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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------------
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
---------------------------------
Date of Report April 29, 1999
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First Union Real Estate Equity and Mortgage Investments
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(Exact name of registrant as specified in its charter)
Ohio 1-6249 34-6513657
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State or other jurisdiction (Commission File Number) (I.R.S. Employer
Identification No.)
Suite 1900, 55 Public Square
Cleveland, Ohio 44113-1937
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (216) 781-4030
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Former name or former address, if changed since last report.
Total number of pages in report 2.
<PAGE> 2
ITEM 5. OTHER EVENTS
------------
First Union Real Estate Equity and Mortgage Investments (the "Company")
has entered into amendments to its (1) Amended and Restated Credit Agreement,
dated as of November 1, 1997, among the Company, First Union Management, Inc.,
the lenders party thereto, and National City Bank, as Administrative Agent for
the lenders, (2) Fixed Rate Loan Agreement, dated as of August 11, 1998, among
the Company, BankBoston, N.A., Wellsford Capital and Bankers Trust Company, as
lenders, and Bankers Trust Company, as Agent for the lenders, and (3) Fixed Rate
Loan Agreement, dated as of August 11, 1998, among the Company, Blackacre Bridge
Capital, L.L.C., Gotham Partners, L.P., Gotham Partners III, L.P. and Elliott
Associates, L.P., as lenders, and Bankers Trust Company, as Agent for the
lenders. Copies of the amendments are being filed as Exhibits 1, 2 and 3 hereto.
In connection with the Company's rights offering (the "Rights Offering") as
described in the Company's Prospectus, dated April 13, 1999, as supplemented by
the Prospectus Supplement, dated April 21, 1999, the Company has entered into a
letter agreement with Gotham Partners, L.P., Gotham Partners III, L.P. and
Gotham Partners International, Ltd. (collectively, "Gotham") that sets forth the
terms of Gotham's agreement to act as a standby purchaser in the Rights
Offering. A copy of the letter agreement is being filed as Exhibit 4 hereto.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
---------------------------------
The following are filed as exhibit hereto:
Exhibits
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99.a) Amendment No. 3, dated as of March 1, 1999, to
Amended and Restated Credit Agreement, dated as of
November 1, 1997, among the Company, First Union
Management, Inc., the lenders party thereto, and
National City Bank, as Administrative Agent for the
lenders.
99.b) Second Amendment of Fixed Rate Loan Agreement, dated
as of April 19, 1999, among the Company, BankBoston,
N.A., Wellsford Capital and Bankers Trust Company, as
lenders, and Bankers Trust Company, as Agent for the
lenders.
99.c) Second Amendment of Fixed Rate Loan Agreement, dated
as of April 19, 1999, among the Company, Ableco
Finance LLC, for its own account and an agent for the
other lenders, Gotham Partners, L.P., Gotham Partners
III, L.P. and Elliott Associates, L.P., as lenders
and Bankers Trust Company, as Agent for the lenders.
99.d) Letter Agreement, dated April 19, 1999, among the
Company, Gotham Partners, L.P., Gotham Partners III,
L.P. and Gotham Partners International, Ltd.
<PAGE> 3
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
First Union Real Estate Equity
and Mortgage Investments
------------------------------
(Registrant)
Date: April 29, 1999 By: /S/ Gregory C. Scott
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Gregory C. Scott
Controller
<PAGE> 1
Exhibit 99(a)
FIRST UNION REAL ESTATE
EQUITY AND MORTGAGE INVESTMENTS
AS THE BORROWER
FIRST UNION MANAGEMENT, INC.
AS THE MANAGEMENT COMPANY
THE FINANCIAL INSTITUTIONS NAMED HEREIN
AS LENDERS
AND
NATIONAL CITY BANK
AS ADMINISTRATIVE AGENT
---------------------
AMENDMENT NO. 3
DATED AS OF
MARCH 1, 1999
TO
AMENDED AND RESTATED
CREDIT AGREEMENT
DATED AS OF
NOVEMBER 1, 1997
---------------------
<PAGE> 2
AMENDMENT NO. 3
TO
AMENDED AND RESTATED CREDIT AGREEMENT
THIS AMENDMENT NO. 3, dated as of March 1, 1999 ("THIS
AMENDMENT"), among FIRST UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS, a
real estate investment trust organized under the laws of Ohio (herein, together
with its successors and assigns, the "BORROWER"); FIRST UNION MANAGEMENT, INC.,
a Delaware corporation (herein, together with its successors and assigns, the
"Management Company"); the financial institutions listed on the signature pages
hereof (the "LENDERS"); and NATIONAL CITY BANK, a national banking association,
as Administrative Agent (the "ADMINISTRATIVE AGENT") for the Lenders under the
Credit Agreement:
PRELIMINARY STATEMENTS:
(1) The Borrower, the Management Company, the Lenders named
therein and the Administrative Agent entered into the Amended and Restated
Credit Agreement, dated as of November 1, 1997, as amended by Amendment No. 1
thereto, dated as of June 15, 1998, and Amendment No. 2 thereto, dated as of
January 8, 1999 (as so amended and in effect prior to the effective date of this
Amendment, the "CREDIT AGREEMENT"; with the terms defined therein, or the
definitions of which are incorporated therein, being used herein as so defined).
(2) The Borrower and the Management Company have requested the
Lenders and the Administrative Agent to amend certain of the provisions of the
Credit Agreement, all as more fully set forth below.
NOW, THEREFORE, the parties hereby agree as follows:
SECTION 1. AMENDMENTS AND AGREEMENTS.
1.1. VOLUNTARY REDUCTION OF THE TOTAL COMMITMENT. The Borrower
hereby voluntarily and permanently reduces the Total Commitment under the Credit
Agreement from $110,000,000 to $105,000,000, effective on the Effective Date of
this Amendment provided for in section 3 hereof. Such reduction shall be applied
to permanently and proportionally reduce the Commitments of each of the Lenders.
The Lenders hereby waive any requirement for prior notice of such reduction.
After giving effect to such reduction, the Commitments of the respective Lenders
will be as follows:
<TABLE>
<CAPTION>
LENDER COMMITMENT
<S> <C>
National City Bank $ 25,200,000
Bankers Trust Company $ 21,000,000
KeyBank National Association $ 21,000,000
The Huntington National Bank $ 16,800,000
Mellon Bank, N. A. $ 12,600,000
First Merit Bank $ 8,400,000
TOTAL COMMITMENT $105,000,000
</TABLE>
1.2. MANDATORY REDUCTION OF TOTAL COMMITMENT. Effective on the
Effective Date of this Amendment provided for in section 3 hereof, section
3.3(c) of the Credit Agreement is amended to read in its entirety as follows:
<PAGE> 3
(c) If as of any date specified below the Total
Commitment has not otherwise been permanently reduced to not
more than the amount specified below for such date, the Total
Commitment shall be automatically and permanently reduced,
without premium or penalty, on each of the dates specified
below to the amount specified for such date:
<TABLE>
<CAPTION>
DATE TOTAL COMMITMENT
<S> <C>
April 30, 1999 $80,000,000
June 30, 1999 $50,000,000
</TABLE>
Any such reduction shall apply to proportionately and
permanently reduce the Commitment of each of the Lenders.
1.3. MANDATORY PREPAYMENT. Effective on the Effective Date of
this Amendment provided for in section 3 hereof, section 4.2(d) of the Credit
Agreement is amended by adding a sentence at the end thereof, with the result
that as so amended, section 4.2(d) of the Credit Agreement reads in its entirety
as follows:
(d) Not later than one Business Day following the
date of receipt of any cash proceeds from the sale or other
disposition of any Mortgaged Property, an amount, conforming
to the requirements as to the amount of partial prepayments
contained in section 4.1, at least equal to 100% of such cash
proceeds (net of fees and expenses of the transaction) then
received from such sale or disposition, shall be applied as a
mandatory prepayment of principal of the outstanding Loans. In
addition, (i) in the event the Borrower successfully completes
a rights offering of its shares (such offering is expected to
be completed in May 1999 with gross proceeds of approximately
$50 million), not later than three Business Days following the
date of receipt of the proceeds from such offering, the
Borrower will make a one time mandatory prepayment of
principal of the outstanding Loans in an amount at least equal
to $9,000,000, or such lesser amount as is necessary to prepay
all outstanding Loans in full; and (ii) if after no loans are
outstanding under the Borrower's Fixed Rate Loan Agreements,
dated as of August 11, 1998, as amended, the Borrower receives
any proceeds from (1) any sale of its shares, (2) any
disposition of a Subsidiary, (3) any disposition or
refinancing of real property and or improvements (including
leaseholds) not constituting a Mortgaged Property, or (4) any
refinancing of any Mortgaged Property which may be permitted
hereunder, then the Borrower will make a mandatory prepayment
of principal of the outstanding Loans in an amount at least
equal to 100% of the cash proceeds (net of fees and expenses
of the transaction and any amounts applied to pay Indebtedness
of the Subsidiary so sold or secured by the disposed property)
then received from such transaction, or such lesser amount as
is necessary to prepay all outstanding Loans in full.
1.4. ADDITIONAL COLLATERAL. Effective on the Effective Date of
this Amendment provided for in section 3 hereof, a new section 7.21 is added to
the Credit Agreement, reading in its entirety as follows:
7.21. ADDITIONAL COLLATERAL. If any Lender so
requests in writing at any time after no loans are outstanding
under the Borrower's Fixed Rate Loan Agreements, dated as of
August 11, 1998, as amended, the Borrower will, or will cause
its Subsidiaries to, within 15
<PAGE> 4
Business Days, grant to the Administrative Agent, as security
for the Obligations, a mortgage, deed of trust or similar
instrument (similar in form and provisions to the Mortgages
previously delivered to the Administrative Agent, but
conforming to any local legal requirements) covering any real
property and improvements (including leaseholds) owned by the
Borrower or any of its Subsidiaries which is identified by
such Lender, located in the United States and is not at the
time then (x) encumbered by a mortgage or similar instrument
securing indebtedness of the Borrower or any of its
Subsidiaries, or (y) owned by Imperial Parking Limited or
Impark Services Limited or any of their Subsidiaries and
subject to restrictions contained in the Canco Credit
Agreement or any related documents which would effectively
prohibit any such mortgage, deed of trust or similar
instrument. No appraisal or environmental assessment shall be
required to be delivered hereunder in connection with any such
mortgage, deed of trust or similar instrument entered into
with the Administrative Agent, notwithstanding anything to the
contrary contained in this Agreement, any of the other Loan
Documents or any other document.
1.5. ADDITIONAL RESTRICTION ON USE OF PROCEEDS. Effective on
the Effective Date of this Amendment provided for in section 3 hereof, a new
section 7.22 is added to the Credit Agreement, reading in its entirety as
follows:
7.22. ADDITIONAL RESTRICTION ON USE OF PROCEEDS. No
Borrowing shall be made after March 22, 1999 if after giving
effect thereto the Unutilized Total Commitment is less than
$4,400,000 (any such Borrowing, to the extent it represents a
reduction of the Unutilized Total Commitment below $4,400,000,
a "LIMITED USE BORROWING"), unless at the time the Borrower
requests such Limited Use Borrowing, the Borrower provides a
certificate to the Administrative Agent, certifying that the
proceeds of such Limited Use Borrowing are to be immediately
applied to payment of the cost and expense of tenant
improvements on Properties leased to persons who are not
Affiliates, specifying in reasonable detail the amount,
character and location of the tenant improvements to be so
financed, and certifying that no prior Limited Use Borrowing
has been made to finance such costs and expenses of tenant
improvements. The Borrower undertakes and covenants that the
proceeds of any Limited Use Borrowing will be immediately
applied to the payment of the costs and expenses of tenant
improvements identified by the Borrower in its certificate
delivered to the Administrative Agent at the time the Borrower
requested such Borrowing. This section 7.22 shall cease being
effective when the Borrower has (x) applied cumulative
proceeds of Loans made after March 22, 1999 of at least
$4,400,000 to finance costs and expenses of tenant
improvements referred to above, and (y) notified the Lenders
in writing of such application, describing in reasonable
detail the amount and purpose of the expenditures by location.
