any business may be transacted at any regular or special
meeting.
SECTION 4. QUORUM.
At any meeting a majority of the Trustees then in office shall
constitute a quorum.
SECTION 5. COMPENSATION OF TRUSTEES.
The Trustees are authorized to fix a reasonable retainer for members
of the Board of Trustees and the Chairman and a reasonable fee for
attendance at meetings. In addition to such compensation there shall
be reimbursement for expenses for traveling to and from such meetings.
SECTION 6. COMMITTEES OF THE BOARD OF TRUSTEES.
The Trustee may elect from their members committees of the Board and
give them any or all powers of the Trustees during intervals between
the meetings of the Trustees, except that such committees shall not be
empowered to declare dividends or fill vacancies in the Board of
Trustees or committees. All actions of such committees shall be
reported to the Trustees at their next meeting and shall be subject to
approval by the Trustees, provided that no right of any third person
shall be affected by such alteration.
SECTION 7. QUALIFICATIONS OF NOMINEES - AGE.
No nominee for Trustee shall be more than 72 years of age at the time
of his election as Trustee, nor shall any Trustee nominated for a
subsequent term be more than 72 years of age at the time of his
election for such subsequent term, provided that any Trustee elected
prior to attaining age 72 may continue to serve the remainder of his
term despite attaining the age of 72 before the expiration of his
term.
ARTICLE III
OFFICERS
SECTION 1. DESIGNATION OF OFFICERS.
The Trustees shall elect a Chairman of the Board, a President, a
Secretary, a Treasurer, and such Vice Presidents and other officers,
or assistant officers, as they shall deem advisable. Each officer and
assistant officer shall have such functions and duties as the Trustees
shall from time to time designate, and, in the absence of such
designation, such duties as are usually associated with such office.
Except as otherwise determined by the Trustees, any two or more
offices may be held by the same person.
SECTION 2. TENURE OF OFFICE.
The officers of the Trust shall hold office at the pleasure of the
Trustees, and until successors are chosen and qualified. A vacancy in
any office, however created, may be filled by election by the
Trustees.
SECTION 3. DELEGATION OF DUTIES.
The Trustees may delegate the duties of any officer to any other
officer and generally may control the action of the officers and
require the performance of duties in addition to those mentioned
herein.
SECTION 4. COMPENSATION.
The Trustees are authorized to determine or to provide the method of
determining the compensation of officers.
SECTION 5. SIGNING CHECKS AND OTHER INSTRUMENTS.
The Trustees shall determine or provide the method of determining how
checks, notes, bills of exchange and similar instruments issued by or
on behalf of the Trust shall be signed, countersigned, or endorsed.
SECTION 6. CONTROL BY TRUSTEES.
Nothing contained herein shall be interpreted to relieve the Trustees,
in any manner, of their duty to control and manage the Trust property.
ARTICLE IV
SHARES IN TRUST
SECTION 1. ISSUE OF CERTIFICATE OF BENEFICIAL OWNERSHIP
The Chairman shall cause to be issued to each Beneficiary one or more
certificates, under the seal of the Trust, signed as provided in
Article III, Section 5 hereof, certifying the number of shares owned
by such Beneficiary in the Trust. Such certificates shall be
countersigned by the Transfer Agent and registered by the Registrar
and shall be transferable on the books of the Trust as provided in the
Declaration of Trust.
ARTICLE V
AMENDMENTS
SECTION 1. AMENDMENT OF BY-LAWS.
The Trustees, by the affirmative vote of a majority, may at any
meeting, provided the substance of the proposed amendment shall have
been stated in a notice of the meeting, alter, change, or amend in any
respect, or supersede by new by-laws, in whole or in part, any of
these by-laws.
ARTICLE VI
MISCELLANEOUS PROVISIONS
SECTION 1. FISCAL YEAR.
The fiscal year of the Trust shall be as determined from time to time
by the Trustees.
SECTION 2. NOTICE AND WAIVER OF NOTICE.
Whenever any notice is required by these by-laws to be given, personal
notice is not required unless expressly so stated; and any notice so
required shall be deemed to be sufficient if given by depositing the
same in a post-office box in a sealed post-paid wrapper, addressed to
the person entitled thereto (at his last known post-office address as
shown by the register of the Trust) and such notice shall be deemed to
have been given on the day of such mailing.
SECTION 3. CHECKS FOR MONEY.
All checks, drafts or orders for the payment of money shall be signed
by the Treasurer or Assistant Treasurer or by such other officer,
officers, Trustee or Trustees as the Trustees may from time to time
designate.
SECTION 4. FORM OF CERTIFICATE OF BENEFICIAL INTEREST.
The form of certificate of beneficial interest representing shares of
$1 par value shall be substantially as follows:
No. Shares
------------------------------
FIRST UNION
Real Estate Equity and Mortgage Investments
THIS CERTIFIES THAT ___________________is the registered holder of
__________ Fully Paid and Non-assessable Share of Beneficial Interest,
$1 Par Value. in
FIRST UNION
Real Estate Equity and Mortgage Investments
a Trust established in business trust from under the laws of the State
of Ohio under a Declaration of Trust dated as of August 1, 1961, as
amended from time to time, a copy of which is on file with the
Transfer Agents of the Trust by all the terms and provisions of which
the holder or transferee hereof by accepting this certificate agrees
to be bound. The Trust is not a bank or trust company and does not and
will not solicit, receive or accept deposits as a business. The shares
represented hereby are transferable on the records of the Trust only
by the registered holder hereof or by his agent duly authorized in
writing on delivery to a Transfer Agent of the Trust of this
certificate properly endorsed or accompanied by duly executed
instrument of transfer together with such evidence of the genuineness
thereof and such other matters as may reasonably be required. The
transferability of the shares represented hereby is subject to such
regulation. as may from time to time be adopted by the Trustees of the
Trust and set forth in the By-Laws to which reference is hereby made
to prevent transfers of shares which would result in disqualification
of the Trust for taxation as a real estate investment trust under the
Internal Revenue Code an amended.
This certificate is not valid unless countersigned by a Transfer Agent
and registered by a Registrar of the Trust.
IN WITNESS WHEREOF, the Trustees of this Trust have caused this
certificate to be signed by facsimile signatures.
[ON REVERSE SIDE]
The By-Laws of the Trust provide, among other things, that no person
may acquire Trust securities (including these securities) if,
thereafter, he would beneficially own more than 9.8% of the Trust's
shares of beneficial interest. In applying this restriction,
convertible securities of the Trust beneficially owned by such person
(including convertible securities) are to be treated as if already
converted into shares of beneficial interest. A copy of the By-Laws
and information about the limitation on ownership may be obtained from
the Secretary of the Trust.
SECTION 5. REGULATIONS ON TRANSFER OF SHARES TO PREVENT
DISQUALIFICATION OF THE TRUST UNDER THE INTERNAL REVENUE CODE
Notification of the Trust Under the Internal Revenue Code.
The Chief Executive Officer of the Trust or an officer designated by
him shall:
a) From time to time cause to be prepared a list of holders of record
(with their holdings) of shares of the Trust (preferred and common)
and shall designate those holders which the officer acting shall have
reason to believe are not also the beneficial owners of the holdings
of record in their respective names;
b) Review the list with counsel and impose such restrictions on
transfer of shares as counsel shall advise should be imposed to
prevent disqualification of the Trust as a Real Estate Investment
Trust under Section 856 et seq. of the Internal Revenue Code.
SECTION 6. RESTRICTIONS ON ISSUANCE AND TRANSFER OF SECURITIES.
a) No person may own more than 9.8% of the outstanding Shares (the
Limit), and no Securities shall be issued or transferred to any person
if, following such issuance or transfer, such person's ownership of
Shares would exceed the Limit. For purposes of computing the Limit,
Convertible Securities owned by such person shall be treated as if the
Convertible Securities owned by such person had been converted into
Shares.
b) If any Securities in excess of the Limit are issued or transferred
to any person in violation of Paragraph a) hereof (the "Excess
Securities"), such issuance or transfer shall be valid only with
respect to such amount of Securities as does not result in a violation
of Paragraph a) hereof, and such issuance or transfer shall be null
and void with respect to such Excess Securities.
If the last clause of the foregoing sentence is determined to be
invalid by virtue of any legal decision, statute, rule or regulation,
such person shall be conclusively deemed to have acted as an agent on
behalf of the Trust in acquiring the Excess Securities and to hold
such Excess Securities on behalf of the Trust. As the equivalent of
treasury Securities for such purposes, the Excess Securities shall not
be entitled to any voting rights; shall not be considered to be
outstanding for quorums or voting purposes; and shall not be entitled
to receive dividends. interest or any other distribution with respect
to the Securities. Any person who receives dividends, interest or any
other distribution in respect to Excess Securities shall hold the same
as agent for the Trust and (following a permitted transfer) for the
transferee thereof.
