<PAGE> 1
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SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. 2)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
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[X] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12.
</TABLE>
FIRST UNION
REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies: .......
(2) Aggregate number of securities to which transaction applies: ..........
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): ............
(4) Proposed maximum aggregate value of transaction: ......................
(5) Total fee paid: .......................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: ...............................................
(2) Form, Schedule or Registration Statement No.: .........................
(3) Filing Party: .........................................................
(4) Date Filed: ...........................................................
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<PAGE> 2
FIRST UNION LOGO
FIRST UNION
REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS
125 PARK AVENUE - NEW YORK, NEW YORK 10017
DEAR BENEFICIARY:
You are cordially invited to attend the Special Meeting in lieu of the 2000
Annual Meeting (the "Meeting") of the Beneficiaries of First Union Real Estate
Equity and Mortgage Investments (the "Company"), which will be held in the
Murray Hill Room of The New York Helmsley Hotel, located at 212 East 42nd
Street, New York, NY 10017, on January , 2001, at 10:00 a.m., local time, for
the following purposes:
1. To elect two Class I Trustees.
2. To consent to the sale of certain properties of the Company and its
subsidiaries (the "Properties") and certain other assets pursuant to two
Contracts of Sale and a letter agreement, each dated as of September 15,
2000, as amended (collectively, the "Sale Contract"), between the
Company and certain subsidiaries of the Company, as sellers, and Radiant
Investors, LLC, a Delaware limited liability company, as purchaser
("Purchaser"), for an aggregate purchase price of $205 million (the
"Asset Sale").
3. To approve amendments to the Company's Amended and Restated Declaration
of Trust eliminating shareholder approval requirements with respect to
the disposition of property of the Company.
4. To transact such other business as may properly come before the Meeting.
In the event that Proposal Two is approved, the amendments to the Company's
Amended and Restated Declaration of Trust proposed in Proposal Three, if also
approved, would take effect upon consummation of the Asset Sale. In the event
that Proposal Two is not approved or the Asset Sale does not occur, the
amendments proposed in Proposal Three would not become effective, whether or not
they were approved. The Company intends to consummate the Asset Sale upon the
approval of Proposal Two, whether or not Proposal Three is approved.
The Board of Trustees of the Company is seeking Beneficiary consent to the
Asset Sale in accordance with the Company's Amended and Restated Declaration of
Trust, which provides that no sale of more than 50% of the Company's property
may be made without the consent of holders of at least a majority of the
outstanding shares of beneficial interest, par value $1.00 per share, of the
Company ("Shares"). A vote to consent to the Asset Sale will be deemed a vote to
consent to the sale by the Company and its subsidiaries of more than 50% of the
Company's property.
The Asset Sale will constitute a sale by the Company and its subsidiaries
of approximately 73% of the book value of the Company's real estate properties,
or approximately 36% of the total book value of the Company's assets, for
aggregate consideration of $205 million. The book value of the Properties to be
sold is approximately $166 million as of September 30, 2000. As part of the
consideration, it is expected that Purchaser will assume or repay approximately
$125 million of mortgages on the Properties. In the event the Purchaser is not
able to assume or repay the mortgages on one or more of the Properties, the
Company may be required to provide Purchaser with up to $46 million in
financing. Based on written assurances made by the Purchaser to the Company
under the Sale Contract, the Company does not expect that it will be required to
provide financing to Purchaser in connection with the Asset Sale. A vote to
consent to the Asset Sale will be deemed a vote to consent to the implementa-
<PAGE> 3
tion of all provisions of the Sale Contract including those that may be in the
discretion of the Company, such as the provision of financing with respect to
the sale of certain of the Properties.
Daniel Friedman, David Schonberger and Anne Zahner (the "Executives"), are
the managing members of Purchaser. They are also the principals of Radiant
Partners LLC, an asset management firm that has managed the assets of the
Company under a management agreement since June 1, 2000. Under the management
agreement, each Executive is a non-employee officer of the Company merely for
administrative purposes. Mr. Friedman serves as President and Mr. Schonberger
and Ms. Zahner serve as Executive Vice Presidents of the Company. At the time
the management agreement became effective, the Company had outsourced many of
its management functions and no senior officers, other than the Chief Financial
Officer, were then employed by the Company. Therefore, in order to preserve its
corporate formalities and maintain the efficient administration of an operating
public company, the Company retained the Executives as officers of the Company.
Since June 1, 2000, the Executives have carried out the day-to-day affairs of
the Company under the direction of the Board of Trustees. On June 1, 2000, their
employment agreements with the Company were terminated and they received
severance payments totaling approximately $2.3 million. Mr. Friedman was
formerly a Trustee of the Company from November 1998 through September 22, 2000.
Material decisions regarding the Company are made either by the Board of
Trustees or the Executive Committee of the Board, neither of which currently
includes any of the Executives.
The Company is in the process of exploring uses for the net cash proceeds
to be received from the Asset Sale, including, without limitation: implementing
or continuing a common or preferred share repurchase or similar program;
distributing such net proceeds to the Beneficiaries, including, but not
necessarily limited to, amounts required to satisfy certain REIT distribution
requirements resulting from previous asset sales and net income in 2000, if any;
and making new investments, including investments in real estate or non-real
estate assets or businesses.
The Company believes that it will qualify as a REIT, subsequent to the
Asset Sale and will be able to maintain its REIT qualification in 2001. However,
the Asset Sale will limit the Company's flexibility with respect to maintaining
its REIT status. In the event that the Company was no longer a REIT, among other
consequences, the Company would no longer be required to distribute to its
shareholders, as dividends, 90% of its taxable income.
The shares of the Company currently trade on the New York Stock Exchange
("NYSE") under the ticker symbols "FUR" for its common shares and "FURPrA" for
its preferred shares. In the event the Company was no longer a REIT, it might
lose its listing on the NYSE. The Company presently intends to maintain its NYSE
listing following the closing of the Asset Sale and believes that it will be
able to do so. In the event that its NYSE listing is not maintained, the Company
believes that it will be able to have its shares listed on another national
securities exchange, such as the American Stock Exchange. The Company believes
that failure to maintain its NYSE listing will not have a significant negative
impact on the liquidity of the trading in the shares of the Company.
Concurrently with the execution of the Sale Contract, shareholders who
beneficially own, in the aggregate, approximately 29.66% of the outstanding
Shares, have agreed to consent to the Asset Sale.
The Notice and Proxy Statement on the following pages contain important
details concerning the foregoing proposals. Please complete, sign and return
your proxy card in the enclosed envelope to ensure that your Shares will be
represented and voted at the Meeting even if you cannot attend. You are urged to
complete, sign and return the enclosed proxy card even if you plan to attend the
Meeting.
I look forward to personally meeting all Beneficiaries who are able to
attend.
Sincerely,
WILLIAM A. ACKMAN
Chairman of the Board of Trustees
December , 2000
<PAGE> 4
FIRST UNION LOGO
FIRST UNION
REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS
125 PARK AVENUE - NEW YORK, NEW YORK 10017
NOTICE OF
SPECIAL MEETING OF BENEFICIARIES
TO THE BENEFICIARIES:
Notice is hereby given that the Special Meeting in lieu of the 2000 Annual
Meeting of the Beneficiaries (the "Meeting") of First Union Real Estate Equity
and Mortgage Investments (the "Company"), will be held in the Murray Hill Room
of The New York Helmsley Hotel, located at 212 East 42nd Street, New York, NY
10017, on January , 2001 at 10:00 a.m., local time, for the following
purposes:
1. To elect as Trustees to Class I of the Board of Trustees Talton R. Embry
and Steven S. Snider.
2. To consent to the sale of certain properties of the Company and its
subsidiaries pursuant to two Contracts of Sale and a letter agreement,
dated as of September 15, 2000 and two amendments to one of the
Contracts of Sale dated as of September 29, 2000 and October 26, 2000
respectively, attached hereto as Appendices A, B, C and D between the
Company and its subsidiaries, 55 Public LLC, North Valley Tech, LLC,
Printers Alley Garage, LLC, Southwest Shopping Centers Co. I, L.L.C.,
all Delaware limited liability companies, First Union Madison L.L.C., an
Illinois limited liability company, and First Union Commercial
Properties Expansion Company, a Delaware corporation, and Radiant
Investors LLC, a Delaware limited liability company.
3. To approve amendments to the Company's Amended and Restated Declaration
of Trust eliminating shareholder approval requirements with respect to
the disposition of property of the Company.
4. To transact such other business as may properly come before the Meeting.
Beneficiaries of record at the close of business on [NOVEMBER 20, 2000],
are entitled to notice of and to vote at the Meeting.
By order of the Board of Trustees
WILLIAM A. ACKMAN
Chairman of the Board of Trustees
[December , 2000]
PLEASE FILL IN, DATE, SIGN AND RETURN PROMPTLY THE ENCLOSED PROXY CARD
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING. A SELF-ADDRESSED
ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE.
<PAGE> 5
TABLE OF CONTENTS
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Introduction................................................ 1
Information About Forward-Looking Statements................ 2
Summary..................................................... 4
Risks Relating to Proposal Two: Consent to the Asset Sale... 16
Risks Relating to Proposal Three: Amendments to the
Declaration of Trust...................................... 18
Proposal One: Election of Trustees.......................... 18
Compensation of Trustees.................................. 21
Organization of Board of Trustees......................... 21
Security Ownership of Trustees and Officers and Certain
Beneficial Owners...................................... 22
Certain Relationships and Related Transactions............ 24
Executive Compensation.................................... 26
Employment Contracts, Termination of Employment and Change
in Control Agreements.................................. 27
Option Grants in Last Fiscal Year......................... 28
Aggregated Share Option Exercises in Last Fiscal Year and
Fiscal Year End Option Values.......................... 29
Compensation Committee Report on Executive Compensation... 29
Performance Graph......................................... 31
Proposal Two: Consent to the Asset Sale..................... 31
The Asset Sale............................................ 32
Background of the Asset Sale.............................. 32
Interests of Management or Trustees in the Asset Sale..... 50
Use of Proceeds of the Asset Sale......................... 52
Plans for the Company Subsequent to the Asset Sale........ 53
The Parties............................................... 55
Terms of the Sale Contract................................ 58
Terms of the Voting Agreements............................ 63
Accounting Treatment of the Asset Sale.................... 63
Federal Income Tax Consequences of the Asset Sale......... 64
Government and Regulatory Approvals....................... 64
No Dissenters' Rights..................................... 65
Required Vote for Proposal................................ 65
Recommendation of the Board of Trustees................... 65
Pro Forma Financial Data of First Union Real Estate Equity
and Mortgage Investments.................................. 66
First Union Real Estate Equity and Mortgage Investments
Pro Forma Combined Balance Sheet as of September 30,
2000................................................... 67
First Union Real Estate Equity and Mortgage Investments
Pro Forma Combined Statement of Operations for the Year
Ended December 31, 1999................................ 68
First Union Real Estate Equity and Mortgage Investments
Pro Forma Combined Statement of Operations for the Nine
Months Ended September 30, 2000........................ 69
Notes to Pro Forma Combined Financial Statements.......... 70
Selected Combined Financial Data of First Union Real Estate
Equity and Mortgage Investments........................... 72
Proposal Three: Amendments to the Company's Declaration of
Trust..................................................... 74
Selection of Auditors....................................... 75
Cost of Proxies and Solicitations........................... 75
Form 10-K Annual Report..................................... 76
Section 16(a) Beneficial Ownership Reporting Compliance..... 76
Beneficiary Proposals....................................... 76
Market for the Shares....................................... 76
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Experts..................................................... 76
Available Information....................................... 77
Incorporation of Certain Documents by Reference............. 77
Appendix A.................................................. A-1
Appendix B.................................................. B-1
Appendix C.................................................. C-1
Appendix D.................................................. D-1
Appendix E.................................................. E-1
Exhibit A................................................... EXA-1
</TABLE>
<PAGE> 7
FIRST UNION LOGO
FIRST UNION
REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS
125 PARK AVENUE - NEW YORK, NEW YORK 10017
------------------
PROXY STATEMENT
------------------
SPECIAL MEETING OF BENEFICIARIES
JANUARY , 2001
INTRODUCTION
This Proxy Statement and the accompanying proxy are being sent by the Board
of Trustees (the "Board of Trustees," the "Board" or the "Trustees") of First
Union Real Estate Equity and Mortgage Investments ("First Union", the "Trust" or
the "Company") in connection with the solicitation of proxies from the holders
(the "Beneficiaries") of shares of beneficial interest, par value $1.00 per
share, of the Company ("Shares"), to be voted at the Special Meeting of
Beneficiaries in lieu of the 2000 Annual Meeting (the "Meeting"), to be held in
the Murray Hill Room of The New York Helmsley Hotel, located at 212 East 42nd
Street, New York, NY 10017, on January , 2001 at 10:00 a.m., local time, to
take the actions set forth in the Notice of Meeting provided with respect to the
Meeting.
The Board is seeking Beneficiary consent to the sale (the "Asset Sale") of
certain properties (the "Properties") in accordance with the Company's Amended
and Restated Declaration of Trust ("the Declaration of Trust"), which provides
that no sale of more than 50% of the Company's property may be made without the
consent of holders of at least a majority of the outstanding Shares. The Asset
Sale will constitute a sale by the Company and its subsidiaries of approximately
73% of the book value of the Company's real estate properties, or approximately
36% of the total book value of the Company's assets.
The principal office of the Company is located at 125 Park Avenue, New
York, New York 10017. The approximate date on which this Proxy Statement and the
accompanying proxy are first being sent to the Beneficiaries is December ,
2000.
The record date for determination of the Beneficiaries that are entitled to
vote at the Meeting is November 20, 2000 (the "Record Date"). On that date,
40,157,204 Shares were outstanding. Each Share has one vote. Abstentions and
broker non-votes will be included in determining the number of Shares present
for purposes of determining the presence of a quorum.
The nominees for Trustee at the Meeting who receive the greatest number of
votes duly cast (although not necessarily a majority of the votes duly cast) by
the Shares represented at the Meeting will be elected as Trustees. The proxies
solicited for the Meeting cannot be voted for a greater number of persons than
the number of nominees named. Abstentions and broker non-votes will have no
effect on the election of the nominees of the Board, Talton R. Embry and Steven
S. Snider (the "Board's Nominees") to the Board of Trustees.
<PAGE> 8
The affirmative vote of a majority of the outstanding Shares as of the
Record Date is required to consent to the Asset Sale. Abstentions and broker
non-votes will have the same effect as a negative vote with respect to the
voting to consent to the Asset Sale.
The affirmative vote of a majority of the outstanding Shares as of the
Record Date is required to consent to the amendments to the Declaration of Trust
proposed in Proposal Three (collectively, the "Amendments"). Abstentions and
broker non-votes will have the same effect as a negative vote with respect to
the voting to consent to the Amendments.
In the event that Proposal Two is approved, the Amendments proposed in
Proposal Three, if also approved, would take effect upon consummation of the
Asset Sale. In the event that Proposal Two is not approved or the Asset Sale
does not occur, the Amendments proposed in Proposal Three would not become
effective, whether or not they were approved. The Company intends to consummate
the Asset Sale upon the approval of Proposal Two, whether or not Proposal Three
is approved.
Shares represented by properly executed proxy cards will be voted at the
Meeting as marked and, in the absence of specific instructions, will be voted
for the Board's Nominees, to consent to the Asset Sale and to approve the
Amendments and, in the discretion of the persons named as proxies, on all such
other business as may properly come before the Meeting.
A Beneficiary may revoke his proxy at any time prior to its exercise by
giving notice to the Company in writing or by attending the Meeting and voting
in person (attendance alone at the Meeting will not by itself revoke a proxy).
The delivery of a subsequently dated proxy, which is properly completed, will
constitute a revocation of any earlier dated proxy. The revocation may be
delivered to the Company in care of Beacon Hill Partners, 90 Broad Street, 20th
Floor, New York, New York 10004-2205 or to the Company at 125 Park Avenue, New
York, New York 10017, or any other address provided by the Company.