1.6. FINANCIAL COVENANTS---ADJUSTED NET WORTH. The last two
sentences of section 7.16(d) of the Credit Agreement are amended to read in
their entirety as follows:
Notwithstanding the foregoing, the foregoing amount (as it may
be increased from time to time as provided above) shall also
be reduced, but not below $80,000,000, by the amount of any
downward adjustments to Adjusted Net Worth made (i) for any
write-down in the carrying value of any specific assets which
is made subsequent to September 30, 1998 in accordance with
the requirements of GAAP, and (ii) to give effect to a
reduction in the depreciable lives of fixed assets, which
change is made after September 30, 1998 as a consequence of
comments from the staff of the SEC. The Borrower will promptly
advise the Lenders in writing of the date, amount and identity
of assets involved in any such write-down, and of the dollar
amounts by relevant period of the change in depreciation
resulting from such change in depreciable lives.
1.7. DEFINITION OF NET INCOME. The definition of the term Net
Income contained in
<PAGE> 5
section 10.1 of the Credit Agreement is amended by changing the quarterly
amount in clause (iv)(A) thereof from $2,500,000 to $4,000,000.
SECTION 2. REPRESENTATIONS AND WARRANTIES.
2.1. REPRESENTATIONS AND WARRANTIES OF THE BORROWER. The
Borrower represents and warrants that: (a) this Amendment has been duly
authorized by all necessary organizational action on its part, has been duly
executed and delivered by it, and constitutes its valid and binding agreement,
enforceable against it in accordance with its terms, SUBJECT to the
qualifications specified in section 6.3(b) of the Credit Agreement; (b) its
representations and warranties contained in the Credit Agreement, as amended
hereby, are true and correct on and as of the date hereof as though made on and
as of the date hereof, except to the extent that such representations and
warranties expressly relate to a specified date, in which case such
representations and warranties are hereby reaffirmed as true and correct when
made; (c) no condition or event has occurred or exists which constitutes or
which, after notice or lapse of time or both, would constitute an Event of
Default; (d) it is in full compliance with all covenants and agreements
contained in the Credit Agreement, as amended hereby, and the other Loan
Documents to which it is a party; and (e) the Borrower has furnished the Lenders
with a true, correct and complete copy of the Borrower's Form 10-Q Quarterly
Report for the fiscal period ended September 30, 1998, as filed with the SEC,
and the financial statements included in such Form 10-Q Quarterly Report present
fairly in all material respects the consolidated financial position of the
Borrower and its Subsidiaries (as combined with the Management Company, if so
presented) and the consolidated results of their operations (combined as
aforesaid, if so presented), subject to routine year-end audit adjustments and
to additional adjustments related to the Borrower's determination to reduce the
depreciable lives of its assets and/or write-down the carrying value of its
assets, all as announced publicly on or prior to March 15, 1999.
2.2. REPRESENTATIONS AND WARRANTIES OF THE MANAGEMENT COMPANY.
The Management Company represents and warrants that: (a) this Amendment has been
duly authorized by all necessary corporate action on its part, has been duly
executed and delivered by it, and constitutes its valid and binding agreement,
enforceable against it in accordance with its terms, subject to the
qualifications specified in section 6.3(b) of the Credit Agreement; (b) its
representations and warranties contained in the Credit Agreement, as amended
hereby, are true and correct on and as of the date hereof as though made on and
as of the date hereof, except to the extent that such representations and
warranties expressly relate to a specified date, in which case such
representations and warranties are hereby reaffirmed as true and correct when
made; (c) no condition or event has occurred or exists which constitutes or
which, after notice or lapse of time or both, would constitute an Event of
Default; and (d) it is in full compliance with all covenants and agreements
contained in the Credit Agreement, as amended hereby, and the other Loan
Documents to which it is a party.
SECTION 3. EFFECTIVENESS.
This Amendment shall become effective if and when, on a date
(the "EFFECTIVE DATE"), on or prior to April 30, 1999, the following conditions
shall be satisfied:
(a) this Amendment shall have been executed by the
Borrower, the Management Company and the Administrative Agent,
and counterparts hereof as so executed shall have been
delivered to the Administrative Agent;
(b) the Administrative Agent shall have been notified
by all of the Lenders that such Lenders have executed this
Amendment (which notification may be by facsimile or
<PAGE> 6
other written confirmation of such execution);
(c) the Borrower shall have paid to the
Administrative Agent, for PRO RATA distribution to the
Lenders, an amendment fee in the amount of $262,500; and
(d) on or prior to the Effective Date, the Borrower
shall have delivered to the Lenders copies of an undertaking
or agreement of the Borrower's lenders under its Fixed Rate
Loan Agreements, dated as of August 11, 1998, as amended,
pursuant to which such lenders agree or it is provided that at
least $9,000,000 of proceeds of the Borrower's pending rights
offering may be applied as a prepayment of the Loans under the
Credit Agreement, and such undertaking or agreement shall be
in full force and effect and satisfactory in form and
substance to each of the Lenders.
The Administrative Agent shall notify the Borrower and each Lender in writing of
the Effective Date.
SECTION 4. RATIFICATIONS.
The terms and provisions set forth in this Amendment shall
modify and supersede all inconsistent terms and provisions set forth in the
Credit Agreement, and except as expressly modified and superseded by this
Amendment, the terms and provisions of the Credit Agreement are ratified and
confirmed and shall continue in full force and effect.
SECTION 5. MISCELLANEOUS.
5.1. SUCCESSORS AND ASSIGNS. This Amendment shall be binding
upon and inure to the benefit of the Borrower, each Lender and the
Administrative Agent and their respective permitted successors and assigns.
5.2. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties made in this Amendment shall survive the
execution and delivery of this Amendment, and no investigation by the
Administrative Agent or any Lender or any subsequent Loan or issuance of a
Letter of Credit shall affect the representations and warranties or the right of
the Administrative Agent or any Lender to rely upon them.
5.3. REFERENCE TO CREDIT AGREEMENT. The Credit Agreement and
any and all other agreements, instruments or documentation now or hereafter
executed and delivered pursuant to the terms of the Credit Agreement as amended
hereby, are hereby amended so that any reference therein to the Credit Agreement
shall mean a reference to the Credit Agreement as amended hereby.
5.4. EXPENSES. As provided in the Credit Agreement, but
without limiting any terms or provisions thereof, the Borrower agrees to pay on
demand all costs and expenses incurred by the Administrative Agent in connection
with the preparation, negotiation, and execution of this Amendment, including
without limitation the costs and fees of the Administrative Agent's special
legal counsel, regardless of whether this Amendment becomes effective in
accordance with the terms hereof, and all costs and expenses incurred by the
Administrative Agent or any Lender in connection with the enforcement or
preservation of any rights under the Credit Agreement, as amended hereby.
<PAGE> 7
5.5. SEVERABILITY. Any term or provision of this Amendment
held by a court of competent jurisdiction to be invalid or unenforceable shall
not impair or invalidate the remainder of this Amendment and the effect thereof
shall be confined to the term or provision so held to be invalid or
unenforceable.
5.6. APPLICABLE LAW. This Amendment shall be governed by and
construed in accordance with the laws of the State of Ohio.
5.7. HEADINGS. The headings, captions and arrangements used in
this Amendment are for convenience only and shall not affect the interpretation
of this Amendment.
5.8. ENTIRE AGREEMENT. This Amendment is specifically limited
to the matters expressly set forth herein. This Amendment and all other
instruments, agreements and documentation executed and delivered in connection
with this Amendment embody the final, entire agreement among the parties hereto
with respect to the subject matter hereof and supersede any and all prior
commitments, agreements, representations and understandings, whether written or
oral, relating to the matters covered by this Amendment, and may not be
contradicted or varied by evidence of prior, contemporaneous or subsequent oral
agreements or discussions of the parties hereto. There are no oral agreements
among the parties hereto relating to the subject matter hereof or any other
subject matter relating to the Credit Agreement.
5.9. LIABILITY OF BORROWER'S TRUSTEES, ETC. Notwithstanding
any provision of this Amendment to the contrary, this Amendment has been
executed and delivered by a duly authorized officer of the Borrower, for and on
behalf of the Borrower's trustees. The Administrative Agent and each Lender each
acknowledges that neither the trustees of the Borrower, nor any additional or
successor trustees of the Borrower, nor any beneficiary, officer, employee or
agent of the Borrower, shall have any personal, individual liability hereunder
or under any of the Loan Documents. The Administrative Agent and each Lender
agrees to look solely to the Property and assets of the Borrower (and, where so
provided herein or in any of the Loan Documents, to the Property and assets of
the Management Company) for the satisfaction of all claims of any nature arising
under or in connection with this Amendment.
5.10. COUNTERPARTS. This Amendment may be executed by the
parties hereto separately in one or more counterparts, each of which when so
executed shall be deemed to be an original, but all of which when taken together
shall constitute one and the same agreement.
<PAGE> 8
IN WITNESS WHEREOF, this Amendment has been duly executed and
delivered as of the date first above written.
<TABLE>
<CAPTION>
<S> <C>
FIRST UNION REAL ESTATE EQUITY FIRST UNION MANAGEMENT, INC.
AND MORTGAGE INVESTMENTS
BY:_____________________________ By:_____________________________
TITLE: Title:
NATIONAL CITY BANK, BANKERS TRUST COMPANY,
individually and as Administrative Agent individually and as Syndication Agent
By:_____________________________ By:_____________________________
Title: Title:
KEYBANK NATIONAL ASSOCIATION, MELLON BANK, N. A.
individually and as Documentation Agent
By:_____________________________
By:_____________________________ Title:
Title:
THE HUNTINGTON NATIONAL BANK FIRST MERIT BANK
By:_____________________________ By:_____________________________
Title: Title:
</TABLE>
<PAGE> 1
Exhibit 99(b)
SECOND AMENDMENT OF FIXED RATE LOAN AGREEMENT
SECOND AMENDMENT OF FIXED RATE LOAN AGREEMENT (as the same may
be amended or otherwise modified from time to time, the "AMENDMENT"), dated as
of the 19th day of April 1999, among First Union Real Estate Equity and Mortgage
Investments, as Borrower; BankBoston, N.A., Wellsford Capital and Bankers Trust
Company, as Lenders; and Bankers Trust Company, as Agent.
W I T N E S S E T H:
--------------------
WHEREAS, pursuant to that certain Fixed Rate Loan Agreement
dated as of August 11, 1998 among the parties hereto (as amended by a First
Amendment of Fixed Rate Loan Agreement dated as of January 8, 1999 and a letter
agreement dated January 8, 1999 and as the same may further be amended or
otherwise modified from time to time, the "LOAN AGREEMENT"), Lenders made loans
to Borrower in the original aggregate principal amount of Forty-Five Million and
00/100 ($45,000,000.00) Dollars;
WHEREAS, without limiting Borrower's obligations under the
Loan Agreement, Borrower contemplates that on or about April 29, 1999, but in no
event later than May 15, 1999, it will complete a rights offering and that the
net proceeds of such offering available to Borrower will equal or exceed
$41,000,000;
WHEREAS, all of such net proceeds shall be applied to repay
the Loans and the Other Loans and $9,000,000 thereof shall be readvanced to
Borrower, as described in this Amendment; and
WHEREAS, to implement the foregoing, Borrower, Lenders and
Agent desire to modify and amend the terms and provisions of the Loan Agreement
as hereinafter provided.
NOW, THEREFORE, in consideration of the covenants set forth
herein and for other good and valuable consideration, the receipt and legal
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
1. DEFINITIONS. All capitalized terms used herein
without definition and which are defined in the Loan
Agreement are used herein with the meanings assigned
to such terms in the Loan Agreement.
2. PRESENT AMENDMENTS. The provisions of this PARAGRAPH
2 shall be effective upon the execution and delivery
of this Amendment.
a. SECTION 6.1.8 of the Loan Agreement is hereby amended to
delete the following: "obtain Lender Approval of the
registration statement for the Offering."