Notwithstanding the foregoing, any holder of Excess Securities may
transfer the same (together with any distributions thereon) to any
person who, following such transfer, would not own Shares (within the
meaning of Paragraph a) in excess of the Limit. Upon such permitted
transfer, the Trust shall pay or distribute to the transferee any
distributions on the Excess Securities not previously paid or
distributed.
c) Ownership of Securities is conditional upon the owner or
prospective owner having provided to the Trust definitive written
information respecting his ownership of Securities. Failure to provide
such information, upon reasonable request shall result in the
Securities so owned being treated as Excess Securities pursuant to
Paragraph b) for so long as such failure continues.
d) For purposes of this Section 6:
(i) Person. includes an individual, corporation, partnership,
association, joint stock company, trust, unincorporated association or
other entity.
(ii) Shares. means Shares of Beneficial Interest, par value $1 per
share.
(iii) Convertible Securities. means any securities of the Trust that
are convertible into Shares.
(iv) Securities. means Shares and Convertible Securities.
(v) Ownership. means beneficial ownership. Beneficial ownership, for
this purpose, may be determined on the basis of the beneficial
ownership rules applicable under the Securities Exchange Act of 1934,
as amended, or such other basis as management reasonably determines to
be appropriate to effectuate the purposes hereof.
e) Nothing herein contained shall limit the ability of the Trust to
impose, or to seek judicial or other imposition of additional
restrictions if deemed necessary or advisable to protect the Trust and
the interests of its security holders by preservation of the Trust's
status as a qualified real estate investment trust under the Code.
f) These restrictions on issuance and transfer of Securities shall be
applied only on a prospective basis. Accordingly, Paragraphs a) and b)
hereof shall not apply to Shares in excess of the limit that were
owned (within the meaning of Paragraph a) by any person at the close
of business on June 3, 1981, but Paragraph a) and b) shall
prospectively apply to the transfer of such Shares and to further
acquisitions of Securities by any such person. Similarly, Paragraphs
a) and b) shall not apply to the conversion of Convertible Securities
that were owned by any person at the close of business on such date or
to the resultant Shares owned by such person, but Paragraph a) and b)
shall prospectively apply to such Shares and to such person.
g) Notwithstanding any other provision of this Section 6, a lower
percentage (the Temporary Limit) shall operate in place of the 9.81
ownership Limit set forth in Paragraph a) hereof for so long as there
are outstanding Securities excepted from the restrictions of this
Section 6 pursuant to Paragraph f) hereof ("Exempt Securities"). The
Temporary Limit shall initially be 6%, but upon the transfer of Exempt
Securities the Temporary Limit shall be fixed by the Trustees from
time to time but shall in no event exceed an amount equal to 25% of
the difference between (i) 49% of the Shares outstanding and (ii) the
number of Shares owned by any person who owns Exempt Securities. For
purposes of this calculation, Convertible Securities owned by such
person shall be treated as if the Convertible Securities owned by such
person had been converted into Shares.
h) If any provision of this Section 6 or any application of any such
provision is determined to be invalid by any federal or state court
having jurisdiction over the issue, the validity of the remaining
provisions shall not be affected and other applications of such
provision shall be affected only to the extent necessary to comply
with the determination of such court.
<PAGE>
Gotham Partners, L.P.
110 East 42nd Street
New York, New York 10017
January 8, 1998
BY HAND DELIVERY
- ----------------
Paul F. Levin, Esq.
Secretary
First Union Real Estate Equity
and Mortgage Investments
55 Public Square, Suite 1900
Cleveland, Ohio 44113-1937
Dear Mr. Levin:
Gotham Partners, L.P. ("Gotham"), a Beneficiary of First Union Real Estate
Equity and Mortgage Investments (the "Company"), hereby gives notice of the
following to the Secretary of the Company pursuant to Article I, Section 7 of
the By-Laws of the Company:
1. Gotham hereby nominates William A. Ackman, David P. Berkowitz and James
A. Williams for election as Class II Trustees to the Board of Trustees
of the Company at the 1998 Annual Meeting of Beneficiaries of the
Company (or any Special Meeting of Beneficiaries held in lieu thereof).
2. Gotham hereby makes the proposal attached as Exhibit A hereto for
consideration by the Beneficiaries at the 1998 Annual Meeting of
Beneficiaries of the Company (or any Special Meeting of Beneficiaries
held in lieu thereof) (the "Proposal").
3. Gotham hereby nominates Daniel Shuchman and Steven S. Snider for
election to the two Class I seats on the Board of Trustees of the
Company created as a result of the adoption of the Proposal; Mary Ann
Tighe and Stephen J. Garchik for election to the two Class II on the
Board of Trustees of the Company created as a result of the adoption of
the Proposal; and David S. Klafter and Daniel J. Altobello for election
to the two Class III seats on the Board of Trustees of the Company
created as a result of the adoption of the Proposal; such elections to
be held immediately following the approval of the Proposal by the
Beneficiaries at the 1998 Annual Meeting of Beneficiaries of the
Company (or any Special Meeting held in lieu thereof).
4. Gotham hereby nominates Richard A. Mandel for election to the Board of
Trustees of the Company, provided that Mr. Mandel shall stand for
election only in the event that any of Gotham's nominees named in
paragraphs 1 or 3 above is unable for any reason to serve as a Trustee
of the Company.
Pursuant to Article I, Section 7 of the By-Laws of the Company, the
following documentation is included herewith: (i) the information specified in
Article I, Section 7(c)(i) of the By-Laws of the Company with respect to each of
Gotham's nominees for election to the Board of Trustees, which is attached as
Exhibit B hereto; (ii) a brief description of the Proposal and a statement of
Gotham's reasons for making the Proposal, which is attached as Exhibit C hereto;
(iii) the information required to be provided pursuant to Article I, Sections
7(c)(iii), (iv) and (v) of the By-Laws of the Company, which is attached as
Exhibit D hereto; (iv) a certification by Gotham that each of Gotham's nominees
meets all of the qualifications for Trustees set forth in the Amended
Declaration of Trust of the Company; and (v) a certification by Gotham that the
Proposal does not conflict with or violate any provision of the Declaration of
Trust of the Company.
If you have any questions concerning this notice or any related legal
matters, please contact our counsel, Alexander R. Sussman of Fried, Frank,
Harris, Shriver & Jacobson, at (212) 859-8551.
Very truly yours,
GOTHAM PARTNERS, L.P.
By: Section H Partners, L.P.,
its general partner
By: DPB Corporation,
a general partner of Section H Partners, L.P.
By: /s/ David P. Berkowitz
------------------------------------------
David P. Berkowitz
President
By: Karenina Corporation,
a general partner of Section H Partners, L.P.
By: /s/ William A. Ackman
------------------------------------------
William A. Ackman
President
EXHIBIT A
---------
Proposal
--------
Gotham Partners, L.P. ("Gotham Partners"), a Beneficiary of First Union
Real Estate Equity and Mortgage Investments ("the Company"), meeting the
qualifications set forth in Article I, Section 7 of the By-Laws of the Company,
sets forth the following proposal to be considered by the Beneficiaries of the
Company at the Company's 1998 Annual Meeting of Beneficiaries (or any Special
Meeting of Beneficiaries held in lieu thereof):
Proposed, in accordance with Article VIII, Section 8.1 of the Company's Amended
Declaration of Trust, dated July 25, 1986,
(i) that the number of Trustees constituting the full Board of
Trustees of the Company shall be determined at the 1998 Annual Meeting of
Beneficiaries of the Company (or any Special Meeting of Beneficiaries held in
lieu thereof) to be fixed at fifteen (an increase of six members); and
(ii) that two of the newly-created seats of the Board of Trustees of
the Company be assigned to each of Class I, Class II and Class III; and
(iii) that, at the 1998 Annual Meeting of Beneficiaries of the Company
(or any Special Meeting of Beneficiaries held in lieu thereof), in addition to
electing the three Trustees to fill the seats of the three Trustees in Class II
whose terms are expiring, the Beneficiaries of the Company shall also elect six
Trustees (two Trustees to each of Class I, Class II and Class III) to serve in
the newly-created seats established in paragraph (ii) above.
EXHIBIT B
----------
Trustee Nominee Information
---------------------------
The following is the information required to be given by Gotham Partners, L.P.