Gotham Partners Management Co. LLC and certain of its affiliates
(collectively, "Gotham"), which beneficially own approximately 14.23% of the
Shares and Apollo Real Estate Advisors II, L.P. and certain of its affiliates
(collectively, "Apollo"), which beneficially own approximately 7.29% of the
Shares, have each entered into agreements (each, a "Voting Agreement"), pursuant
to which they have agreed to vote to consent to the Asset Sale. In addition,
Magten Asset Management Corp. ("Magten"), which beneficially owns approximately
8.14% of the Shares, has agreed to vote those Shares with respect to which it
has voting control to consent to the Asset Sale.
As far as the Board of Trustees is aware, no matters other than those
outlined in this Proxy Statement will be presented at the Meeting for action on
the part of the Beneficiaries. If any other matters are properly brought before
the Meeting, it is the intention of the persons named in the accompanying proxy
card to vote the Shares to which the proxy relates in accordance with their best
judgment.
INFORMATION ABOUT FORWARD-LOOKING STATEMENTS
Certain sections in this Proxy Statement, including "Risks Relating to
Proposal Two: Consent to the Asset Sale," "Proposal Two: Consent to the Asset
Sale", "-- Use of Proceeds of the Asset Sale," "-- Plans for the Company
Subsequent to the Asset Sale," "Pro Forma Financial Data of First Union Real
Estate Equity and Mortgage Investments" and "Proposal Three: Amendments to the
Company's Declaration of Trust" contain forward-looking statements that are
based on current beliefs, estimates and assumptions concerning the operations,
future results, and prospects of the Company. All statements that address
operating performance, events or developments that are anticipated to occur in
the future, including statements related to future sales, profits, expenses,
income and earnings per share, or statements expressing general optimism about
future results, are forward-looking statements. In addition, words such as
"expects," "anticipates," "intends," "plans," "believes," "estimates," and
variations of such words and similar expressions are intended to identify
forward-looking statements.
2
<PAGE> 9
The statements described in the preceding paragraph constitute
"forward-looking statements" within the meaning of Section 21E of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). Because forward-looking
statements are based on a number of beliefs, estimates and assumptions that
could cause actual results to materially differ from those in the
forward-looking statements, there is no assurance that forward-looking
statements will prove to be accurate.
Any number of factors could affect future operations and results,
including, without limitation, the Company's ability to be profitable with a
smaller and less diverse portfolio that will generate less revenue; the value of
replacement assets, if any; the Company's ability to maintain its real estate
investment trust ("REIT") status; general industry and economic conditions;
interest rate trends; capital requirements; competition from other companies and
venues; changes in applicable laws, rules and regulations (including changes in
tax laws); the availability of equity and/or debt financing in the amounts and
on the terms necessary to support the Company's future business; and those
specific risks that are discussed in the Risk Factors detailed in the Company's
previously filed Annual Report on Form 10-K for the fiscal year ended December
31, 1999.
Forward-looking statements are subject to the safe harbors created in the
Exchange Act.
The Company undertakes no obligation to update publicly any forward-looking
statements, whether as a result of new information or future events.
3
<PAGE> 10
SUMMARY
The following is a brief summary of information contained elsewhere in this
Proxy Statement. This summary is not intended to be complete and is subject to
the detailed information appearing elsewhere in this Proxy Statement and the
appendices hereto.
THE MEETING
TIME, DATE AND PLACE The Meeting will be held in the Murray
Hill Room of The New York Helmsley
Hotel, located at 212 East 42nd Street,
New York, NY 10017, on January , 2001
at 10:00 a.m., local time.
PURPOSES OF THE MEETING 1. TO ELECT TWO CLASS I TRUSTEES.
The Board has recommended the election
by shareholders of Messrs. Embry and
Snider as Trustees for a term of three
years, serving as Class I Trustees.
2. TO CONSENT TO THE ASSET SALE.
The Board is seeking Beneficiary
consent to the Asset Sale in accordance
with the Declaration of Trust, which
provides that no sale of more than 50%
of the Company's property may be made
without the consent of holders of at
least a majority of the outstanding
Shares. The Asset Sale will constitute
a sale by the Company and its
subsidiaries of approximately 73% of
the book value of the Company's real
estate properties, or approximately 36%
of the total book value of the assets
of the Company. Accordingly, a vote to
consent to the Asset Sale will be
deemed a vote to consent to the sale by
the Company of more than 50% of the
Company's property.
3. TO APPROVE AMENDMENTS TO THE
DECLARATION OF TRUST WITH RESPECT TO
DISPOSITION OF THE PROPERTY OF THE
COMPANY.
The Board is seeking Beneficiary
approval of certain amendments to the
Declaration of Trust which would have
the effect of eliminating shareholder
approval requirements with respect to
the disposition of property of the
Company.
4. TO TRANSACT SUCH OTHER BUSINESS AS
MAY PROPERLY COME BEFORE THE
MEETING.
RELATIONSHIP OF PROPOSALS In the event that Proposal Two is
approved, the Amendments proposed in
Proposal Three, if also approved, would
take effect upon consummation of the
Asset Sale. In the event that Proposal
Two is not approved or the Asset Sale
does not occur, the Amendments proposed
in Proposal Three would not become
effective, whether or not they were
approved. The Company intends to
consummate the Asset Sale upon the
approval of Proposal Two, whether or
not Proposal Three is approved.
4
<PAGE> 11
RECORD DATE [November 20, 2000.]
PROPOSAL ONE: ELECTION OF TRUSTEES
NOMINEES The Board of Trustees has nominated Mr.
Embry and Mr. Snider for election to
the Board of Trustees at the Meeting.
TERM OF OFFICE The terms of office of the Class I
Trustees elected at the Meeting will
expire at the Company's Annual Meeting
in 2003.
PROPOSAL TWO: CONSENT TO THE ASSET SALE
THE ASSET SALE The Company and certain of its
subsidiaries will sell two shopping
center properties, four office
properties, six parking garages, one
parking lot, a $1.5 million note
receivable secured by a mortgage on a
non-owned apartment property and
certain assets used in the operation of
the properties being sold
(collectively, the "Properties").
Radiant Investors, LLC, a Delaware
limited liability Company (the
"Purchaser"), will be the buyer of the
Properties with the exception of the
Huntington Garage in Cleveland, Ohio,
which Purchaser has agreed that the
Company may sell to a third party and
which is currently under a contract of
sale to a third party. As a part of the
Asset Sale, Purchaser will receive the
net operating income from the
Properties from June 1, 2000 less (a)
debt service on the Properties, (b)
capital expenditures committed
subsequent to May 9, 2000 and paid
prior to closing and (c) 66.6% of the
asset management fees paid to Radiant
Partners, LLC, an affiliate of
Purchaser ("Partners") from June 1,
2000 until the closing of the
transaction.
CONSIDERATION TO BE RECEIVED The aggregate purchase price for the
Properties is $205 million and the
Company estimates that, after deducting
allocations to the Company and its
subsidiaries, 55 Public LLC, North
Valley Tech, LLC, Printers Alley
Garage, LLC, Southwest Shopping Centers
Co. I, L.L.C., all Delaware limited
liability companies, First Union
Madison L.L.C., an Illinois limited
liability Company and First Westgate
Mall L.P., a Texas limited partnership
(collectively the "Seller"), under the
Sale Contract and Seller's share of
transaction costs, it will receive
aggregate consideration of
approximately $199 million. See
"Summary -- Use of Proceeds" on page
12. As part of the consideration, it is
expected that mortgages on the
Properties in the approximate amount of
$125 million will be assumed or repaid
(see "Proposal Two: Consent to the
Asset Sale -- Terms of the Sale
Contract -- The Purchase Price"
beginning on page 59
5
<PAGE> 12
and "-- Liabilities to be Assumed" on
page 60.) In the event the Purchaser is
not able to assume or repay existing
mortgages on one or more of the
Properties, the Company may be required
to provide Purchaser with up to $46
million in financing. Based on written
assurances made by the Purchaser to the
Company under the Sale Contract, the
Company does not expect that it will be
required to provide financing to
Purchaser in connection with the Asset
Sale. The acquisition price of the
Properties was determined as a result
of negotiations between Purchaser and
the Company. The Company believes that
the terms of the Sale Contract are at
least as favorable to the Company as
those that would have been obtained
from an unrelated third party as
purchaser. The book value as of
September 30, 2000 of the real estate
properties to be sold is approximately
$166 million.
FIRST UNION REAL ESTATE EQUITY AND
MORTGAGE INVESTMENTS First Union is a REIT whose primary
business has been to buy, manage,
improve the cash flow of and own
retail, apartment, office and parking
properties throughout the United States
and Canada. First Union and First Union
Management, Inc., a Delaware
corporation and an affiliate of First
Union ("FUMI"), have an organizational
structure commonly referred to as
"stapled," where the Shares are
"stapled to" a proportionately equal
interest in the common stock of FUMI,
with some exceptions. The Shares may
not be issued or transferred without
their "stapled" counterparts in FUMI.
The common stock of FUMI is held in
trust for the benefit of the
Beneficiaries. The primary asset of
FUMI is the stock of VenTek
International, Inc., a manufacturer of
parking equipment ("VenTek").
As of September 30, 2000, the Company
and its subsidiaries owned, including
under long-term ground leases, real
estate properties consisting of: three
shopping centers, five office
properties and seven parking
facilities.
SELLER The Company and seven of its direct and
indirect wholly owned subsidiaries that
own specific Properties.
PURCHASER Purchaser, whose address is 1212 Avenue
of the Americas, 18th Floor , New York,
New York 10036, is a limited liability
company whose three managing members,
Daniel Friedman, David Schonberger and
Anne Zahner, serve as officers of the
Company pursuant to an Asset Management
Agreement dated as of March 27, 2000,
as amended, between the Company and
Partners. Purchaser has agreed to
assign its interest in the Sale
Contract to Radiant
6
<PAGE> 13
Ventures I, L.L.C. ("Radiant Ventures
I") on or before the closing of the
Asset Sale. Purchaser is the managing
member of Radiant Ventures I. The
principal equity investors in Radiant
Ventures I are Purchaser, which is the
managing member, and Landmark Equity
Trust VII, which is the principal
non-managing member (owning
approximately 89% of the total
ownership interests in Radiant Ventures
I). Radiant Ventures I is required to
obtain Landmark Equity Trust VII's
consent prior to making major decisions
relating to Radiant Ventures I.
Landmark Equity Trust VII is a real
estate investment fund with
approximately $400 million of committed
capital. None of the Trustees of the
Company or their affiliates had, or are
expected to have, an interest in, or a
relationship with, Radiant Ventures I,
Landmark Equity Trust VII or Purchaser.
BACKGROUND OF RELATIONSHIP WITH
EXECUTIVES In November 1998, the Company hired
Daniel Friedman as President and Chief
Executive Officer of the Company, and
David Schonberger and Anne Zahner, each
as an Executive Vice President of the
Company (the "Executives"). Each of the
Executives entered into four-year
employment agreements with the Company.
Prior to joining the Company, each of
the Executives was employed as an
officer of Enterprise Asset Management,
Inc., a private real estate firm
unaffiliated with the Company. The
original employment agreements
contained provisions which would have
required the Company to pay to each
Executive lump sum settlement amounts
in the event certain circumstances
occurred, including substantial
distributions by the Company to its
shareholders, and the employment of the
Executive was thereafter terminated.
The original employment agreements with
the Executives were amended in March
2000 to provide that the Executives
would be entitled to terminate their
employment and receive severance
payments totaling approximately $2.3
million upon the occurrence of the
distribution of the common shares of
Imperial Parking Corporation to the
shareholders of the Company and the
refinancing of the Park Plaza Mall.
These two events occurred in March and
April of 2000, respectively, and the
termination of Executives' employment
became effective on June 1, 2000.
Partners is an asset management firm
founded in March 2000 by the Executives
at the time the employment agreements
were amended, and is an affiliate of
Purchaser. Upon termination of the
employment of the Executives, a
management agreement between the
Company and Partners became effective
on June 1, 2000. The management
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<PAGE> 14
agreement provides that Partners
manages the corporate and real estate
functions of the Company for an annual
management fee of $1.5 million, from
which are paid the salaries of the
Executives and other employees of
Partners as well as its overhead,
including the leasing of its office
space. Under the management agreement,
each of the Executives remained a
non-employee officer of the Company
merely for administrative purposes. At
the time the management agreement
became effective, the Company had
outsourced many of its management
functions and no senior officers, other
than the Chief Financial Officer, were
then employed by the Company.
Therefore, in order to preserve its
corporate formalities and maintain the
efficient administration of an
operating public company, the Company
retained the Executives as officers of
the Company. Since June 1, 2000, the
Executives have carried out the
day-to-day affairs of the Company under
the direction of the Board of Trustees.
The officer status of the Executives
will terminate upon the closing of the
Asset Sale. Mr. Friedman was formerly a
Trustee of the Company from November
1998 through September 22, 2000.
Material decisions regarding the
Company currently are made either by
the Board of Trustees or the Executive
Committee of the Board, neither of
which currently includes any of the
Executives.
INSIDER CONFLICTS OF INTEREST The Executives are both the managing
members of Purchaser and the principals
of Partners. In April 2000, the
Executives, on behalf of the Purchaser,
made a proposal to acquire the Company
or most of its real estate properties.
The negotiation of that proposal
ultimately resulted in the Sale
Contract. The Executives had a conflict
of interest during the negotiations
which culminated in the Sale Contract,
as they had gained knowledge through
their employment with the Company
regarding the properties that were the
subject of the proposal which they were
negotiating on behalf of Purchaser and
it was in their best interest to obtain
the price and terms for the sale most
favorable to Purchaser. This was in
conflict with the interests of the
Company, which desired to obtain the
price and terms for the sale most
favorable to the Company.
The representatives of the Company who
conducted the negotiations with
Purchaser on behalf of the Company (the
"Representatives") were the Chairman of
the Board of the Company, William
Ackman, and the Vice-Chairman of the
Board of the Company, William Scully,
each of whom has extensive experience
in the real estate industry and is a
mem-
8
<PAGE> 15
ber of the Executive Committee of the
Board, to which approval of
dispositions and financings of the
Company's real estate properties is
generally delegated, from time to time,
by the Board. Each of the
Representatives was knowledgeable
regarding the real estate properties of
the Company and served as
Representatives without compensation.
Other than Mr. Friedman, none of the
Trustees of the Company, including the
Representatives, or their affiliates
had an interest in, or a relationship
with, Purchaser or any of its
affiliates.
PRINCIPAL REASONS FOR BOARD'S
RECOMMENDATION The principal reasons for the Board's
recommendation of the approval of the
Sale Contract are summarized as
follows: Based largely upon a review of
the Company's remaining portfolio of
real estate properties, the Board
determined, in the second half of 1999,
to explore the possible sale or
liquidation of the Company. The Board's
deliberative process in this regard is
described in greater detail on pages
36-38. The Board subsequently explored,
without success, the possible sale or
liquidation of the Company. The Board
then determined that because the
Company's remaining real estate
properties (taken as a whole) were not
attractive assets to potential
purchasers of the Company, due, in
large part, to the factors described on
page 35, most of the remaining
properties should be sold. The Board
then determined that a bulk sale of the
Company's real properties would be more
efficient and less costly than numerous
individual property sales due to the
transactional costs, the legal expense
and management time involved in
multiple sales.
The proposal received from the
Purchaser was a bulk sale proposal
which would yield a significant amount
of cash proceeds to the Company, as
opposed to other consideration in the
form of securities or other non-liquid
assets of the acquiring party, the
valuation of which would be uncertain.
This proposal was not contingent upon
other significant events, such as the
sale of the Park Plaza mall property,
other than obtaining the financing of
the purchase consideration. Although
the Company's real estate properties
had been marketed for sale for an
extended period of time, this proposal
was the only firm offer, subsequent to
the sale of the Marathon Portfolio in
1999, that the Company has received for
a significant amount of the Company's
real estate properties, other than an
offer that was deemed not as
advantageous as the proposal of
Purchaser.
9
<PAGE> 16
In addition, Purchaser was very
familiar with the properties under
consideration and the normal due
diligence review period required by a
purchaser unfamiliar with the
properties would be reduced, both
lessening time delays and uncertainties
with respect to reaching a definitive
agreement. The Company and its
affiliates, as Seller under the Sale
Contract, were required to provide very
limited representations with respect to
the Properties; thus the Company was
not subject to the potential liability
with respect to the standard expanded
representations and warranties that
would likely have been required to be
provided to a potential purchaser not
as familiar with the Properties as was
Purchaser.