<PAGE> 2
b. SECTION 8.1(a)(xvi) of the Loan Agreement is hereby amended
to read, in its entirety, as follows:
"(xvi) if on April 29, 1999, (A) the
outstanding principal amount of the Loans is
$35,000,000 or more and (B) the Registration
Statement to be used by Borrower in an Offering which
will result in net proceeds to Borrower of
$41,000,000 or more is not effective;"
c. SECTION 8.1(a)(xvii) of the Loan Agreement is hereby
amended to read, in its entirety, as follows:
"(xvii) if on May 15, 1999, the outstanding principal
balance of the Loans is $18,955,000 or more; or"
d. SECTION 8.1(a) of the Loan Agreement is hereby amended to
add the following thereto as a new SECTION 8.1(a)(xviii):
"(xviii) without limiting any of the other provisions
of this SECTION 8.1(a), if Borrower defaults under any Standby
Purchase Agreement or if the First Subscription Price (as
defined in any Standby Purchase Agreement) or the Second
Subscription Price (as defined in any Standby Purchase
Agreement) shall exceed the subscription price per share at
which Borrower agreed, in the Standby Purchase Agreements, to
conduct the First Offering or the Second Offering, as the case
may be, or if Borrower takes any action, or permits any event
(within its reasonable control) to occur, which would release
or relieve any Standby Purchaser from its obligation(s) under
any Standby Purchase Agreement; provided, however, that it
shall not be an Event of Default under this clause (xviii) if
Borrower indemnifies any Standby Purchaser for its obligations
under any Standby Purchase Agreement or if Borrower and any
Standby Purchaser agree to a higher subscription price and
such agreement does not release any Standby Purchaser of its
obligations under any Standby Purchase Agreement."
e. SECTION 11.1 of the Loan Agreement is hereby amended to
read, in its entirety, as follows:
"Borrower shall use its best efforts to consummate,
on or before each of April 29, 1999 (but if the Registration
Statement to be used by Borrower in an offering which will
result in net proceeds to Borrower of $41,000,000 or more is
effective on or prior to April 29, 1999, then such foregoing
reference to April 29, 1999 shall be deemed to be May 15,
1999) and August 11, 1999 (each, a "REQUIRED PAYMENT DATE"),
an offering, or offerings, as the case may be (collectively,
the "OFFERING"), pursuant to the Registration Statement filed
by Borrower on September 17, 1998 (Registration No.
333-63547), as amended from time to time, and such
<PAGE> 3
other registration statements as Borrower shall deem necessary
or appropriate, which entitle(s) holders of equity securities
of Borrower to purchase additional equity securities of
Borrower, on a pro rata basis and which Offering, if fully
subscribed, would provide Borrower with net proceeds, together
with any other Capital Event Proceeds received by Borrower
prior to each Required Payment Date, sufficient to enable
Borrower to make principal payments on account of the Loans
and Other Loans such that no Event of Default will occur under
SECTIONS 8.1(a)(i), (xvi) or (xvii) of the Loan Agreement or
SECTIONS 8.1(a)(i), (xvi) or (xvii) of the Other Loan
Agreement. Borrower shall use its best efforts to take, or
cause to be taken, any and all further action or actions
necessary or advisable to be taken in order to consummate the
Offering when and as required by this SECTION 11.1, including
but not limited to the distribution of a prospectus or
preparation, filing and distribution of any necessary
prospectus supplement with respect to any of the applicable
registration statements referred to above. It shall be an
Event of Default if Borrower shall not commence, by sixteen
(16) days prior to each of May 15, 1999 and August 11, 1999,
an Offering which, if fully subscribed, would provide the
Borrower with net proceeds, together with any other Capital
Event Proceeds received by Borrower prior to each of May 15,
1999 and August 11, 1999, sufficient to enable Borrower to
satisfy such principal payment or amortization requirements
(as previously reduced by other prepayments) under the Loans
and Other Loans due on such dates. Following the commencement
of such Offering, Borrower shall diligently proceed to
consummate such Offering. Borrower shall use its best efforts
to cause the Registration Statement filed by Borrower on
September 17, 1998 (Registration No. 333-6351) to be declared
effective on or prior to April 29, 1999."
f. The definition of Line of Credit Facility is hereby amended
to include, as part of the Amended and Restated Credit
Agreement referred to in such definition, that certain
Amendment No. 3 dated as of March 1, 1999 to the Amended and
Restated Credit Agreement dated as of November 1, 1997, a copy
of which Amendment No. 3 is annexed to this Amendment as
EXHIBIT A. Accordingly, the references in SECTIONS 6.1.9 and
7.1.3 of the Loan Agreement to the Line of Credit Facility "as
in effect on the date hereof" and in SECTION 8.1(a)(xii) of
the Loan Agreement to the Prior Debt Documents "as in effect
on the date hereof" (to the extent such reference to the Prior
Debt Document is a reference to the Line of Credit Facility)
shall mean the Line of Credit Facility as in effect after
giving effect to Amendment No. 3.
g. On the execution and delivery of this Amendment, Borrower
shall pay to Agent (for the ratable benefit of Lenders) a
non-refundable payment of one-quarter of one percent (.25%) of
the outstanding principal balance of the Loans as of March 31,
1999, and this payment is in addition to any other payments
payable by Borrower under the Loan Documents.
<PAGE> 4
h. With respect to SECTION 2.11 of the Loan Agreement and
PARAGRAPH 4 of the Intercreditor Agreement, it is agreed that
such provisions shall be implemented through purchases of
interests in the Loans and the Other Loans (not
participations) at face and effective as of the date the
payment was improperly made or received, with each party to
bear its own expenses, and accrued and unpaid interest on such
interests shall be equitably adjusted and shared, when
received by Agent, by the purchaser and the seller of such
interests. In addition, the Person making the purchase shall
pay interest to the seller of such interest at six percent
(6%) per annum from the date of the original payment which is
being redistributed as a result of SECTION 2.11 of the Loan
Agreement or PARAGRAPH 4 of Intercreditor Agreement to the
date of purchase.
3. FUTURE AMENDMENTS. If the rights offering referred to in the
recitals hereto is timely consummated, no Default and/or Event
of Default shall exist and be continuing and the Net Proceeds
(as defined below) of the rights offering referred to in the
recitals to this Amendment are timely applied as provided in
PARAGRAPH 3(a) below, then the provisions of this PARAGRAPH 3
shall become operative; otherwise they shall have no force or
effect.
a. Borrower hereby confirms that it is obligated to apply the
entire net proceeds (the "NET PROCEEDS") of the rights
offering referred to in the recitals to this Amendment to
reduce the principal of the Loans and the Other Loans.
However, if the Net Proceeds equal or exceed $41,000,000, then
Borrower may, by written notice to Agent given on the date the
Net Proceeds become available to the Borrower (but in no event
later than May 15, 1999), elect that $9,000,000 of the
repayments of the principal of the Loans and the Other Loans
be readvanced to Borrower by certain of the Lenders and
certain of the Other Lenders (which term shall refer to the
"Lenders" under the Other Loan Agreement) specified below. Any
such notice must be accompanied by a currently dated
certificate of Borrower's chief financial officer and chief
executive officer, in such capacities, stating that no Default
and/or Event of Default then exists under the Loan Agreement
and that no "Default" and/or "Event of Default" (as such
quoted terms are defined in the Other Loan Agreement) then
exists under the Other Loan Agreement. If no Default and/or
Event of Default shall then exist under the Loan Agreement and
if no "Default" and/or "Event of Default" (as such quoted
terms are defined in the Other Loan Agreement) shall then
exist under the Other Loan Agreement, Bankers Trust Company
shall readvance to Borrower $3,000,000 under the Loan
Agreement (and such readvance shall be referred to as the
"READVANCED LOAN") and Gotham Partners, L.P., Gotham Partners
III, L.P. and Elliott Associates, L. P. shall, in the
aggregate, readvance (each maker of an Other Readvanced Loan
only being obligated so to readvance the amount set forth
opposite its name in (ii) through (iv) below) to Borrower
$6,000,000 under the Other Loan Agreement (and such readvance
shall be referred to as the
<PAGE> 5
"OTHER READVANCED LOANS"; the Readvanced Loan and the Other
Readvanced Loans are, collectively, the "AGGREGATE READVANCED
LOANS"). Bankers Trust Company agrees to make its Readvanced
Loan concurrently with the making of the Other Readvanced
Loans. The Aggregate Readvanced Loans shall be made without an
exchange of funds and shall for all purposes of the Loan
Agreement and the Other Loan Agreement, except as otherwise
expressly provided in PARAGRAPH 3(d) of this Amendment, be
treated as Advances of the Loans or Other Loans, as the case
may be. The Aggregate Readvanced Loans shall be held in the
following amounts and percentages by the following Lender and
Other Lenders (collectively, the "AGGREGATE READVANCED
LENDERS"):
<TABLE>
<CAPTION>
<S> <C> <C>
i. Bankers Trust Company $3,000,000 33.333334%
ii. Elliott Associates, L.P. $3,000,000 33.333333%
iii. Gotham Partners, L.P. $2,970,000 33.0%
iv. Gotham Partners III, L.P. $ 30,000 .333333%
</TABLE>
b. The Net Proceeds shall be applied to the principal of the
Loans and the Other Loans in accordance with the following
percentages, except that, solely in order to implement the
making of the Aggregate Readvanced Loans with the Net
Proceeds, the amount otherwise payable to each Aggregate
Readvanced Lender shall be reduced by the amount of such
Aggregate Readvanced Lender's Aggregate Readvanced Loan:
<TABLE>
<CAPTION>
LENDERS AND OTHER LENDERS PERCENTAGES
------------------------- -----------
<S> <C>
Bankers Trust Company 16.666667%
BankBoston N.A. 16.666667%
Wellsford Capital 16.666667%
Gotham Partners, L.P. 16.500000%
Gotham Partners III, L.P. 0.166667%
Elliott Associates, L.P. 16.666667%
Ableco Finance LLC, individually and as Agent 16.666667%
</TABLE>
c. The Aggregate Readvanced Loans shall be utilized for the
following purpose and no others: to repay $9,000,000 of the
principal due and owing under the Line of Credit Facility.
d. Except as otherwise provided in SECTIONS 2.8.2, 2.8.3 or
2.11 of the Loan Agreement or PARAGRAPHS 3 (other than
PARAGRAPH 3A) or 4 of the Intercreditor Agreement, if the
Aggregate Readvanced Loans have been made and no Default
and/or Event of Default shall exist and be
<PAGE> 6
continuing, thereafter (i) all principal payments made on
account of the Loans or the Other Loans shall be applied to
the principal of the Loans and the Other Loans (excluding the
Aggregate Readvanced Loans) in accordance with the percentages
set forth in PARAGRAPH 3(b) of this Amendment and (ii) the
principal of the Loans and the Other Loans (excluding the
Aggregate Readvanced Loans) shall be paid in full prior to any
payments being made on account of the principal of the
Aggregate Readvanced Loans. If a Default or an Event of
Default shall exist and be continuing, the foregoing
provisions of this subparagraph (d) shall be void and of no
force or effect and payments shall be made as provided in the
Loan Agreement and the Intercreditor Agreement. If, while a
Default or an Event of Default shall exist and be continuing,
a payment shall have been made on account of the principal of
the Loans and the Other Loans (to the exclusion of the
Aggregate Readvanced Loans), then such payments shall be
treated as a payment received by the Remaining Lenders in
excess of their Pro Rata Share and SECTION 2.11 of the Loan
Agreement and PARAGRAPH 4 of the Intercreditor Agreement shall
be applicable. If Borrower is, for any reason, to make a
principal payment on account of the Loans and the Other Loans
(excluding the Aggregate Readvanced Loans), then as a
condition precedent to making such principal payment, Borrower
shall deliver to Agent and each Lender and Other Lender a
certificate of Borrower's chief financial officer and chief
executive officer, in such capacities, stating that, as of the
date of the proposed payment, no Default and/or Event of
Default then exists under the Loan Agreement and that no
"Default" and/or "Event of Default" (as such quoted terms are
defined in the Other Loan Agreement) exists under the Other
Loan Agreement. Except as otherwise expressly provided in
SECTIONS 2.8.2, 2.8.3 or 2.11 of the Loan Agreement or
PARAGRAPHS 3 (other than PARAGRAPH 3A) or 4 of the
Intercreditor Agreement, once all of the principal of and
interest on the Loans and the Other Loans (excluding the
Aggregate Readvanced Loans) and all other amounts payable to
the Remaining Lenders (in such capacity) have been paid in
full, all payments with respect to the Loans and all the Other
Loans shall be made exclusively in reduction of the Aggregate
Readvanced Loans and other amounts owing to the Aggregate
Readvanced Lenders in accordance with the percentages set
forth in PARAGRAPH 3(a) of this Amendment.
e. PARAGRAPH 3A of the Intercreditor Agreement is hereby amended to
delete the phrase "PARI PASSU basis (in accordance with such Lender's
Pro Rata Share (as defined in the Group A Loan Agreement and the Group
B Loan Agreement) under the Group A Loan Agreement or the Group B Loan
Agreement, as the case may be) without preference or priority of any
<PAGE> 7
amount over any other amount" and to substitute, in lieu thereof,
"ratable basis in accordance with each Lender's share of the total
amounts owing (including the Readvanced Loans) by Borrower to Lenders
under the Group A Loan Documents and the Group B Loan Documents without
preference or priority of any amount over any other amount." It is the
intention of the parties that if a Default or an Event of Default shall
exist and be continuing, then all Lenders and Other Lenders shall
share, on a pro-rata basis, in all payments and recoveries in respect
of the Loans and the Other Loans (including the Aggregate Readvanced
Loans), except as otherwise expressly provided in SECTIONS 2.8.2, 2.8.3
or 2.11 of the Loan Agreement or PARAGRAPHS 3 (other than PARAGRAPH 3A)
or 4 of the Intercreditor Agreement.
f. The following definitions are added to SECTION 1.1 of the Loan
Agreement in the appropriate alphabetical order:
"AGGREGATE READVANCED LOANS" shall mean the Readvanced Loan (as defined
in this Agreement) and the Readvanced Loans (as defined in the Other
Loan Agreement).