("Gotham") with respect to its nominees for election to the Board of Trustees of
First Union Real Estate Equity and Mortgage Investments (the "Company") pursuant
to Article I, Section 7(c) of the By-Laws of the Company. All of such nominees
have an understanding with Gotham whereby they have agreed to be nominated to
the Board of Trustees by Gotham, and to serve on such Board if elected. In
addition, Gotham has agreed to indemnify each of the nominees for any liability
incurred by such nominee in connection with his or her nomination for election
to the Board of Trustees. None of the nominees has held any position or office
with the Company or with an entity affiliated with the Company since January 1,
1993.
WILLIAM A. ACKMAN
- -----------------
ADDRESS: 150 Columbus Avenue, Apt. 4D, New York, New York 10023
DATE OF BIRTH: May 11, 1966 (age 31)
CITIZENSHIP: United States
BUSINESS ADDRESS: Gotham Partners Management Co. LLC, 110 East 42nd Street, 18th
Floor, New York, New York 10017
EMPLOYMENT HISTORY: Since January 1, 1993, Mr. Ackman has been the Vice
President, Secretary and Treasurer of GPLP Management Corp., the Managing Member
of Gotham Partners Management Co. LLC, an investment management firm (and the
General Partner of its predecessor entity). Mr. Ackman has been employed by
Gotham Partners Management Co. LLC and its predecessor entity since January 1,
1993. Mr. Ackman was a general partner of Section H Partners, L.P., the General
Partner of the Gotham Partners, L.P. and Gotham Partners II, L.P. investment
funds, from January 1, 1993 through September 1993. Mr. Ackman has been the
President, Secretary and Treasurer of Karenina Corporation, a general partner of
Section H Partners, L.P. since October 1993.
DIRECTORSHIPS REQUIRED TO BE REPORTED PURSUANT TO ITEM 401(E)(2) OF REGULATION
S-K: None.
INVOLVEMENT IN LEGAL PROCEEDINGS REQUIRED TO BE REPORTED PURSUANT TO ITEM 401(F)
OF REGULATION S-K: None.
DANIEL J. ALTOBELLO
- -------------------
ADDRESS: 9727 Avenel Farm Drive, Potomac, Maryland 20854
DATE OF BIRTH: February 28, 1941 (age 56)
CITIZENSHIP: United States
BUSINESS ADDRESS: ONEX Food Services, Inc., 6550 Rock Spring Drive, Bethesda,
Maryland 20817
EMPLOYMENT HISTORY: Mr. Altobello has been the Chairman of the Board of ONEX
Food Services, Inc., an airline catering company, since September 1995. Mr.
Altobello has been a partner in Ariston Investment Partners, a consulting firm,
since September 1995. Mr. Altobello was the Chairman, President and Chief
Executive Officer of Caterair International Corporation, an airline catering
company, from January 1, 1993 until September 1995.
DIRECTORSHIPS REQUIRED TO BE REPORTED PURSUANT TO ITEM 401(E)(2) OF REGULATION
S-K: Mr. Altobello is a member of the Boards of Directors of American Management
Systems, Inc. and Colorado Prime Corporation.
INVOLVEMENT IN LEGAL PROCEEDINGS REQUIRED TO BE REPORTED PURSUANT TO ITEM 401(F)
OF REGULATION S-K: None.
DAVID P. BERKOWITZ
- ------------------
ADDRESS: 2109 Broadway, New York, New York 10023
DATE OF BIRTH: March 10, 1962 (age 35)
CITIZENSHIP: United States
BUSINESS ADDRESS: Gotham Partners Management Co. LLC, 110 East 42nd Street, 18th
Floor, New York, New York 10017
EMPLOYMENT HISTORY: Since January 1, 1993, Mr. Berkowitz has been the President
of GPLP Management Corp., the Managing Member of Gotham Partners Management Co.
LLC, an investment management firm (and the General Partner of its predecessor
entity). Mr. Berkowitz has been employed by Gotham Partners Management Co. LLC
and its predecessor entity since January 1, 1993. Mr. Berkowitz was a general
partner of Section H Partners, L.P., the General Partner of Gotham Partners,
L.P. and Gotham Partners II, L.P. investment funds, from January 1993 through
September 1993. Mr. Berkowitz has been the President, Secretary and Treasurer of
DBP Corporation, a general partner of Section H Partners, L.P. since October
1993.
DIRECTORSHIPS REQUIRED TO BE REPORTED PURSUANT TO ITEM 401(E)(2) OF REGULATION
S-K: None.
INVOLVEMENT IN LEGAL PROCEEDINGS REQUIRED TO BE REPORTED PURSUANT TO ITEM 401(F)
OF REGULATION S-K: None.
ADDRESS: 56 East 92nd Street, New York, New York 10128
STEPHEN J. GARCHIK
- ------------------
ADDRESS: 9605 Sotweed Drive, Potomac, Maryland 20854
DATE OF BIRTH: March 12, 1954 (age 43)
CITIZENSHIP: United States
BUSINESS ADDRESS: The Evans Company, 8251 Greensboro Drive, Suite 850, McLean,
Virginia 22102
EMPLOYMENT HISTORY: Since January 1, 1993, Mr. Garchik has been the President of
The Evans Company, a commercial real estate development and management firm. Mr.
Garchik has been the Chairman of Florida Golf Partners, L.P., a golf course
ownership, operation and development enterprise, since July 1996.
DIRECTORSHIPS REQUIRED TO BE REPORTED PURSUANT TO ITEM 401(E)(2) OF REGULATION
S-K: None.
INVOLVEMENT IN LEGAL PROCEEDINGS REQUIRED TO BE REPORTED PURSUANT TO ITEM 401(F)
OF REGULATION S-K: None.
DAVID S. KLAFTER
- ----------------
ADDRESS: 119 Waverly Place, Apt. 3, New York, New York 10011
DATE OF BIRTH: February 24, 1955 (age 42)
CITIZENSHIP: United States
BUSINESS ADDRESS: Gotham Partners Management Co. LLC, 110 East 42nd Street, 18th
Floor, New York, New York 10017
EMPLOYMENT HISTORY: Mr. Klafter has been an in-house counsel and investment
analyst at Gotham Partners Management Co. LLC, an investment management firm,
since April 1996. Mr. Klafter was counsel at White & Case, a law firm, from
January 1, 1993 until December 1993, and a partner at White & Case from January
1994 until April 1996.
DIRECTORSHIPS REQUIRED TO BE REPORTED PURSUANT TO ITEM 401(E)(2) OF REGULATION
S-K: None.
INVOLVEMENT IN LEGAL PROCEEDINGS REQUIRED TO BE REPORTED PURSUANT TO ITEM 401(F)
OF REGULATION S-K: None.
RICHARD A. MANDEL
- -----------------
ADDRESS: 28 Hilltop Road, Short Hills, New Jersey 07078
DATE OF BIRTH: September 1, 1962 (age 35)
CITIZENSHIP: United States
BUSINESS ADDRESS: Kennedy-Wilson International, 1270 Avenue of the Americas,
Suite 1818, New York, New York 10020
EMPLOYMENT HISTORY: Mr. Mandel has been the President of the Brokerage Division
of Kennedy-Wilson International, a real estate brokerage and investment firm,
since December 1996. From October 1993 until December 1996, Mr. Mandel was a
Managing Director in charge of the Asian Operations of Kennedy-Wilson
International. From January 1, 1993 until October 1993, he was a Director of
Jones Lang Wootton, a real estate brokerage firm.
DIRECTORSHIPS REQUIRED TO BE REPORTED PURSUANT TO ITEM 401(E)(2) OF REGULATION
S-K: Mr. Mandel is a member of the Board of Directors of Kennedy-Wilson
International.
INVOLVEMENT IN LEGAL PROCEEDINGS REQUIRED TO BE REPORTED PURSUANT TO ITEM 401(F)
OF REGULATION S-K: None.
DANIEL SHUCHMAN
- ---------------
ADDRESS: 203 East 72nd Street, Apt. 7D, New York, New York 10021
DATE OF BIRTH: August 4, 1965 (age 32)
CITIZENSHIP: United States
BUSINESS ADDRESS: Gotham Partners Management Co. LLC, 110 East 42nd Street, 18th
Floor, New York, New York 10017
EMPLOYMENT HISTORY: Mr. Shuchman has been an investment analyst at Gotham
Partners Management Co. LLC, an investment management firm, since October 1994.
Mr. Shuchman was an investment banker at Goldman Sachs & Co., an investment
banking firm, from January 1, 1993 until August 1994.
DIRECTORSHIPS REQUIRED TO BE REPORTED PURSUANT TO ITEM 401(E)(2) OF REGULATION
S-K: None.
INVOLVEMENT IN LEGAL PROCEEDINGS REQUIRED TO BE REPORTED PURSUANT TO ITEM 401(F)
OF REGULATION S-K: None.
