UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 32)
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)
August 11, 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).
SCHEDULE 13D
CUSIP No. 337400105 Page 2 of 11 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
NUMBER OF 7 SOLE VOTING POWER
SHARES 2,573,543 Shares
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY EACH 0
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON WITH 2,573,543 Shares
10 SHARED DISPOSITIVE POWER
0
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,573,543 Shares
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) [ ]
EXCLUDES CERTAIN SHARES*
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
8.14%
14 TYPE OF REPORTING PERSON*
PN
*SEE INSTRUCTIONS
SCHEDULE 13D
CUSIP No. 337400105 Page 3 of 11 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
NUMBER OF 7 SOLE VOTING POWER
SHARES 30,449 Shares
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY EACH 0
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON WITH 30,449 Shares
10 SHARED DISPOSITIVE POWER
0
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
30,449 Shares
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) [ ]
EXCLUDES CERTAIN SHARES*
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0.10%
14 TYPE OF REPORTING PERSON*
PN
*SEE INSTRUCTIONS
SCHEDULE 13D
CUSIP No. 337400105 Page 4 of 11 Pages
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Gotham International Advisors, L.L.C.
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
Delaware
NUMBER OF 7 SOLE VOTING POWER
SHARES 415,400
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY EACH 0
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON WITH 415,400
10 SHARED DISPOSITIVE POWER
0
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
415,400
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) [ ]
EXCLUDES CERTAIN SHARES*
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
1.31%
14 TYPE OF REPORTING PERSON*
00; IA
*SEE INSTRUCTIONS
SCHEDULE 13D
CUSIP No. 337400105 Page 5 of 11 Pages
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Gotham Partners III, 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
NUMBER OF 7 SOLE VOTING POWER
SHARES 28,408 Shares
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY EACH 0
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON WITH 28,408 Shares
10 SHARED DISPOSITIVE POWER
0
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
28,408 Shares
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) [ ]
EXCLUDES CERTAIN SHARES*
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0.09%
14 TYPE OF REPORTING PERSON*
PN
*SEE INSTRUCTIONS
This Amendment No. 32 (the "Amendment") amends and supplements the
Statement on Schedule 13D (the "Schedule 13D") relating to the shares of
beneficial interest, par value $1.00 per share (the "Shares"), of First
Union Real Estate Equity and Mortgage Investments, an Ohio business trust
(the "Issuer"), previously filed by Gotham Partners, L.P. ("Gotham"),
Gotham Partners II, L.P. ("Gotham II"), both New York limited partnerships,
and Gotham International Advisors, L.L.C. ("Gotham Advisors"), a Delaware
limited liability company. This Amendment has been filed to reflect the
inclusion of an additional Reporting Person, and to update the Schedule 13D
in light of certain recent events. 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 2 is hereby amended to add the following information:
"Item 2. Identity and Background
This Statement is being filed by Gotham Partners III, L.P., a New York
limited partnership ("Gotham III", and together with Gotham, Gotham II and
Gotham Advisors, the "Reporting Persons") with respect to the Shares owned
by Gotham III. Section H Partners, L.P., a New York limited partnership
("Section H"), is the sole general partner of Gotham III. The business
address of Gotham III is 110 East 42nd Street, 18th Floor, New York, New
York 10017.
Effective July 1, 1998, Gotham converted to a Section 3(c)(7) exempt
entity from a Section 3(c)(1) exempt entity under the Investment Company
Act of 1940, as amended (the "Act"). Gotham III was created in connection
with Gotham's conversion to a Section 3(c)(7) exempt entity in order to
provide an investment entity for those limited partners of Gotham who did
not meet the definition of a "qualified purchaser" set forth in Section
2(a)(51) of the Act. Only "qualified purchasers" may invest in Section
3(c)(7) exempt entities. Gotham distributed approximately 1.09% of its
assets and liabilities to withdrawing limited partners, who contributed
such assets and liabilities to Gotham III in return for limited partnership
interests therein. Gotham III buys and sells securities for investment for
its own account.
During the last five years, Gotham III (i) has not been convicted in a
criminal proceeding (excluding traffic violations or similar misdemeanors)
and (ii) has not been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such
proceeding was or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting or mandating activities subject to,
federal or state securities laws or finding any violation with respect to
such laws."
Item 4 is hereby amended to add the following information:
"Item 4. Purpose of the Transaction
On July 10, 1998, Issuer commenced a Tender Offer to repurchase all of
its $100,000,000 outstanding 8 7/8% Senior Notes due 2003. On August 11,
1998, following the expiration of the Tender Offer, Issuer repurchased
approximately $87,000,000 in aggregate principal amount of Issuer's Notes.
In connection with the repurchase of the Notes, Issuer borrowed $90,000,000
from a syndicate of lenders, led by Bankers Trust Company, which included,
among others, Gotham and Gotham III. Issuer intends to repay this loan from
the proceeds of a Rights Offering which Issuer will conduct as soon as
practicable. To fund the loan, the lenders required standby purchase
commitments under the planned Rights Offering for the amount of the loan.
Gotham and Gotham III, and an additional lender, have entered into Standby
Purchase Agreements, each dated as of August 11, 1998, to provide such
commitments. Gotham and Gotham III are committed under the Standby Purchase
Agreements to purchase, in the aggregate, up to $70,000,000 of the
securities to be issued in the contemplated Rights Offering if such
securities are not otherwise purchased by shareholders, including Gotham
and Gotham III, in connection with the Rights Offering. The Standby
Purchase Agreements of Gotham and Gotham III, attached hereto as Exhibit 56
and Exhibit 57, respectively, are each incorporated herein."
Item 5 is hereby amended to add the following information:
"Item 5. Interest in Securities of the Issuer
(a) Gotham owns 2,573,543 Shares as of the date of this amendment,
representing an aggregate of approximately 8.14% of the outstanding Shares
of the Issuer. Gotham II owns 30,449 Shares as of the date of this Schedule
13D, representing an aggregate of approximately 0.10% of the outstanding
Shares of the Issuer. Gotham III owns 28,408 Shares as of the date of this
Schedule 13D, representing an aggregate of approximately 0.09% of the
outstanding Shares of the Issuer. Gotham International owns 415,400 Shares
as of the date of this Schedule 13D, representing an aggregate of
approximately 1.31% of the outstanding Shares of the Issuer. The combined
interest of Gotham, Gotham II, Gotham III and Gotham International is
3,047,800 Shares, representing an aggregate of approximately 9.64% of the
outstanding Shares of the Issuer. None of Section H Partners, L.P.,
Karenina Corporation, DPB Corporation, Mr. Ackman, Mr. Berkowitz or Gotham
Advisors beneficially owns any of the Shares (other than the Shares
beneficially owned by Gotham, Gotham II, Gotham III and Gotham
International).
(b) Each of Gotham, Gotham II and Gotham III have the sole power to
vote and to dispose of all of the Shares beneficially owned by it. Pursuant
to the Investment Management Agreement, Gotham Advisors currently has the
power to vote and to dispose of all of the Shares beneficially owned by
Gotham International.
(c) The tables below set forth information with respect to all
purchases and sales of Shares by Gotham International since March 31, 1998.
In each case, the transactions took place on the New York Stock Exchange.
Shares of Common Stock
Date Purchased/(Sold) Price per Share
---- ---------------- ---------------
Gotham International
04/06/98 32,100 $11.9250
04/07/98 20,000 $11.8469
04/08/98 30,400 $11.8000
04/14/98 45,000 $11.3000
(d) and (e) Not applicable."
Item 7 is hereby amended to add the following information:
"Item 7. Material to be Filed as Exhibits
55. An amended and restated agreement relating to the filing of joint
acquisition statements as required by Rule 13d-1(f)(1) promulgated under
the Securities Exchange Act of 1934, as amended.