"READVANCED LOAN" shall mean the $3,000,000 Readvanced Loan made by
Bankers Trust Company to the Borrower, as provided in that certain
Second Amendment of Fixed Rate Loan Agreement dated as of April 19,
1999.
"REMAINING LENDERS" shall mean the holders of the Remaining Loans.
"REMAINING LOANS" shall mean all Loans other than the Readvanced Loan.
g. The definition of Interest Rate is hereby amended to read, in its
entirety, as follows:
"INTEREST RATE" means (i) from the date hereof to and including
November 11, 1998, a rate of interest equal to nine and seven- eighths
percent (9.875%) per annum and (ii) on and after November 12, 1998, a
rate of interest equal to twelve percent (12%) per annum; provided,
however, that the Interest Rate applicable to the Readvanced Loan shall
(from after the making of the Readvanced Loan) be fifteen percent (15%)
per annum.
h. The definition of Pro Rata Share is hereby amended to read, in its
entirety, as follows:
"PRO RATA SHARE" means with respect to each Lender, the percentage
obtained by dividing as of any date of determination, (A) the aggregate
principal amount of such Lender's outstanding
<PAGE> 8
Advances BY (B) the sum of the aggregate principal amount of all
outstanding Advances.
i. SECTION 2.7(b) of the Loan Agreement is hereby amended to read, in its
entirety, as follows:
"If, on May 31, 1999, the outstanding principal balance of the
Remaining Loans exceeds $15,000,000, then on May 31, 1999 Borrower
shall pay to Agent (for the ratable benefit of Remaining Lenders in
accordance with their then respective interests in the Remaining Loans)
a non-refundable facility payment of one percent (1.0%) of the then
outstanding principal balance of the Remaining Loans. However, if on
May 31, 1999, the outstanding principal balance of the Remaining Loans
is less than or equal to $15,000,000, then on May 31, 1999 Borrower
shall pay to Agent (for the ratable benefit of Remaining Lenders in
accordance with their then respective interests in the Remaining Loans)
a non-refundable facility payment of one-half of one percent (.50%) of
the then outstanding principal balance of the Remaining Loans. Each of
the payments payable pursuant to this SECTION 2.7(b) shall be payable
only if on the date such payment is due Remaining Loans are
outstanding. Any repayment of the Loans shall not entitle Borrower to
any refund of any payments or other amounts paid to Lenders. Borrower's
failure to pay, when due, any payment payable pursuant to this SECTION
2.7(b) shall be an Event of Default."
j. SECTION 8.1(a)(xvii) of the Loan Agreement is hereby modified to
read, in its entirety, as follows:
"(xvii) if on May 15, 1999 the outstanding principal balance of the
Remaining Loans is $18,955,000 or more; or"
k. SECTION 11.1 of the Loan Agreement is hereby modified to add the
following sentence at the end thereof:
"For all purposes of SECTION 11.1, Loans and Other Loans shall include
the Readvanced Loans and the Remaining Loans."
l. Notwithstanding anything in the Loan Agreement to the contrary, the
Required Lenders may not elect to take any action which is materially
adverse to the holder of the Readvanced Loan, unless such holder
consents, in writing, to such action.
4. CONCERNING THE STANDBY PURCHASE AGREEMENTS. Each Lender hereby consents to
the execution and delivery of the letter agreement dated April 19, 1999
(the "LETTER AGREEMENT") among Gotham Partners, L.P., Gotham Partners III,
L.P., Gotham Partners International, Ltd. and Borrower, and agrees
<PAGE> 9
that, except with respect to Elliott Associates, L.P., all references in
the Loan Documents to the Standby Purchase Agreements shall mean the
Standby Purchase Agreements as modified by the Letter Agreement. A copy of
the Letter Agreement is annexed to this Amendment as EXHIBIT B.
5. OUTSTANDING LOANS. Borrower represents and warrants to Lenders that the
outstanding principal amount of the Loans is $37,640,093.50, that there
are no offsets, defenses or counterclaims to its obligations under the
Loan Documents and, that to the extent that any such offsets, defenses or
counterclaims exist without its knowledge, the same are hereby waived to
the fullest extent permitted by law. Except as modified by this
Amendment, the terms and provisions of the Loan Documents are hereby
ratified and confirmed in all respects and continue in full force and
effect.
6. CONSENT OF LENDERS. Concurrently herewith the parties to the Other Loan
Agreement are entering into a Second Amendment of Fixed Rate Loan
Agreement (the "OTHER AMENDMENT"), which Other Amendment is, except for
the parties thereto, substantially identical to this Amendment. The
Lenders hereby consent to the execution and delivery of the Other
Amendment and agree that they will not amend the provisions of PARAGRAPH
3 without the prior written consent of the "Required Lenders" under the
Other Loan Agreement.
7. MODIFICATIONS. No provision of this Amendment may be waived, amended or
supplemented except by a written instrument executed in accordance with
SECTION 9.4 of the Loan Agreement.
8. SUCCESSORS AND ASSIGNS. This Amendment, which sets forth the entire
understanding of the parties hereto with respect to the subject matter
hereof, inures to the benefit of, and shall be binding upon, the parties
hereto and their respective successors and permitted assigns.
9. SEVERABILITY. In the event that any one or more of the provisions
contained in this Amendment shall for any reason be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision of this Amendment,
but this Amendment shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein.
10. CAPTIONS; COUNTERPARTS; GOVERNING LAW. Captions used in this Amendment
are for convenience of reference only and shall not be deemed a part of
this Amendment nor used in the construction of its meaning. This
Amendment may be signed in any number of counterparts, each of which,
when taken together, shall constitute one and the same Amendment. This
Amendment shall be governed by and construed and enforced in accordance
with the laws of the State of New York applicable to contracts made and
to wholly be performed within such state.
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have duly executed this
Amendment, as of the date and year first written above.
LENDER AND AGENT:
BANKERS TRUST COMPANY
By: /s/ Steven P. Lapman
Name: Steven P. Lapman
Title: Principal
LENDERS:
BANKBOSTON, N.A.
By: /s/ Mark E. Beaham
Name: Mark E. Beaham
Title: Managing Director
WELLSFORD CAPITAL
By: /s/ Gregory F. Hughes
Name: Gregory F. Hughes
Title:
BORROWER:
FIRST UNION REAL ESTATE EQUITY
AND MORTGAGE INVESTMENTS
By: /s/ Daniel P. Friedman
Name: Daniel P. Friedman
Title: President
First Union - Second Amendment of Fixed
Rate Loan Agreement
<PAGE> 11
CONSENT OF STANDBY PURCHASERS
-----------------------------
(BANK GROUP)
Each of Gotham Partners, L.P. and Gotham Partners III, L.P. (a) represents and
warrants to Lenders that there are no offsets, defenses or counterclaims to its
obligations under the Standby Purchase Agreement to which it is a party and,
that to the extent that any such offsets, defenses or counterclaims exist
without its knowledge, the same are hereby waived to the fullest extent
permitted by law, (b) agrees that the terms and provisions of the Standby
Purchase Agreements, as modified by the Letter Agreement, are hereby ratified
and confirmed in all respects and continue in full force and effect, and (c)
consents to the execution and delivery by Borrower of the foregoing Amendment.
Elliott Associates, L.P., in its capacity as a Standby Purchaser, hereby
consents to the execution and delivery of the foregoing Amendment, but such
consent shall not be construed as a waiver of any offsets, defenses, or
counterclaims which Elliott Associates, L.P. may have to its obligations, if
any, under the Standby Purchase Agreement to which it is a party.
GOTHAM PARTNERS, L.P.
By: Section H Partners, L.P.
By: Karenina Corp.
By: /s/ William A. Ackman
Name: William A. Ackman
Title: President
ELLIOTT ASSOCIATES, L.P.
By: /s/ Paul Singer
Name: Paul Singer
Title: General Partner
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
<PAGE> 1
Exhibit 99(c)
SECOND AMENDMENT OF FIXED RATE LOAN AGREEMENT
SECOND AMENDMENT OF FIXED RATE LOAN AGREEMENT (as the same may
be amended or otherwise modified from time to time, the "AMENDMENT"), dated as
of the 19th day of April 1999, among First Union Real Estate Equity and Mortgage
Investments, as Borrower; Gotham Partners, L.P., Gotham Partners III, L.P.,
Elliott Associates, L.P. and Ableco Finance LLC, for its own account and as
agent for other Lenders, and Bankers Trust Company, as Agent.
W I T N E S S E T H:
WHEREAS, pursuant to that certain Fixed Rate Loan Agreement
dated as of August 11, 1998 among the parties hereto or, in the case of Ableco
Finance LLC, its predecessor, (as amended by a First Amendment of Fixed Rate
Loan Agreement dated as of January 8, 1999 and a letter agreement dated January
8, 1999 and as the same may further be amended or otherwise modified from time
to time, the "LOAN AGREEMENT"), Lenders made loans to Borrower in the original
aggregate principal amount of Forty-Five Million and 00/100 ($45,000,000.00)
Dollars;
WHEREAS, without limiting Borrower's obligations under the
Loan Agreement, Borrower contemplates that on or about April 29, 1999, but in no
event later than May 15, 1999, it will complete a rights offering and that the
net proceeds of such offering available to Borrower will equal or exceed
$41,000,000;
WHEREAS, all of such net proceeds shall be applied to repay
the Loans and the Other Loans and $9,000,000 thereof shall be readvanced to
Borrower, as described in this Amendment; and
WHEREAS, to implement the foregoing, Borrower, Lenders and
Agent desire to modify and amend the terms and provisions of the Loan Agreement
as hereinafter provided.
NOW, THEREFORE, in consideration of the covenants set forth
herein and for other good and valuable consideration, the receipt and legal
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
1. DEFINITIONS. All capitalized terms used herein
without definition and which are defined in the Loan
Agreement are used herein with the meanings assigned
to such terms in the Loan Agreement.