STEVEN S. SNIDER
- ----------------
ADDRESS: 1624 Foxhall Road, N.W., Washington, D.C. 20007
DATE OF BIRTH: December 31, 1956 (age 41)
CITIZENSHIP: United States
BUSINESS ADDRESS: Hale and Dorr LLP, 1455 Pennsylvania Avenue, N.W., Washington,
D.C. 20004
EMPLOYMENT HISTORY: Since January 1, 1993, Mr. Snider has been a senior partner
at Hale and Dorr LLP, a law firm.
DIRECTORSHIPS REQUIRED TO BE REPORTED PURSUANT TO ITEM 401(E)(2) OF REGULATION
S-K: None.
INVOLVEMENT IN LEGAL PROCEEDINGS REQUIRED TO BE REPORTED PURSUANT TO ITEM 401(F)
OF REGULATION S-K: None.
MARY ANN TIGHE
- --------------
ADDRESS: 1320 York Avenue, Apt. 36B, New York, New York 10021
DATE OF BIRTH: August 24, 1948 (age 49)
CITIZENSHIP: United States
BUSINESS ADDRESS: Insignia/ESG, 200 Park Avenue, New York, New York 10166
EMPLOYMENT HISTORY: Since January 1, 1993, Ms. Tighe has been an Executive
Managing Director and a member of the Executive and Strategic Planning
Committees of Insignia/ESG, a commercial real estate firm.
DIRECTORSHIPS REQUIRED TO BE REPORTED PURSUANT TO ITEM 401(E)(2) OF REGULATION
S-K: None.
INVOLVEMENT IN LEGAL PROCEEDINGS REQUIRED TO BE REPORTED PURSUANT TO ITEM 401(F)
OF REGULATION S-K: None.
JAMES A. WILLIAMS
- -----------------
ADDRESS: 3518 Franklin Road, Bloomfield Hills, Michigan 48382
DATE OF BIRTH: March 30, 1942 (age 55)
CITIZENSHIP: United States
BUSINESS ADDRESS: Williams, Williams, Ruby & Plunkett PC, 380 N. Woodward
Avenue, Suite 380, Birmingham, Michigan 48009
EMPLOYMENT HISTORY: Since January 1, 1993, Mr. Williams has been the President
of Williams, Williams, Ruby & Plunkett PC, a law firm. Mr. Williams has also
been the Chairman of Michigan National Bank and Michigan National Corporation
since November 1995.
DIRECTORSHIPS REQUIRED TO BE REPORTED PURSUANT TO ITEM 401(E)(2) OF REGULATION
S-K: None.
INVOLVEMENT IN LEGAL PROCEEDINGS REQUIRED TO BE REPORTED PURSUANT TO ITEM 401(F)
OF REGULATION S-K: None.
EXHIBIT C
----------
Description of the Proposal
---------------------------
To increase the number of Trustees on the Company's Board of Trustees from
its current composition of nine members to fifteen members and to hold an
election of Trustees to fill the newly-created positions along with the three
seats whose terms are expiring.
Reasons for the Proposal
------------------------
Gotham Partners, L.P. and Gotham Partners II, L.P. ("Gotham") together are
the Company's largest Beneficiaries, holding 7.18% of the outstanding shares of
Beneficial Interest of the Company as well as options to acquire approximately
an additional 1.78% of the shares which Gotham intends to exercise on or before
the expiration date of the options.
On July 14, 1997 Gotham sent a letter (the "Letter") to the Company's
Trustees and the Directors of First Union Management, Inc. indicating concern
with the Company's recently modified strategic plan. In addition, Gotham
questioned management's ability to implement a strategy which would maximize the
value of the Company's stapled-stock structure, given management's limited
experience acquiring and managing operating businesses. Gotham's concerns arose
primarily from (1) the Company's equity offerings which Gotham believes were
ill-timed, poorly-executed and dilutive; (2) the price paid by the Company for
Impark; and (3) the fact that Mr. Mastandrea has told Gotham that he is
unwilling to enter into any transaction which would replace existing management
with a new investor group and management team with the capital and experience to
maximize the value of the Company's structure.
In the Letter and a follow-up letter dated July 23, 1997, Gotham requested
a meeting with the Trustees and Directors to discuss its concerns and proposals
for maximizing the Company's value. These and future attempts by Gotham to meet
with the Trustees and Directors have proven unsuccessful.
The Company has stated that it intends to focus on purchasing parking
assets. Despite its stated goal to acquire parking assets, the Company has used
most of its financial resources ($292 million of $350 million invested in the
third and fourth quarters of 1997) to acquire shopping malls which do not take
advantage of the Company's stapled-stock structure. Based on management's record
to date, Gotham believes that the Company has yet to demonstrate it is capable
of implementing its own strategic plan.
Mr. Mastandrea's record as Chairman, CEO, and President of the Company has
been disappointing particularly when measured based on the Company's share price
performance during his tenure. From the date he became Chairman of the Company
on January 1, 1994 to the date prior to the Company's initial disclosure of its
stapled-stock structure in its convertible preferred offering on October 24,
1996, the Company's common stock price DECLINED 27% (from $9.625 to $7).
Since the Company's stapled-stock structure was publicly revealed in the
preferred stock offering prospectus, the Company's common stock has appreciated
substantially. Even if one includes the recent share price increase, the
Company's stock has underperformed the other paired-shared REITs over Mr.
Mastandrea's tenure with the Company. From January 1, 1994 to the present, while
the Company's stock has appreciated by 69%, Starwood's stock has appreciated
451%, California Jockey/Patriot American's stock has appreciated 344% and Santa
Anita/MediTrust's stock has appreciated 104%.
Gotham believes that the existing Board of Trustees has done little to
maximize shareholder value. Gotham believes this is largely due to the Board's
lack of real estate expertise and insubstantial shareholdings in the Company.
Mr. Mastandrea has publicly stated (Wachtell Lipton REIT conference, New York
City, April 7, 1997) that he does not want his board members to own stock
because the only way they can be truly independent is if they are not
significant shareholders of the Company.
Gotham believes that the best board members are those who are independent -
INDEPENDENT OF MANAGEMENT, not INDEPENDENT OF SHAREHOLDERS' INTERESTS - and who
have significant real estate and operating company investment experience and/or
a substantial cash investment in the stock in the Company. Gotham believes its
nominees better meet these criteria and can better represent the interests of
the shareholders than the existing board.
As a result, Gotham intends to seek shareholder support for its nominees.
Gotham will seek majority representation on the Board of Trustees at the next
Annual Meeting of Beneficiaries (or any Special Meeting of Beneficiaries held in
lieu thereof) and has nominated nine individuals (who are described in further
detail in the accompanying nomination notice) to replace the three trustees
whose terms are expiring and to fill a newly-expanded board.
Upon gaining majority representation on the Company's Board of Trustees and
after reviewing relevant information about the business and operations of the
Company, Gotham expects that the new board will propose changes in the
management of the Company, but has not presently identified new management. In
addition, after careful analysis of various factors, in particular the
value-maximization strategies of the other paired-share REITs, the new board may
cause the Company to change its strategic direction, including, without
limitation, identifying a strategic partner or partners, pursuing acquisitions
in other real-estate-intensive operating businesses, disposing of non-core
assets and/or seeking the sale of the Company in a single transaction or a
series of transactions which would preserve and maximize the value of the
Company's stapled-stock structure. Gotham does not currently have any specific
plans regarding any of the foregoing.
EXHIBIT D
----------
Proponent Information
---------------------
The following is the information required to be given pursuant to Article I,
Sections 7(c)(iii), (iv) and (v) of the By-Laws of First Union Real Estate
Equity and Mortgage Investments (the "Company") by a Beneficiary offering a
nomination or proposal:
1. NAME AND ADDRESS OF THE BENEFICIARY MAKING THE PROPOSAL OR NOMINATION (THE
"PROPONENT") AS THEY APPEAR IN THE SHARE TRANSFER BOOKS OF THE COMPANY:
Gotham Partners, L.P., 110 East 42nd Street, New York, New York 10017
2. NAME AND ADDRESS OF ANY OTHER BENEFICIARY KNOWN BY THE PROPONENT TO BE
SUPPORTING THE NOMINATION AND PROPOSAL: Gotham Partners II, L.P., 110 East
42nd Street, New York, New York 10017
3. THE CLASS AND NUMBER OF SHARES OF BENEFICIAL INTEREST OF THE COMPANY
("SHARES") OWNED BY THE PROPONENT: Gotham Partners, L.P. owns 1,998,301
Shares and holds an option to acquire 493,150 Shares.