56. Standby Purchase Agreement by and among Gotham, Issuer and Bankers
Trust Company, as Agent, dated as of August 11, 1998.
57. Standby Purchase Agreement by and among Gotham III, Issuer and
Bankers Trust Company, as Agent, dated as of August 11, 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.
August 14, 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
GOTHAM PARTNERS III, 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 INTERNATIONAL ADVISORS, L.L.C.
By: /s/ William A. Ackman
----------------------------
William A. Ackman
Senior Managing Member
By: /s/ David P. Berkowitz
----------------------------
David P. Berkowitz
Senior Managing Member
EXHIBIT 55
AMENDED AND RESTATED
JOINT ACQUISITION STATEMENT
PURSUANT TO RULE 13d-1(f)1
The undersigned acknowledge and agree that the foregoing
statement on Schedule 13D, as amended, is filed on behalf of each of the
undersigned and that all subsequent amendments to this statement on
Schedule 13D, as amended, shall be filed on behalf of each of the
undersigned without the necessity of filing additional joint acquisition
statements. The undersigned acknowledge that each shall be responsible for
the timely filing of such amendments, and for the completeness and accuracy
of the information concerning him or it contained therein, but shall not be
responsible for the completeness and accuracy of the information concerning
the other, except to the extent that he or it knows or has reason to
believe that such information is inaccurate.
DATED: August 14, 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
GOTHAM PARTNERS III, 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 INTERNATIONAL ADVISORS, L.L.C.
By: /s/ William A. Ackman
----------------------------------
William A. Ackman
Senior Managing Member
By: /s/ David P. Berkowitz
----------------------------------
David P. Berkowitz
Senior Managing Member
EXHIBIT 56
STANDBY PURCHASE AGREEMENT
THIS STANDBY PURCHASE AGREEMENT (as the same may be amended or
otherwise modified from time to time, the "AGREEMENT"), made and entered
into as of August 11, 1998, by and between (i) First Union Real Estate
Equity and Mortgage Investments, a business trust organized under the laws
of Ohio (the "COMPANY"), and (ii) Gotham Partners, L.P., a New York limited
partnership (together with its permitted successors and assigns hereunder
the "PURCHASER") and acknowledged and agreed to by (a) Bankers Trust
Company, a New York banking corporation, as agent under that certain Fixed
Rate Loan Agreement (as the same may be amended or otherwise modified from
time to time, the "BANK LOAN AGREEMENT") dated as of August 11, 1998 (in
such capacity, together with its successors and assigns under the Bank Loan
Agreement, the "BANK AGENT"), and (b) Bankers Trust Company, a New York
banking corporation, as agent under that certain Fixed Rate Loan Agreement
(as the same may be amended or otherwise modified from time to time, the
"GFB LOAN AGREEMENT"; the Bank Loan Agreement and the GFB Loan Agreement
are referred to herein collectively, as the "LOAN AGREEMENTS") dated as of
August 11, 1998 (in such capacity, together with its successors and assigns
under the GFB Loan Agreement, the "GFB AGENT"; the Bank Agent and the GFB
Agent are referred to herein collectively, as the "Agents").
WITNESSETH:
WHEREAS, under the terms of the Loan Agreements, the lenders
thereunder (the "LENDERS") have agreed to make certain loans to the Company
(the "LOANS");
WHEREAS, in accordance with the terms of the Loan Agreements, the
Company is required to implement a rights offering (the "RIGHTS OFFERING")
pursuant to which it anticipates issuing certain rights (the "RIGHTS") to
subscribe for and purchase additional securities of the Company (the
securities issued pursuant to such Rights being referred to herein
individually as a "SECURITY", and collectively, as the "SECURITIES") which
Securities may consist, in whole or in part, of a unit entitling the owner
of such unit to purchase one or more securities of the Company, at a price
per Security (the "SUBSCRIPTION PRICE") to be determined by the Company at
the time such Rights are issued, and which in any event would, if fully
subscribed, result in aggregate proceeds to the Company of not less than
the outstanding principal, accrued and unpaid interest, fees and any other
amounts due in connection with the Loan Agreements; and
WHEREAS, in order to induce the Lenders to make the Loans to the
Company, the Purchaser is required to, and by these presents hereby does,
agree to serve as a Standby Purchaser (defined below) for a specified
amount of Securities available for issuance upon the expiration of
unexercised Rights, and the Company has agreed with the Agents and the
Purchaser to issue and sell such Securities to the Purchaser, all as is
more particularly set forth herein.
NOW, THEREFORE, for and in consideration of the premises, and other
good and valuable consideration the receipt and sufficiency of all of which
is hereby acknowledged, the parties hereto agree as follows:
1. RIGHTS OFFERING.
---------------
The Company will, as promptly as possible, (i) prepare the appropriate
documentation for the Rights Offering, (ii) commence the Rights Offering
and (iii) consummate the Rights Offering, all in accordance with the
Company's obligations under Article XI of the Loan Agreements.
2. PURCHASE AND DELIVERY OF UNSUBSCRIBED SECURITIES.
------------------------------------------------
(a) The Purchaser, the Agents and the Company hereby acknowledge
and agree that the Company may enter into, or contemplates entering into,
one or more other Standby Purchase Agreements (the "ADDITIONAL STANDBY
AGREEMENTS") with certain other parties (together with the Purchaser, the
"STANDBY PURCHASERS") providing for the same Subscription Price per
Security as this Agreement and having material terms substantially similar
to those in this Agreement except that they may provide for the purchase of
a different number of Standby Securities (defined below) in subsection 2(b)
and in certain instances, may not provide for delivery of the waiver of
ownership limitations described in subsection 7(a) and Section 17 of this
Agreement. The rights or obligations of the Agents, the Purchaser and the
Company hereunder are not contingent on the consummation of the
transactions contemplated in any of the Additional Standby Agreements.
Notwithstanding the foregoing, the Purchaser, the Agents and the Company
hereby acknowledge and agree that if any Standby Purchaser fails to
purchase its "Standby Securities" ("DEFAULTED STANDBY SECURITIES") in
accordance with the terms of its respective Additional Standby Agreement,
the Purchaser shall have the right (but not the obligation), at its option,
in its sole discretion, to purchase all or any portion of such Defaulted
Standby Securities at a price equal to the Subscription Price per Security;
PROVIDED, HOWEVER, if multiple Standby Purchasers (including the Purchaser)
exercise rights to acquire Defaulted Standby Securities (the "EXERCISING
STANDBY PURCHASERS"), such Defaulted Standby Securities shall be allocated
to each such Exercising Standby Purchaser pro rata in the same proportion
as the Standby Securities that each such Exercising Standby Purchaser has
agreed to purchase bears to the aggregate number of Standby Securities to
be purchased by all Exercising Standby Purchasers, to the extent necessary
to avoid an oversubscription with respect to such Defaulted Standby
Securities.
(b) Subject to the terms and conditions herein set forth, the
Company hereby agrees with the Agents and the Purchaser to issue and sell
to the Purchaser, and the Purchaser hereby agrees with the Agents and the
Company to purchase from the Company, at the Subscription Price, the number
of Securities (the "STANDBY SECURITIES") equal to 77.00% of the Residual
Securities (defined below). For purposes of this Agreement the term
"RESIDUAL SECURITIES" shall mean a number of Securities (which number shall
not be less than zero), equal to (i) the aggregate outstanding principal
amount of the Loans, plus all accrued and unpaid interest and fees and any
other amounts due thereunder, as of the date the Rights may no longer be
exercised by the recipients of the Rights pursuant to the terms of the
Rights Offering, DIVIDED BY the Subscription Price, minus (ii) the number
of Securities validly subscribed for through the exercise of the Rights in
accordance with the terms of the Rights Offering (including the exercise of
any oversubscription options or privileges).