2. PRESENT AMENDMENTS. The provisions of this PARAGRAPH
2 shall be effective upon the execution and delivery
of this Amendment.
a. SECTION 6.1.8 of the Loan Agreement is
hereby amended to delete the
<PAGE> 2
following: "obtain Lender Approval of the
registration statement for the Offering."
b. SECTION 8.1(a)(xvi) of the Loan Agreement is
hereby amended to read, in its entirety, as
follows:
"(xvi) if on April 29, 1999, (A) the
outstanding principal amount of the Loans is
$35,000,000 or more and (B) the Registration
Statement to be used by Borrower in an
Offering which will result in net proceeds
to Borrower of $41,000,000 or more is not
effective;"
c. SECTION 8.1(a)(xvii) of the Loan Agreement
is hereby amended to read, in its entirety,
as follows:
"(xvii) if on May 15, 1999, the outstanding
principal balance of the Loans is $18,955,000 or
more; or"
d. SECTION 8.1(a) of the Loan Agreement is
hereby amended to add the following thereto
as a new SECTION 8.1(a)(xviii):
"(xviii) without limiting any of the other
provisions of this SECTION 8.1(a), if Borrower
defaults under any Standby Purchase Agreement or if
the First Subscription Price (as defined in any
Standby Purchase Agreement) or the Second
Subscription Price (as defined in any Standby
Purchase Agreement) shall exceed the subscription
price per share at which Borrower agreed, in the
Standby Purchase Agreements, to conduct the First
Offering or the Second Offering, as the case may be,
or if Borrower takes any action, or permits any event
(within its reasonable control) to occur, which would
release or relieve any Standby Purchaser from its
obligation(s) under any Standby Purchase Agreement;
provided, however, that it shall not be an Event of
Default under this clause (xviii) if Borrower
indemnifies any Standby Purchaser for its obligations
under any Standby Purchase Agreement or if Borrower
and any Standby Purchaser agree to a higher
subscription price and such agreement does not
release any Standby Purchaser of its obligations
under any Standby Purchase Agreement."
e. SECTION 11.1 of the Loan Agreement is hereby
amended to read, in its entirety, as follows:
"Borrower shall use its best efforts to
consummate, on or before each of April 29, 1999 (but
if the Registration Statement to be used by Borrower
in an offering which will result in net proceeds to
Borrower of $41,000,000 or more is effective on or
prior to April 29, 1999, then such foregoing reference
to April 29, 1999 shall be deemed to be May 15, 1999)
<PAGE> 3
and August 11, 1999 (each, a "REQUIRED PAYMENT DATE"),
an offering, or offerings, as the case may be
(collectively, the "OFFERING"), pursuant to the
Registration Statement filed by Borrower on September
17, 1998 (Registration No. 333-63547), as amended from
time to time, and such other registration statements
as Borrower shall deem necessary or appropriate, which
entitle(s) holders of equity securities of Borrower to
purchase additional equity securities of Borrower, on
a pro rata basis and which Offering, if fully
subscribed, would provide Borrower with net proceeds,
together with any other Capital Event Proceeds
received by Borrower prior to each Required Payment
Date, sufficient to enable Borrower to make principal
payments on account of the Loans and Other Loans such
that no Event of Default will occur under SECTIONS
8.1(a)(i), (xvi) or (xvii) of the Loan Agreement or
SECTIONS 8.1(a)(i), (xvi) or (xvii) of the Other Loan
Agreement. Borrower shall use its best efforts to
take, or cause to be taken, any and all further action
or actions necessary or advisable to be taken in order
to consummate the Offering when and as required by
this SECTION 11.1, including but not limited to the
distribution of a prospectus or preparation, filing
and distribution of any necessary prospectus
supplement with respect to any of the applicable
registration statements referred to above. It shall be
an Event of Default if Borrower shall not commence, by
sixteen (16) days prior to each of May 15, 1999 and
August 11, 1999, an Offering which, if fully
subscribed, would provide the Borrower with net
proceeds, together with any other Capital Event
Proceeds received by Borrower prior to each of May 15,
1999 and August 11, 1999, sufficient to enable
Borrower to satisfy such principal payment or
amortization requirements (as previously reduced by
other prepayments) under the Loans and Other Loans due
on such dates. Following the commencement of such
Offering, Borrower shall diligently proceed to
consummate such Offering. Borrower shall use its best
efforts to cause the Registration Statement filed by
Borrower on September 17, 1998 (Registration No.
333-6351) to be declared effective on or prior to
April 29, 1999."
f. The definition of Line of Credit Facility is
hereby amended to include, as part of the Amended and
Restated Credit Agreement referred to in such
definition, that certain Amendment No. 3 dated as of
March 1, 1999 to the Amended and Restated Credit
Agreement dated as of November 1, 1997, a copy of
which Amendment No. 3 is annexed to this Amendment as
EXHIBIT A. Accordingly, the references in SECTIONS
6.1.9 and 7.1.3 of the Loan Agreement to the Line of
Credit Facility "as in effect on the date hereof" and
in SECTION 8.1(a)(xii) of the Loan Agreement to the
Prior Debt Documents "as in effect on the date
hereof" (to the extent such reference to the Prior
Debt Document is a reference to the Line of Credit
Facility) shall mean the Line of Credit Facility as
in effect after giving effect to Amendment No. 3.
<PAGE> 4
g. On the execution and delivery of this Amendment,
Borrower shall pay to Agent (for the ratable benefit
of Lenders) a non-refundable payment of one-quarter
of one percent (.25%) of the outstanding principal
balance of the Loans as of March 31, 1999, and this
payment is in addition to any other payments payable
by Borrower under the Loan Documents.
h. With respect to SECTION 2.11 of the Loan Agreement
and PARAGRAPH 4 of the Intercreditor Agreement, it is
agreed that such provisions shall be implemented
through purchases of interests in the Loans and the
Other Loans (not participations) at face and
effective as of the date the payment was improperly
made or received, with each party to bear its own
expenses, and accrued and unpaid interest on such
interest shall be equitably adjusted and shared, when
received by Agent, by the purchaser and the seller on
such interest. In addition, the Person making the
purchase shall pay interest to the seller of such
interest at six percent (6%) per annum from the date
of the original payment which is being redistributed
as a result of SECTION 2.11 of the Loan Agreement or
PARAGRAPH 4 of Intercreditor Agreement to the date of
purchase.
3. FUTURE AMENDMENTS. If the rights offering referred to
in the recitals hereto is timely consummated, no
Default and/or Event of Default shall exist and be
continuing and the Net Proceeds (as defined below) of
the rights offering referred to in the recitals to
this Amendment are timely applied as provided in
PARAGRAPH 3(a) below, then the provisions of this
PARAGRAPH 3 shall become operative; otherwise they
shall have no force or effect.
a. Borrower hereby confirms that it is obligated to
apply the entire net proceeds (the "NET PROCEEDS") of
the rights offering referred to in the recitals to
this Amendment to reduce the principal of the Loans
and the Other Loans. However, if the Net Proceeds
equal or exceed $41,000,000, then Borrower may, by
written notice to Agent given on the date the Net
Proceeds become available to the Borrower (but in no
event later than May 15, 1999), elect that $9,000,000
of the repayments of the principal of the Loans and
the Other Loans be readvanced to Borrower by certain
of the Lenders and one of the Other Lenders (which
term shall refer to the "Lenders" under the Other
Loan Agreement) specified below. Any such notice must
be accompanied by a currently dated certificate of
Borrower's chief financial officer and chief
executive officer, in such capacities, stating that
no Default and/or Event of Default then exists under
the Loan Agreement and that no "Default" and/or
"Event of Default" (as such quoted terms are defined
in the Other Loan Agreement) then exists under the
Other Loan Agreement. If no Default and/or Event of
Default shall then exist under the Loan Agreement and
if no "Default" and/or "Event of Default" (as such
quoted terms are defined in the Other Loan Agreement)
<PAGE> 5
shall then exist under the Other Loan Agreement,
Bankers Trust Company shall readvance to Borrower
$3,000,000 under the Other Loan Agreement (and such
readvance shall be referred to as the "OTHER
READVANCED LOAN") and Gotham Partners, L.P., Gotham
Partners III, L.P. and Elliott Associates, L. P.
shall, in the aggregate, readvance (each maker of a
Readvanced Loan only being obligated so to readvance
the amount set forth opposite its name in (ii)
through (iv) below) to Borrower $6,000,000 under the
Loan Agreement (and such readvance shall be referred
to as the "READVANCED LOANS"; the Readvanced Loans
and the Other Readvanced Loan are, collectively, the
"AGGREGATE READVANCED LOANS"). Gotham Partners, L.P.,
Gotham Partners III, L.P. and Elliott Associates,
L.P. each agrees to make its Readvanced Loan
concurrently with the making of the Other Readvanced
Loan. The Aggregate Readvanced Loans shall be made
without an exchange of funds and shall for all
purposes of the Loan Agreement and the Other Loan
Agreement, except as otherwise expressly provided in
PARAGRAPH 3(d) of this Amendment, be treated as
Advances of the Loans or Other Loans, as the case may
be. The Aggregate Readvanced Loans shall be held in
the following amounts and percentages by the
following Lenders and Other Lender (collectively, the
"AGGREGATE READVANCED LENDERS"):
<TABLE>
<CAPTION>
<S> <C> <C> <C>
i. Bankers Trust Company $3,000,000 33.333334%
ii. Elliott Associates, L.P. $3,000,000 33.333333%
iii. Gotham Partners, L.P. $2,970,000 33.0%
iv. Gotham Partners III, L.P. $ 30,000 .333333%
</TABLE>
b. The Net Proceeds shall be applied to the principal of
the Loans and the Other Loans in accordance with the
following percentages, except that, solely in order
to implement the making of the Aggregate Readvanced
Loans with the Net Proceeds, the amount otherwise
payable to each Aggregate Readvanced Lender shall be
reduced by the amount of such Aggregate Readvanced
Lender's Aggregate Readvanced Loan:
<TABLE>
<CAPTION>
LENDERS AND OTHER LENDERS PERCENTAGES
------------------------- -----------
<S> <C>
Bankers Trust Company 16.666667%
BankBoston N.A. 16.666667%
Wellsford Capital 16.666667%
Gotham Partners, L.P. 16.500000%
Gotham Partners III, L.P. 0.166667%
Elliott Associates, L.P. 16.666667%
</TABLE>
<PAGE> 6
<TABLE>
<CAPTION>
<S> <C>
Ableco Finance LLC, individually and as Agent 16.666667%
</TABLE>
c. The Aggregate Readvanced Loans shall be utilized
for the following purpose and no others: to repay
$9,000,000 of the principal due and owing under the
Line of Credit Facility.
d. Except as otherwise provided in SECTIONS 2.8.2,
2.8.3 or 2.11 of the Loan Agreement or PARAGRAPHS 3
(other than PARAGRAPH 3A) or 4 of the Intercreditor
Agreement, if the Aggregate Readvanced Loans have
been made and no Default and/or Event of Default
shall exist and be continuing, thereafter (i) all
principal payments made on account of the Loans or
the Other Loans shall be applied to the principal of
the Loans and the Other Loans (excluding the
Aggregate Readvanced Loans) in accordance with the
percentages set forth in PARAGRAPH 3(b) of this
Amendment and (ii) the principal of the Loans and the
Other Loans (excluding the Aggregate Readvanced
Loans) shall be paid in full prior to any payments
being made on account of the principal of the
Aggregate Readvanced Loans. If a Default or an Event
of Default shall exist and be continuing, the
foregoing provisions of this subparagraph (d) shall
be void and of no force or effect and payments shall
be made as provided in the Loan Agreement and the
Intercreditor Agreement. If, while a Default or an
Event of Default shall exist and be continuing, a
payment shall have been made on account of the
principal of the Loans and the Other Loans (to the
exclusion of the Aggregate Readvanced Loans), then
such payments shall be treated as a payment received
by the Remaining Lenders in excess of their Pro Rata
Share and SECTION 2.11 of the Loan Agreement and
PARAGRAPH 4 of the Intercreditor Agreement shall be
applicable. If Borrower is, for any reason, to make a
principal payment on account of the Loans and the
Other Loans (excluding the Aggregate Readvanced
Loans), then as a condition precedent to making such
principal payment, Borrower shall deliver to Agent
and each Lender and Other Lender a certificate of
Borrower's chief financial officer and chief
executive officer, in such capacities, stating that,
as of the date of the proposed payment, no Default
and/or Event of Default then exists under the Loan
Agreement and that no "Default" and/or "Event of
Default" (as such quoted terms are defined in the
Other Loan Agreement) exists under the Other Loan
Agreement. Except as otherwise expressly provided in
SECTIONS 2.8.2, 2.8.3 or 2.11 of the Loan Agreement
or PARAGRAPHS 3 (other than PARAGRAPHS 3A) or 4 of
the Intercreditor Agreement, once all of the
principal of and interest on the Loans and the Other
Loans (excluding the Aggregate Readvanced Loans) and
all other amounts payable to the Remaining Lenders
(in such capacity) have been paid in full, all
payments with respect to the Loans and all the Other
Loans shall be made exclusively in reduction of the
Aggregate
<PAGE> 7
Readvanced Loans and other amounts owing to the
Aggregate Readvanced Lenders in accordance with the
percentages set forth in PARAGRAPH 3(a) of this
Amendment.
e. PARAGRAPH 3A of the Intercreditor Agreement is
hereby amended to delete the phrase "PARI PASSU basis
(in accordance with such Lender's Pro Rata Share (as
defined in the Group A Loan Agreement and the Group B
Loan Agreement) under the Group A Loan Agreement or
the Group B Loan Agreement, as the case may be)
without preference or priority of any amount over any
other amount" and to substitute, in lieu thereof,
"ratable basis in accordance with each Lender's share
of the total amounts owing (including the Readvanced
Loans) by Borrower to Lenders under the Group A Loan
Documents and the Group B Loan Documents without
preference or priority of any amount over any other
amount." It is the intention of the parties that if a
Default or an Event of Default shall exist and be
continuing, then all Lenders and Other Lenders shall
share, on a pro-rata basis, in all payments and
recoveries in respect of the Loans and the Other
Loans (including the Aggregate Readvanced Loans),
except as otherwise expressly provided in SECTIONS
2.8.2, 2.8.3 or 2.11 of the Loan Agreement or
PARAGRAPHS 3 (other than PARAGRAPH 3A) or 4 of the
Intercreditor Agreement.
f. The following definitions are added to SECTION 1.1
of the Loan Agreement in the appropriate alphabetical
order:
"AGGREGATE READVANCED LOANS" shall mean the
Readvanced Loans (as defined in this
Agreement) and the Readvanced Loan (as
defined in the Other Loan Agreement).