RISKS RELATING TO THE ASSET SALE The Beneficiaries should consider all
the information set forth in this Proxy
Statement in deciding whether to vote
to consent to the Asset Sale,
including, without limitation, the
following risks and considerations:
- After the Asset Sale, the Company's
real estate properties will consist
of a shopping center property in
Arkansas and an office property in
Indiana. As a result, because of the
REIT asset and income tests, the
Asset Sale will limit the Company's
flexibility to engage in non-real
estate related activities without
adversely affecting its REIT status.
The Company does not believe that the
Asset Sale will deprive it of the
ability to qualify as a REIT in 2001.
- In the event the Company was no
longer a REIT, among other
consequences, the Company would no
longer be required to distribute to
its shareholders, as dividends, 90%
of its taxable income.
- To maintain its REIT status after
2001, the Company may need to invest
in additional real estate related
assets. If the Company desires to
maintain its REIT status after 2001,
while still maximizing its liquidity,
it may need to invest in real estate
mortgage investment conduits or
REMICs, within the meaning of Section
860D of the Internal Revenue Code of
1986, as amended (the "Code"), which
issue multiclass mortgage-backed
securities.
- There is no assurance that the
Company's business strategy, when
determined, will be successfully
implemented. If any or all of the net
proceeds of the Asset Sale are
applied to the acquisition of
replacement assets, there can be no
assurance that the replacement assets
will provide greater returns to the
Company and the shareholders than the
Properties to be sold.
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<PAGE> 17
- In the event that the Company was no
longer a REIT, it might lose its
listing on the NYSE. The Company does
not believe that it will lose its
NYSE listing as a result of the Asset
Sale. If, for any reason, the Company
is not able to maintain its NYSE
listing, the Company believes that it
would be able to have its equity
securities listed on the American
Stock Exchange.
ASSETS AND LIABILITIES AFTER THE
ASSET SALE First Union's remaining assets, after
the Asset Sale, will consist primarily
of the following (with approximate
September 30, 2000 book values in
parentheses): two real estate
properties: Park Plaza, a shopping mall
located in Little Rock, Arkansas
($59,800,000) and Circle Tower, an
office building located in
Indianapolis, Indiana ($2,200,000);
unrestricted cash ($96,300,000);
restricted cash ($2,400,000); U.S.
Treasury bills ($199,400,000); a
preferred stock investment in HQ Global
Workplaces, Inc. ($10,500,000);
accounts receivable ($3,500,000); and
the inventory of VenTek ($5,400,000).
In addition, the Company has a damage
claim referred to as the Peach Tree
Mall legal claim, which is described on
page 55 below. The Company has made no
firm decision regarding selling its
remaining real estate assets, although
it has retained a broker to solicit
indications of interest in the purchase
of the Park Plaza property. There are
no plans for major improvements that
the Company is considering for the
properties that will remain after the
Asset Sale. The Company does not
anticipate selling its non-real estate
assets in the near term, and has no
immediate plans to do so. The Company
plans to continue investing its
liquidity in U.S. Treasury bills and,
to the extent necessary to maintain
REIT status, in REMICs. REMICs have the
advantage of being relatively liquid
while qualifying as a real estate asset
for the REIT asset tests and generating
qualified real estate income for the
REIT income tests.
Liabilities of the Company after the
Asset Sale will consist primarily of a
mortgage loan collateralized by the
Park Plaza property ($42,400,000);
notes payable collateralized by the
U.S. Treasury bills ($150,100,000); the
Company's 8 7/8% senior notes
($12,500,000); and accounts payable and
accrued liabilities ($16,300,000). In
addition, the Company has provided
performance guarantees for the
manufacturing and installation of
transit ticket vending equipment with
respect to VenTek. The guarantees of
$5.3 million and $6.2 million expire in
February 2001 and 2002, respectively.
11
<PAGE> 18
USE OF PROCEEDS Under the Sale Contract, the aggregate
purchase price for the Properties is
$205 million. The Company expects to
receive approximately $199 million in
aggregate consideration for the
Properties. The downward adjustments to
the aggregate purchase price of $205
million that result in the $199 million
in aggregate consideration to the
Company at closing of the Asset Sale
are estimated to be approximately as
follows: projected net operating income
to Purchaser from the Properties from
June 1, 2000, less debt service,
capital expenditures committed
subsequent to May 9, 2000 and 66.6% of
asset management fees paid to Partners
from June 1, 2000 to closing: $660,000;
reserve fund provided by a municipality
for construction of improvements to 5th
and Marshall Garage, in Richmond,
Virginia: $2.3 million; prior Pecanland
Mall outlot sale: $530,000; the
Company's share of estimated closing
costs (maximum $2.0 million); and legal
and accounting fees and miscellaneous
costs and adjustments: $1.0 million. Of
the approximately $199 million, it is
expected that approximately $74 million
will be in cash and approximately $125
million will be from the assumption or
repayment of mortgage indebtedness on
the Properties. The Company is in the
process of exploring uses for the net
cash proceeds to be received,
including, without limitation: making
new investments, including investments
in real estate or non-real estate
assets or businesses; implementing or
continuing a common or preferred share
repurchase or similar program; and
distributing such net proceeds to the
Beneficiaries, including, but not
necessarily limited to, amounts
required to satisfy certain REIT
distribution requirements resulting
from previous asset sales and net
income in 2000, if any.
PLANS FOR THE COMPANY AFTER THE
ASSET SALE The Company's long-term economic goal
is to increase the per share net asset
value of the Company at the highest
possible rate, without undue risk. The
Company continues to monitor the
benefits of, and the restrictions
imposed by, maintaining its REIT
status. The Company presently desires
and intends to maintain its status as a
REIT for federal income tax purposes
but, if appropriate, would consider
other organizational structures.
New Board of Trustees. From September
2000 through December 2000, a
restructuring of the Board of Trustees
of the Company occurred. Mr. Friedman,
appointed Trustee in November 1998, and
six of the nine nominees of Gotham who
were elected as Trustees at the May
1998 Special Meeting (see "Background
of the Asset Sale -- 1998 Change in
Control" beginning on page 33),
resigned and
12
<PAGE> 19
three new persons were appointed
Trustees. The current restructured
Board is comprised of seven persons,
four of whom own or are affiliated with
entities that own significant amounts
of Shares.
Strategic Alternatives. The current
Board is engaged in a process of
considering alternatives for the
strategic direction of the Company, but
has not determined to pursue any
specific major strategic initiative.
The following is a summary of
activities that the Company believes,
based on current discussions at the
Board level, that it will consider
after the Asset Sale:
- The Company has explored various
acquisition, investment and business
combination transactions and will most
likely continue to explore these
transactions. These transactions may
include, without limitation, the
acquisition of assets in exchange for
securities of the Company and business
combination transactions in which the
Company is not the surviving entity.
Parties to these transactions may also
include existing shareholders of the
Company or entities in which these
shareholders have significant
interests. The Company believes that,
subsequent to the completion of the
Asset Sale, it will be a more
attractive acquisition candidate due
to the disposition of the Properties
and the addition to its balance sheet
of approximately $80 million in
liquidity. However, there can be no
assurance that any of these
discussions will lead to any of these
transactions occurring subsequent to
the Asset Sale.
- The Company may either continue or
expand its Share repurchase program.
The Board recently authorized the
expansion of its current Share
repurchase program and may further
expand the program after the Asset
Sale.
- The Company will consider making new
investments in operating assets,
including investments in real estate
or non-real estate assets or
businesses.
- Although the Company has retained a
broker to solicit indications of
interest in the purchase of the Park
Plaza property, the Company will
likely continue to hold the two real
estate properties that it will own
after the Asset Sale, Park Plaza and
Circle Tower, having a combined book
value of $59.8 million as of September
30, 2000.
The foregoing list of potential
activities is not intended to be an
exhaustive list and the Company is
committed to considering any reasonable
proposal
13
<PAGE> 20
which could help the Company achieve
its long-term economic goals. The Board
of Trustees has not determined whether
or not to change the investment
policies of the Company concerning the
types of assets in which it will make
investments; however, the investment
authority of the Trustees set forth in
the Declaration of Trust was amended at
the 1999 Special Meeting of
Beneficiaries to modify the Trustees'
prior investment limitations.
The Company is not aware of
understandings or determinations, other
than as disclosed in this Proxy
Statement, as to the general direction
of the Company after the Asset Sale.
Determinations concerning material
matters with respect to the Company
will continue to be made by the Board
of Trustees or with its Executive
Committee. Certain members of the Board
of Trustees are principals in Gotham,
Apollo and Magten, and those
individuals, as Trustees, have taken
part in discussions about the post-sale
operations of the Company.
After the Asset Sale, the Asset
Management Agreement will provide,
among other things, for the management
by Partners of the real estate
properties remaining in the Company for
a period of two years for an annual fee
of $250,000, and that the Executives
shall cease to be officers of the
Company. The Company does not plan to
hire a full-time Chief Executive
Officer after the Asset Sale.
CONDITIONS TO THE CLOSING The Asset Sale is contingent upon,
among other things, the consent of the
Beneficiaries, the receipt of estoppel
certificates from shopping center and
office tenants, parking facility net
lessees and lessors under three ground
leases and other customary conditions.
THE CLOSING If the conditions to closing the Asset
Sale are satisfied, the closing is
expected to take place during January,
2001 (the "Closing Date").
TAX CONSEQUENCES OF THE ASSET SALE The Asset Sale will have federal income
tax consequences for both the Company
and the Beneficiaries as described in
"Proposal Two: Consent to the Asset
Sale -- Federal Income Tax Consequences
of the Asset Sale." on page 65.
NO DISSENTERS' RIGHTS Under Ohio law, the Beneficiaries do
not have dissenters' rights to receive
payment for their Shares as a result of
the Asset Sale.
REQUIRED VOTE FOR PROPOSAL The affirmative vote of the holders of
a majority of the outstanding Shares as
of the Record Date is required to
consent to the Asset Sale.
14
<PAGE> 21
VOTING AGREEMENTS Gotham, which beneficially owns
approximately 14.23% of the Shares and
Apollo, which beneficially owns
approximately 7.29% of the Shares, have
each entered into Voting Agreements
with Purchaser pursuant to which they
have agreed to vote to consent to the
Asset Sale. In addition, Magten, which
beneficially owns approximately 8.14%
of the Shares, has agreed to vote the
Shares with respect to which it has
voting control to consent to the Asset
Sale.
RECOMMENDATION OF THE BOARD OF
TRUSTEES The Board of Trustees has unanimously
recommended that the Beneficiaries
consent to the Asset Sale. In light of
his affiliation with Purchaser (of
which the Board was apprised), Daniel
Friedman, a former member of the Board
of Trustees and a principal of
Purchaser, did not participate in the
Board deliberations or approval with
respect to the Asset Sale.
PROPOSAL THREE: AMENDMENTS TO THE DECLARATION OF TRUST
PROVISIONS TO BE AMENDED The provisions of Sections 12.2 and 2.8
of the Declaration of Trust are
proposed to be amended by shareholder
vote.
PROPOSAL THREE: DISPOSITION OF
PROPERTY The Declaration of Trust provides that
shareholder approval is required with
respect to the sale of 50% or more of
the property of the Company. The
Amendments would eliminate the
requirement of shareholder approval for
the disposition of property of the
Company.
RISKS OF THE AMENDMENTS The Amendments would have the effect of
permitting the Board of Trustees,
without approval of the shareholders,
to sell any or all property of the
Company, including properties purchased
with the proceeds of the Asset Sale or
otherwise acquired prior or subsequent
to the Asset Sale.
EFFECTIVENESS OF THE AMENDMENTS In the event that Proposal Two is
approved, the Amendments proposed in
Proposal Three, if also approved, would
take effect upon consummation of the
Asset Sale. In the event that Proposal
Two is not approved or the Asset Sale
does not occur, the Amendments proposed
in Proposal Three would not become
effective, whether or not they were
approved. The Company intends to
consummate the Asset Sale upon the
approval of Proposal Two, whether or
not Proposal Three is approved.
RECOMMENDATION OF THE BOARD OF
TRUSTEES The Board of Trustees unanimously
recommends that the Beneficiaries
approve the Amendments set forth in
Proposal Three.
15
<PAGE> 22
RISKS RELATING TO PROPOSAL TWO: CONSENT TO THE ASSET SALE
THE ASSET SALE WILL SUBSTANTIALLY REDUCE THE COMPANY'S REAL ESTATE PROPERTIES
AND MAY ADVERSELY AFFECT ITS ABILITY TO MAINTAIN ITS REIT STATUS
Qualification as a REIT involves the application of highly technical and
complex provisions of the Code, for which there are only limited judicial or
administrative interpretations. Among many other requirements, in order to
qualify as a REIT, at least 75% of the value of a REIT's total assets generally
must consist of real estate assets, cash and cash items and government
securities and at least 75% of a REIT's gross income generally must be derived
from rents from real property, mortgage interest and gains from the disposition
of interests in real property and mortgages on real property.
The Asset Sale will reduce the Company's real estate properties to an
office building in Indianapolis, Indiana and a shopping center in Little Rock,
Arkansas. As a result, the Asset Sale will limit the Company's flexibility to
engage in non-real estate related activities without adversely affecting its
REIT status. Among the other assets of the Company subsequent to the Asset Sale
will be the Company's investment in the preferred stock of HQ Global Workplaces,
Inc., which is expected to qualify as a taxable REIT subsidiary under the Code
effective January 1, 2001.
By virtue of the income generated by its real estate assets and the gains
it will recognize on the sale of the Properties, including the sale of the
Huntington Garage, the Company believes that it will maintain its qualification
as a REIT for 2000 and 2001. The Company believes that the Asset Sale will not
deprive the Company of the ability to qualify as a REIT in 2000 and 2001. If the
Company were to invest in additional non-real estate assets after the Asset
Sale, the Company might not qualify as a REIT in 2001. The Company has no
specific plans to invest in additional non-real estate assets that would cause
the Company to lose its REIT status in 2001.
The Company does not know whether it will continue to qualify as a REIT
after 2001. In order for the Company to qualify as a REIT after 2001, it would
have to implement affirmative strategies to do so, which may include, but not be
limited to: acquisition of real estate businesses or assets; distribution of
cash to shareholders; share repurchases; and acquisition of an unspecified
amount of interests in REMICs. The Company will invest in REMICs if it desires
to maintain its REIT status while maximizing its liquidity.
If the Company were to fail to qualify as a REIT, it would be subject to
federal income taxation as if it were a domestic corporation (i.e., its income
would be subject to a corporate level tax), and the Beneficiaries would be taxed
on distributions from the Company in the same manner as shareholders in ordinary
corporations (i.e., the distributions generally would be ordinary income). In
addition, the Company would not be required to distribute to its shareholders,
as dividends, 90% of its taxable income. Furthermore, if the Company had
significant net taxable income, it could be subject to potentially significant
corporate income tax liabilities, and, therefore, the amount of cash available
for distribution to the Beneficiaries would be reduced or eliminated and the
liquidity and results of operations could be negatively impacted. As an
additional consequence of losing its REIT status, the Company could not re-elect
REIT status for the four taxable years following the year during which
qualification is lost, and would permanently lose its grandfathered status as a
"stapled" REIT.
If the Company were to lose its REIT status, it is not anticipated that
there would be, as a result, a significant negative impact on its capital
resources.
Additionally, if the Company were to fail to qualify as a REIT, it might
lose its listing on the New York Stock Exchange. See "Failure to maintain its
REIT status may cause the Company to lose its New York Stock Exchange listing"
on page 17.
16
<PAGE> 23
THERE IS NO ASSURANCE THAT THE COMPANY'S BUSINESS STRATEGY, WHEN DETERMINED,
WILL BE SUCCESSFULLY IMPLEMENTED AND THAT REPLACEMENT ASSETS, IF ANY, WILL
PROVIDE GREATER RETURNS
The Company's long-term economic goal is to increase the per share net
asset value of the Company at the highest possible rate, without undue risk.