3. THE CLOSING.
-----------
Promptly following its determination of the number of Securities
validly subscribed for through the exercise of the Rights in accordance
with the terms of the Rights Offering (including the exercise of any
oversubscription options or privileges), the Company shall notify the
Purchaser of the number of Standby Securities, if any, to be purchased by
the Purchaser pursuant to Section 2(b). The delivery of and payment for the
Standby Securities shall take place at the New York offices of Fried,
Frank, Harris, Shriver & Jacobson at 10:00 a.m., New York City time, on the
date of the sale of the Securities to the subscribing shareholders in the
Rights Offering (such time and date being referred to as the "CLOSING
TIME", the date of the Closing Time being referred to as the "CLOSING DATE"
and the consummation of the transaction being referred to as the
"CLOSING").
4. DELIVERY OF STANDBY SECURITIES.
------------------------------
At the Closing, the Standby Securities to be purchased by the
Purchaser hereunder, registered in the name of the Purchaser or such of its
nominees as the Purchaser may specify at least two business days prior to
the Closing Date, shall be delivered by or on behalf of the Company to the
Purchaser, for the Purchaser's account, and Purchaser shall deliver the
Subscription Price for each Standby Security purchased by the Purchaser in
immediately available funds in the form of one or more wire transfers to an
account designated by the Company.
5. REPRESENTATIONS AND WARRANTIES.
------------------------------
(a) The Company hereby represents and warrants to the Purchaser
and the Agents as of the date hereof and as of the Closing Date as follows:
(i) The Company is a real estate investment trust (a "REIT")
within the meaning of Section 856 of the Internal Revenue Code of
1986, as amended (the "CODE"), has complied with all applicable
material provisions of the Code relating to a REIT and has been
duly formed and is an existing business trust in good standing
under the laws of the State of Ohio with all requisite power and
authority to perform its obligations under this Agreement and the
Rights Offering.
(ii) The execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of
the transactions contemplated hereby have been duly authorized by
all necessary trust action of the Company; and this Agreement,
when duly executed and delivered by the Purchaser and
acknowledged and agreed to by the Agents, will constitute a valid
and legally binding instrument of the Company enforceable in
accordance with its terms, subject to bankruptcy, insolvency,
reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to
general equity principles.
(iii) On or prior to the date the Rights Offering shall be
commenced by the Company, the Rights and the Standby Securities
shall have been duly authorized by the Company, the Standby
Securities and any securities into which the Standby Securities
may be exercisable or convertible shall have been reserved for
issuance by the Company and the Standby Securities when issued
and delivered by the Company against payment therefor as
contemplated hereby, will be validly issued, fully paid and
non-assessable.
(iv) The execution and delivery of this Agreement by the
Company, the consummation by the Company of the transactions
herein contemplated and the compliance by the Company with the
terms hereof do not and will not violate the Amended Declaration
of Trust or By-laws of the Company as in effect as of the date
hereof, or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Company is a party or by which the
Company is bound or to which any of its Properties or assets are
subject, with such exceptions as would not have a Material
Adverse Effect, or any applicable statute or any order, judgment,
decree, rule or regulation of any court or governmental agency or
body having jurisdiction over the Company or any of its
Properties or assets; and no consent, approval, authorization,
order, registration or qualification of or with any such court or
governmental agency or body is required for the valid
authorization, execution, delivery and performance by the Company
of this Agreement, the issue of the Rights and the Standby
Securities or the consummation by the Company of the other
transactions contemplated by this Agreement, except such as have
been, or prior to the Closing Time will have been, obtained under
the Securities Act, and such consents, approvals, authorizations,
registrations or qualifications as may be required under
applicable state securities or "blue sky" laws.
(v) The Standby Securities, and any securities into which
they are exercisable or convertible, shall be issued by the
Company under either that certain registration statement on Form
S-3 (No. 333-31695) originally filed with the Securities and
Exchange Commission (the "COMMISSION") on July 21, 1997, and
declared effective on August 6, 1997, as the same may be amended
and supplemented through one or more prospectus supplements or
post-effective amendments and/or under a subsequently filed
registration statement necessary to implement the Rights Offering
in accordance with the requirements of Section 1 of this
Agreement (collectively, the "SHELF REGISTRATION STATEMENT"). The
Shelf Registration Statement shall be effective at the time of
the purchase by the Purchaser of any Standby Securities and no
stop order suspending the effectiveness of such registration
statement or any amendment or supplement thereto shall have been
issued. Any common stock that comprises a portion of the Standby
Securities and any securities issuable upon exercise or
conversion of the Standby Securities shall be listed on the New
York Stock Exchange as of the Closing Date.
(vi) As of the date hereof, the Shelf Registration Statement
does not include any untrue statement of a material fact or omit
to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and, as
of the Closing Date, the Shelf Registration Statement and the
prospectus included therein will not include any untrue statement
of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein not
misleading.
(b) The Purchaser hereby represents and warrants to the Company
and the Agents as follows:
(i) The Purchaser is a limited partnership duly formed,
validly existing and in good standing under the laws of the State
of New York, with partnership power and authority to perform its
obligations under this Agreement and to own or hold under lease
its properties and to transact the businesses in which it is now
engaged, and to execute and deliver this Agreement.
(ii) The execution, delivery and performance of this
Agreement by the Purchaser and the consummation by the Purchaser
of the transactions contemplated hereby have been duly authorized
by all necessary partnership action of the Purchaser; and this
Agreement, when duly executed and delivered by the Purchaser will
constitute a valid and legally binding instrument, enforceable in
accordance with its terms subject to bankruptcy, insolvency,
reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to
general equity principles.
(iii) The Purchaser is not insolvent and has sufficient cash
funds on hand (including funds under management) and/or access to
margin loans or other credit to purchase the Standby Securities
on the terms and conditions contained in this Agreement and will
have such funds on the Closing Date. The Purchaser has
simultaneously with the execution and delivery of this Agreement
or prior thereto provided the Company and the Agents with
evidence or substantiated that Purchaser has the financial means
to satisfy its financial obligations under this Agreement and the
foregoing evidence and substantiation is a true and accurate
representation of such means.
(iv) No state, federal or foreign regulatory approvals,
permits, licenses, or consents or other contractual or legal
obligations are required in order for the Purchaser to enter into
this Agreement or otherwise purchase the Standby Securities,
except those that have been obtained or performed and those which
the failure to obtain or perform will not impair the Purchaser's
ability to perform its obligations under this Agreement.
(v) The execution and delivery of this Agreement, the
consummation by the Purchaser of the transactions herein
contemplated and the compliance by the Purchaser with the terms
hereof do not and will not conflict with, or result in a breach
or violation of any of the terms or provisions of, or constitute
a default under the partnership agreement of the Purchaser or
other applicable document governing the Purchaser or any
indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which the Purchaser is a party or by
which any of its Properties or assets are bound, with such
exceptions as would not have a material adverse effect on the
financial condition of the Purchaser, or any applicable statute
or any order, judgment, decree, rule or regulation of any court
or governmental agency or body, domestic or foreign, having
jurisdiction over the Purchaser or any of its Properties or
assets; and no consent, approval, authorization, order,
registration or qualification of or with any such court or
governmental agency or body is required for the valid
authorization, execution, delivery and performance by the
Purchaser of this Agreement or the consummation by the Purchaser
of the transactions contemplated by this Agreement.
(vi) The Purchaser has not entered into any contracts,
arrangements, understandings or relationships (legal or
otherwise) with any other person or persons with respect to any
securities of the Company, including but not limited to transfer
or voting of any of the securities, finder's fees, joint
ventures, loan or option arrangements, puts or calls, guarantees
of profits, division of profits or loss, or the giving or
withholding of proxies, except to the extent that any such
contract, arrangement, understanding or relationship shall have
only a minimal adverse effect on the ability of Purchaser to
consummate the transaction contemplated in this Agreement; and
the Purchaser does not own any securities of the Company which
are pledged or otherwise subject to a contingency the occurrence
of which would give another person voting power or investment
power over such securities, except to the extent that any such
pledge or contingency shall have only a minimal adverse effect on
the ability of Purchaser to consummate the transaction
contemplated in this Agreement.