"READVANCED LOANS" shall mean the $6,000,000
Readvanced Loans made by Gotham Partners,
L.P., Gotham Partners III, L.P. and Elliott
Associates, L.P. to the Borrower, as
provided in that certain Second Amendment of
Fixed Rate Loan Agreement dated as of April
19, 1999.
"REMAINING LENDERS" shall mean the holders
of the Remaining Loans.
"REMAINING LOANS" shall mean all Loans other
than the Readvanced Loans.
g. The definition of Interest Rate is hereby amended
to read, in its entirety, as follows:
"INTEREST RATE" means (i) from the date
hereof to and including November 11, 1998, a
rate of interest equal to nine and seven-
<PAGE> 8
eighths percent (9.875%) per annum and (ii)
on and after November 12, 1998, a rate of
interest equal to twelve percent (12%) per
annum; provided, however, that the Interest
Rate applicable to the Readvanced Loans
shall (from after the making of the
Readvanced Loans) be fifteen percent (15%)
per annum.
h. The definition of Pro Rata Share is hereby
amended to read, in its entirety, as
follows:
"PRO RATA SHARE" means with respect to each
Lender, the percentage obtained by dividing
as of any date of determination, (A) the
aggregate principal amount of such Lender's
outstanding Advances BY (B) the sum of the
aggregate principal amount of all
outstanding Advances.
i. SECTION 2.7(b) of the Loan Agreement is hereby
amended to read, in its entirety, as follows:
"If, on May 31, 1999, the outstanding
principal balance of the Remaining Loans
exceeds $15,000,000, then on May 31, 1999
Borrower shall pay to Agent (for the ratable
benefit of Remaining Lenders in accordance
with their then respective interests in the
Remaining Loans) a non-refundable facility
payment of one percent (1.0%) of the then
outstanding principal balance of the
Remaining Loans. However, if on May 31,
1999, the outstanding principal balance of
the Remaining Loans is less than or equal to
$15,000,000, then on May 31, 1999 Borrower
shall pay to Agent (for the ratable benefit
of Remaining Lenders in accordance with
their then respective interests in the
Remaining Loans) a non-refundable facility
payment of one-half of one percent (.50%) of
the then outstanding principal balance of
the Remaining Loans. Each of the payments
payable pursuant to this SECTION 2.7(b)
shall be payable only if on the date such
payment is due Remaining Loans are
outstanding. Any repayment of the Loans
shall not entitle Borrower to any refund of
any payments or other amounts paid to
Lenders. Borrower's failure to pay, when
due, any payment payable pursuant to this
SECTION 2.7(b) shall be an Event of
Default."
j. SECTION 8.1(a)(xvii) of the Loan Agreement is
hereby modified to read, in its entirety, as follows:
"(xvii) if on May 15, 1999 the outstanding principal
balance of the Remaining Loans is $18,955,000 or
more; or"
k. SECTION 11.1 of the Loan Agreement is hereby
modified to add the
<PAGE> 9
following sentence at the end thereof:
"For all purposes of SECTION 11.1, Loans and Other
Loans shall include the Readvanced Loans and the
Remaining Loans."
l. Notwithstanding anything in the Loan Agreement to the
contrary, the Required Lenders may not elect to take any
action which is materially adverse to a holder of a Readvanced
Loan, unless such holder consents, in writing, to such action.
4. CONCERNING THE STANDBY PURCHASE AGREEMENTS. Each Lender hereby
consents to the execution and delivery of the letter agreement
dated April 19, 1999 (the "LETTER AGREEMENT") among Gotham
Partners, L.P., Gotham Partners III, L.P., Gotham Partners
International, Ltd. and Borrower, and agrees that, except with
respect to Elliott Associates, L.P., all references in the
Loan Documents to the Standby Purchase Agreements shall mean
the Standby Purchase Agreements as modified by the Letter
Agreement. A copy of the Letter Agreement is annexed to this
Amendment as EXHIBIT B.
5. OUTSTANDING LOANS. Borrower represents and warrants to Lenders
that the outstanding principal amount of the Loans is
$37,640,093.50, that there are no offsets, defenses or
counterclaims to its obligations under the Loan Documents and,
that to the extent that any such offsets, defenses or
counterclaims exist without its knowledge, the same are hereby
waived to the fullest extent permitted by law. Except as
modified by this Amendment, the terms and provisions of the
Loan Documents are hereby ratified and confirmed in all
respects and continue in full force and effect.
6. CONSENT OF LENDERS. Concurrently herewith the parties to the
Other Loan Agreement are entering into a Second Amendment of
Fixed Rate Loan Agreement (the "OTHER AMENDMENT"), which Other
Amendment is, except for the parties thereto, substantially
identical to this Amendment. The Lenders hereby consent to the
execution and delivery of the Other Amendment and agree that
they will not amend the provisions of PARAGRAPH 3 without the
prior written consent of the "Required Lenders" under the
Other Loan Agreement.
7. MODIFICATIONS. No provision of this Amendment may be waived,
amended or supplemented except by a written instrument
executed in accordance with SECTION 9.4 of the Loan Agreement.
8. SUCCESSORS AND ASSIGNS. This Amendment, which sets forth the
entire understanding of the parties hereto with respect to the
subject matter hereof, inures to the benefit of, and shall be
binding upon, the parties hereto and their respective
successors and permitted assigns.
<PAGE> 10
9. SEVERABILITY. In the event that any one or more of the
provisions contained in this Amendment shall for any reason be
held to be invalid, illegal or unenforceable in any respect,
such invalidity, illegality or unenforceability shall not
affect any other provision of this Amendment, but this
Amendment shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein.
10. CAPTIONS; COUNTERPARTS; GOVERNING LAW. Captions used in this
Amendment are for convenience of reference only and shall not
be deemed a part of this Amendment nor used in the
construction of its meaning. This Amendment may be signed in
any number of counterparts, each of which, when taken
together, shall constitute one and the same Amendment. This
Amendment shall be governed by and construed and enforced in
accordance with the laws of the State of New York applicable
to contracts made and to wholly be performed within such
state.
<PAGE> 11
IN WITNESS WHEREOF, the parties hereto have duly executed this
Amendment, as of the date and year first written above.
AGENT:
BANKERS TRUST COMPANY
By: /s/ Steven P. Lapman
Name: Steven P. Lapman
Title: Principal
LENDERS:
ABLECO FINANCE LLC, individually
and as agent for other Lenders
By: /s/ Mark A. Neporent
Name: Mark A. Neporent
Title: Senior Vice President
ELLIOTT ASSOCIATES, L.P.
By: /s/ Paul Singer
Name: Paul Singer
Title: General Partner
GOTHAM PARTNERS, L.P. and
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
BORROWER:
FIRST UNION REAL ESTATE EQUITY AND MORTGAGE
INVESTMENTS
By: /s/ Daniel P. Friedman
Name: Daniel P. Friedman
Title: President
<PAGE> 12
CONSENT OF STANDBY PURCHASERS
-----------------------------
(GOTHAM GROUP)
Each of Gotham Partners, L.P. and Gotham Partners III, L.P. (a) represents and
warrants to Lenders that there are no offsets, defenses or counterclaims to its
obligations under the Standby Purchase Agreement to which it is a party and,
that to the extent that any such offsets, defenses or counterclaims exist
without its knowledge, the same are hereby waived to the fullest extent
permitted by law, (b) agrees that the terms and provisions of the Standby
Purchase Agreements, as modified by the Letter Agreement, are hereby ratified
and confirmed in all respects and continue in full force and effect, and (c)
consents to the execution and delivery by Borrower of the foregoing Amendment.
Elliott Associates, L.P., in its capacity as a Standby Purchaser, hereby
consents to the execution and delivery of the foregoing Amendment, but such
consent shall not be construed as a waiver of any offsets, defenses or
counterclaims which Elliott Associates, L.P. may have to its obligations, if
any, under the Standby Purchase Agreement to which it is a party.
GOTHAM PARTNERS, L.P.
By: Section H Partners, L.P.
By: Karenina Corp.
By: /s/ William A. Ackman
Name: William A. Ackman
Title: President
ELLIOTT ASSOCIATES, L.P.
By: /s/ Paul Singer
Name: Paul Singer
Title: General Partner
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
<PAGE> 1
Exhibit 99(d)
April 19, 1999
First Union Real Estate Equity and Mortgage Investments
55 Public Square, Suite 1900
Cleveland, Ohio 44113-1937
Ladies and Gentlemen:
Reference is hereby made to (i) the Fixed Rate Loan Agreement
(as amended through the date hereof, the "Gotham Loan Agreement") dated as of
August 11, 1998 by and between First Union Real Estate Equity and Mortgage
Investments (the "Company"), Ableco Finance LLC, as Agent, Gotham Partners, L.P.
("Gotham LP"), Gotham Partners III, L.P. ("Gotham III LP"), Elliott Associates,
L.P. ("Elliott Associates"), and Bankers Trust Company, (ii) the Fixed Rate Loan
Agreement (as amended through the date hereof, the "Other Loan Agreement," and
together with the Gotham Loan Agreement, the "Loan Agreements") dated as of
August 11, 1998 by and between the Company, Bankers Trust Company, BankBoston
N.A. and Wellsford Capital, (iii) the Standby Purchase Agreement dated as of
August 11, 1998 (the "Gotham Partners Standby Purchase Agreement") by and
between the Company and Gotham LP, (iv) the Standby Purchase Agreement dated as
of August 11, 1998 (the "Gotham III Standby Purchase Agreement," and together
with the Gotham Partners Standby Purchase Agreement, the "Standby Purchase
Agreements") by and between the Company and Gotham III LP, (v) the Letter
Agreement dated August 11, 1998 (the "August 11 Letter Agreement") among the
Company, Gotham LP, Gotham III LP and Elliott Associates and (vi) the rights
offering(s) described in your registration statement on Form S-3 (File No.
333-63547) originally filed on September 17, 1998, as the same may be amended
with the consent of each of the Standby Purchasers (which consent may not be
unreasonably withheld or delayed), and in any prospectus or prospectus
supplement thereto (collectively, and together with all the documents
incorporated by reference therein, the "Registration Statement"). Gotham LP,
Gotham III LP and Gotham Partners International, Ltd. ("GPI," and together with
Gotham LP and Gotham III LP, "Gotham") are referred to herein as the "Standby
Purchasers."
1. ONE OR MORE RIGHTS OFFERINGS CONTEMPLATED; STANDBY PURCHASE
AGREEMENTS REMAIN IN FULL FORCE AND EFFECT. Notwithstanding the references to
"the Rights Offering" in each of the Standby Purchase Agreements and to "the
Offering" in each of the Loan Agreements, the parties hereto hereby agree that
such references shall
<PAGE> 2
refer to not more than two rights offerings to be conducted by the Company (for
purposes of this letter agreement, each, an "Offering"). In addition, the
parties also agree that references in each of the Standby Purchase Agreements to
the "Shelf Registration Statement" shall be deemed to refer to the Registration
Statement. The parties hereby further agree that, except as otherwise provided
herein, the terms and conditions of the Standby Purchase Agreements shall remain
in full force and effect and shall apply to each Offering, MUTATIS MUTANDIS.
Notwithstanding the foregoing, the parties hereby further agree that the
obligations of the Standby Purchasers under the Standby Purchase Agreements
shall be limited to the two Offerings contemplated by this letter agreement.