4. THE CLASS AND NUMBER OF SHARES OWNED BY ANY BENEFICIARIES DESCRIBED IN
PARAGRAPH 2 ABOVE: Gotham Partners II, L.P. owns 23,599 Shares and holds an
option to acquire 6,850 Shares.
5. ANY FINANCIAL INTEREST OF THE PROPONENT IN THE PROPONENT'S PROPOSAL: Gotham
has no interest in the Proposal other than its interest as an owner of
Shares and an option to acquire Shares.
<PAGE>
CERTIFICATION OF PROPOSAL
Pursuant to Article I, Section 7 of the By-Laws of First Union Real
Estate Equity and Mortgage Investments (the "Company"), the undersigned, Gotham
Partners, L.P., a Beneficiary of the Company, hereby certifies that its proposal
to be brought before the 1998 Annual Meeting of Beneficiaries of the Company (or
any Special Meeting of Beneficiaries held in lieu thereof), a copy of which is
attached as Exhibit A hereto, does not conflict with or violate any provisions
of the Declaration of Trust of the Company.
IN WITNESS WHEREOF, the undersigned has executed this Certificate on
this 8th day of January, 1998.
GOTHAM PARTNERS, L.P.
By: Section H Partners, L.P.,
its general partner
By: DPB Corporation,
a general partner of Section H Partners, L.P.
By: /s/ David P. Berkowitz
--------------------------------------
David P. Berkowitz
President
By: Karenina Corporation,
a general partner of Section H Partners, L.P.
By: /s/ William A. Ackman
--------------------------------------
William A. Ackman
President
Exhibit A
---------
Proposal
--------
Gotham Partners, L.P. ("Gotham Partners"), a Beneficiary of First Union
Real Estate Equity and Mortgage Investments ("the Company"), meeting the
qualifications set forth in Article I, Section 7 of the By-Laws of the Company,
sets forth the following proposal to be considered by the Beneficiaries of the
Company at the Company's 1998 Annual Meeting of Beneficiaries (or any Special
Meeting of Beneficiaries held in lieu thereof):
Proposed, in accordance with Article VIII, Section 8.1 of the Company's
Amended Declaration of Trust, dated July 25, 1986,
(i) that the number of Trustees constituting the full Board of Trustees
of the Company shall be determined at the 1998 Annual Meeting of Beneficiaries
of the Company (or any Special Meeting of Beneficiaries held in lieu thereof) to
be fixed at fifteen (an increase of six members); and
(ii) that two of the newly-created seats of the Board of Trustees of the
Company be assigned to each of Class I, Class II and Class III; and
(iii) that, at the 1998 Annual Meeting of Beneficiaries of the Company (or
any Special Meeting of Beneficiaries held in lieu thereof), in addition to
electing the three Trustees to fill the seats of the three Trustees in Class II
whose terms are expiring, the Beneficiaries of the Company shall also elect six
Trustees (two Trustees to each of Class I, Class II and Class III) to serve in
the newly-created seats established in paragraph (ii) above.
<PAGE>
CERTIFICATION OF NOMINEES
Pursuant to Article I, Section 7(c) of the By-Laws of First Union Real
Estate Equity and Mortgage Investments (the "Company"), the undersigned, Gotham
Partners, L.P., a Beneficiary of the Company, hereby certifies that each of its
nominees for election to the Board of Trustees of the Company at the 1998 Annual
Meeting of Beneficiaries of the Company (or any Special Meeting of Beneficiaries
held in lieu thereof), a list of whom is attached hereto as Exhibit A, meets all
the qualifications for Trustees set forth in the Declaration of Trust of the
Company, including, but not limited to, Section 8.10 thereof.
IN WITNESS WHEREOF, the undersigned has executed this Certificate on
this 8th day of January, 1998.
GOTHAM PARTNERS, L.P.
By: Section H Partners, L.P.,
its general partner
By: DPB Corporation,
a general partner of Section H Partners, L.P.
By: /s/ David P. Berkowitz
------------------------------------------
David P. Berkowitz
President
By: Karenina Corporation,
a general partner of Section H Partners, L.P.
By: /s/ William A. Ackman
------------------------------------------
William A. Ackman
President
Exhibit A
---------
Nominees
--------
William A. Ackman
Daniel J. Altobello
David P. Berkowitz
Stephen J. Garchik
David S. Klafter
Richard A. Mandel
Daniel Shuchman
Steven S. Snider
Mary Ann Tighe
James A. Williams
EXHIBIT 14
COURT OF COMMON PLEAS
CUYAHOGA COUNTY, OHIO
FIRST UNION REAL ESTATE ) CASE NO. 347063
EQUITY AND MORTGAGE )
INVESTMENTS, ) JUDGE TIMOTHY J. McGINTY
)
Plaintiff, ) NOTICE OF FILING
) NOTICE OF REMOVAL
v. )
)
GOTHAM PARTNERS, L.P. )
)
and )
)
GOTHAM PARTNERS II, L.P., )
)
Defendants. )
Please take notice that on January 20, 1998, Defendants
filed with the Clerk of the United States District Court for the
Northern District of Ohio, Eastern Division, the attached Notice of
Removal pursuant to 28 U.S.C. ss.ss. 1441 and 1446, thereby removing
this action from the Court of Common Pleas, Cuyahoga County, Ohio to
the United States District Court for the Northern District of Ohio.
Respectfully submitted,
OF COUNSEL: /s/ Michael J. Garvin
______________________________
David C. Weiner (0013351)
HAHN LOESER & PARKS LLP Michael J. Garvin (0025394)
3300 BP America Building
200 Public Square
Cleveland, Ohio 44114-2301
(216) 621-0150
- and -
OF COUNSEL:
/s/ Alexander R. Sussman
_______________________________
FRIED, FRANK, HARRIS, SHRIVER Alexander R. Sussman(FN1)
& JACOBSON
25th Floor
One New York Plaza
New York, New York 10004-1980
(212) 859-8000
Attorneys for Defendants
[FN]
1. Application to appear pro hac vice being submitted.
</FN>
CERTIFICATE OF SERVICE
----------------------
A copy of the foregoing was sent by messenger to Frances
Floriano Goins, Squire, Sanders & Dempsey L.L.P., 4900 Key Tower, 127
Public Square, Cleveland, Ohio 44114-1304, attorneys for plaintiff,
this 20th day of January, 1998.
/s/ Michael J. Garvin
___________________________________
One of the attorneys for Defendants
EXHIBIT 15
IN THE UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF OHIO
EASTERN DIVISION
FIRST UNION REAL ESTATE EQUITY ) CIVIL ACTION NO. 98CV0105
AND MORTGAGE INVESTMENTS )
55 Public Square, Suite 1900 )
Cleveland, Ohio 44113, )
) JUDGE ALDRICH
)
Plaintiff, )
)
)
v. )
)
)
GOTHAM PARTNERS, L.P. ) ANSWER AND
110 East 42nd Street ) COUNTERCLAIMS
New York, New York 10017, )
)
)
and )
)
)
GOTHAM PARTNERS II, L.P. )
110 East 42nd Street )
New York, New York 10017, )
)
Defendants and Counterclaimants. )
For their Answer and Counterclaims against First Union Real
Estate Equity and Mortgage Investments ("First Union"), Defendants
Gotham Partners, L.P.("Gotham I") and Gotham Partners II, L.P.
("Gotham II") (Gotham I and Gotham II collectively hereinafter the
"Gotham Partnerships") state as follows:
1. Deny each and every allegation of Paragraph 1 of the
Complaint except deny knowledge or information sufficient to form a
belief as to why First Union was formed and admit that First Union is
governed by, among other things, a Declaration of Trust, that its
principal place of business is Cleveland, Ohio, and that its shares
are publicly traded.
2. Admit the allegations of Paragraph 2 of the Complaint.
3. Admit the allegations of Paragraph 3 of the Complaint.
4. Deny each and every allegation of Paragraph 4 of the
Complaint.
5. Deny each and every allegation of Paragraph 5 of the
Complaint.
6. Deny each and every allegation of Paragraph 6 of the
Complaint.
7. Deny each and every allegation of Paragraph 7 of the
Complaint.
8. Deny knowledge or information sufficient to form a belief
as to the truth of the allegations contained in Paragraph 8 of the
Complaint.
9. Deny knowledge or information sufficient to form a belief
as to the truth of the allegations contained in Paragraph 9 of the
Complaint.
10. Deny each and every allegation of Paragraph 10 of the
Complaint, except admit that First Union is governed by, among other
things, a Declaration of Trust, which First Union represents is
Exhibit A to the Complaint, and respectfully refer the Court to that
exhibit for its contents.