(vii) Except as set forth on SCHEDULE (VII), there are no
actions, suits or proceedings at law or in equity by or before
any Governmental Authority or other agency now pending or, to
Purchaser's knowledge, threatened against or affecting Purchaser,
except to the extent that any such action, suit or proceeding
shall have only a minimal adverse effect on the ability of
Purchaser to consummate the transaction contemplated in this
Agreement.
(viii) The Purchaser is not party to any agreement or
instrument or subject to any restriction which does or could
reasonably be expected to result in a material adverse effect on
the ability of the Purchaser to consummate the transaction
contemplated in this Agreement. The Purchaser is not in default
in any material respect in the performance, observance or
fulfillment of any of the obligations, covenants or conditions
contained in any material agreement or instrument to which it is
a party or by which such Purchaser is bound except to the extent
that any such default shall have only a minimal adverse effect on
the ability of Purchaser to consummate the transaction
contemplated in this Agreement.
(ix) The Purchaser has not filed, and is not contemplating
either the filing of a petition under any state or federal
bankruptcy or insolvency law or the liquidation of all or a major
portion of its assets or property, and the Purchaser has no
knowledge of any Person contemplating the filing of any such
petition against it.
6. PURCHASER NEGATIVE COVENANTS.
----------------------------
From the date hereof through the Closing Date, the Purchaser covenants
and agrees with Agents that it will not do, directly or indirectly, any of
the following:
(a) The Purchaser shall not dissolve, terminate or liquidate or
suffer any liquidation or dissolution.
(b) The Purchaser shall not cancel or otherwise forgive or
release any material claim or material Debt owed to the Purchaser by
any Person, unless such forgiveness or release is for adequate
consideration and in the ordinary course of Purchaser's business,
except to the extent that any forgiveness or release shall have only a
minimal adverse effect on the ability of Purchaser to consummate the
transaction contemplated in this Agreement.
(c) The Purchaser shall not enter into, or be a party to, any
transaction with any Affiliate of any Purchaser, except in the
ordinary course of business and on terms which are no less favorable
to the Purchaser or such Affiliate than would be obtained in a
comparable arm's-length transaction with an unrelated third party or
except to the extent that any such transaction shall have only a
minimal adverse effect on the ability of Purchaser to consummate the
transaction contemplated in this Agreement.
(d) The Purchaser shall not take any other action or actions
which individually or in the aggregate would result in the Purchaser
failing to have sufficient funds available on the Closing date to
purchase the Standby Securities on the terms and conditions set forth
in this Agreement.
7. CLOSING CONDITIONS.
------------------
The obligations of the Purchaser to consummate the purchase and
sale of the Standby Securities shall be subject, in the discretion of
the Purchaser, to satisfaction of each of the following conditions on
or before the Closing:
(a) the Company shall have caused to be issued to the Purchaser a
waiver of the ownership limitations set forth in Article VI, Section 6
of the By-Laws of the Company, in form and substance reasonably
satisfactory to Purchaser, to the extent necessary (in light of all
other equity securities of the Company directly, indirectly,
beneficially or constructively owned or controlled by or subject to
the power to vote of (in each case, within the meaning of the
Company's Amended Declaration of Trust, the Securities Exchange Act of
1934, as amended and the rules and regulations thereunder and the Code
and the rules and regulations thereunder) the Purchaser) to permit the
Purchaser to acquire the Standby Securities;
(b) all of the Company's representations and warranties and other
statements in this Agreement (excluding subsection 5(a)(ii)) shall be
true, correct and complete in all material respects as of the Closing
Time;
(c) no stop order suspending the effectiveness of the Shelf
Registration Statement or any amendment or supplement thereto shall
have been issued and no proceeding for that purpose shall have been
initiated or threatened by the Commission or any other state or
federal authority; and
(d) the Subscription Price and other material terms of the Rights
Offering shall be fair and reasonable to each of the Purchaser, the
Company and shareholders of the Company entitled to participate in the
Rights Offering, and the Rights Offering shall otherwise provide for
customary terms and provisions for rights offerings to shareholders of
publicly traded companies that qualify as real estate investments
trusts under the Code.
8. TERMINATION.
-----------
The Purchaser may terminate this Agreement if the transactions
contemplated hereby are not consummated by February 11, 2000 through no
fault of the Purchaser. In addition, this Agreement shall terminate upon
mutual consent of the parties hereto and the Agents.
9. NOTICES.
-------
All communications hereunder will be in writing and, if to the
Company, will be mailed, delivered or facsimiled and confirmed to it, at
the offices of the Company at Suite 1900, 55 Public Square, Cleveland, Ohio
44113-1937, Attention: Paul F. Levin, Facsimile: (216) 781-7364, with a
copy to Fried, Frank, Harris, Shriver & Jacobson, One New York Plaza, New
York, New York, 10004-1980 Attention: Steven G. Scheinfeld, Esq.,
Facsimile: (212) 859-8585; if to the Bank Agent at 130 Liberty Street, New
York, New York 10006, Attention: Jeffrey Baevsky, Facsimile: (212)
669-0764, with a copy Loeb & Loeb LLP, 345 Park Avenue, New York, New York
10154, Attention: Kenneth D. Freeman, Esq., Facsimile: (212) 407-4990; if
to the GFB Agent at 130 Liberty Street, New York, New York 10006,
Attention: Jeffrey Baevsky, Facsimile: (212) 669-0764, with a copy Loeb &
Loeb LLP, 345 Park Avenue, New York, New York 10154, Attention: Kenneth D.
Freeman, Esq., Facsimile: (212) 407-4990; and, if to the Purchaser, will be
mailed, delivered or facsimiled and confirmed to it, at the offices of
Purchaser at Gotham Partners Management Co., LLC, 110 East 42nd Street,
18th Floor, New York, New York 10017, Attention: William A. Ackman,
Facsimile: (212) 286-1133, with copies to Goodwin, Procter & Hoar, LLP, 599
Lexington Avenue, 40th Floor, New York, New York 10022, Attention: Richard
J. Holmstrom, Facsimile: (212) 355-3333; with a copy to the Bank Agent and
the GFB Agent at 130 Liberty Street, New York, New York 10006, Attention:
Jeffrey Baevsky, Facsimile: (212) 669-0764; and Loeb & Loeb LLP, 345 Park
Avenue, New York, New York 10154, Attention: Kenneth D. Freeman, Esq.,
Facsimile: (212) 407-4990.
10. BINDING EFFECT.
--------------
This Agreement shall be binding upon, and shall inure solely to the
benefit of, each of the parties hereto, and each of their respective heirs,
executors, administrators, successors and permitted assigns, and no other
person shall acquire or have any right under or by virtue of this
Agreement. The parties acknowledge that this Agreement is being entered
into in order to induce the Lenders to make the Loans to the Company
pursuant to the Loan Agreements, that the Lenders would not make such Loans
in the absence of this Agreement and that the Lenders are relying upon the
consummation of the transactions contemplated hereby in making the Loans.
The parties therefore expressly agree that monetary damages would be
insufficient to compensate the Agents for any breach by the Company or
Purchaser of this Agreement and that the Agents shall be entitled to
specifically enforce any and all of the terms and provisions of this
Agreement against the Company and/or the Purchaser on their own behalf or
on behalf of the Lenders. Neither the Company nor the Purchaser may amend
this Agreement or assign any of its rights or obligations hereunder to any
other person or entity without the prior written consent of the Agents;
provided, however, that Purchaser may assign its rights (but not its
obligation) to purchase all or any portion of the Standby Securities
without the consent of either the Company or the Agents.