2. FIRST OFFERING. The Company hereby agrees that it shall
conduct an Offering (the "First Offering") of such size as shall be determined
by the Board of Trustees of the Company, provided that (i) the First Offering
shall generate gross proceeds to the Company of at least $50,000,000 and (ii)
the subscription price per share (the "First Subscription Price") of the
Company's Shares of Beneficial Interest, $1.00 par value per share (the "Common
Shares"), offered for sale in the First Offering shall be as follows: (a) if the
Company commences the First Offering on or before April 23, 1999, then the First
Subscription Price shall be $4.00 and (b) if the Company commences the First
Offering after April 23, 1999, then the First Subscription Price shall be the
lesser of: (1) $4.00; and (2) the average of the closing prices of the Common
Shares on the New York Stock Exchange (the "NYSE") during the 10 consecutive
trading days immediately preceding the date such Offering is commenced (the
"Average Market Value"), less a discount equal to 5% of such Average Market
Value (it being understood that the calculation made pursuant to this subclause
(2) shall be rounded to the nearest one-sixteenth of $1.00). For purposes of
this paragraph 2, the First Offering will be deemed to commence on the date the
rights relating thereto are distributed. The Company further agrees that it
shall provide the Standby Purchasers with five trading days' advance notice of
the record date for the distribution of rights in the First Offering. The
Company and the Standby Purchasers understand that the proceeds of the First
Offering shall be used by the Company to repay amounts outstanding under the
Loan Agreements, and for no other purpose; provided that the parties also
understand that the lenders under the Loan Agreements shall extend the Aggregate
Readvanced Loans (as defined in the Loan Agreements) to the Company following
the application of the proceeds of the First Offering to enable the Company to
repay $9,000,000 principal amount outstanding under the Company's senior credit
facility.
2.1 FIRST STANDBY PURCHASE COMMITMENT. (a) In connection with
the First Offering, Gotham hereby agree to purchase, subject to the terms and
conditions of this letter agreement, from the Company, at the First Subscription
Price, all of the Common Shares offered for sale in the First Offering and not
validly subscribed for through the exercise of Rights (as defined in each of the
Standby Purchase Agreements) and any oversubscription option or privilege in
accordance with the terms of the First
-2-
<PAGE> 3
Offering (the "First Standby Purchase Commitment"); provided, however, that the
maximum aggregate subscription price required to be paid (and the corresponding
maximum number of Common Shares required to be purchased) by such Standby
Purchasers in the First Offering shall equal the difference of (i) the lesser of
(a) an amount equal to the product of (I) the number of Common Shares offered
for sale in the First Offering multiplied by (II) the First Subscription Price
and (b) $50,000,000 minus (ii) an amount equal to the product of (a) the number
of Common Shares validly subscribed for in the First Offering through the
exercise of Rights and any oversubscription option or privilege (but excluding
the purchase of Common Shares by the Standby Purchasers pursuant to the
provisions of this paragraph 2.1) multiplied by (b) the First Subscription Price
(it being understood that if the calculation made pursuant to this proviso
results in an amount that is less than zero, the value assigned to such amount
shall be zero).
(b) The parties hereby agree that the Standby Purchasers'
obligations under the First Standby Purchase Commitment shall expire on the 45th
day following the date the First Offering is commenced (the "First Expiration
Date") if the First Offering shall not have been consummated by the First
Expiration Date. For all purposes of this Agreement, an Offering shall be deemed
consummated on the Closing Date (as defined in each of the Standby Purchase
Agreements). The Company shall give the Standby Purchasers at least one business
day's advance notice of the Closing Date.
2.2 PAYMENTS. The Company acknowledges that the Standby
Purchasers entered into the Standby Purchase Agreements to enable the Company to
consummate the Loan Agreements. The Company hereby agrees that in consideration
for their agreement to enter into the Standby Purchase Agreements and for other
good and valuable consideration, receipt of which is hereby acknowledged by the
Company, Gotham is entitled to a payment of $1,800,000 (collectively, the "First
Payments"), which First Payments the Company agrees have been earned. The
parties hereby agree that the applicable First Payments shall be paid by the
Company to the Standby Purchasers contemporaneously with the execution this
letter agreement.
3. SECOND OFFERING. The parties hereby agree that in the event
the Company elects to conduct another Offering for the sole purpose of repaying
all or a portion of the amounts outstanding under the Loan Agreements (the
"Second Offering") (and the Company hereby agrees that it shall conduct such
Second Offering if required to do so under the Loan Agreements), the Standby
Purchasers shall purchase such number of Common Shares offered for sale in the
Second Offering as described in paragraph 3.1 below (the "Second Standby
Purchase Commitment"). The Company agrees that it shall provide the Standby
Purchasers with five trading days' advance notice of the record date for the
distribution of the rights in the Second Offering. The Second Standby Purchase
Commitment shall be subject to the condition that the subscription price per
Common
-3-
<PAGE> 4
Share (the "Second Subscription Price") of the Common Shares offered for sale in
the Second Offering shall equal the Average Market Value of the Common Shares
immediately preceding the date the Second Offering is commenced, less a discount
equal to 15% of such Average Market Value (it being understood that the
calculation made pursuant to this sentence shall be rounded to the nearest
one-sixteenth of $1.00); provided, however, that such Second Subscription Price
shall in no event exceed $4.00 (subject to appropriate adjustment for stock
splits and stock dividends as shall be reasonably determined by the parties
hereto); and provided further, however, that the pricing mechanism described
above shall be announced publicly at least ten trading days in advance of the
date the Second Offering is commenced. For purposes of this paragraph 3, the
Second Offering will be deemed to commence on the date the rights relating
thereto are distributed. In no event shall the Second Offering be commenced
sooner than 20 trading days after the consummation of the First Offering.
3.1 SECOND STANDBY PURCHASE COMMITMENT. (a) In connection with
the Second Offering, Gotham hereby agree to purchase from the Company, at the
Second Subscription Price, the Common Shares offered for sale in the Second
Offering and not validly subscribed for through the exercise of Rights and any
oversubscription option or privilege in accordance with the terms of the Second
Offering; provided, however, that the maximum aggregate subscription price
required to be paid (and the corresponding maximum number of Common Shares
required to be purchased) by such Standby Purchasers in the Second Offering
shall equal the difference of (i) the lesser of (the "Second Base Commitment
Amount") (a) an amount equal to the aggregate principal amount outstanding under
the Loan Agreements on the day immediately preceding the date the Second
Offering is consummated and (b) $40,000,000 minus (ii) an amount equal to the
product of (a) the number of Common Shares validly subscribed for in the Second
Offering through the exercise of Rights and any oversubscription option or
privilege (but excluding the purchase of Common Shares by the Standby Purchasers
pursuant to the provisions of this paragraph 3.1) multiplied by (b) the Second
Subscription Price (it being understood that if the calculation made pursuant to
this clause (ii) results in an amount that is less than zero, the value assigned
to such amount shall be zero).
(b) The parties hereby agree that the Standby Purchasers'
obligations under the Second Standby Purchase Commitment shall expire on the
45th day following the date the Second Offering is commenced (the "Second
Expiration Date") if the Second Offering shall not have been consummated by the
Second Expiration Date.
3.2 SECOND PAYMENTS. The Standby Purchasers and the Company
hereby agree that there will be no additional consideration, fee or payment due
or payable to the Standby Purchasers in connection with the Second Standby
Purchase Commitment.
4. TERMINATION BY THE STANDBY PURCHASERS. In addition to their
other
-4-
<PAGE> 5
rights in this letter agreement, the parties hereby agree that each
Standby Purchaser shall have the right to terminate, without any liability, its
obligations hereunder and under its Standby Purchase Agreement with respect to a
particular Offering if (i) after January 15, 1999 there shall be a material
adverse change in the Company's business, financial condition or results of
operations (except to the extent (a) such business, financial condition or
results of operations are reflected or described in (x) the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1998, as amended by
its Amendment to Annual Report on Form 10-K/A for the fiscal year ended December
31, 1998, as filed with the Securities and Exchange Commission on April 13,
1999, or (y) the section of the base prospectus entitled "The Company" contained
in the Registration Statement, as amended through April 13, 1999, or (b) any
such changes result from the decline in the trading prices of stocks generally),
(ii) between the date the rights with respect to such Offering are distributed
and the Closing Time (as defined in each of the Standby Purchase Agreements) of
such Offering, trading in securities generally on the NYSE is suspended, (iii)
between the date the rights with respect to such Offering are distributed and
the Closing Time, an event of default exists under any instrument governing
outstanding indebtedness of the Company such that the lenders thereunder shall
have the right to accelerate such indebtedness and such default would result in
a material adverse effect on the financial condition of the Company and its
subsidiaries, taken as a whole, provided, however, that the Standby Purchasers
shall not have such right of termination so long as the lenders waive such
default for at least 30 days after the Closing Date, (iv) between the date the
rights with respect to such Offering are distributed and the Closing Time of
such Offering, a general moratorium on commercial banking activities in New York
shall have been declared by either federal or New York State authorities, (v)
the Common Shares are suspended (other than with respect to temporary
suspensions lasting no more than one trading day in duration) or delisted from
trading on the NYSE on or after April 22, 1999, (vi) any of the closing
conditions contained in Section 7 of each of the Standby Purchase Agreements (as
applicable to the respective Standby Purchasers) (other than subsection (d) of
such Section 7) shall not be satisfied as of the Closing Time of such Offering,
(vii) the Company shall otherwise be in material breach of this letter agreement
or the applicable Standby Purchase Agreement, (viii) the Company fails to
deliver a certificate of its chief executive officer, dated the Closing Date of
such Offering and delivered prior to the Closing Time on such date, certifying
that, to the knowledge of the Company, as of such date no event or state of
facts exists that would give a Standby Purchaser the right to terminate its
obligations under this letter agreement or its Standby Purchase Agreement
pursuant to this paragraph 4 or (ix) such Offering is not consummated by
February 11, 2000 (provided that with respect to the Second Offering, such date
shall be changed to August 11, 1999 if the First Offering is consummated on or
prior to May 15, 1999 and generates gross proceeds to the Company of at least
$50,000,000). The parties hereby further agree that a material adverse change in
the Company's business, financial condition or results of operations shall not
be deemed to exist solely as a result of a decline in the price of any class of
the Company's
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<PAGE> 6
capital stock. Any exercise of the right to terminate hereunder by a Standby
Purchaser shall be in writing and delivered prior to the Closing Time of an
Offering in accordance with the provisions of paragraph 14 below. Any
termination by a Standby Purchaser shall be without prejudice to any claims for
damages which such Standby Purchaser may have as a result of the Company's
failure, if any, to comply with its obligations.
5. NO MATERIAL OMISSIONS OR MISSTATEMENTS IN REGISTRATION
STATEMENT. The Company hereby represents that as of the date of any final
prospectus or prospectus supplement relating to any Offering contemplated by
this letter agreement, and as of the date any such Offering is consummated, such
prospectus or prospectus supplement (including all documents incorporated or
deemed to be incorporated by reference therein) shall not contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading.
6. AUGUST 11 LETTER AGREEMENT SUPERSEDED. The parties hereby
agree that this letter agreement shall supersede and replace the August 11
Letter Agreement, and that except as expressly amended hereby, the Standby
Purchase Agreements shall remain unchanged and in full force and effect.
7. REGISTRATION RIGHTS. The Company agrees that it shall enter
into a registration rights agreement with respect to the registration for resale
under the Securities Act of 1933, as amended, of all of the Common Shares to be
acquired by Gotham in the First Offering and/or the Second Offering, which
registration rights agreement shall be upon such reasonable terms and conditions
as the parties hereto shall reasonably agree.
8. INDEMNIFICATION. (a) The Company hereby agrees to indemnify
and hold harmless each Standby Purchaser and its partners:
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of an untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement, or
the omission or alleged omission therefrom of a material fact required to be
stated therein or necessary to make the statements therein not misleading or
arising out of an untrue statement or alleged untrue statement of a material
fact included in any preliminary prospectus or prospectus supplement or final
prospectus or prospectus supplement (or any amendment or supplement thereto), or
the omission or alleged omission therefrom of a material fact necessary in order
to make the statements therein, in the light of the circumstances under which
they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount paid with
respect to any litigation, investigation or proceeding by any governmental
agency or body, commenced
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<PAGE> 7
or threatened, or of any claim whatsoever based upon any such untrue statement
or omission, or any such alleged untrue statement or omission; and
(iii) against any and all expense whatsoever (including,
without limitation, the fees and disbursements of legal counsel) reasonably
incurred in investigating, preparing or defending against any litigation, or
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission, to the extent that
any such expense is not paid under subparagraphs (i) or (ii) of this paragraph
8(a);
provided, however, that this indemnity does not apply to any loss, liability,
claim, damage or expense to the extent arising out of an untrue statement or
omission or alleged untrue statement or omission made in reliance upon and in
conformity with information furnished to the Company by or on behalf of such
Standby Purchaser (as Standby Purchaser and not in any other capacity) for use
in the Registration Statement or any preliminary prospectus or prospectus
supplement or final prospectus or prospectus supplement (or any amendment or
supplement thereto).