11. Deny knowledge or information sufficient to form a
belief as to the truth of the allegations contained in Paragraph 11 of
the Complaint, and respectfully refer the Court to the Declaration of
Trust and the By-Laws for their contents.
12. Deny each and every allegation of Paragraph 12 of the
Complaint, except admit that the Gotham Partnerships are owners of
shares of First Union.
13. Deny knowledge or information sufficient to form a
belief as to the truth of the allegations contained in Paragraph 13 of
the Complaint, and respectfully refer the Court to the Declaration of
Trust and the By-Laws for their contents.
14. Deny each and every allegation of Paragraph 14 of the
Complaint, and respectfully refer the Court to the Declaration of
Trust and the By-Laws for their contents.
15. Deny knowledge or information sufficient to form a
belief as to the truth of the allegations contained in Paragraph 15 of
the Complaint, except admit that the Board of Trustees currently
consists of nine trustees.
16. Admit the allegations of Paragraph 16 of the Complaint.
17. Deny each and every allegation of Paragraph 17 of the
Complaint, and respectfully refer the Court to the Declaration of
Trust for its contents.
18. Deny each and every allegation of Paragraph 18 of the
Complaint, except admit that First Union's Annual Meeting for 1998 is
scheduled to take place on or about April 14, 1998.
19. Deny each and every allegation of Paragraph 19 of the
Complaint, except admit that the Gotham Partnerships began acquiring
First Union shares in or about Fall, 1996.
20. Deny each and every allegation of Paragraph 20 of the
Complaint.
21. Admit that Gotham delivered a letter on or about January
8, 1998, to First Union's Secretary and General Counsel and
respectfully refer the Court to the letter for its contents.
22. Deny each and every allegation of Paragraph 22 of the
Complaint, and respectfully refer the Court to the January 8, 1998,
letter for its contents.
23. Admit the allegations of Paragraph 23 of the Complaint.
24. Deny each and every allegation of Paragraph 24 of the
Complaint.
25. Deny each and every allegation of Paragraph 25 of the
Complaint, and respectfully refer the Court to the Declaration of
Trust and the By-Laws for their contents.
26. Deny each and every allegation of Paragraph 26 of the
Complaint, and respectfully refer the Court to the parties'
correspondence for its contents.
27. Deny each and every allegation of Paragraph 27 of the
Complaint.
28. Deny each and every allegation of Paragraph 28 of the
Complaint.
29. Deny each and every allegation of Paragraph 29 of the
Complaint, and respectfully refer the Court to the Declaration of
Trust and the By-Laws for their contents.
30. Deny each and every allegation of Paragraph 30 of the
Complaint.
31. Deny each and every allegation of Paragraph 31 of the
Complaint.
32. Deny each and every allegation of Paragraph 32 of the
Complaint, and respectfully refer the Court to Article I, Section 7 of
the By-Laws for its contents.
33. Deny each and every allegation of Paragraph 33 of the
Complaint.
34. Deny each and every allegation of Paragraph 34 of the
Complaint.
35. Deny each and every allegation of Paragraph 35 of the
Complaint, and respectfully refer the Court to Article I, Section 7 of
the By-Laws for its contents.
36. Deny each and every allegation of Paragraph 36 of the
Complaint, except deny knowledge or information sufficient to form a
belief as to the truth of the allegations contained in subparts (a)
and (c).
37. Deny each and every allegation of Paragraph 37 of the
Complaint.
38. Deny each and every allegation of Paragraph 38 of the
Complaint, and respectfully refer the Court to the Declaration of
Trust for its contents.
39. Deny each and every allegation of Paragraph 39 of the
Complaint.
40. Deny each and every allegation of Paragraph 40 of the
Complaint.
41. Deny each and every allegation of Paragraph 41 of the
Complaint, and respectfully refer the Court to the Declaration of
Trust for its contents.
42. Deny each and every allegation of Paragraph 42 of the
Complaint.
43. Deny each and every allegation of Paragraph 43 of the
Complaint.
44. Deny each and every allegation of Paragraph 44 of the
Complaint.
45. Deny each and every allegation of Paragraph 45 of the
Complaint.
46. Deny knowledge or information sufficient to form a
belief as to the truth of the allegations contained in Paragraph 46 of
the Complaint.
47. Deny knowledge or information sufficient to form a
belief as to the truth of the allegations contained in Paragraph 47 of
the Complaint.
48. Deny knowledge or information sufficient to form a
belief as to the truth of the allegations contained in Paragraph 48 of
the Complaint.
49. Deny knowledge or information sufficient to form a
belief as to the truth of the allegations contained in Paragraph 49 of
the Complaint.
50. Deny each and every allegation of Paragraph 50 of the
Complaint.
51. Repeat and reallege their responses to Paragraphs 1
through 50 of the Complaint as if fully set forth herein.
52. Deny each and every allegation of Paragraph 52 of the
Complaint, except admit that a real and substantial controversy exists
between the parties.
53. Deny each and every allegation of Paragraph 53 of the
Complaint.
54. Repeat and reallege their responses to Paragraphs 1
through 53 of the Complaint as if fully set forth herein.
55. Deny each and every allegation of Paragraph 55 of the
Complaint.
56. Deny each and every allegation of Paragraph 56 of the
Complaint.
57. Deny each and every allegation of Paragraph 57 of the
Complaint.
58. Deny each and every allegation of Paragraph 58 of the
Complaint.
As and For a First
Affirmative Defense:
--------------------
59. The Complaint fails to state any claim upon which relief
may be granted.
As and For a Second
Affirmative Defense:
--------------------
60. Plaintiff's purported claims are barred by the doctrine
of laches.
As and For a Third
Affirmative Defense:
--------------------
61. Plaintiff's purported claims are barred by waiver and
estoppel.
As and For a Fourth
Affirmative Defense:
--------------------
62. Plaintiff's purported claims are barred by the doctrine
of unclean hands and breaches of fiduciary duty.
As and For a Fifth
Affirmative Defense:
--------------------
63. The relief sought by Plaintiff is barred by or conflicts
with Ohio and federal law.
COUNTERCLAIMS
-------------
The Gotham Partnerships, as and for their counterclaims
against First Union, allege upon knowledge as to themselves and their
own acts, and upon information and belief as to all other matters as
follows:
64. These counterclaims arise out of First Union's unlawful
attempt to strip shareholders of their voting rights and to wrest from
Gotham I its right to present a proposal for consideration by all
First Union shareholders and to nominate qualified nominees.
65. As more specifically alleged below, First Union's
heavy-handed and unlawful actions to squelch shareholder democracy are
part of a larger pattern of management's entrenchment tactics and
breaches of fiduciary duty.
66. The Gotham Partnerships seek injunctive and declaratory
relief that would, inter alia: (a) prohibit First Union from further
solicitations unless and until it makes all necessary and proper
filings with the SEC as required under Rule 14(a) of the Securities
Exchange Act of 1934 and from making material misrepresentations in
violation of the proxy rules (and requiring First Union to correct
prior misleading statements); (b) enjoin First Union from continuing
to interfere with the Gotham Partnerships' rights under the proxy
rules and the Declaration of Trust to vote, to nominate qualified
nominees and to make proposals; and (c) declare that the Gotham
Partnerships are in compliance with federal proxy rules and the terms
of First Union's Trust and By-Laws. Additionally, the Gotham
Partnerships seek damages for harm caused to them as a result of First
Union's wrongdoing.
PARTIES
-------
67. Gotham I and Gotham II are New York limited partnerships
whose principal place of business is New York, New York.
68. First Union purports to be an Ohio business trust with
its principal place of business in Cleveland, Ohio. First Union
qualifies as a real estate investment trust ("REIT") under the
Internal Revenue Code of 1986, as amended (the "IRC"). Shares of First
Union are traded on the New York Stock Exchange.
69. The Gotham Partnerships own 8.96% of First Union's
shares, including options to acquire 500,000 shares.
70. The Gotham Partnerships are First Union's largest
shareholders.
JURISDICTION AND VENUE
----------------------
71. This Court has jurisdiction over the subject matter of
these counterclaims pursuant to Section 27 of the Exchange Act, 15
U.S.C. ss. 78aa; 28 U.S.C. ss. 1331(a); 28 U.S.C. ss. 1332(a); and
this Court's supplemental jurisdiction, 28 U.S.C. ss. 1367.
72. Venue is properly laid in this District pursuant to
Section 27 of the Exchange Act, 15 U.S.C. ss. 78aa and 28 U.S.C. ss.
1391(b).
FACTUAL BACKGROUND
------------------
73. First Union has done business as a REIT since its
creation in 1961. REITs are byproducts of the Real Estate Investment
Trust Act of 1960, which amended the IRC to offer special tax
treatment to such entities. In essence, a REIT is a trust in which
investors pool capital for investment in real estate or in real estate
mortgage loans.