11. GOVERNING LAW.
-------------
This Agreement shall be governed by, and construed in accordance with,
the internal laws of the State of New York (without regard to its conflict
of laws provisions) in effect at the time of the execution hereof.
12. EXECUTION IN COUNTERPARTS.
-------------------------
This Agreement may be executed in any number of counterparts, each of
which counterparts when so executed and delivered shall be deemed to be an
original, but all such respective counterparts shall together constitute
but one and the same instrument.
13. ENTIRE AGREEMENT.
----------------
Except for any Subscription Rights Certificate which the Purchaser may
execute, this Agreement, together with the Loan Agreements and other
agreements related thereto, constitutes the entire agreement of the parties
with respect to the subject matter hereof.
14. DEFINED TERMS.
-------------
Capitalized terms used herein without definition and defined in the
Loan Agreements shall have meanings ascribed to such terms in the Loan
Agreements.
15. NON-SOLICITATION, ETC.
---------------------
Notwithstanding anything to the contrary contained herein, the Company
is not making, and shall not be deemed to have made, any offer to sell
securities to the Purchaser or any solicitation of an offer to buy
securities from the Purchaser. Any offer by the Company to the Purchaser to
purchase securities or solicitation by the Company of an offer to buy
securities from the Purchaser shall be made pursuant to the Shelf
Registration Statement with respect to the proposed Rights Offering which
covers an offer to Purchaser of the Standby Securities.
16. LIABILITY OF OFFICERS, TRUSTEES, ETC.
------------------------------------
Notwithstanding any provision of this Agreement to the contrary, this
Agreement has been executed and delivered by a duly authorized officer of
the Company, for and on behalf of the Company's trustees. The Agents and
Purchaser each acknowledge that neither the trustees of the Company, nor
any additional or successor trustees of the Company, nor any beneficiary,
officer, employee or agent of the Company, shall have any personal,
individual liability hereunder.
17. COMPANY COVENANT.
----------------
The Company hereby covenants and agrees to use its best efforts to
cause to be issued to the Purchaser a waiver of the ownership limitations
set forth in Article VI, Section 6 of the By-Laws of the Company, in form
and substance reasonably satisfactory to the Purchaser, to the extent
necessary (in light of all other equity securities directly, indirectly,
beneficially or constructively owned or controlled by or subject to the
power to vote of (in each case, within the meaning of the Company's Amended
Declaration of Trust, the Securities Exchange Act of 1934, as amended and
the rules and regulations thereunder and the Code Exchange Act and the
rules and regulations thereunder) the Purchaser) to permit the Purchaser to
acquire the Standby Securities; PROVIDED, HOWEVER, that notwithstanding the
foregoing (i) the Company shall not be obligated to take any action
hereunder which would prevent the Company from qualifying or continuing to
qualify for taxation under the Internal Revenue Code as a REIT or result in
the Company becoming disqualified for taxation under the Internal Revenue
Code as a REIT, and (ii) the Company shall not be prevented or restricted
hereunder with respect to taking any action which the Board of Trustees of
Borrower shall deem advisable to prevent disqualification of the Company
for taxation under the Internal Revenue Code as a REIT.
18. ASSIGNMENT.
----------
Notwithstanding anything herein or in the Loan Agreements to the
contrary, Agents and Company acknowledge and agree that Purchaser may
assign any or all of its rights and interests to acquire the Standby
Securities hereunder to one or more persons without the consent and either
the Agent or Company provided however, that notwithstanding any such
assignment, Purchaser shall remain responsible in all respects for the
performance of all of its obligations hereunder.
[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.]
IN WITNESS WHEREOF, and intending to be legally bound thereby, each of
the Purchaser and the Company has signed or caused to be signed its name,
all as of the day and year first above written.
FIRST UNION REAL ESTATE
EQUITY AND MORTGAGE INVESTMENTS
By: /s/ Thomas T. Kmiecik
-------------------------------------
Name: Thomas T. Kmiecik
Title: Senior Vice President-
Treasurer
GOTHAM PARTNERS, L.P.
By: Section H Partners, L.P.
By: Karenina Corp.
By: /s/ William A. Ackman
---------------------------
Name: William A. Ackman
Title: President
ACKNOWLEDGED AND AGREED:
BANKERS TRUST COMPANY, as Bank Agent
By: /s/ Alexander B. Johnson
-------------------------------
Name: Alexander B. Johnson
Title: Managing Director
BANKERS TRUST COMPANY, as GFB Agent
By: /s/ Alexander B. Johnson
-------------------------------
Name: Alexander B. Johnson
Title: Managing Director
SCHEDULE (VII)
CERTAIN LITIGATION
NONE
EXHIBIT 57
STANDBY PURCHASE AGREEMENT
THIS STANDBY PURCHASE AGREEMENT (as the same may be amended or
otherwise modified from time to time, the "AGREEMENT"), made and entered
into as of August 11, 1998, by and between (i) First Union Real Estate
Equity and Mortgage Investments, a business trust organized under the laws
of Ohio (the "COMPANY"), and (ii) Gotham Partners III, L.P., a New York
limited partnership (together with its permitted successors and assigns
hereunder the "PURCHASER") and acknowledged and agreed to by (a) Bankers
Trust Company, a New York banking corporation, as agent under that certain
Fixed Rate Loan Agreement (as the same may be amended or otherwise modified
from time to time, the "BANK LOAN AGREEMENT") dated as of August 11, 1998
(in such capacity, together with its successors and assigns under the Bank
Loan Agreement, the "BANK AGENT"), and (b) Bankers Trust Company, a New
York banking corporation, as agent under that certain Fixed Rate Loan
Agreement (as the same may be amended or otherwise modified from time to
time, the "GFB LOAN AGREEMENT"; the Bank Loan Agreement and the GFB Loan
Agreement are referred to herein collectively, as the "LOAN AGREEMENTS")
dated as of August 11, 1998 (in such capacity, together with its successors
and assigns under the GFB Loan Agreement, the "GFB AGENT"; the Bank Agent
and the GFB Agent are referred to herein collectively, as the "Agents").
WITNESSETH:
WHEREAS, under the terms of the Loan Agreements, the lenders
thereunder (the "LENDERS") have agreed to make certain loans to the Company
(the "LOANS");
WHEREAS, in accordance with the terms of the Loan Agreements, the
Company is required to implement a rights offering (the "RIGHTS OFFERING")
pursuant to which it anticipates issuing certain rights (the "RIGHTS") to
subscribe for and purchase additional securities of the Company (the
securities issued pursuant to such Rights being referred to herein
individually as a "SECURITY", and collectively, as the "SECURITIES") which
Securities may consist, in whole or in part, of a unit entitling the owner
of such unit to purchase one or more securities of the Company, at a price
per Security (the "SUBSCRIPTION PRICE") to be determined by the Company at
the time such Rights are issued, and which in any event would, if fully
subscribed, result in aggregate proceeds to the Company of not less than
the outstanding principal, accrued and unpaid interest, fees and any other
amounts due in connection with the Loan Agreements; and
WHEREAS, in order to induce the Lenders to make the Loans to the
Company, the Purchaser is required to, and by these presents hereby does,
agree to serve as a Standby Purchaser (defined below) for a specified
amount of Securities available for issuance upon the expiration of
unexercised Rights, and the Company has agreed with the Agents and the
Purchaser to issue and sell such Securities to the Purchaser, all as is
more particularly set forth herein.
NOW, THEREFORE, for and in consideration of the premises, and other
good and valuable consideration the receipt and sufficiency of all of which
is hereby acknowledged, the parties hereto agree as follows:
1. RIGHTS OFFERING.
---------------
The Company will, as promptly as possible, (i) prepare the appropriate
documentation for the Rights Offering, (ii) commence the Rights Offering
and (iii) consummate the Rights Offering, all in accordance with the
Company's obligations under Article XI of the Loan Agreements.