(b) Each Standby Purchaser hereby agrees to indemnify and hold
harmless the Company, its Trustees, each of its officers who signed the
Registration Statement and the other Standby Purchasers and their partners
against any and all losses, liabilities, claims, damages and expenses described
in the indemnity contained in subparagraph (a) of this paragraph 8, but only
with respect to untrue statements or omissions, or alleged untrue statements or
omissions, made in the Registration Statement or in any preliminary prospectus
or prospectus supplement or final prospectus or prospectus supplement (or any
amendment or supplement thereto) in reliance upon and in conformity with
information furnished to the Company by or on behalf of such Standby Purchaser
(as Standby Purchaser and not in any other capacity) for use in the Registration
Statement or such preliminary prospectus or prospectus supplement or final
prospectus or prospectus supplement (or any amendment or supplement thereto).
The aggregate indemnification obligation by a Standby Purchaser pursuant to this
subparagraph (b) of paragraph 8 shall not exceed the product of (i) an amount
equal to the number of Common Shares acquired by such Standby Purchaser in the
applicable Offering, multiplied by (ii) the subscription price for Common Shares
in such Offering.
(c) The parties agree that each indemnified party shall give
prompt notice to each indemnifying party of any action commenced against it in
respect of which indemnity may be sought hereunder, but failure to so notify an
indemnifying party shall not relieve it from any liability which it may have
otherwise than on account of this indemnity agreement. If any such action shall
be brought against an indemnified party, and it shall notify the indemnifying
party thereof, the indemnifying party shall be entitled to participate therein
and, to the extent that it wishes, jointly with any other similarly
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<PAGE> 8
notified indemnifying party, to assume the defense thereof with counsel
satisfactory to the indemnified party. After notice from the indemnifying party
to the indemnified party of its election to assume the defense of such claim or
action, the indemnifying party shall not be liable to the indemnified party
under this paragraph 8 for any legal or other expenses subsequently incurred by
the indemnified party in connection with the defense thereof other than
reasonable costs of investigation. The indemnified party shall have the right to
employ separate counsel in any such action and to participate in the defense
thereof, but the fees and expenses of such counsel shall not be at the expense
of the indemnifying party if the indemnifying party has assumed the defense of
the action with counsel reasonably satisfactory to the indemnified party;
PROVIDED, HOWEVER, that if the indemnified party is a Standby Purchaser, the
fees and expenses of such counsel shall be at the expense of the indemnifying
party if: (i) the employment of such counsel has been specifically authorized in
writing by the indemnifying party, or (ii) the named parties to any such action
(including any impleaded parties) include both a Standby Purchaser and the
indemnifying party, and representation of both parties by the same counsel would
be inappropriate due to actual or potential differing interests between them or
a Standby Purchaser has been advised that there may be one or more legal
defenses available to it different from or in conflict with any legal defenses
available to the indemnifying party (in which case the indemnifying party shall
not have the right to assume the defense of such action on behalf of such
Standby Purchaser).
(d) The parties further agree that no indemnifying party
shall, without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such proceeding. No indemnifying party shall be
liable for any settlement of any action or claim for monetary damages which an
indemnified party may effect without the written consent of the indemnifying
party, which written consent shall not be unreasonably withheld.
9. CONTRIBUTION. If the indemnification provided for in
paragraph 8 is unavailable to or insufficient to hold harmless an indemnified
party under subparagraphs (a) or (b) of paragraph 8 in respect of any loss,
liability, claim, damage or expense (or actions in respect thereof) referred to
therein, then each indemnifying party, in lieu of indemnifying such indemnified
party thereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage or expense
(or actions in respect thereof) in such proportion as is appropriate to reflect
the relative benefits received by the Company on the one hand and the Standby
Purchasers on the other from any Offering to which such loss, liability, claim,
damage or expense (or action in respect thereof) relates. If, however, the
allocation provided by the immediately preceding sentence is not permitted by
applicable law or if the indemnified party failed to
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<PAGE> 9
give the notice required under subparagraph (c) of paragraph 8 above, then each
indemnifying party shall contribute to such amount paid or payable by such
indemnified party in such proportion as is appropriate to reflect not only such
relative benefits but also the relative fault of the Company on the one hand and
the Standby Purchasers on the other in connection with the statements or
omissions which resulted in such loss, liability, claim, damage or expense (or
actions in respect thereof), as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one hand
and the Standby Purchasers on the other in connection with any Offering shall be
deemed to be in the same proportion as the total net proceeds from such Offering
(before deducting expenses but after deducting any payments made by the Company
to the Standby Purchasers pursuant to paragraph 2.2 hereof) received by the
Company bear to the total payments received by such Standby Purchasers. The
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
Company on the one hand or the Standby Purchasers on the other and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Company and the Standby Purchasers agree
that it would not be just and equitable if contributions pursuant to this
paragraph 9 were determined by pro rata allocation between the Company on the
one hand and the Standby Purchasers on the other or by any other method of
allocation which does not take account of the equitable considerations referred
to above in this paragraph 9. The amount paid or payable by an indemnified party
as a result of the loss, liability, claim, damage or expense (or actions in
respect thereof) referred to above in this paragraph 9 shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act of 1933, as amended) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
10. OPINION OF COUNSEL. The Company hereby agrees that in
connection with any purchase of Common Shares by the Standby Purchasers pursuant
to the terms of this letter agreement, the Standby Purchasers shall receive an
opinion of independent legal counsel to the Company that addresses the issues
set forth in Exhibit A attached hereto, that is substantially in the form set
forth in such Exhibit A and that is otherwise in form and substance reasonably
acceptable to the Standby Purchasers.
11. GPI BOUND BY GOTHAM PARTNERS STANDBY PURCHASE AGREEMENT.
By its execution of this letter agreement, (i) GPI hereby agrees, including
without limitation, for the benefit of the lenders under the Loan Agreements, to
be bound by the terms and conditions of the Gotham Partners Standby Purchase
Agreement as if it were originally a party thereto and acknowledges that it
shall be jointly and severally liable with Gotham LP and Gotham III LP
thereunder and (ii) Gotham LP and Gotham III LP hereby
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<PAGE> 10
acknowledge that GPI shall be so bound and liable and agree that they will
separately arrange and coordinate with GPI with respect to any specific
obligations to be performed by GPI under the Gotham Partners Standby Purchase
Agreement.
12. OBLIGATIONS NOT SEVERAL. All the obligations of Gotham LP,
Gotham III LP and GPI under this letter agreement are joint and several.
13. BINDING EFFECT. The parties hereby agree that if the terms
and conditions set forth in this letter agreement are in conflict with, or
inconsistent in any way with, the Standby Purchase Agreements, the terms of this
letter agreement shall control.
14. NOTICES. All notices and other communications under this
letter agreement shall be in writing and deemed to have been duly given if
delivered by hand, courier or mail or transmitted by any standard form of
telecommunication, if to: (i) the Company, to Suite 1900, 55 Public Square,
Cleveland, Ohio 44113-1937, Attention: Paul F. Levin, Senior Vice President,
General Counsel and Secretary, 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) 859-4000; or
(ii) Gotham LP, Gotham III LP or GPI, to 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, Esq., Facsimile: (212) 355-3333.
Notices shall be deemed effective on receipt thereof.
15. NO PERSONAL LIABILITY. Notwithstanding anything contained
herein to the contrary, this letter agreement is made and executed on behalf of
the Company, a business trust organized under the laws of the State of Ohio, by
its officer(s) on behalf of the Trustees thereof, and none of the Trustees or
any additional or successor Trustee hereafter appointed, or any beneficiary,
officer, employee or agent of the Company shall, except as otherwise may be
required by law, have any liability in such Trustee's, beneficiary's, officer's,
employee's or agent's personal or individual capacity, but instead, all parties
shall look solely to the property and assets of the Company for satisfaction of
claims of any nature arising under or in connection with this letter agreement.
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<PAGE> 11
Please confirm your agreement with the above by signing in the
space provided below. This letter agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
Very truly yours,
GOTHAM PARTNERS, L.P.
By: Section H Partners, L.P.
By: Karenina Corp.
By:
-------------------------------------
Name:
Title:
GOTHAM PARTNERS III, L.P.
By: Section H Partners, L.P.
By: Karenina Corp.
By:
-------------------------------------
Name:
Title:
GOTHAM PARTNERS INTERNATIONAL, LTD.
By: Gotham International Advisors, L.L.C.,
its investment manager
By:
-------------------------------------
Name:
Title:
ACCEPTED AND AGREED TO:
FIRST UNION REAL ESTATE EQUITY
AND MORTGAGE INVESTMENTS
By
Name: Daniel P. Friedman
Title: President and Chief Executive Officer
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<PAGE> 12
EXHIBIT A
Opinion of independent counsel of the Company to be delivered pursuant
to paragraph 10 of this letter agreement :
1. The Company is validly existing as a business trust in good standing
under the applicable laws of the State of Ohio.
2. This letter agreement has been duly authorized, executed and
delivered by, and is a valid and binding agreement of, the Company, enforceable
against the Company in accordance with its terms.
3. The Common Shares to be purchased by the Standby Purchasers from the
Company have been duly authorized for issuance and sale and, when issued and
delivered by the Company against payment of the consideration therefor, will be
validly issued, fully paid and nonassessable.
4. The Registration Statement has been declared effective by the
Securities and Exchange Commission (the "Commission") under the Securities Act
of 1933, as amended (the "Securities Act"). To the best of such counsel's
knowledge, no stop order suspending the effectiveness of the Registration
Statement has been issued under the Securities Act and no proceedings for such
purpose have been instituted or are pending or threatened by the Commission.
5. The execution, delivery and performance of this letter agreement and
the consummation by the Company of the transactions contemplated in this letter
agreement and compliance by the Company with its obligations under this letter
agreement 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
of, or default under any indenture, mortgage, deed of trust, loan agreement or
other material 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, which such agreement or instrument (i) has been filed with the
Commission (the "Filed Contracts") or (ii) with respect to agreements or
instruments entered into by the Company on or after June 1, 1998, is a Filed
Contract or is an agreement or instrument which such counsel has actual
knowledge of (the agreements or instruments in clauses (i) and (ii), the
"Applicable Contracts"), except for any such breach or default as would not
result in a Material Adverse Effect, nor will such action result in any
violation of the provisions of any applicable federal, New York or Ohio law,
statute, rule, regulation, or any judgment, order, or decree, known to such
counsel, of any government, government instrumentality or court of the United
States, or New York or
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<PAGE> 13
Ohio having jurisdiction over the Company or its Properties or assets, which
violation in any such case would result in a Material Adverse Effect; provided,
however, that such counsel need express no opinion with respect to any
violation, breach or default, as applicable, not ascertainable from the face of
any agreement, instrument, judgment, decree or order referred to above, or
arising under or based upon any cross-default provision, insofar as any such
violation relates to a default under an agreement or instrument that is not an
Applicable Contract or such violation arises under or is based upon any covenant
of a financial or numerical nature or which requires arithmetic computation.
6. No filing with, or authorization, approval, consent, license, order,
registration, qualification or decree of, any New York, Ohio or federal court or
governmental authority or New York, Ohio or federal agency, is necessary or
required in connection with the due authorization, execution and delivery of
this letter agreement or for the offering, issuance, sale or delivery of the
Common Shares (other than under the Securities Act and the regulations
thereunder, which have been obtained, or as may be required under the securities
or blue sky laws of the various states).
In addition, such counsel shall state that they have participated in
conferences with officers and other representatives of the Company,
representatives of the independent public or certified public accountants for
the Company and with representatives of the Standby Purchasers at which the
contents of the Registration Statement, prospectus dated _______, 1999 (the
"Prospectus") and prospectus supplement dated ________, 1999 (the "Prospectus
Supplement"), and any supplements or amendments thereto, and related matters
were discussed and, although such counsel is not passing upon and does not
assume any responsibility for the accuracy, completeness or fairness of the
statements contained in the Registration Statement, the Prospectus or the
Prospectus Supplement, and any supplements or amendments thereto, on the basis
of the foregoing, nothing has come to their attention which would lead them to
believe that either the Registration Statement or any amendments thereto, at the
time the Registration Statement or such amendments became effective, contained
an untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading or that the Prospectus or the Prospectus Supplement, as of their
respective dates or at the date of the closing of the applicable Offering,
contained an untrue statement of a material fact or omitted to state a material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading (it being understood
that such counsel need express no belief as to the financial statements or
schedules or other financial or statistical data derived therefrom, included or
incorporated by reference in the Registration Statement, the Prospectus or the
Prospectus Supplement or any amendments or supplements thereto).
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