However, the Company has not determined whether or not to change the investment
policies of the Company concerning the types of assets in which it will make
investments and the Company has made no firm decision regarding selling its
remaining real estate assets. The Company is in the process of exploring uses
for the net cash proceeds to be received from the Asset Sale, including, without
limitation: making new investments including investments in real estate or
non-real estate assets or businesses; implementing or continuing a common or
preferred share repurchase or similar program; distributing such net proceeds to
the Beneficiaries, including, but not necessarily limited to, amounts required
to satisfy certain REIT distribution requirements resulting from previous asset
sales and net income in 2000, if any. The Company has also explored various
acquisition, investment and business combination transactions and will most
likely continue to explore such transactions. There is no assurance that the
Company's business strategy for the conduct of its business after the Asset
Sale, when determined, will be successfully implemented. In addition, if any or
all of the net proceeds of the Asset Sale are applied to the acquisition of
replacement assets, there can be no assurance that the replacement assets will
provide greater returns to the Company and the shareholders than the Properties
to be sold.
RISKS ASSOCIATED WITH INVESTMENT IN REMICS
If the Company desires to maintain its REIT status after 2001, while still
maximizing its liquidity, the Company may invest in REMICs. Depending on the
Company's other investments, if any, at such time, the amount of the Company's
investment in REMICs necessary to maintain REIT status could be substantial. A
REMIC is a vehicle that issues multiclass mortgage-backed securities. Investing
in REMICs involves certain risks, including the failure of a counter-party to
meet its commitments, adverse interest rate changes and the effects of
prepayments on mortgage cash flows. Further, the yield characteristics of REMICs
differ from those of traditional fixed-income securities. The major differences
typically include more frequent interest and principal payments (usually
monthly), the adjustability of interest rates, and the possibility of
prepayments of principal. The Company may fail to recoup fully its investment in
REMICs notwithstanding any direct or indirect governmental agency or other
guarantee. REMICs may also be less effective than other types of U.S. government
securities as a means of "locking in" interest rates.
FAILURE TO MAINTAIN ITS REIT STATUS MAY CAUSE THE COMPANY TO LOSE ITS NEW YORK
STOCK EXCHANGE LISTING
If the Company were to fail to qualify as a REIT, it might lose its listing
on the New York Stock Exchange. Whether the Company would lose its NYSE listing
would depend on the amount and composition of its assets, as well as many other
factors, at the time it fails to qualify as a REIT. If, at the time it fails to
qualify as a REIT, the Company's assets were substantially similar in amount to
its assets following the Asset Sale, the Company would most likely lose its NYSE
listing. On the other hand, if the Company had acquired significant additional
assets, then the Company would most likely not lose its NYSE listing. In either
event, if the Company loses its NYSE listing, the Company intends to have its
shares listed on another national securities exchange, such as the American
Stock Exchange. The Company believes that even if its assets at that time are
substantially similar to its assets following the Asset Sale, it will qualify
for listing on another national securities exchange. The Company believes that
it would be able to satisfy the original listing guidelines for the American
Stock Exchange.
INSIDER CONFLICTS OF INTEREST
The Executives are the principals of Partners and are the managing members
of Purchaser. In April 2000, the Executives, on behalf of the Purchaser, made a
proposal to acquire the Company or a number of its real estate properties. The
negotiation of that proposal ultimately resulted in the Sale
17
<PAGE> 24
Contract. The Executives had a conflict of interest during the negotiations
which culminated in the Sale Contract, as the Executives had gained knowledge
through their employment with the Company regarding the properties that were the
subject of the purchase proposal which they were negotiating on behalf of
Purchaser, and it was in their best interest to obtain the price and terms for
the sale most favorable to Purchaser. This was in conflict with the interests of
the Company, which desired to obtain the price and terms for the sale most
favorable to the Company. On the other hand, each of the Representatives of the
Company who conducted the negotiations with Purchaser on behalf of the Company
has extensive experience in the real estate industry and was a member of the
Executive Committee of the Board, to which approval of all dispositions and
financings of the Company's real estate properties had been delegated by the
Board. Each of the Representatives was knowledgeable regarding the real estate
properties of the Company. Other than Mr. Friedman, none of the Trustees of the
Company, including the Representatives, or their affiliates had an interest in,
or a relationship with, Purchaser or any of its affiliates.
NO FAIRNESS OPINION OR INDEPENDENT APPRAISALS WERE OBTAINED IN CONNECTION WITH
THE ASSET SALE
No fairness opinion from an independent professional advisor to the Company
was obtained in connection with the Asset Sale, nor were independent appraisals
of the Properties obtained in connection with the Asset Sale. In connection with
its approval of the Sale Contract, the Board determined not to retain a third
party to render a fairness opinion or obtain independent property appraisals
regarding the Asset Sale because it (i) believed that the Company had ample
opportunity to determine the fair market value of the Properties by widely
marketing the Properties and the Company for an extended period of time and (ii)
the Board desired to avoid the expense of a fairness opinion. The Board of
Trustees of the Company is comprised of persons with extensive experience in the
real estate industry. The Company believes that the terms of the Sale Contract
are at least as favorable to the Company as those that would have been obtained
from an unrelated third party as purchaser.
RISKS RELATING TO PROPOSAL THREE: AMENDMENTS TO THE DECLARATION OF TRUST
The amendment eliminating the requirement of shareholder approval for the
disposition of property of the Company would have the effect of permitting the
Board of Trustees, without approval of the shareholders, to sell, exchange,
transfer or dispose of any or all property of the Company, in one or more
transactions, which may or may not be related, including properties purchased
with the proceeds of the Asset Sale or otherwise acquired prior or subsequent to
the Asset Sale.
Subsequent to the Asset Sale, the Board of Trustees may determine that it
is in the best interest of the Trust to dispose of part or all of the remaining
properties of the Trust. These or other actions may be deemed to be actions
which cause the Trust to fail to qualify as a REIT for federal income tax
purposes. In the event that the Company was no longer a REIT, among other
consequences, the Company would no longer be required to distribute to its
shareholders, as dividends, 90% of its taxable income.
PROPOSAL ONE: ELECTION OF TRUSTEES
Under the Declaration of Trust, the Board of Trustees is divided into three
classes, with each class as nearly equal in number to the other classes as
possible. The term of office of each class expires in successive years.
Accordingly, at each annual meeting, successors to the Trustees whose terms
expire at that meeting are elected to three-year terms. Any vacancy occurring in
a class of Trustees may be filled by a majority vote of the Trustees remaining
in office, effective for the remainder of the term for such class.
The Board of Trustees is currently comprised of nine Trustees and is
divided into three classes known as Class I, II and III whose terms expire in
2000, 2001 and 2002, respectively. The authorized number of Trustees has been
fixed at 15 by the shareholders and the authorized size of each class has
18
<PAGE> 25
been fixed at five members. Class II is currently comprised of three members and
two vacancies. Classes I and III are currently comprised of two members and
three vacancies in each Class. See "--Remaining Trustees" on page 19 below.
Each individual listed below is a United States citizen. Unless otherwise
indicated, no individual or entity listed below has been convicted in a criminal
proceeding during the past five years (excluding traffic violations or similar
misdemeanors) or has been a party to any judicial or administrative proceeding
during the past five years (except for matters that were dismissed without
sanction or settlement) that resulted in a judgment, decree or final order
enjoining the individual or entity from future violations of, or prohibiting
activities subject to, federal or state securities laws, or a finding of any
violation of federal or state securities laws.
NOMINEES
Talton R. Embry and Steven S. Snider are the current Trustees whose terms
as members of Class I of the Board of Trustees will expire at the Meeting. Mr.
Embry was appointed by the Board of Trustees in September 2000 to fill a vacancy
in Class I. Mr. Snider was elected by shareholders as a Class I Trustee in 1998.
Messrs. Friedman and Shuchman, formerly Class I Trustees, resigned as Class I
Trustees effective in September 2000.
Talton R. Embry and Steven S. Snider are nominees for election as Class I
Trustees at the Meeting (the "Board's Nominees"), to serve for a term of three
years expiring at the 2003 annual meeting, upon the election of successors.
While the Trustees do not anticipate that any of the Board's Nominees will be
unable to serve, if any is not available for election, proxies may be voted for
a substitute as well as for the other persons named.
The Board of Trustees recommends a vote FOR the election of Messrs. Embry
and Snider as Trustees, to serve for a term of three years expiring at the 2003
annual meeting, upon the election of successors.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS, PERIOD OF SERVICE EXPIRATION
NAME AND AGE BUSINESS EXPERIENCE AND AFFILIATIONS AS TRUSTEE OF TERM
------------ ------------------------------------------------------ ----------------- ----------
<S> <C> <C> <C>
CLASS I
Talton R. Embry (54) Mr. Embry has been the Chairman of Magten Asset September 2000 2000
Management Corp. ("Magten"), a private investment to Date
management company, since 1998, where he is the chief
investment officer for Magten's clients. Mr. Embry has
been associated with Magten in various capacities
since 1978. Mr. Embry is also a director of Imperial
Parking Corporation ("Impark"), Anacomp, Inc., Salant
Corporation and BDK Holdings, Inc.
Steven S. Snider (43) Mr. Snider has been a senior partner at Hale and Dorr June 1998 to 2000
LLP ("Hale and Dorr"), a law firm, since June 1988 and Date
a junior partner from June 1985 to June 1988.
</TABLE>
REMAINING TRUSTEES
In September 2000, Mr. David P. Berkowitz resigned as a Class II Trustee,
Mr. Klafter resigned as a Class III Trustee and Mr. Citrin was appointed a Class
II Trustee by the Board of Trustees. In December 2000, Ms. Tighe and Messrs.
Garchik and Williams resigned as Class II Trustees and Mr. Bruce R. Berkowitz
(who is not related to Mr. David P. Berkowitz) was appointed by the Board as
Trustees to fill a vacancy in Class II. After the Meeting, there will be seven
Trustees. The Trustees other than the Class I Trustees nominated for election at
the Meeting, whose terms of office as Trustee will continue after the
19
<PAGE> 26
Meeting and will expire in the year set forth opposite his name, upon the
election and qualification of his successor, and certain additional information
with respect to each of them, are as follows:
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS, PERIOD OF SERVICE EXPIRATION
NAME AND AGE BUSINESS EXPERIENCE AND AFFILIATIONS AS TRUSTEE OF TERM
------------ ------------------------------------------ ----------------- ----------
<S> <C> <C> <C>
CLASS II
William A. Ackman Mr. Ackman has been Chairman of the Board June 1998 to Date 2001
(34) of Trustees of the Company since June
1998. Since January 1, 1993, through a
company he owns, Mr. Ackman has served as
co-investment manager of three investment
funds: Gotham Partners L.P. ("Gotham LP"),
Gotham Partners III, L.P. ("Gotham III
LP") and Gotham International Advisors,
L.L.C., a Delaware limited liability
company ("GIA"). Mr. Ackman has been
Chairman and a director of Impark from
March 2000 to present.
Jeffrey B. Citrin Mr. Citrin has been President of Blackacre September 2000 to 2001
(42) Capital Management LLC, a private fund Date
engaged in real estate investment, since
1994.
Bruce R. Berkowitz Managing Member of Fairholme Capital December 2000 to 2001
(42) Management L.L.C. since June 1997. Date
President and Director of Fairholme Funds,
Inc., a registered investment company
under the Investment Company Act of 1940
since December 1999. Managing Director,
Smith Barney, Inc. from 1995 to May 1997.
CLASS III
Daniel J. Altobello Mr. Altobello has been a partner in June 1998 to Date 2002
(59) Ariston Investment Partners, a consulting
firm, since October 1995. Mr. Altobello
was Chairman of the Board of ONEX Food
Services, Inc., an airline catering
company from October 1995 to January 2000.
Mr. Altobello was the Chairman, President
and Chief Executive Officer of Caterair
International Corporation, an airline
catering company, from November 1989 until
October 1995. Mr. Altobello is a member of
the Board of Directors of ONEX Food
Services, Inc., American Management
Systems, Inc., Colorado Prime, Inc., Care
First, Inc., Care First of Maryland, Inc.,
Mesa Air Group, Inc., World Airways, Inc.,
Sodexho Marriott Services, Inc., Atlantic
Aviation Holdings, Thayer Capital Partners
and Friedman, Billings and Ramsey, Inc.
William A. Scully Mr. Scully has been Vice Chairman of the October 1998 to 2002
(39) Board of Trustees of the Company since Date
November 1998. Mr. Scully has been a
partner of Apollo Real Estate Advisors II,
L.P. ("Apollo") since 1996 and is
responsible for new investments and
investment management. Mr. Scully has been
a director of Impark from March 2000 to
present. From 1994 to 1996, Mr. Scully was
a Senior Vice President of O'Connor
Capital, Inc., the general partner of The
Argo Funds, and the Director of
Acquisitions for The Argo Funds. From 1993
to 1994, Mr. Scully directed private
investment activities for entities related
to Clark Construction and The Carlyle
Group, primarily in land development
projects in suburban Washington, D.C. Mr.
Scully was a member of GE Capital's
portfolio acquisitions group from 1991 to
1993.
</TABLE>
20
<PAGE> 27
COMPENSATION OF TRUSTEES
Trustees, other than Messrs. Ackman, David P. Berkowitz, Friedman, Klafter,
Shuchman and Scully, received in May 1999 an annual retainer fee of 2,500
restricted Shares for Board service. In addition, during 1999 they were paid an
attendance fee of $1,500 for each Board or committee meeting attended in person
and a $500 fee for each Board or committee meeting attended telephonically. The
restrictions on the Shares granted to the Trustees in May 1999 were removed in
December 2000.
ORGANIZATION OF BOARD OF TRUSTEES
The Board of Trustees held 11 meetings during 1999. Each of the present
Trustees attended at least 75% of the aggregate of the meetings of the Board and
the committees of the Board on which he or she served. During 1999, the Board
had standing Audit, Compensation and Nominating Committees.
AUDIT COMMITTEE AND AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Trustees is composed of three (3)
non-employee Trustees. The members of the Audit Committee are: Daniel J.
Altobello (Chairman), Steven S. Snider and Bruce R. Berkowitz, who succeeded
James A. Williams upon his resignation from the Board in December 2000. The
Board determined each member of the Audit Committee was "independent" as defined
in Sections 303.01(B)(2)(a) and (3) of the NYSE's listing standards. The Audit
Committee held two meetings during fiscal year 1999 and one meeting during
fiscal year 2000.
Management is responsible for the Company's internal control and the
financial reporting process. The independent auditors are responsible for
performing an independent audit of the Company's consolidated financial
statements in accordance with auditing standards generally accepted in the
United States of America and for issuing a report thereon.
The responsibilities of the Audit Committee are set forth in its written
Charter, adopted April 11, 2000 by the Board. The Charter is attached as Exhibit
A to this Proxy Statement. Generally, the Audit Committee reviews and monitors
the Company's financial reporting process on behalf of the Board of Trustees. In
fulfilling its responsibility, the Audit Committee recommends to the Board of
Trustees the selection of First Union's independent auditor and approves the
compensation to be paid to the independent auditor. The Audit Committee is
primarily responsible for: (1) reviewing the annual audited and quarterly
financial statements and Management's Discussion and Analysis with management;
(2) reviewing significant financial reporting issues and judgments made in
connection with the preparation of the Company's financial statements and
changes to the Company's auditing and accounting principles and practices as
suggested by the independent auditor or management; (3) reviewing with
management the Company's major financial risk exposures and the steps management
has taken to monitor and control such exposures; and (4) obtaining from
management and the independent auditor reports and/or assurances that applicable
legal requirements are being followed.
The Audit Committee has: (i) reviewed and discussed the Company's audited
financial statements for the fiscal year ending December 31, 1999 with the
Company's management; (ii) discussed with the Company's independent auditor the
matters required to be discussed by SAS 61 (Codification of Statements on
Auditing Standards); and (iii) received the written disclosures and the letter
from the Company's independent auditor required by Independence Standards Board
Standard No. 1 (Independence Standards Board Standard No. 1, Independence
Discussions with Audit Committees), and has discussed with the Company's
independent auditor the independent accountants' independence. Based on the
review and discussions referred to above, the Audit Committee recommended to the
Board of Trustees that the audited financial statements be included in the
Company's Annual Report on Form 10-K for the fiscal year ending December 31,
1999 for filing with the Commission.