2. PURCHASE AND DELIVERY OF UNSUBSCRIBED SECURITIES.
------------------------------------------------
(a) The Purchaser, the Agents and the Company hereby acknowledge
and agree that the Company may enter into, or contemplates entering into,
one or more other Standby Purchase Agreements (the "ADDITIONAL STANDBY
AGREEMENTS") with certain other parties (together with the Purchaser, the
"STANDBY PURCHASERS") providing for the same Subscription Price per
Security as this Agreement and having material terms substantially similar
to those in this Agreement except that they may provide for the purchase of
a different number of Standby Securities (defined below) in subsection 2(b)
and in certain instances, may not provide for delivery of the waiver of
ownership limitations described in subsection 7(a) and Section 17 of this
Agreement. The rights or obligations of the Agents, the Purchaser and the
Company hereunder are not contingent on the consummation of the
transactions contemplated in any of the Additional Standby Agreements.
Notwithstanding the foregoing, the Purchaser, the Agents and the Company
hereby acknowledge and agree that if any Standby Purchaser fails to
purchase its "Standby Securities" ("DEFAULTED STANDBY SECURITIES") in
accordance with the terms of its respective Additional Standby Agreement,
the Purchaser shall have the right (but not the obligation), at its option,
in its sole discretion, to purchase all or any portion of such Defaulted
Standby Securities at a price equal to the Subscription Price per Security;
PROVIDED, HOWEVER, if multiple Standby Purchasers (including the Purchaser)
exercise rights to acquire Defaulted Standby Securities (the "EXERCISING
STANDBY PURCHASERS"), such Defaulted Standby Securities shall be allocated
to each such Exercising Standby Purchaser pro rata in the same proportion
as the Standby Securities that each such Exercising Standby Purchaser has
agreed to purchase bears to the aggregate number of Standby Securities to
be purchased by all Exercising Standby Purchasers, to the extent necessary
to avoid an oversubscription with respect to such Defaulted Standby
Securities.
(b) Subject to the terms and conditions herein set forth, the
Company hereby agrees with the Agents and the Purchaser to issue and sell
to the Purchaser, and the Purchaser hereby agrees with the Agents and the
Company to purchase from the Company, at the Subscription Price, the number
of Securities (the "STANDBY SECURITIES") equal to 0.777778% of the Residual
Securities (defined below). For purposes of this Agreement the term
"RESIDUAL SECURITIES" shall mean a number of Securities (which number shall
not be less than zero), equal to (i) the aggregate outstanding principal
amount of the Loans, plus all accrued and unpaid interest and fees and any
other amounts due thereunder, as of the date the Rights may no longer be
exercised by the recipients of the Rights pursuant to the terms of the
Rights Offering, DIVIDED BY the Subscription Price, MINUS (ii) the number
of Securities validly subscribed for through the exercise of the Rights in
accordance with the terms of the Rights Offering (including the exercise of
any oversubscription options or privileges).
3. THE CLOSING.
-----------
Promptly following its determination of the number of Securities
validly subscribed for through the exercise of the Rights in accordance
with the terms of the Rights Offering (including the exercise of any
oversubscription options or privileges), the Company shall notify the
Purchaser of the number of Standby Securities, if any, to be purchased by
the Purchaser pursuant to Section 2(b). The delivery of and payment for the
Standby Securities shall take place at the New York offices of Fried,
Frank, Harris, Shriver & Jacobson at 10:00 a.m., New York City time, on the
date of the sale of the Securities to the subscribing shareholders in the
Rights Offering (such time and date being referred to as the "CLOSING
TIME", the date of the Closing Time being referred to as the "CLOSING DATE"
and the consummation of the transaction being referred to as the
"CLOSING").
4. DELIVERY OF STANDBY SECURITIES.
------------------------------
At the Closing, the Standby Securities to be purchased by the
Purchaser hereunder, registered in the name of the Purchaser or such of its
nominees as the Purchaser may specify at least two business days prior to
the Closing Date, shall be delivered by or on behalf of the Company to the
Purchaser, for the Purchaser's account, and Purchaser shall deliver the
Subscription Price for each Standby Security purchased by the Purchaser in
immediately available funds in the form of one or more wire transfers to an
account designated by the Company.
5. REPRESENTATIONS AND WARRANTIES.
------------------------------
(a) The Company hereby represents and warrants to the Purchaser and
the Agents as of the date hereof and as of the Closing Date as follows:
(i) The Company is a real estate investment trust (a "REIT")
within the meaning of Section 856 of the Internal Revenue Code of
1986, as amended (the "CODE"), has complied with all applicable
material provisions of the Code relating to a REIT and has been
duly formed and is an existing business trust in good standing
under the laws of the State of Ohio with all requisite power and
authority to perform its obligations under this Agreement and the
Rights Offering.
(ii) The execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of
the transactions contemplated hereby have been duly authorized by
all necessary trust action of the Company; and this Agreement,
when duly executed and delivered by the Purchaser and
acknowledged and agreed to by the Agents, will constitute a valid
and legally binding instrument of the Company enforceable in
accordance with its terms, subject to bankruptcy, insolvency,
reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to
general equity principles.
(iii) On or prior to the date the Rights Offering shall be
commenced by the Company, the Rights and the Standby Securities
shall have been duly authorized by the Company, the Standby
Securities and any securities into which the Standby Securities
may be exercisable or convertible shall have been reserved for
issuance by the Company and the Standby Securities when issued
and delivered by the Company against payment therefor as
contemplated hereby, will be validly issued, fully paid and
non-assessable.
(iv) The execution and delivery of this Agreement by the
Company, the consummation by the Company of the transactions
herein contemplated and the compliance by the Company with the
terms hereof do not and will not violate the Amended Declaration
of Trust or By-laws of the Company as in effect as of the date
hereof, or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Company is a party or by which the
Company is bound or to which any of its Properties or assets are
subject, with such exceptions as would not have a Material
Adverse Effect, or any applicable statute or any order, judgment,
decree, rule or regulation of any court or governmental agency or
body having jurisdiction over the Company or any of its
Properties or assets; and no consent, approval, authorization,
order, registration or qualification of or with any such court or
governmental agency or body is required for the valid
authorization, execution, delivery and performance by the Company
of this Agreement, the issue of the Rights and the Standby
Securities or the consummation by the Company of the other
transactions contemplated by this Agreement, except such as have
been, or prior to the Closing Time will have been, obtained under
the Securities Act, and such consents, approvals, authorizations,
registrations or qualifications as may be required under
applicable state securities or "blue sky" laws.
(v) The Standby Securities, and any securities into which
they are exercisable or convertible, shall be issued by the
Company under either that certain registration statement on Form
S-3 (No. 333-31695) originally filed with the Securities and
Exchange Commission (the "COMMISSION") on July 21, 1997, and
declared effective on August 6, 1997, as the same may be amended
and supplemented through one or more prospectus supplements or
post-effective amendments and/or under a subsequently filed
registration statement necessary to implement the Rights Offering
in accordance with the requirements of Section 1 of this
Agreement (collectively, the "SHELF REGISTRATION STATEMENT"). The
Shelf Registration Statement shall be effective at the time of
the purchase by the Purchaser of any Standby Securities and no
stop order suspending the effectiveness of such registration
statement or any amendment or supplement thereto shall have been
issued. Any common stock that comprises a portion of the Standby
Securities and any securities issuable upon exercise or
conversion of the Standby Securities shall be listed on the New
York Stock Exchange as of the Closing Date.
(vi) As of the date hereof, the Shelf Registration Statement
does not include any untrue statement of a material fact or omit
to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and, as
of the Closing Date, the Shelf Registration Statement and the
prospectus included therein will not include any untrue statement
of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein not
misleading.