74. First Union is one of only a few known REITs in the
United States that have what is called a "paired-share" structure. The
purpose of the paired-share structure is to allow their shareholders
to participate in the economic benefits from the ownership and from
the operations of certain real-estate-intensive operating businesses
(such as hotels, gaming, golf, healthcare, etc.). Non-paired share
REITs are prohibited from investing in operating businesses, and, as a
result, their shareholders do not enjoy the economic benefits of
operating company ownership. In 1984, Congress added a provision to
the IRC barring the further adoption by REITs of this valuable
paired-share structure, but grandfathering those paired-share REITs
already in existence.
75. In light of its public filings and press releases, until
very recently, it appears that management was not aware of its
paired-share REIT status and the value of First Union's structure.
76. The Gotham Partnerships first purchased First Union
stock in or about Fall, 1996.
77. On July 14, 1997, the Gotham Partnerships sent a letter
to First Union's Trustees and the Directors of First Union Management,
Inc. indicating concern with First Union's so-called strategic plan.
In addition, the Gotham Partnerships questioned management's ability
to implement a strategy that would maximize the value of First Union's
paired-share structure, given management's limited experience
acquiring and managing operating businesses.
78. The Gotham Partnerships' concerns arose primarily from
(1) First Union's equity offerings, which were ill-timed, poorly
executed and dilutive; (2) the price paid by First Union for various
acquisitions; and (3) the fact that First Union's CEO James Mastandrea
had told the Gotham Partnerships that he was unwilling to enter into
any transaction that would replace existing management with a new
investor group and management team with the capital and experience to
maximize the value of First Union's structure, regardless of the
potential for such a transaction to create shareholder value.
79. In that letter and a follow-up one dated July 23, 1997,
the Gotham Partnerships requested a meeting with the Trustees and
Directors to discuss their concerns and proposals for maximizing First
Union's value.
80. To date, First Union's Trustees have steadfastly refused
to meet with representatives from the Gotham Partnerships. A meeting
scheduled for December 29, 1997, between representatives of the Gotham
Partnerships and First Union's management was canceled by First
Union's management.
81. Furthermore, in response to the Gotham Partnerships'
July letters, First Union harassed the Gotham Partnerships by sending
an unreasonable written request for highly confidential information
about the makeup of the Gotham Partnerships.
82. Despite the unreasonableness of the request, the Gotham
Partnerships provided additional information responsive to First
Union's request.
83. Thereafter, First Union has never demanded any further
response.
84. Furthermore, the Gotham Partnerships are unaware of any
other requests for information by First Union being sent to other
entities similar in nature.
85. For several reasons, including management's failure to
maximize the value of First Union's unique tax structure, on January
8, 1998, Gotham I set forth a proposal involving, among other things,
electing three Gotham I nominees in place of three incumbent trustees,
expanding the Board of Trustees by adding six new positions, and
electing Gotham I's nominees to the six new positions.
86. In making its proposal and putting forth its nominees,
Gotham I fully complied with the requirements contained in First
Union's Declaration of Trust and By-Laws.
87. In response to Gotham I's proposal and nominees, First
Union launched a concerted campaign to solicit shareholders by issuing
press releases attacking the proposal and defending management's
entrenchment tactics.
88. Furthermore, on January 16, 1998, First Union notified
Gotham I that its proposal and nominees allegedly failed to meet the
qualifications and requirements set forth in the Declaration of Trust
and the By-Laws, but First Union's letter merely paraphrased the
By-Laws without offering specific instances of non-compliance.
89. Through a press release issued that same day by First
Union, the Gotham Partnerships learned that First Union had commenced
an action in state court against the Gotham Partnerships.
90. Stripped to its essence, First Union's lawsuit seeks to
rob shareholders, including the Gotham Partnerships, of their voting
rights under the Declaration of Trust by nullifying Gotham I's
proposal and nominees, and by attempting to render non-voting all of
the Gotham Partnerships' shares.
91. This is not the first time that First Union has resorted
to such tactics.
92. In 1995, First Union sued another large shareholder,
Richard Osborne, out of fear that Osborne would seek to oust
management.
93. After wasting $1.6 million of First Union's money on
needless litigation, First Union entered into a "settlement
agreement," i.e., greenmail, whereby First Union sold to Osborne or an
entity controlled by him two office buildings totaling 400,000 square
feet and a 475 space parking garage for $8.8 million; provided seller
financing for 80% of the purchase price at 8% interest per annum; and
repurchased for over $7 million shares Osborne had accumulated in
First Union. This transaction resulted in a loss of $5.6 million to
First Union.
94. Furthermore, in an attempt to dilute the stock, First
Union has engaged in ill-conceived equity offerings and has repeatedly
revised its By-Laws to make it increasingly difficult for shareholders
to exercise their rights under the Declaration of Trust.
95. In order to protect First Union shareholders, the
investing public, and the Gotham Partnerships, First Union must be
enjoined preliminarily and permanently from continuing to interfere
with the Gotham Partnerships' right to submit their proposal to First
Union shareholders for a vote and to proffer a slate of highly
qualified nominees.
COUNT I
(Violations of Section 14(a) of the '34 Act and the SEC
Rules promulgated thereunder)
96. The Gotham Partnerships repeat and reallege the
allegations contained in each of the preceding paragraphs as if fully
set forth herein.
97. The Proxy Rules, including in particular SEC Rules
14a-3, 14a-6, and 14a-11, require First Union to file proxy
solicitation materials in advance of any solicitation, to receive
certain required SEC clearances with respect to such materials, and to
make certain filings containing detailed disclosures about each
participant in First Union's solicitation efforts.
98. First Union has not filed a proxy statement, received
the required SEC clearances, or filed any solicitation materials in
connection with the solicitation of proxies for First Union shares as
required by Section 14(a) of the '34 Act and the Proxy Rules. First
Union has solicited more than ten persons in the course of their
solicitation of proxies.
99. First Union has engaged in and is continuing to engage
in the active solicitation of proxies for First Union shares in
violation of Section 14(a) of the '34 Act and the Proxy Rules.
100. First Union's public statements following Gotham I's
notice of nominations and proposal were materially misleading and
omissive in violation of Section 14(a) of the '34 Act and the Proxy
Rules.
101. First Union's unlawful solicitations have caused and
will continue to cause immediate and irreparable harm to Gotham and
First Union's shareholders, for which Gotham has no adequate remedy at
law.
COUNT II
(Interference with security holder rights to present nominations
and proposals, in violation of Section 14(a) of the '34 Act
and the SEC Rules promulgated thereunder).
102. Gotham I repeats and realleges the allegations
contained in each of the preceding paragraphs as if fully set forth
herein.
103. The Proxy Rules are designed to permit public
securityholders to vote on properly noticed shareholder nominations
and proposals at duly noticed meetings of stockholders.
104. First Union has initiated litigation and is taking
other action through which it seeks nullification of Gotham I's
shareholder nominations and proposal on grounds antithetical to the
purposes of the Proxy Rules.
105. First Union's efforts to prevent Gotham I from
submitting for a stockholder vote its duly noticed nominations and
proposal are causing and will continue to cause immediate and
irreparable harm to Gotham I and First Union's other shareholders, for
which Gotham I has no adequate remedy at law.
COUNT III
(Interference with Suffrage Right of Shareholder in
violation of Section 14(a) of the '34 Act and the SEC Rules
promulgated thereunder)
106. The Gotham Partnerships repeat and reallege the
allegations contained in each of the preceding paragraphs as if fully
set forth herein.
107. Section 14(a) of the '34 Act prohibits First Union from
impermissibly burdening the absolute right of shareholders to vote
their shares.
108. First Union has initiated litigation and engaged in
other tactics through which it seeks to strip the Gotham Partnerships'
shares of their voting rights, and to prohibit them from being
considered "for quorum or voting purposes."
109. Such effort by First Union to deny the Gotham
Partnerships their lawful voting rights as shareholders violates
Sections 14(a) of the '34 Act.
110. First Union's effort to deny the Gotham Partnerships
suffrage has caused and will continue to cause immediate and
irreparable harm to the Gotham Partnerships and First Union
shareholders, for which the Gotham Partnerships have no adequate
remedy at law.
COUNT IV
(Violation of Declaration of Trust)
111. The Gotham Partnerships repeat and reallege the
allegations contained in each of the preceding paragraphs as if fully
set forth herein.
112. Section 7.5 of the Declaration of Trust provides that
First Union Beneficiaries of record shall be entitled to vote at any
meeting of the Beneficiaries.