21
<PAGE> 28
NOMINATING COMMITTEE
The Nominating Committee was responsible for recommending nominees to the
Board of Trustees to fill vacancies on the Board of Trustees and for evaluating
shareholder nominees for election as Trustees. During 1999 and through September
2000, the members of the Nominating Committee were James A. Williams (Chairman),
Stephen J. Garchik, Daniel Shuchman and Mary Ann Tighe. The Nominating Committee
did not meet during 1999 or 2000. Effective in September 2000, the Nominating
Committee was dissolved and the Executive Committee, comprised of Messrs.
Ackman, Embry and Scully, assumed the function of the Nominating Committee. The
Nominating Committee will consider nominees recommended by securityholders who
follow the prescribed procedures for such nominations. See "Beneficiary
Proposals" on page 77.
COMPENSATION COMMITTEE
The Compensation Committee was formed on February 9, 1999 and held one
meeting during 1999. The Compensation Committee is responsible for making
recommendations to the Board of Trustees regarding matters of employee and
officer compensation and overseeing of the administration of benefit plans of
the Trust. From June 3, 1998 through the date the Compensation Committee was
formed, the Board of Trustees was responsible for the hiring and compensation of
the Trust's executives. During 1999 and through November 2000, the members of
the Compensation Committee were Daniel J. Altobello (Chairman), William A.
Ackman and James A. Williams. Mr. Williams resigned as a Trustee and member of
the Compensation Committee in December 2000.
SECURITY OWNERSHIP OF TRUSTEES AND OFFICERS AND CERTAIN BENEFICIAL OWNERS.
The table below sets forth, with respect to Trustees, nominees for Trustee,
executive officers of the Company, and all Trustees and executive officers as a
group, information relating to their beneficial ownership of Shares as of
October 31, 2000:
<TABLE>
<CAPTION>
AMOUNT AND NATURE
NAME OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP(1) PERCENT
------------------------ -------------------------- -------
<S> <C> <C>
TRUSTEES
William A. Ackman(2)......................... 5,841,233 14.23%
Daniel J. Altobello(3)....................... 4,500 *
Bruce R. Berkowitz(4)........................ 405,895 1.0%
Jeffrey P. Citrin(5)......................... 7,970 *
Talton R. Embry(6,15)........................ 4,871,200 11.87%
William A. Scully(7)......................... 0 --
Steven S. Snider(3).......................... 7,500 *
EXECUTIVE OFFICERS
Daniel P. Friedman(8)........................ 348,983 *
Anne N. Zahner(9)............................ 156,744 *
David Schonberger(9)......................... 156,744 *
All Trustees and Executive Officers
(10 in number) as a group(10)................... 11,800,769 28.75%
</TABLE>
---------------
* Beneficial ownership is less than 1%
The following table sets forth, according to publicly available information
on file with the Securities and Exchange Commission (the "Commission") as of the
dates indicated in the accompanying foot-
22
<PAGE> 29
notes, except as otherwise indicated, information concerning each person known
by the Company to be the beneficial owner of more than 5% of the Shares:
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP(11) PERCENT
------------------------------------ ----------------- -------
<S> <C> <C>
Gotham Partners, L.P.(12)................................... 5,841,233 14.23%
Gotham International Advisors, L.L.C.(12)
Gotham Partners III, L.P.(12)
Gotham Holdings II, L.L.C.(12)
110 East 42nd Street New York, New York 10017
Apollo Real Estate Investment Fund II, L.P.(13)............. 2,990,379 7.29%
Apollo Real Estate Advisors, L.P.(13)
1301 Avenue of the Americas
New York, New York 10019
Magten Asset Management Corp.(14)........................... 3,341,600 8.14%
35 East 21st Street
New York, New York 10010
Snyder Capital Management, L.P.(15)......................... 4,519,000 11.01%
Snyder Capital Management, Inc.
350 California Street Suite 1460
San Francisco, California 94104
</TABLE>
---------------
(1)Pursuant to Rule 13d-3 of the Securities Exchange Act of 1934, a person is
deemed to be a beneficial owner if he has or shares voting power or
investment authority in respect of such security or has the right to acquire
beneficial ownership within 60 days. The amounts shown in the above table do
not purport to represent beneficial ownership except as determined in
accordance with this Rule. Each Trustee and executive officer has sole
voting and investment power with respect to the amounts shown or shared
voting and investment powers with his or her spouse, except as indicated
below.
(2) Mr. Ackman is the President of Karenina Corporation, a general partner of
Section H Partners. Accordingly, Mr. Ackman may be deemed beneficial owner
of Shares owned by Gotham LP and Gotham III LP. Gotham International
Advisors, L.L.C., a Delaware limited liability company ("GIA"), has the
power to vote and dispose of the Shares held for the account of Gotham
Partners International, Limited, a Cayman exempted company ("Gotham
International"), and accordingly, may be deemed the beneficial owner of
such Shares. Mr. Ackman is a senior managing member of GIA and may be
deemed beneficial owner of Shares owned by Gotham International. For
purposes of this table, all of such ownership is included. The address of
Mr. Ackman is c/o Gotham Partners L.P., 110 East 42nd Street, New York, New
York 10017.
(3)Includes 2,500 share awards granted to each of Mr. Altobello and Mr. Snider
under the Trust's 1999 Share Option Plan for Trustees.
(4)Includes 10,000 shares owned directly by Mr. Bruce R. Berkowitz and 395,895
shares owned by clients of Fairholme Capital Management L.L.C., with respect
to which Mr. Bruce R. Berkowitz has shared investment power. Mr. Bruce R.
Berkowitz is not related to Mr. David P. Berkowitz.
(5)Includes 1,527 Shares owned directly by Mr. Citrin and 3,809 Shares owned by
his minor children. Also includes 2,634 Shares owned by spouse, beneficial
ownership of which is disclaimed. Mr. Citrin is President of Blackacre
Capital Management, LLC, which may be deemed to be under common control with
Cerberus Partners L.P. Cerberus Partners L.P. and its affiliates
beneficially own 1,769,615 Shares. In accordance with information provided
by Mr. Citrin, he has no right to vote or dispose of any Shares held by
Cerberus Partners, L.P. ("Cerberus"), and therefore does not beneficially
own any Shares held by Cerberus.
(6)According to a Report of Changes in Beneficial Ownership on Form 4 filed by
Mr. Embry for October 2000, at October 31, 2000, Mr. Embry was deemed to
beneficially own 4,871,200 Shares. As the Chairman of Magten, Mr. Embry is
deemed to beneficially own all of the Shares beneficially owned by Magten.
He also beneficially owns additional Shares with respect to which he has
sole voting and investment power.
(7)Mr. Scully is a limited partner of Apollo. As a limited partner, he has no
right to vote or dispose of any Shares held by Apollo, and therefore does
not beneficially own any Shares held by Apollo.
(8)Includes 313,735 Shares that Mr. Friedman has the vested right to acquire
through the exercise of options.
(9)Includes 156,744 Shares which each of Mr. Schonberger and Ms. Zahner has the
vested right to acquire through the exercise of options.
23
<PAGE> 30
(10)Includes a total of 627,223 Shares which are subject to options referenced
in footnotes 9 and 10 and 5,000 Share Awards referenced in footnote 3.
(11)Pursuant to Rule 13d-3 of the Exchange Act, a person is deemed to be a
beneficial owner if he has or shares voting power or investment authority in
respect of such security or has the right to acquire beneficial ownership
within 60 days. The amounts shown in the above table do not purport to
represent beneficial ownership except as determined in accordance with this
Rule.
(12)The Company obtained the information regarding these holders from an
amendment to Schedule 13D filed with the Commission on October 5, 2000.
Gotham LP has sole voting and investment power with respect to 3,853,158
Shares, GIA has shared voting and investment power with respect to 1,431,664
Shares, Gotham III LP has sole voting and investment power with respect to
78,448 Shares and Gotham Holdings II, L.L.C. has sole voting and dispositive
power with respect to 477,963 Shares.
(13)The Company obtained the information regarding these holders from a Schedule
13D filed with the Commission on July 28, 1998. These holders have shared
voting and investment power with respect to all Shares indicated.
(14) The information regarding Magten is as of October 31, 2000, and was
provided by Magten. Magten was deemed to beneficially own 3,341,600 Shares.
Magten has shared investment power with respect to all of these Shares and
has shared voting power with respect to 2,392,820 of these Shares.
(15)The information regarding these holders is as of December 31, 1999 and was
obtained from an amendment to Schedule 13G filed with the Commission on
February 15, 2000. These holders have shared voting power with respect to
4,032,340 Shares and shared investment power with respect to 4,519,000
Shares.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
GOTHAM'S PARTICIPATION IN BRIDGE LOAN
In July 1998, Gotham LP and Gotham III LP funded $15 million of a $90
million original principal amount bridge loan (the "Bridge Loan") to the Company
that was needed to fund a tender offer to repurchase $88 million in principal
amount of the Company's 8 7/8% Senior Notes Due 2003 (the "Senior Notes").
Gotham LP and Gotham III LP, together with its affiliates GIA and Gotham
Holdings II, L.L.C., beneficially own 14.23% of the Shares. William A. Ackman
and David P. Berkowitz, both Trustees during 1999, indirectly control and have a
pecuniary interest in each of the foregoing Gotham entities.
In January 1999, the Bridge Loan, was amended to:
- extend the maturity of the Bridge Loan to August 11, 1999,
- incorporate certain covenants from another credit facility into the
Bridge Loan, and
- modify the Company's obligation to conduct a rights offering to raise
funds to repay all amounts outstanding under the Bridge Loan.
In consideration for these amendments, the Company:
- paid the lenders under the Bridge Loan a fee of $300,000,
- increased the interest rate on the Bridge Loan from 9.875% to 12% per
annum, and
- paid the lenders under the Bridge Loan additional fees totaling
$1,508,700 in 1999, which fees were determined based upon the outstanding
principal balance of the Bridge Loan on various dates.
The lenders under the Bridge Loan and the Company subsequently agreed to
require the Company to reduce the outstanding principal balance under the Bridge
Loan to less than approximately $38 million by May 15, 1999 and to allow $9
million of the net proceeds from the Company's proposed rights offering to be
used to repay amounts outstanding under another credit facility. This $9 million
portion of the Bridge Loan then bore interest at 15% per annum.
The Bridge Loan was repaid in full in July 1999. During 1999, a total of
$5.2 million was paid as interest on the Bridge Loan, of which $934,426 was paid
to Gotham LP and Gotham III LP as lenders under the Bridge Loan. During 1999, a
total of $1,808,700 in fees were paid to the lenders in connection
24
<PAGE> 31
with the Bridge Loan, of which $268,117 was paid to Gotham LP and Gotham III LP
as lenders under the Bridge Loan.
STANDBY PURCHASE COMMITMENTS WITH GOTHAM
In August 1998, the Company obtained standby purchase commitments from
Gotham LP and Gotham III LP in connection with the rights offering conducted to
repay the Bridge Loan.
In April 1999, the Company amended its standby purchase commitments with
Gotham LP and Gotham III LP. Among other things, the parties agreed that:
- Gotham International would be added as another standby purchaser. William
A. Ackman and David P. Berkowitz indirectly control and have a pecuniary
interest in Gotham International;
- the Company would conduct a rights offering for at least $20 million (the
"First Offering") and for which the standby purchasers would "standby" to
purchase up to such number of Shares that would result in gross proceeds
to the Company of the lesser of $50 million and the amount of gross
proceeds from the First Offering;
- the Company would pay Gotham LP, Gotham III LP and Gotham International
(collectively, "Gotham") an aggregate standby purchaser fee equal to
$1,800,000 upon the execution of such amendments;
- the standby purchaser would have certain customary rights to terminate
their respective obligations; and
- the standby purchase commitments would expire August 11, 1999.
In May 1999, the Company distributed approximately 12.5 million rights to
purchase shares of beneficial interest of the Company at $4.00 per share,
raising approximately $46.7 million net of offering costs. The Company used the
net proceeds of the rights offering to repay $37.7 million of the Bridge Loan
and $9 million of its bank loans. The Company had entered into standby purchase
commitments with Gotham LP and Gotham III LP with respect to the rights
offering. Due to the success of the First Offering, the Company did not have to
exercise its rights under the standby purchase commitments.
In addition, in April 1999 Gotham agreed with the Company to standby
purchase commitments in connection with a potential second rights offering. As
the second rights offering did not commence, the Company relieved Gotham of such
obligations and no fees were paid to Gotham in connection with any second
offering.
REGISTRATION RIGHTS AGREEMENT WITH GOTHAM
Pursuant to the standby purchase commitments, a registration rights
agreement ("Registration Rights Agreement") was entered into between the Company
and Gotham in November 1999 which provided for the registration by the Company
of Shares owned by Gotham at the expense of the Company. Under the Registration
Rights Agreement, Gotham requested that the Company file a shelf registration
statement relating to the offer and sale of all qualifying securities held by
Gotham. Under the Registration Rights Agreement, the shelf registration
statement was required to be filed on or before December 15, 1999. Gotham has
extended such required filing date on numerous occasions and the Company is
currently required to file such shelf registration statement on or before
January 31, 2001. Should the Company fail to file the shelf registration
statement by such date, absent a further extension by Gotham, it will likely be
in breach of its obligations under the Registration Rights Agreement and Gotham
will be entitled to seek specific performance by the Company and to pursue other
legal and equitable remedies.
25
<PAGE> 32
OTHER RELATIONSHIPS
The Company leases four of its parking facilities to a third party which is
partially owned by an affiliate of Apollo. In 1999, the Company received
approximately $4.0 million in rent from this third party with respect to these
properties.
The Company in December 1998 engaged Ackman-Ziff Real Estate Group LLC
("Ackman-Ziff") to arrange for mortgage financing on several properties of the
Trust. Lawrence D. Ackman, who is the father of William A. Ackman, is an equity
owner of Ackman-Ziff. The Board of Trustees was informed of the aforementioned
family relationship in advance of the engagement of Ackman-Ziff by the
management of the Company. William A. Ackman did not participate in the decision
of management with respect to the engagement of Ackman-Ziff by the Company. In
1999, $609,952 in fees were paid to Ackman-Ziff.
The Company has engaged the law firm of Hale and Dorr to advise the Trust
on certain matters. Steven S. Snider, a member of the Board of Trustees, is a
senior partner at Hale and Dorr. In 1999, the Trust made $268,970 in payments to
Hale and Dorr for services rendered.
The related party transactions described above, including without
limitation, the Bridge Loan, the standby purchase commitments, the Registration
Rights Agreement, the engagement of Hale and Dorr for legal services, the
leasing of four parking facilities to an affiliate of Apollo and the engagement
of Ackman-Ziff for mortgage brokerage services were negotiated at arms length or
were subject to competitive bidding and the Company believes that the terms of
all such transactions were as favorable to the Company as those that would have
been obtained from unrelated third parties.
EXECUTIVE COMPENSATION
The Executive Officers of the Company are set forth below:
<TABLE>
<S> <C>
Daniel P. Friedman Mr. Friedman has been a managing member of Purchaser since
August 21, 2000 and a principal of Radiant Partners LLC
since March 2000. Mr. Friedman has been President and
Chief Executive Officer of the Company since November 1998
and served as a Trustee from November 1998 until September
2000. Mr. Friedman was President and Chief Operating
Officer of Enterprise Asset Management, Inc., a real
estate investment firm ("Enterprise"), from June 1996 to
November 1998 and was Executive Vice President and Chief
Operating Officer of Enterprise from February 1992 to June
1996. Mr. Friedman has been Vice-Chairman and a director
of Impark from March 2000 to present. From September 1994
to November 1998, he was a manager of the Cheshire Limited
Liability Companies ("Cheshire"). Cheshire is involved in
the acquisition and restructuring of mortgage loans and
apartments. From May 1993 to December 1997, Mr. Friedman
was a board member of Emax Advisors, Inc., which provides
capital advisory services for real estate transactions.
From May 1993 to December 1996, he was a board member of
Emax Securities, Inc. (a NASD broker/dealer).