(b) The Purchaser hereby represents and warrants to the Company and
the Agents as follows:
(i) The Purchaser is a limited partnership duly formed,
validly existing and in good standing under the laws of the State
of New York, with partnership power and authority to perform its
obligations under this Agreement and to own or hold under lease
its properties and to transact the businesses in which it is now
engaged, and to execute and deliver this Agreement.
(ii) The execution, delivery and performance of this
Agreement by the Purchaser and the consummation by the Purchaser
of the transactions contemplated hereby have been duly authorized
by all necessary partnership action of the Purchaser; and this
Agreement, when duly executed and delivered by the Purchaser will
constitute a valid and legally binding instrument, enforceable in
accordance with its terms subject to bankruptcy, insolvency,
reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to
general equity principles.
(iii) The Purchaser is not insolvent and has sufficient cash
funds on hand (including funds under management) and/or access to
margin loans or other credit to purchase the Standby Securities
on the terms and conditions contained in this Agreement and will
have such funds on the Closing Date. The Purchaser has
simultaneously with the execution and delivery of this Agreement
or prior thereto provided the Company and the Agents with
evidence or substantiated that Purchaser has the financial means
to satisfy its financial obligations under this Agreement and the
foregoing evidence and substantiation is a true and accurate
representation of such means.
(iv) No state, federal or foreign regulatory approvals,
permits, licenses, or consents or other contractual or legal
obligations are required in order for the Purchaser to enter into
this Agreement or otherwise purchase the Standby Securities,
except those that have been obtained or performed and those which
the failure to obtain or perform will not impair the Purchaser's
ability to perform its obligations under this Agreement.
(v) The execution and delivery of this Agreement, the
consummation by the Purchaser of the transactions herein
contemplated and the compliance by the Purchaser with the terms
hereof do not and will not conflict with, or result in a breach
or violation of any of the terms or provisions of, or constitute
a default under the partnership agreement of the Purchaser or
other applicable document governing the Purchaser or any
indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which the Purchaser is a party or by
which any of its Properties or assets are bound, with such
exceptions as would not have a material adverse effect on the
financial condition of the Purchaser, or any applicable statute
or any order, judgment, decree, rule or regulation of any court
or governmental agency or body, domestic or foreign, having
jurisdiction over the Purchaser or any of its Properties or
assets; and no consent, approval, authorization, order,
registration or qualification of or with any such court or
governmental agency or body is required for the valid
authorization, execution, delivery and performance by the
Purchaser of this Agreement or the consummation by the Purchaser
of the transactions contemplated by this Agreement.
(vi) The Purchaser has not entered into any contracts,
arrangements, understandings or relationships (legal or
otherwise) with any other person or persons with respect to any
securities of the Company, including but not limited to transfer
or voting of any of the securities, finder's fees, joint
ventures, loan or option arrangements, puts or calls, guarantees
of profits, division of profits or loss, or the giving or
withholding of proxies, except to the extent that any such
contract, arrangement, understanding or relationship shall have
only a minimal adverse effect on the ability of Purchaser to
consummate the transaction contemplated in this Agreement; and
the Purchaser does not own any securities of the Company which
are pledged or otherwise subject to a contingency the occurrence
of which would give another person voting power or investment
power over such securities, except to the extent that any such
pledge or contingency shall have only a minimal adverse effect on
the ability of Purchaser to consummate the transaction
contemplated in this Agreement.
(vii) Except as set forth on Schedule (vii), there are no
actions, suits or proceedings at law or in equity by or before
any Governmental Authority or other agency now pending or, to
Purchaser's knowledge, threatened against or affecting Purchaser,
except to the extent that any such action, suit or proceeding
shall have only a minimal adverse effect on the ability of
Purchaser to consummate the transaction contemplated in this
Agreement.
(viii) The Purchaser is not party to any agreement or
instrument or subject to any restriction which does or could
reasonably be expected to result in a material adverse effect on
the ability of the Purchaser to consummate the transaction
contemplated in this Agreement. The Purchaser is not in default
in any material respect in the performance, observance or
fulfillment of any of the obligations, covenants or conditions
contained in any material agreement or instrument to which it is
a party or by which such Purchaser is bound except to the extent
that any such default shall have only a minimal adverse effect on
the ability of Purchaser to consummate the transaction
contemplated in this Agreement.
(ix) The Purchaser has not filed, and is not contemplating
either the filing of a petition under any state or federal
bankruptcy or insolvency law or the liquidation of all or a major
portion of its assets or property, and the Purchaser has no
knowledge of any Person contemplating the filing of any such
petition against it.
6. PURCHASER NEGATIVE COVENANTS.
----------------------------
From the date hereof through the Closing Date, the Purchaser covenants
and agrees with Agents that it will not do, directly or indirectly, any of
the following:
(a) The Purchaser shall not dissolve, terminate or liquidate or
suffer any liquidation or dissolution.
(b) The Purchaser shall not cancel or otherwise forgive or
release any material claim or material Debt owed to the Purchaser by
any Person, unless such forgiveness or release is for adequate
consideration and in the ordinary course of Purchaser's business,
except to the extent that any forgiveness or release shall have only a
minimal adverse effect on the ability of Purchaser to consummate the
transaction contemplated in this Agreement.
(c) The Purchaser shall not enter into, or be a party to, any
transaction with any Affiliate of any Purchaser, except in the
ordinary course of business and on terms which are no less favorable
to the Purchaser or such Affiliate than would be obtained in a
comparable arm's-length transaction with an unrelated third party or
except to the extent that any such transaction shall have only a
minimal adverse effect on the ability of Purchaser to consummate the
transaction contemplated in this Agreement.
(d) The Purchaser shall not take any other action or actions
which individually or in the aggregate would result in the Purchaser
failing to have sufficient funds available on the Closing date to
purchase the Standby Securities on the terms and conditions set forth
in this Agreement.
7. CLOSING CONDITIONS.
------------------
The obligations of the Purchaser to consummate the purchase and sale
of the Standby Securities shall be subject, in the discretion of the
Purchaser, to satisfaction of each of the following conditions on or before
the Closing:
(a) the Company shall have caused to be issued to the
Purchaser a waiver of the ownership limitations set forth in
Article VI, Section 6 of the By-Laws of the Company, in form and
substance reasonably satisfactory to Purchaser, to the extent
necessary (in light of all other equity securities of the Company
directly, indirectly, beneficially or constructively owned or
controlled by or subject to the power to vote of (in each case,
within the meaning of the Company's Amended Declaration of Trust,
the Securities Exchange Act of 1934, as amended and the rules and
regulations thereunder and the Code and the rules and regulations
thereunder) the Purchaser) to permit the Purchaser to acquire the
Standby Securities;
(b) all of the Company's representations and warranties and
other statements in this Agreement (excluding subsection
5(a)(ii)) shall be true, correct and complete in all material
respects as of the Closing Time;
(c) no stop order suspending the effectiveness of the Shelf
Registration Statement or any amendment or supplement thereto
shall have been issued and no proceeding for that purpose shall
have been initiated or threatened by the Commission or any other
state or federal authority; and
(d) the Subscription Price and other material terms of the
Rights Offering shall be fair and reasonable to each of the
Purchaser, the Company and shareholders of the Company entitled
to participate in the Rights Offering, and the Rights Offering
shall otherwise provide for customary terms and provisions for
rights offerings to shareholders of publicly traded companies
that qualify as real estate investments trusts under the Code.
8. TERMINATION.
-----------
The Purchaser may terminate this Agreement if the transactions
contemplated hereby are not consummated by February 11, 2000 through no
fault of the Purchaser. In addition, this Agreement shall terminate upon
mutual consent of the parties hereto and the Agents.