113. First Union has initiated litigation and engaged in
other tactics through which it seeks to strip the Gotham Partnerships'
shares of their voting rights, and to prohibit them from being
considered "for quorum or voting purposes."
114. Such effort by First Union to deny the Gotham
Partnerships their voting rights as shareholders violates the
Declaration of Trust.
115. First Union's effort to deny the Gotham Partnerships
suffrage has caused and will continue to cause immediate and
irreparable harm to the Gotham Partnerships and First Union
shareholders, for which the Gotham Partnerships have no adequate
remedy at law.
COUNT V
(For Breach of Fiduciary Duty Directly Affecting the Gotham
Partnerships'Individual Rights as Beneficiaries and Stockholders)
116. The Gotham Partnerships repeat and reallege the
allegations contained in each of the preceding paragraphs as if fully set
forth herein.
117. First Union's management and Trustees have a fiduciary
obligation to preserve its assets and to act prudently in taking
action on First Union's behalf.
118. First Union has violated this duty by wasting assets
and seeking to entrench the position of First Union's current officers
and management in the following respects, among others:
a) attacking Gotham I's nominations and proposal through
unlawful proxy solicitations and through a baseless notice of
deficiency in response to Gotham I' nominations and proposal;
b) authorizing litigation against the Gotham Partnerships
aimed at prohibiting a shareholder vote on Gotham I's proposal
at the upcoming annual meeting;
c) pursuing ill-timed, poorly executed and dilutive equity
offerings;
d) paying an excessive amount for Imperial Parking Company;
e) refusing to enter into any transaction -- despite the
potential for such a transaction to maximize the
company's value -- which would replace existing
management with a new investor group and management
team with the capital and experience to maximize the
value of the Company's structure;
f) authorizing the Osborne lawsuit on the basis of trumped-up
charges;
g) spending at least $1.6 million of the shareholders'
money in pursuing the claim and proxy fight against
Osborne; and
h) entering into a "settlement agreement," i.e.,
greenmail, whereby First Union repurchased for over $7
million 950,000 shares held by Osborne and sold to
Osborne or an entity controlled by him two office
buildings totaling 400,000 square feet and a 475 space
parking garage for $8.8 million, resulting in a loss of
$5.6 million to First Union; and provided seller
financing for 80% of the purchase price at 8% interest
per annum.
119. As a proximate result of this gross malfeasance and
entrenchment, First Union's assets have been wasted and First Union
management and Trustees are violating the Gotham Partnerships' rights
as Beneficiaries, causing immediate and irreparable harm for which
they have no adequate remedy at law.
COUNT VI
(Declaratory Judgment)
120. The Gotham Partnerships repeat and reallege the
allegations contained in each of the preceding paragraphs as if fully
set forth herein.
121. A real and substantial controversy exists between the
Gotham Partnerships and First Union concerning the right of the Gotham
Partnerships to make nominations and proposals at the Annual Meeting
and to vote as Beneficiaries of the Declaration of Trust.
122. The Gotham Partnerships are entitled to a declaration
of this Court that the Gotham Partnerships have complied with First
Union's informational requests and Declaration of Trust and By-Law
requirements to the extent they are valid and enforceable; that Gotham
I is entitled to make its nominations and proposal at the Annual
Meeting; and that the Gotham Partnerships are entitled to vote
thereon.
123. Alternatively, the Gotham Partnerships are entitled to
a declaration of this Court that First Union is required to inform
Gotham I sufficiently in advance of the Annual Meeting of any
requirements that Gotham I must fulfill to make its nominations and
proposal, so that it has adequate time to comply and that First
Union's stockholders have adequate time to consider and vote upon
Gotham I's nominations and proposal.
124. In addition, the Gotham Partnerships are entitled to a
declaration of this Court that certain requirements of the Declaration
of Trust and By-Laws are invalid on their face or as applied under
Ohio and federal law and that certain other requirements of the
By-Laws are in conflict with the Declaration of Trust.
125. The Gotham Partnerships are also entitled to a
declaration of this Court that First Union's attempt to apply
Declaration of Trust and By-Law requirements in an unreasonable way,
in derogation of the Gotham Partnerships' federal rights under the
proxy rules, and in violation of First Union's fiduciary obligations
is invalid and of no force or effect.
WHEREFORE, the Gotham Partnerships respectfully request that
this Court enter an order:
(a) preliminarily and permanently enjoining First Union,
its directors, Trustees, officers, employees, agents,
affiliates, partners, participants and all other
persons acting in concert with them, directly or
indirectly, from any solicitation of First Union
shareholders within the meaning of SEC Rule 14a-1(i)
with respect to First Union until First Union has made
the proper, complete and requisite filings required by
Section 14(a) of the Securities Exchange Act of 1934,
15 U.S.C. section 78(n)(a) and the SEC Rules promulgated
thereunder, received all SEC clearances with respect to
such filings, and for ten days thereafter;
(b) ordering that First Union make appropriate disclosures
to correct all of the false and misleading statements
it has heretofore made in its unlawful proxy
solicitations, and that thereafter First Union be
prohibited from soliciting any proxies for First Union
shares for an appropriate period to allow full
dissemination of these disclosures to First Union
shareholders;
(c) preliminarily and permanently enjoining First Union
from making future false and misleading statements in
the course of soliciting proxies for First Union
shares;
(d) enjoining First Union, its directors, officers,
Trustees, successors, agents, servants, subsidiaries,
employees and attorneys, and all persons acting in
concert or participating with them, from taking any
steps to impede or frustrate the ability of First
Union's stockholders to consider and make their own
determination on Gotham I's nominations and proposal to
or taking any other action to thwart or interfere with
the proxy contest;
(e) enjoining First Union, its directors, officers,
successors, Trustees, agents, servants, subsidiaries,
employees and attorneys, and all persons acting in
concert or participating with them, from taking any
actions that would dilute or interfere with the Gotham
Partnerships' voting, nomination, and proposal rights
or in any other way discriminate against the Gotham
Partnerships in the exercise of its rights with respect
to its First Union shares;
(f) declaring and adjudging: (i) that the Gotham
Partnerships have complied with First Union's
informational requests and Declaration of Trust and
By-Law requirements; that Gotham I is entitled to make
its nominations and proposal at the Annual Meeting; and
that the Gotham Partnerships are entitled to vote
thereon; (ii) alternatively declaring and adjudging
that First Union is required to inform, and enjoining
First Union to inform, Gotham I sufficiently in advance
of the Annual Meeting of the requirements that Gotham I
must fulfill to make its nominations and proposal, so
that it has adequate time to comply and that First
Union's stockholders have adequate time to consider and
vote upon Gotham I's nominations and proposal; or (iii)
declaring and adjudging that any unmet requirements of
the Declaration of Trust and By-Laws are invalid on
their face or as applied under Ohio and federal law;
(g) declaring and adjudging that First Union's attempt to
apply Declaration of Trust and By-Law requirements in
an unreasonable way, in derogation of the Gotham
Partnerships' federal rights under the proxy rules, and
in violation of First Union's fiduciary obligations, is
invalid and of no force or effect.
(h) declaring and adjudging that Gotham I's nominations
and proposal may be presented at the Annual Meeting for
a vote;
(i) dismissing the Complaint;
(j) awarding judgment in favor of the Gotham Partnerships on
the counterclaims;
(k) awarding the Gotham Partnerships their costs and
disbursements in this action, including reasonable
attorneys' fees; and
(l) granting such other and further relief as to the Court
deems just and proper.
Dated: January 20, 1998
Cleveland, Ohio
OF COUNSEL: /s/ David C. Weiner
_______________________________
David C. Weiner (0013351)
HAHN LOESER & PARKS LLP Michael J. Garvin (0025394)
3300 BP America Building
200 Public Square
Cleveland, Ohio 44114-2301
(216) 621-0150
- and -
OF COUNSEL:
/s/ Alexander R. Sussman
------------------------------
FRIED, FRANK, HARRIS, SHRIVER Alexander R. Sussman(FN1)
& JACOBSON
25th Floor
One New York Plaza
New York, New York 10004-1980
(212) 859-8000
Attorneys for Defendants
and Counterclaimants
[FN]
1 Application to appear pro hac vice being submitted.
</FN>
CERTIFICATE OF SERVICE
A copy of the foregoing Answer and Counterclaims was sent by
messenger to Frances Floriano Goins, Squire, Sanders & Dempsey L.L.P.,
4900 Key Tower, 127 Public Square, Cleveland, Ohio 44114-1304,
attorneys for Plaintiff, this 20th day of January, 1998.
/s/ Stephen Jay Obie
------------------------------
One of the attorneys for Defendants
and Counterclaimants