</TABLE>
26
<PAGE> 33
<TABLE>
<S> <C>
Anne N. Zahner Ms. Zahner has been a managing member of Purchaser since
August 21, 2000 and a principal of Radiant Partners LLC
since March 2000. Ms. Zahner has been Executive Vice
President of the Company since November 1998. She was
Executive Vice President of Enterprise from March 1996
until November 1998. From November 1990 until March 1996,
Ms. Zahner was a director and Vice President of Travelers
Insurance Company ("Travelers"), a stock insurance
company, and Travelers Realty Investment Co., a subsidiary
of Travelers.
David Schonberger Mr. Schonberger has been a managing member of Purchaser
since August 21, 2000 and a principal of Radiant Partners
LLC since March 2000. Mr. Schonberger has been Executive
Vice President of the Company since November 1998. He has
been Vice-President of Impark from March 2000 to present.
From November 1997 to November 1998, he was Senior Vice
President of Enterprise. Since January 1990, Mr.
Schonberger has been a director of Legacy Construction
Corp., a leasing and project management company. In
February 1996, Legacy Construction Corp. merged with Peter
Elliot Corporation to form Peter Elliott LLC. From
February 1996 to October 1997, Mr. Schonberger served as
Treasurer and Manager of Peter Elliot LLC, a full-service
commercial real estate firm.
</TABLE>
The table below sets forth the plan and non-plan compensation awarded, paid
or earned for services rendered to the Company during each of the last three
years to or by the Chief Executive Officer during 1999 and each of the remaining
highest compensated executive officers of the Trust at December 31, 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
------------------------------------------------ ------------------------------
SECURITIES LTIP
BONUS OTHER ANNUAL UNDERLYING PAYOUTS
NAME AND PRINCIPAL POSITION YEAR SALARY($)(1) ($) COMPENSATION($) OPTIONS/SHARES(#) ($)
--------------------------- ---- ------------ -------- --------------- ----------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Daniel P. Friedman........ 1999 $342,833 376,483
President and Chief 1998 56,667 1,080,000
Executive Officer $126,414
Anne N. Zahner............ 1999 $201,667 $135,000 125,494
Executive Vice President 1998 33,333 360,000 $ 9,062
David Schonberger......... 1999 $201,667 $135,000 125,494
Executive Vice President 1998 33,333 360,000
Brenda J. Mixson.......... 1999 $226,000 $100,000
Chief Financial Officer
</TABLE>
---------------
(1) Amounts shown for 1998 salaries are for a two-month period commencing
November 1998.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT
AND CHANGE IN CONTROL AGREEMENTS
EMPLOYMENT AGREEMENTS
In November 1998, the Trust entered into a four-year employment agreement
with Mr. Friedman. The agreement provided that he would be President and Chief
Executive Officer of the Trust and that
27
<PAGE> 34
the Trust would use its reasonable best efforts to cause him to be elected to
the Board of Trustees and its Executive Committee. Under the agreement, Mr.
Friedman received an annual base salary of not less than $340,000, subject to
annual review and increase by the Board of Trustees by at least 5% each year,
health and welfare benefits and 1,080,000 stock options, as described in the
Stock Option tables below. Mr. Friedman was also entitled to options to purchase
additional Shares equal to 3% of the Shares issued by the Trust in connection
with raising an additional $120 million of equity. Such options would have an
exercise price equal to the purchase price of the Shares offered for sale.
Additionally, the Trust agreed to pay Mr. Friedman long-term compensation as
follows: one-third on the commencement of his employment, and one-third on the
second and fourth anniversaries of the commencement of his employment.
The Trust also entered into a four-year employment agreement with each of
Mr. Schonberger and Ms. Zahner in November 1998. Mr. Schonberger and Ms. Zahner
were Executive Vice Presidents of the Trust and received annual base salaries of
not less than $200,000 each, subject to annual review and increase by the Board
of Trustees by at least 5% each year, health and welfare benefits and 360,000
stock options, as described in the Stock Option tables below. Under each of
their employment agreements, Ms. Zahner and Mr. Schonberger were also entitled
to options to purchase additional Shares equal to 1% of the Shares issued by the
Trust in connection with raising an additional $120 million of equity. Such
options would have an exercise price equal to the purchase price of the Shares
offered for sale. Additionally, the Trust agreed to pay Ms. Zahner long-term
compensation as follows: one-third on the commencement of her employment, and
one-third on the second and fourth anniversaries of the commencement of her
employment.
Each executive's employment could be terminated at any time; however, if
the Trust were to terminate such executive's employment without cause, or if he
or she terminated his or her employment for good reason or in the event of a
"change in control," the Trust would be required to: (1) continue to pay his or
her accrued but unpaid base salary and earned but unpaid bonuses and incentive
compensation, (2) provide benefits for a period of two years, and (3) pay a lump
sum equal to three times base salary, if the executive were terminated prior to
18 months from the commencement of his or her term, or a lump sum equal to two
and a half times base salary, if the executive were terminated after 18 months
from the commencement of his or her term.
For purposes of the employment agreements, a "change in control" would have
occurred if any of the following events occur:
(A) An acquisition (other than directly from the Trust or any subsidiary,
an employment benefit plan (in a trust forming a part thereof) maintained by the
Trust or any subsidiary of the Trust, or any person in connection with such
acquisition) of any voting securities of the Trust (treating all classes of
outstanding voting securities or other securities convertible into voting
securities as if they were converted into voting securities) by any person
(other than Gotham LP, Apollo or any affiliate of Gotham LP or Apollo)
immediately after which such person has beneficial ownership of 30% or more of
the combined voting power of the Trust's then outstanding voting securities.
(B) Six of the ten individuals who were appointed to the Board of Trustees
after April 1, 1998 cease for any reason to be members of the Board; provided,
however, that if the election, or nomination for election by the Trust's
shareholders, of any new Trustee was approved by Mr. Friedman, such new Trustee
shall, for purposes of the employment agreement, be considered as a member of
the Board of Trustees who was appointed after April 1, 1998.
(C) A merger, consolidation or reorganization involving the Trust, unless
certain circumstances had occurred.
Notwithstanding the foregoing, a change in control shall not be deemed to
occur solely because any person acquired beneficial ownership of more than the
permitted amount of the outstanding voting securities as a result of the
acquisition of voting securities by the Trust which, by reducing the number of
voting securities outstanding, increases the proportional number of Shares
beneficially owned by
28
<PAGE> 35
such person, provided that if a change in control would occur (but for the
operation of this sentence) as a result of the acquisition of voting securities
by the Trust, and after such Share acquisition by the Trust, such person becomes
the beneficial owner of any additional voting securities which increases the
percentage of the then outstanding voting securities beneficially owned by such
person, then a change in control shall occur.
AMENDMENTS TO EMPLOYMENT AGREEMENTS
In March 2000, the Trust amended the employment agreements of each of
Messrs. Friedman and Schonberger and Ms. Zahner (each, an "Executive"). The
amended agreements provided that after (i) the Impark spin-off and (ii) a sale
or financing of Park Plaza Mall (the "Park Plaza Financing"), each Executive
could terminate his or her employment with the Trust on or after June 1, 2000,
and then would be entitled to receive a severance payment from the Company of
$1,001,000 for Mr. Friedman and $630,000 for each of Mr. Schonberger and Ms.
Zahner. The Impark spin-off and the Park Plaza Financing have occurred and each
Executive terminated his or her employment agreement and received the severance
payment on or about June 1, 2000. The amended employment agreements also
provided, among other things, that the options held by the Executives with
exercise prices of $8.50 and $6.50 were canceled and that certain additional
options granted in connection with the May 1999 rights offering with an initial
exercise price of $4.00 per share would become immediately exercisable and
expire eight months after a termination of employment under certain
circumstances. Prior to termination of employment, each Executive was permitted
to invest in other businesses, provided that the Executive first offers such
opportunity to the Trust. Finally, the amended employment agreements provided
that (A) two of the Executives, Messrs. Friedman and Schonberger, would receive
options to purchase shares of Impark and (B) the Trust would pay Ms. Zahner an
additional cash payment of $110,000.
For additional information with respect to Messrs. Friedman and
Schonberger, Ms. Zahner and Radiant Partners LLC, see "Proposal Two: Consent to
the Asset Sale -- The Parties -- Purchaser," on page 56 and "-- Interests of
Management or Trustees in the Asset Sale" beginning on page 51.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
------------------------------------------------------- ANNUAL RATES OF
NUMBER OF % OF TOTAL SHARE PRICE
SHARES OPTIONS APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR 10 YEARS(3)
OPTIONS EMPLOYEES PRICE EXPIRATION ---------------------
NAME GRANTED(1)(2) IN 1999 PER SHARE($) DATE 5%(#) 10%(#)
---- ------------- ---------- ------------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Daniel P. Friedman....... 376,483 60% $3.69 11/2/2008 -- --
Anne N. Zahner........... 125,494 20% $3.69 11/2/2008 -- --
David Schonberger........ 125,494 20% $3.69 11/2/2008 -- --
Brenda J. Mixson......... --
</TABLE>
---------------
(1) The options for Messrs. Friedman and Schonberger and Ms. Zahner were granted
in accordance with each of their employment agreements based on the new
equity raised from the Company's rights offering in May 1999. The options
were issued under the 1994 Plan in the form of Incentive Stock Options to
the maximum extent permitted by Section 422 of the Internal Revenue Code of
1986, as amended (the "Code") and Nonstatutory Stock Options. At the time of
grant, the options had an exercise price of $4.00 per Share, representing
the per Share issue price of the new equity. The options have a cost of
capital feature, which provides that the exercise price will increase by 10%
per annum, prorated monthly, and it will decrease by the amount of per share
dividends or other distributions to shareholders; however, the increase in
the exercise price will not begin until May 2, 2000. During 1999, dividends
declared of $.31 per share reduced the original exercise price. The options
become exercisable ratably over four years and expire after 10 years, based
on options that were previously granted in 1998. Effective on May 17, 1999,
the 1994 Plan was amended and restated and renamed the 1999 Long Term
Incentive Plan.
(2) Effective June 1, 2000, in accordance with the provisions of their
Employment Agreements, as amended, certain stock options held by the
Executives were canceled and certain additional options granted in
connection with the rights offering became
29
<PAGE> 36
immediately exercisable. See "Employment Contracts, Termination of Employment
and Change in Control Agreements -- Amendments to Employment Agreements" on page
29.
(3) The potential realizable value cannot be calculated because the amount of
dividends or other distributions to shareholders, which decrease the per
Share option price, are not determinable over the 10-year option life.
AGGREGATED SHARE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SHARES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES AT FISCAL YEAR END(#) AT FISCAL YEAR END($)
ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE(#) REALIZED($) UNEXERCISABLE EXERCISABLE UNEXERCISABLE EXERCISABLE
---- -------------- ----------- ------------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Daniel P. Friedman... 1,092,363 364,120 $299,305 $99,767
Anne N. Zahner....... 364,120 121,374 $ 99,767 $33,256
David Schonberger.... 364,120 121,374 $ 99,767 $33,256
Brenda J. Mixson.....
</TABLE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
APPROACH TO EXECUTIVE COMPENSATION
The Compensation Committee's policy with respect to the compensation of
executive officers is to pay cash and other compensation to attract and retain
high quality executive officers. The compensation packages provided to the
Executives were the outcome of negotiations between the Trust and the
individuals involved.
In 1998, the Trust granted the three new members of management options at
strike prices significantly above market, each with a cost of capital feature.
It was provided that the strike prices of the options granted would increase by
10% per annum and would decrease by the amount of any dividends or distributions
made to shareholders; however, the increase in the strike prices did not begin
until May 2, 2000. Effective in March 2000, pursuant to amendments to their
employment agreements, the foregoing options were canceled. See "Employment
Contracts, Termination of Employment and Change in Control
Agreements -- Amendments to Employment Agreements" on page 29.
The Compensation Committee's policy is that a substantial portion of an
executive officer's compensation is to be incentive based. That policy is
reflected in the compensation packages provided to the Executives by the
inclusion therein of stock options that were priced above the market price of
the Trust's common shares on the date of the grant, which options would gain
value only if the common shares of the Trust increased in value. The starting
salaries of the Executives, as provided in their respective employment
agreements, were not increased during the effectiveness of the agreements from
November 1998 through termination of the agreements in June 2000, except for a
5% increase, effective November 1999, as required under the employment
agreements. The salary amounts shown as being paid in 1998 to the Executives in
the Summary Compensation Table were for a period of less than two months, as
their employment commenced in November 1998. Mr. Friedman, as President and
Chief Executive Officer of the Company, did not receive a performance bonus
during 1998 or 1999. Mr. Schonberger and Ms. Zahner, as Executive Vice
Presidents, received performance bonuses for their roles in administrating the
successful sale and refinancing of numerous assets of the Trust, as directed by
the Board of Trustees. Ms. Mixson, who served as Chief Financial Officer during
1999 and did not have an employment agreement with the Company, received a
performance bonus of $100,000 during 1999. These cash bonuses compensated these
individuals for superior individual performances in carrying out
responsibilities assigned to them by the Board of Trustees.
In 1999, the Trust granted to Messrs. Friedman and Schonberger and Ms.
Zahner options at a strike price equal to the sales price of Shares in the
Trust's 1999 rights offering, pursuant to provisions in their
30
<PAGE> 37
employment agreements that obligated the Trust to issue said options. Effective
June 1, 2000, those options became immediately exercisable. See the information
provided for the foregoing individuals in "Security Ownership of Trustees and
Officers and Certain Beneficial Owners, beginning on page 22.
The Compensation Committee believes that option compensation is generally
only appropriate for those employees who can materially impact the value of the
entire company. Otherwise, the Trust intends to compensate executives with cash
bonuses based on an executive officer's performance in his or her particular
area of responsibility. To the extent consistent with the general business goals
of the Trust and its other compensation policies, the Board of Trustees and the
Compensation Committee structure annual bonus and long-term incentive awards
with the intention that compensation deductions attributable thereto would not
be limited by Section 162(m) of the Code.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
During 1999, Mr. Friedman served as Chief Executive Officer and President
pursuant to an employment agreement. See "Employment Contracts, Termination of
Employment and Change in Control Agreements -- Employment Agreements" beginning
on page 27. During the period of his employment in 1999, he received a base
salary at the rate of $340,000 per annum that was increased to $357,000 per
annum effective November 1999 and new options to purchase 376,483 Shares, which
were to become exercisable ratably over four years and expire in 2008. Due to
the amendment to the Employment Agreements and the termination of employment,
effective June 1, 2000, Mr. Friedman held options to purchase 313,735 shares,
exercisable immediately with an expiration of February 2001.
SUBMITTED BY THE COMPENSATION COMMITTEE OF THE BOARD OF TRUSTEES:
William A. Ackman
Daniel J. Altobello
James A. Williams
31
<PAGE> 38
PERFORMANCE GRAPH
The performance graph assumes $100 invested on December 31, 1994 in Shares,
all REITs and the NYSE Composite Index, with dividends reinvested when paid and
Share prices as of the last day of each calendar year. The total return for all
REITs was compiled by the National Association of Real Estate Investment Trusts.
<TABLE>
<CAPTION>
FIRST UNION ALL REITS NYSE COMPOSITE INDEX
----------- --------- --------------------
<S> <C> <C> <C>
1994 100 100 100
1995 112 118 131
1996 209 161 161
1997 283 191 218
1998 101 155 258
1999 89 145 287
</TABLE>
PROPOSAL TWO: CONSENT TO THE ASSET SALE
The Beneficiaries are being asked to consent to the Asset Sale. The Board
is seeking Beneficiary consent to the Asset Sale in accordance with the
Declaration of Trust, which provides that no sale of more than 50% of the
Company's property may be made without the consent of holders of at least a
majority of the outstanding Shares. The Asset Sale will constitute a sale by the
Company and its subsidiaries of more than 50% of the Company's property.
Accordingly, a vote to consent to the Asset Sale will be deemed a vote to
consent to the sale by the Company of more than 50% of the Company's property.
The Board of Trustees unanimously determined that the Sale Contract is fair and
reasonable to the Beneficiaries and in the best interests of the Company. In
light of his affiliation with Purchaser (of which the Board was apprised),
Daniel Friedman, a former member of the Board of Trustees and a principal of
Purchaser, did not participate in the Board deliberations or approval with
respect to the Asset Sale. THE BOARD OF TRUSTEES UNANIMOUSLY HAS RECOMMENDED
THAT THE BENEFICIARIES VOTE TO CONSENT TO THE ASSET SALE.