9. NOTICES.
-------
All communications hereunder will be in writing and, if to the
Company, will be mailed, delivered or facsimiled and confirmed to it, at
the offices of the Company at Suite 1900, 55 Public Square, Cleveland, Ohio
44113-1937, Attention: Paul F. Levin, Facsimile: (216) 781-7364, with a
copy to Fried, Frank, Harris, Shriver & Jacobson, One New York Plaza, New
York, New York, 10004-1980 Attention: Steven G. Scheinfeld, Esq.,
Facsimile: (212) 859-8585; if to the Bank Agent at 130 Liberty Street, New
York, New York 10006, Attention: Jeffrey Baevsky, Facsimile: (212)
669-0764, with a copy to Loeb & Loeb LLP, 345 Park Avenue, New York, New
York 10154, Attention: Kenneth D. Freeman, Esq., Facsimile: (212) 407-4990;
if to the GFB Agent at 130 Liberty Street, New York, New York 10006,
Attention: Jeffrey Baevsky, Facsimile: (212) 669-0764, with a copy to Loeb
& Loeb LLP, 345 Park Avenue, New York, New York 10154, Attention: Kenneth
D. Freeman, Esq., Facsimile: (212) 407-4990; and, if to the Purchaser, will
be mailed, delivered or facsimiled and confirmed to it, at the offices of
Purchaser at Gotham Partners Management Co., LLC, 110 East 42nd Street,
18th Floor, New York, New York 10017, Attention: William A. Ackman,
Facsimile: (212) 286-1133, with copies to Goodwin, Procter & Hoar, LLP, 599
Lexington Avenue, 40th Floor, New York, New York 10022, Attention: Richard
J. Holmstrom, Facsimile: (212) 355-3333; with a copy to the Bank Agent and
the GFB Agent at 130 Liberty Street, New York, New York 10006, Attention:
Jeffrey Baevsky, Facsimile: (212) 669-0764; and Loeb & Loeb LLP, 345 Park
Avenue, New York, New York 10154, Attention: Kenneth D. Freeman, Esq.,
Facsimile: (212) 407-4990.
10 BINDING EFFECT.
--------------
This Agreement shall be binding upon, and shall inure solely to the
benefit of, each of the parties hereto, and each of their respective heirs,
executors, administrators, successors and permitted assigns, and no other
person shall acquire or have any right under or by virtue of this
Agreement. The parties acknowledge that this Agreement is being entered
into in order to induce the Lenders to make the Loans to the Company
pursuant to the Loan Agreements, that the Lenders would not make such Loans
in the absence of this Agreement and that the Lenders are relying upon the
consummation of the transactions contemplated hereby in making the Loans.
The parties therefore expressly agree that monetary damages would be
insufficient to compensate the Agents for any breach by the Company or
Purchaser of this Agreement and that the Agents shall be entitled to
specifically enforce any and all of the terms and provisions of this
Agreement against the Company and/or the Purchaser on their own behalf or
on behalf of the Lenders. Neither the Company nor the Purchaser may amend
this Agreement or assign any of its rights or obligations hereunder to any
other person or entity without the prior written consent of the Agents;
provided, however, that Purchaser may assign its rights (but not its
obligation) to purchase all or any portion of the Standby Securities
without the consent of either the Company or the Agents.
11. GOVERNING LAW.
-------------
This Agreement shall be governed by, and construed in accordance with,
the internal laws of the State of New York (without regard to its conflict
of laws provisions) in effect at the time of the execution hereof.
12. EXECUTION IN COUNTERPARTS.
-------------------------
This Agreement may be executed in any number of counterparts, each of
which counterparts when so executed and delivered shall be deemed to be an
original, but all such respective counterparts shall together constitute
but one and the same instrument.
13. ENTIRE AGREEMENT.
----------------
Except for any Subscription Rights Certificate which the Purchaser may
execute, this Agreement, together with the Loan Agreements and other
agreements related thereto, constitutes the entire agreement of the parties
with respect to the subject matter hereof.
14. DEFINED TERMS.
-------------
Capitalized terms used herein without definition and defined in the
Loan Agreements shall have meanings ascribed to such terms in the Loan
Agreements.
15. NON-SOLICITATION, ETC.
---------------------
Notwithstanding anything to the contrary contained herein, the Company
is not making, and shall not be deemed to have made, any offer to sell
securities to the Purchaser or any solicitation of an offer to buy
securities from the Purchaser. Any offer by the Company to the Purchaser to
purchase securities or solicitation by the Company of an offer to buy
securities from the Purchaser shall be made pursuant to the Shelf
Registration Statement with respect to the proposed Rights Offering which
covers an offer to Purchaser of the Standby Securities.
16. LIABILITY OF OFFICERS, TRUSTEES, ETC.
------------------------------------
Notwithstanding any provision of this Agreement to the contrary, this
Agreement has been executed and delivered by a duly authorized officer of
the Company, for and on behalf of the Company's trustees. The Agents and
Purchaser each acknowledge that neither the trustees of the Company, nor
any additional or successor trustees of the Company, nor any beneficiary,
officer, employee or agent of the Company, shall have any personal,
individual liability hereunder.
17. COMPANY COVENANT.
----------------
The Company hereby covenants and agrees to use its best efforts to
cause to be issued to the Purchaser a waiver of the ownership limitations
set forth in Article VI, Section 6 of the By-Laws of the Company, in form
and substance reasonably satisfactory to the Purchaser, to the extent
necessary (in light of all other equity securities directly, indirectly,
beneficially or constructively owned or controlled by or subject to the
power to vote of (in each case, within the meaning of the Company's Amended
Declaration of Trust, the Securities Exchange Act of 1934, as amended and
the rules and regulations thereunder and the Code Exchange Act and the
rules and regulations thereunder) the Purchaser) to permit the Purchaser to
acquire the Standby Securities; provided, however, that notwithstanding the
foregoing (i) the Company shall not be obligated to take any action
hereunder which would prevent the Company from qualifying or continuing to
qualify for taxation under the Internal Revenue Code as a REIT or result in
the Company becoming disqualified for taxation under the Internal Revenue
Code as a REIT, and (ii) the Company shall not be prevented or restricted
hereunder with respect to taking any action which the Board of Trustees of
Borrower shall deem advisable to prevent disqualification of the Company
for taxation under the Internal Revenue Code as a REIT.
18. ASSIGNMENT.
----------
Notwithstanding anything herein or in the Loan Agreements to the
contrary, Agents and Company acknowledge and agree that Purchaser may
assign any or all of its rights and interests to acquire the Standby
Securities hereunder to one or more persons without the consent and either
the Agent or Company provided however, that notwithstanding any such
assignment, Purchaser shall remain responsible in all respects for the
performance of all of its obligations hereunder.
[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.]
IN WITNESS WHEREOF, and intending to be legally bound thereby, each of
the Purchaser and the Company has signed or caused to be signed its name,
all as of the day and year first above written.
FIRST UNION REAL ESTATE
EQUITY AND MORTGAGE INVESTMENTS
By: /s/ Thomas T. Kmiecik
-------------------------------------
Name: Thomas T. Kmiecik
Title: Senior Vice President-
Treasurer
GOTHAM PARTNERS III, L.P.
By: Section H Partners, L.P.
By: Karenina Corp.
By: /s/ William A. Ackman
---------------------------
Name: William A. Ackman
Title: President
ACKNOWLEDGED AND AGREED:
BANKERS TRUST COMPANY, as Bank Agent
By: /s/ Alexander B. Johnson
-------------------------------
Name: Alexander B. Johnson
Title: Managing Director
BANKERS TRUST COMPANY, as GFB Agent
By: /s/ Alexander B. Johnson
-------------------------------
Name: Alexander B. Johnson
Title: Managing Director
SCHEDULE (VII)
--------------
CERTAIN LITIGATION
NONE