The following information describes: (1) the history of the Company's
property sales program, (2) the Asset Sale, (3) how the Company intends to use
the proceeds from the Asset Sale and (4) the plans for the Company subsequent to
the Asset Sale. Also included is information with respect to the parties to the
Asset Sale, the interests of management or the Trustees in the Asset Sale, the
terms of the Sale Contract and the terms of the Voting Agreements.
32
<PAGE> 39
THE ASSET SALE
The properties proposed to be sold in the Asset Sale (individually, a
"Property" and collectively, the "Properties") have a combined book value as of
September 30, 2000 of $166 million and consist of: (i) four office properties:
the 55 Public Square Building and the CEI Building in Cleveland, Ohio, the North
Valley Tech Center in Thornton, Colorado and the Two Rivers Business Center in
Clarksville, Tennessee; (ii) two shopping center properties: the Westgate Town
Center in Abilene, Texas and the Pecanland Mall in Monroe, Louisiana; (iii) six
parking garages: two located in Cleveland, Ohio and one located in each of
Chicago, Illinois, Columbus, Ohio, Nashville, Tennessee and Richmond, Virginia;
and (iv) one parking lot in Cleveland, Ohio. The Asset Sale also includes a note
receivable secured by a mortgage on an apartment property in Atlanta, Georgia
and certain assets used in the operation of the properties being sold.
The following schedule provides certain information with respect to the
mortgage debt secured by the Properties:
<TABLE>
<CAPTION>
MAY 31, 2000 MATURITY DATE
PROPERTY BALANCE ($) INTEREST RATE (MM/YY)
-------- ------------ ----------------------- -------------
<S> <C> <C> <C>
55 Public Square 21,100,000 LIBOR + 325 bp 09/02
North Valley Tech Center 16,000,000 LIBOR + 295 bp 07/02
Pecanland Mall 37,913,058 12.25% + participation 12/17
Huntington Garage 7,794,901 8.55% 01/14
Long Street (1st Mortgage) 605,735 8.63% 02/09
Long Street (2nd Mortgage) 787,500 8.25% 10/03
Madison and Wells Garage 30,000,000 LIBOR + 175 bp 05/01
Printers Alley Garage 4,000,000 LIBOR + 175 bp 07/01
</TABLE>
In addition, a mortgage loan secured by the Westgate Town Center in the
principal amount of $8.5 million, of which $7.5 million was advanced at the time
of closing in September 2000, has been obtained by the Company. This mortgage
debt shall be assumed by Purchaser as part of the Asset Sale.
Under certain circumstances, the Company may provide financing to the
Purchaser to replace the mortgage indebtedness described above. Purchaser has
provided written assurances to the Company that it has obtained firm commitments
for acceptable financing, either in the form of a consent to the Purchaser's
assumption of existing mortgages or new mortgage loans with respect to all of
the Properties it will purchase. Based upon such written assurances, the Company
does not expect that it will be required to provide financing to Purchaser in
connection with the Asset Sale.
BACKGROUND OF THE ASSET SALE
1998 CHANGE IN CONTROL
During 1997, Gotham accumulated a substantial amount of common shares of
the Company, and engaged in discussions with the then current management of the
Company with respect to, among others matters, the future direction of the
Company. As a result of these discussions, Gotham proposed a new Board slate for
the 1998 Annual Meeting of the Company.
At the Company's 1998 Annual Meeting in May 1998, as the result of a proxy
contest between the Company and Gotham, the size of the Company's Board of
Trustees was increased from nine to 15 Trustees and Gotham's slate of nine
candidates were elected as Trustees. The new Trustees took office in June 1998.
In June 1998, the lenders under the $125 million senior credit facility of
the Company determined that a default had occurred as a result of the change in
the Board's composition. The Company entered into negotiations with the lenders
with respect to repayment of the facility. Additionally, in July 1998, due
primarily to adverse change-in-control provisions in the documents governing the
Senior Notes, the
33
<PAGE> 40
Company commenced a tender offer to repurchase all $100 million principal amount
of the Senior Notes. The tender offer resulted in the repurchase of
approximately $88 million of Senior Notes, which was funded by the Bridge Loan.
INDIVIDUAL ASSET SALES FROM FEBRUARY TO JULY 1999
The Board determined to liquidate real estate properties to raise cash for
general corporate purposes, including the repayment of the indebtedness under
the senior credit facility and the Bridge Loan and, in June, 1998, the Board
engaged commercial real estate brokerage firms to assist the Company in selling
its office properties, apartment properties and shopping mall properties. The
Company hired Granite Partners, Inc. ("Granite") to market its shopping malls
for a fee of 0.6% of the applicable purchase price. In September 1998, Granite
distributed an offering memorandum to seek indications of interest in buying the
Company's mall assets. After receiving bids from interested buyers in December
1998 and in January 1999, the Company concluded that it would maximize its
profits if it sold each property separately or some properties as a package, but
not all of the properties as a group. As a result, the Company contacted
selected bidders and commenced preliminary negotiations for the sale of
different groups of properties, as well as for individual properties.
As of December 31, 1998, the aggregate cost of the Company's properties,
after reserves on carrying value, was approximately $807 million (with a book
value of approximately $642 million). The following is a list of the properties
that the Company had sold through July 1999 as a result of its marketing efforts
with respect to its various real estate properties in general chronological
order as to the date of sale:
<TABLE>
<CAPTION>
APPROXIMATE SIZE GROSS
PROPERTY LOCATION (OWNED) DATE SOLD PROCEEDS($)
-------- -------- ---------------- ----------------- -----------
<S> <C> <C> <C> <C>
Woodland Commons Buffalo Grove, IL 170,000 sq. February 1999 21,637,000
Shopping Center ft.
Beck Building (Office) Shreveport, LA 185,000 sq. March 1999 2,150,000
ft.
Sutter Buttes (Office) Marysville, CA 427,000 sq. April 1999 3,800,000
ft.
Northwest Malls May 1999 37,400,000
Valley Mall Yakima, WA 272,000 sq.
ft.
Valley North Mall Wenatchee, WA 163,000 sq.
ft.
Mall 205 Portland, OR 255,000 sq.
ft.
Plaza 205 Portland, OR 167,000 sq.
ft.
Apartment Complexes May 1999 86,000,000
Somerset Lakes Indianapolis, IN 360 units
Steeplechase Cincinnati, OH 272 units
Briarwood Fayetteville, NC 274 units
Hunter's Creek Cincinnati, OH 146 units
Beech Lake Durham, NC 345 units
Woodfield Gardens Charlotte, NC 132 units
Windgate Place Charlotte, NC 196 units
Walden Village Atlanta, GA 372 units
Magic Mile Parking Lot Arlington, TX 1,000 spaces May 1999 2,000,000
Two Mall Sales Package June 1999 22,050,000
Crossroads Mall Fort Dodge, IA 332,000 sq.
ft.
Kandi Mall Willmar, MN 441,000 sq.
ft.
Fingerlakes Mall Auburn, NY 405,000 sq. June 1999 2,250,000
ft.
Mountaineer Mall Morgantown, WV 618,000 sq. July 1999 11,000,000
ft.
Fairgrounds Square Mall Reading, PA 537,000 sq. July 1999 24,750,000
ft.
</TABLE>
Net proceeds from the sale of the Company's properties from February
through July 1999, after costs and prorations, was approximately $206.5 million.
The net proceeds after the repayment of mortgage debt related to the properties
of approximately $3.6 million and the transfer of mortgage loans related to the
properties of approximately $49.0 million was $153.9 million. The net proceeds
of approximately $153.9 million were used to partially repay approximately $49.8
million of the Bridge
34
<PAGE> 41
Loan, partially repay approximately $86 million of the senior credit facility,
and the remaining approximately $18.1 million was held as cash to be used for
general corporate purposes.
BACKGROUND OF THE MARATHON PORTFOLIO SALE (JULY 1999)
In July 1999, the Company and certain of its affiliated entities entered
into an agreement for the sale of six of the Company's mall properties (the
"Marathon Portfolio"). The Company entered into this agreement because of the
following reasons:
- The Board's belief that the Company could earn a more attractive return
from reinvesting the net proceeds of the sale than from retaining the
Marathon Portfolio properties;
- The Marathon Portfolio properties were subject to a cross-collateralized
mortgage, thereby reducing the Company's financial flexibility and
subjecting the equity in all of the properties to the risk of loss if one
of the Marathon Portfolio properties would perform poorly;
- The Board's belief that the Marathon Portfolio properties required
significant additional capital to maintain present occupancy levels and
compete effectively for tenants and shoppers; and
- The risk that the Marathon Portfolio properties might yield less
attractive returns in the future as a result of competition between
tenants of the Marathon Portfolio properties and Internet retailers.
On April 12, 1999, Granite sent a letter to the four prospective buyers
which had submitted the best bids for six of the mall properties (the "Marathon
Portfolio") and other properties, requesting that they submit their highest and
final offers. WXI/Z Southwest Real Estate Partnership, a Delaware limited
partnership ("Whitehall/Zamias") submitted a bid on April 15, 1999 and another
prospective purchaser (the "Competitor") submitted a bid on April 20, 1999. Two
other prospective bidders also submitted bids, but the Company determined that
the Whitehall/Zamias bid and the Competitor's bid were superior to these two
other bids. Consequently, the Company decided to negotiate only with
Whitehall/Zamias and the Competitor for the sale of the Company's mall assets.
On May 4, 1999, William A. Ackman, Chairman of the Board of Trustees, together
with senior management of the Company, met separately with Whitehall/Zamias and
the Competitor to discuss the terms of their respective bids. On May 7, 1999,
the Company and its outside counsel commenced negotiations with the Competitor
for the sale of the Marathon Portfolio, Pecanland Mall in Monroe, Louisiana and
its 50% interest in Temple Mall in Temple, Texas. At that time, the Competitor
commenced a customary due diligence review. On May 17, 1999, the Board met and
authorized management to pursue a purchase and sale agreement with the
Competitor containing the terms and conditions discussed at the meeting. On May
26, 1999, the Company sent a draft purchase and sale agreement to the
Competitor.
On June 8, 1999, the Company received comments from the Competitor on the
draft purchase and sale agreement. At that time, significant outstanding open
issues remained. Discussions between the Company and the Competitor continued
for several days. On June 21, 1999, Daniel P. Friedman, President and Chief
Executive Officer of the Company, and Anne Zahner, Executive Vice President of
the Company, met with the Competitor's management to discuss the status of the
deal. Mr. Friedman and Ms. Zahner concluded that several outstanding open issues
remained between the Company and the Competitor. Discussions between the Company
and the Competitor were sporadic thereafter until the week of July 5, 1999, when
the Company and its outside counsel resumed frequent negotiation sessions with
the Competitor. The Company continued to provide due diligence materials to the
Competitor through July 13, 1999. Meanwhile, on June 2, 1999, the Company and
its outside counsel commenced negotiations with Whitehall/Zamias for the sale of
the Marathon Portfolio. On June 7, 1999, the Company distributed a draft
purchase and sale agreement to Whitehall/Zamias. At a meeting on June 16, 1999,
Mr. Ackman and Michael K. Klingher, a managing director of Goldman, Sachs & Co.,
discussed the potential purchase price to be paid for the Marathon Portfolio.
Also on June 16, 1999, Whitehall/Zamias distributed to the Company a revised
draft purchase and sale agreement. On June 22, 1999, Mr. Ackman met with Brad S.
Lebovitz, Senior Vice President of Zamias Services Inc., to discuss outstanding
open
35
<PAGE> 42
issues. From June 16, 1999 until July 13, 1999, management and representatives
of each of the Company and Whitehall/Zamias participated in a number of meetings
and negotiation sessions to resolve any outstanding open issues with respect to
their purchase and sale agreement.
On July 13, 1999, the Board of Trustees considered the terms and status of
the proposals of Whitehall/Zamias and the Competitor and directed management and
the Chairman of the Board to pursue the Whitehall/Zamias proposal and to seek
certain modifications to the proposal. The Competitor's bid was contingent on
obtaining additional debt financing and resolving several outstanding open
issues. Additionally, contract negotiations with respect to the Competitor's bid
were not complete and were expected to continue for several weeks. On July 13
and 14, 1999, the Company's management and the Chairman of the Board negotiated
further with Whitehall/Zamias and Whitehall/Zamias agreed to the requested
changes. On July 14, 1999, the Company executed the purchase agreement relating
to the sale of the Marathon Portfolio.
The Company sought and received approval of the Marathon Portfolio sale
agreement from its shareholders at a special meeting held November 16, 1999 (the
"1999 Special Meeting"). The Marathon Portfolio sale was completed in December
1999 and yielded gross proceeds of $191.5 million to the Company. The following
is a list of the properties the Company sold as part of the Marathon Portfolio
sale:
<TABLE>
<CAPTION>
APPROXIMATE SIZE
(SQUARE FEET
PROPERTY LOCATION OWNED)
-------- ---------------- -------------------
<S> <C> <C>
Alexandria Mall Alexandria, LA 634,000
Brazos Mall Lake Jackson, TX 597,000
Killeen Mall Killeen, TX 348,000
Mesilla Valley Mall Las Cruces, NM 378,000
Shawnee Mall Shawnee, OK 231,000
Villa Linda Mall Santa Fe, NM 350,000
</TABLE>
Net proceeds from the December 1999 sale of the Company's Marathon
Portfolio, after costs and prorations, were $178.9 million. The net proceeds
after the repayment of mortgage debt related to the properties of $45.9 million
and the transfer of mortgage loans related to the properties of $114.7 million
was $18.3 million. The net proceeds of $18.3 were held as cash to be used for
general corporate purposes.
At the end of 1998, the aggregate net book value of the Company's real
estate assets was approximately $642 million. During 1999, the Company sold
properties with an aggregate cost of approximately $474 million after reserves
on carrying value (with a book value of approximately $365 million). As of
December 31, 1999, the remaining properties of the Company had an aggregate cost
of approximately $335 million after reserves on carrying value (with a book
value of approximately $260 million). As a result of the Company's asset sales
in 1999, at the end of 1999, the aggregate book value of the Company's assets
was approximately $503 million.
ALTERNATIVES CONSIDERED BY THE COMPANY AFTER SALE OF THE MARATHON PORTFOLIO
Subsequent to closing of the Marathon Portfolio sale, the Board reviewed
with management the remaining real estate properties of the Company (the
"Remaining Properties"). The Board discussed its belief that the Remaining
Properties had the following undesirable attributes: they were primarily
properties that were geographically diverse and multi-class in terms of type and
quality and did not comprise a critical mass of any one type of property or
geographic concentration to enable the Company to have a strong presence in any
market. Furthermore, during the process of becoming familiar with, studying and
authorizing the sales of portions of the Company's real estate portfolio, the
Board of Trustees determined that the trading price of the common shares of the
Company did not fully reflect the intrinsic values of the real estate portfolio
of the Company. Accordingly, the Board deter-
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<PAGE> 43
mined to evaluate options for enhancement of shareholder value, including a sale
of the Company and a liquidation of the properties of the Company and the
distribution of the proceeds to the shareholders.
Sale of the Company. In September 1999, the Company engaged the investment
banking firm of Lazard Freres & Co. (the "Investment Banker") to render advice
to it with respect to the possible sale of the Company and interests in the
Company or a subsidiary or division of the Company to another corporation or
business entity, whether in the form of a merger, spin-off, or sale of assets or
equity securities or other interests (a "Transaction").
Liquidation of the Company. Subsequent to the 1999 Special Meeting, the
Board requested an analysis by management of a possible plan of complete
liquidation of the Company. Management formulated a preliminary analysis of the
issues that would be involved in a complete liquidation of the Company; however,
the Board did not adopt a plan of complete liquidation. Among the factors
considered by the Board regarding a plan of complete liquidation were the
following: the length of time involved to complete a liquidation; the necessity
of maintaining a substantial amount of cash reserves, which the Board did not
quantify, in the Company during and subsequent to liquidation to satisfy
possible contingent liabilities, including those related to representations and
warranties with respect to the disposition of properties, potential shareholder
and other lawsuits and tax liabilities; the possible negative impact that
announcement of a plan of liquidation would have on the value of the Company and
the ability to obtain a fair price for the assets of the Company; funding the
liquidation value of the preferred shares in the approximate face amount of
$33,725,000 then outstanding, subsequently reduced to $24,620,000 as of
September 30, 2000; and payment of the indebtedness of the Company, including
approximately $12.5 million of 8 7/8% Senior Notes. Notwithstanding the
foregoing, there can be no assurance that the Board of Trustees will not
consider and adopt a plan of complete liquidation with respect to the assets of
the Company in the future.
Negotiations with Third Parties with respect to a Possible Sale
Transaction. With the assistance of the Investment Banker, the Company has
received and evaluated a number of proposals regarding a possible Transaction
involving the Company and other public and non-public companies. The Company
initially instructed the Investment Banker to solicit a type of purchase
proposal which would value the Company's public stockholder base, NYSE listing,
paired-share structure and the available cash balances. The Investment Banker
developed a profile of the types of companies that would be potentially
interested in the attributes of the Company, which included public and private
real estate operating companies including equity and mortgage REITs, owners of
multiple real estate companies (including opportunity funds and institutional
investors), and non-real estate companies seeking access to public capital and
the available cash balances. Discussions were held with approximately 40
different interested parties with respect to this engagement. Among those
parties who entered into confidentiality agreements and who undertook at least
initial due diligence with respect to the Company were several financially
capable purchasers, some of which were also public companies.
Discussions were held with several interested parties with respect to a
possible Transaction prior to the receipt from Purchaser of its indication of
interest in a bulk sale of assets. A summary of the most significant of these
discussions follows:
- A corporation was interested primarily in the cash balances and
paired-share structure of the Company. It was active in the mortgage
business and non-REIT qualified businesses. On the basis of its due
diligence, the Company determined not to pursue a possible Transaction. No
price was discussed and no firm offers or proposals were made.
- A public company in the mortgage business expressed a desire to diversify
its business into the REIT area by acquisition of the Company. After the
commencement of discussions, the taxable REIT subsidiary ("TRS") provision
of the Code was enacted, to be effective in January 2001. After
preliminary discussions, this potential purchaser indicated that it
believed it could achieve the flexibility it desired under the new TRS
provisions without having to acquire a paired-share structure, such as
that offered by the Company, and discussions were terminated by the
potential purchaser. No price was discussed and no firm offers or
proposals were made.
37
<PAGE> 44
- A public company in the real estate business conducted due diligence and
held discussions with the Company with respect to the possible acquisition
of the Company. The proposed transaction discussed was a stock-for-stock
merger with consideration consisting of a preferred stock issue of the
acquirer in the approximate amount of $50 million with the balance to be
paid in common stock of the acquirer. The parties were unable to reach
agreement on an exchange ratio and other business terms during the course
of their discussions and the discussions eventually ceased. No firm offers
or proposals were made.
- Another public REIT conducted due diligence with respect to the assets of
the Company and made a written proposal to acquire all of the Company's
assets other than the Park Plaza Mall (including at least $111 million in
cash, which was to include the proceeds of the sale of the Park Plaza Mall
property), in exchange for shares of the common stock of the interested
party, which were valued at approximately $131.7 million as of the date of
the written proposal. The written proposal stated that it was not made on
the basis of completed due diligence and was not an offer, but rather was
an outline of the basis for further discussions. A condition of the
proposal was that the Park Plaza Mall would be sold to a third party for
at least $70 million. The Company responded to the written proposal with a
draft term sheet outlining a transaction in which the interested party
would acquire the Company, including approximately $90 million of cash on
the Company's balance sheet, but excluding the Park Plaza Mall, and would
keep the Company's preferred shares outstanding. The consideration for the
acquisition, as proposed by the Company, would have consisted of an
exchange of shares of the interested party's common stock for Shares at a
specified exchange ratio, one three-year warrant for every ten Shares
exchanged to purchase the interested party's common stock at a price of
$36 per share (representing a premium of 30% over the then current trading
price), and a commitment from the interested party to conduct a
post-closing issuer tender offer for one million of its common shares,
which represented approximately 10% of its common shares then outstanding,
at a price to be negotiated. Discussions with the interested party
ultimately ceased because the parties were unable to reach agreement on
the exchange ratio and other business and financial terms of a transaction
and, furthermore, the Company did not have an agreement to sell the Park
Plaza Mall property.
The representatives of the Company who conducted the negotiations with the
interested parties on behalf of the Company were the Chairman of the Company,
William Ackman, and the Vice-Chairman of the Company, William Scully, each of
whom has extensive experience in the real estate industry and in the public
equity capital markets, and serve the Company without compensation in such
capacities. In addition, representatives of the Investment Banker solicited
indications of interest in the sale of the Company and assisted the
Representatives in their negotiations with these interested parties and
potential purchasers. During the period of discussions with these interested
parties and potential purchasers, the Executives, in their capacity as executive
officers of the Company, supplied information regarding the properties of the
Company at the direction of the Representatives to various interested parties
and potential purchasers in connection with the due diligence reviews being
conducted by such interested parties with respect to the possible sale of the
Company. In addition, the Executives participated in discussions as to whether
offers for sale or refinancing of various properties of the Company would be
pursued or not in the ordinary course of business.
PROPERTY SALES AND REFINANCINGS AND ASSET DISPOSITIONS FOLLOWING THE SALE OF THE
MARATHON PORTFOLIO (DECEMBER 1999-SEPTEMBER 2000)
Following the sale of the Marathon Portfolio, the Company continued to sell
selected assets where management believed a suitable price could be obtained,
and to refinance other assets to provide additional liquidity to the Company.
Other than the Marathon Portfolio sale, among the significant sale,
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<PAGE> 45
financing and refinancing transactions that took place from December 1999
through September 2000, were the following:
Property Sale Transactions
<TABLE>
<CAPTION>
APPROXIMATE SIZE GROSS
PROPERTY LOCATION (SQUARE FEET OWNED) DATE SOLD PROCEEDS($)
-------- ------------- ------------------- ----------- -----------
<S> <C> <C> <C> <C>
Crossroads Center St. Cloud, MN 671,000 April 2000 80,100,000
Temple Mall(1) Temple, TX 746,000 August 2000 12,850,000
</TABLE>
---------------
(1)Amount indicated as gross proceeds is the amount of gross proceeds to the
Company. The Company's ownership was represented by a 50% interest in a
partnership with the other 50% owned by an unrelated third party. The amount
of square footage owned is that owned by the partnership. The total gross
proceeds of the sale to the partnership were $25,700,000.
Property Refinancing Transactions
<TABLE>
<CAPTION>
APPROXIMATE SIZE REFINANCING
PROPERTY LOCATION (SQUARE FEET OWNED) DATE REFINANCED PROCEEDS($)
-------- --------------- ------------------- --------------- -----------
<S> <C> <C> <C> <C>
Park Plaza Little Rock, AK 264,000 April 2000 42,500,000
Westgate Town Center(1) Abilene, TX 185,000 September 2000 8,500,000(1)
</TABLE>
---------------
(1)Financing proceeds of $7.5 million were available at the time of closing and
an additional $1.0 million will be advanced upon completion of certain
environmental work.
Imperial Parking Corporation Spinoff
In April 1997, the Company acquired voting control of Imperial Parking
Limited and its affiliates, a parking management and transit ticketing
manufacturing company based in Canada ("Impark"). As a result of tax legislation
enacted in July 1998, the Board reviewed the advisability of having the Company
continue to own a parking services business. The Board concluded that it would
be in the best interest of the Beneficiaries to combine the parking services
business operated by Impark with parking properties in Canada owned by the
Company and then distribute the stock of that corporation to the Beneficiaries.
The Board determined that undertaking the distribution would (i) improve each
company's access to capital; (ii) improve the focus of management employees on
the performance of each company's core business; and (iii) provide management
incentives linked to the objective performance of each company's shares in the
public markets. In addition, the distribution would help the Company maintain
its status as a REIT during the year 2000 by divesting it of certain
non-qualifying investments.
Prior to the distribution, the Company developed and implemented a plan of
reorganization and funding of Impark as an independent company. Ownership of
VenTek was retained by the Company as part of this transaction. The goal of the
plan was to create a parking services company with a sound financial footing and
capacity to grow. In March 2000, following the implementation of this plan, the
Company distributed all of the common stock of Impark to its Beneficiaries.
One share of Impark common stock was distributed for every twenty (20)
Shares held by Beneficiaries of record on March 20, 2000. Approximately 2.1
million shares of Impark common stock were distributed. As part of this
transaction, the Company repaid Impark's bank credit facility of approximately
$24.2 million, contributed approximately $7.5 million of cash, its fourteen (14)
Canadian parking properties and $6.7 million for a parking development located
in San Francisco, California. The Company also provided a secured line of credit
of $8 million to Impark. The line of credit was never drawn on by Impark and was
subsequently replaced with independent, third party financing. Impark's common
stock is listed on the American Stock Exchange under "IPK".
OUTSOURCING MANAGEMENT OF THE COMPANY
A substantial number of the employees of the Company had been engaged in
activities relative to the properties in the Marathon Portfolio. Following the
sale of those properties, the Company's em-
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<PAGE> 46
ployee base was substantially reduced. The Board authorized the outsourcing of
the real property management and accounting functions that were formerly handled
by the Company.
At this time, the Board entered into negotiations with the Executives
whereby, upon the completion of certain corporate restructuring activities (the
refinancing of the Park Plaza Mall and spin-off of Imperial Parking
Corporation), the Executives would be entitled to terminate their current
employment agreements and simultaneously enter into a management agreement with
the Company, pursuant to which they would provide corporate and real estate
asset management services to the Company. In March 2000, the Executives formed
Radiant Partners LLC ("Partners") to provide asset and corporate management
services to the Company. These amendments to the employment agreements of the
Executives and the asset management agreement with Partners were negotiated in
early 2000, executed as of March 27, 2000, and became effective June 1, 2000,
after completion of the Park Plaza refinancing and the Imperial Parking
Corporation spin-off. When the management agreement became effective, the
Company had only one senior officer, the Chief Financial Officer. Therefore, in
order to preserve its corporate formalities and maintain the efficient
administration of an operating public company, the Company retained the
Executives as officers.
NEGOTIATIONS WITH RESPECT TO PURCHASER'S PROPOSALS
Mr. Ackman reported to the Board at its April 11, 2000 meeting, at which
Mr. Friedman was in attendance, that the discussions that he and Mr. Scully and
the Investment Banker had held with potential interested parties regarding the
sale of the Company had not produced a firm offer for the Company or even a
possible transaction that they believed worthy of further negotiation by the
Company. Mr. Ackman summarized the discussions to date for the Board. Mr. Ackman
informed the Board that it was his conclusion, with which the Investment Banker
concurred, that one of the principal reasons that the efforts of the Company had
not produced a firm offer or even a possible transaction subject to further
negotiation regarding the sale of the Company was that the Remaining Properties
were not attractive assets to potential purchasers of the Company, and that the
Company would be a more attractive acquisition candidate if it were able to
dispose of the Remaining Properties.
Mr. Ackman also reported that, after consultation with several Board
members, he had indicated to Mr. Friedman that the Company would be receptive to
a proposal from the Executives for a bulk purchase of the real estate assets of
the Company. Subsequent to the report of Mr. Ackman at the April 10, 2000 Board
meeting, Mr. Friedman indicated to several Board members that the Executives
were seriously considering formulating a proposal with respect to the
acquisition of the Company.
In connection with the Executives' interest in a possible transaction,
Partners, on behalf of Purchaser and not in its capacity as the Company's asset
manager, sent proposal letters to the Company regarding a possible asset sale
dated April 26, 2000, May 9, 2000, May 18, 2000 and May 31, 2000 and eventually
entered into, on behalf of Purchaser, a letter of intent (the "Letter of
Intent") with the Company dated June 20, 2000, each as discussed below.
The Representatives conducted the negotiations with Purchaser on behalf of
the Company. Each of the Representatives has extensive experience in the real
estate industry and in the public equity capital markets and is a member of the
Executive Committee of the Board, to which approval of dispositions and
financing of the Company's real estate properties had been delegated, from time
to time, by the Board since June 1998 with respect to Mr. Ackman and since
November 1998 with respect to Mr. Scully. Each of the Representatives was
knowledgeable regarding the real estate properties of the Company and both
served as Representatives without compensation. Other than Mr. Friedman, none of
the Trustees of the Company, including the Representatives, or their affiliates
had an interest in, or a relationship with, Purchaser or any of its affiliates.
Mr. Friedman, who was a Trustee through September 22, 2000, recused himself
from all discussions and actions taken by the Board with respect to the Asset
Sale and with respect to any proposal from any other interested party received
subsequent to the April 26, 2000 proposal, except as specifically referenced
herein. In addition, except as specifically referenced herein, none of the
Executives were in
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<PAGE> 47
attendance during the portions of the Board meetings during which any of the
Purchaser's proposals or any proposal from any other interested party received
subsequent to April 26, 2000 was discussed or acted upon.
PURCHASER'S APRIL 26 PROPOSAL
Purchaser's first proposal to the Company was through a letter dated April
26, 2000, pursuant to which Purchaser proposed to acquire the Company for cash
consideration of up to $3.30 per Share. In its proposal letter, Purchaser
outlined two transaction implementation alternatives, one of which involved the
purchase of the Company and the other of which involved the purchase of all the
real estate and other assets of the Company.
The first alternative proposed by Purchaser, which contemplated the
purchase of the Company for $3.30 per share, required the successful
implementation of a number of steps, some of which were not within the control
of the parties, as follows: (i) Purchaser would purchase the bulk of the real
estate assets of the Company for an amount to be determined in consideration
consisting of cash and the assumption of the first mortgage debt and assumption
of liabilities of the Company directly related to the acquired properties; (ii)
the Company would be obligated to commence an exchange offer so that $8.7
million in face amount of its outstanding preferred stock would be exchanged for
a new issue of perpetual preferred shares on terms to be determined and the
balance of the preferred shares would be purchased by the Company from the
holders thereof; (iii) the Company would provide a return on capital
distribution to its shareholders in an amount equal to the net proceeds it
received from the first two steps, upon their completion; and (iv) Purchaser
would acquire all the outstanding common shares of the Company directly from the
holders thereof for an amount equal to the remaining unallocated portion of the
purchase price, which had not been determined.
The second alternative entailed the purchase by Purchaser of all the real
estate and other assets of the Company for consideration consisting of an
unspecified amount of cash, a purchase money mortgage on the Park Plaza property
of $21.2 million and assumption of all outstanding first mortgage debt and other
liabilities directly related to the acquired properties. The second alternative
in the April 26 proposal assumed the sale of the Company's Temple Mall
partnership interest and related loan prior to the closing, and these assets
were not among the assets subject to the second alternative in the April 26
proposal.
THE COMPANY'S RESPONSE TO THE APRIL 26 PROPOSAL
After discussion among Purchaser, the Representatives and the Investment
Banker, the parties concluded that the first alternative in the April 26
proposal regarding the acquisition of the Company involved too many
contingencies and unknown costs and expenses. The Representatives, upon
consultation with the Investment Banker, assigned a low likelihood of success to
the first alternative in the April 26 proposal regarding the acquisition of the
Company. The second alternative in the April 26 proposal regarding the purchase
of the real estate and other assets of the Company by Purchaser was assigned by
the Representatives a higher likelihood of success.
On or about April 28, 2000, Mr. Ackman contacted Mr. Friedman and requested
that Purchaser restate the April 26 proposal solely as an offer to purchase the
real estate properties of the Company without the alternative of a multi-step
acquisition of the Company. The Representatives pursued negotiations with
Purchaser with respect to the content of its restated proposal. The negotiations
involved a number of meetings and telephone conferences between either one or
both of the Representatives, on the one hand, and the Executives, on the other
hand. On May 1, 2000, Mr. Ackman met with the Executives and a representative
from UBS Warburg LLC, the initial advisor to Purchaser with respect to raising
capital for and structuring the proposed transaction. This meeting was followed
by telephone conferences between Mr. Ackman and Mr. Friedman. In the course of
these negotiations, the Representatives conveyed their desire that a revised
proposal not include a purchase money mortgage on the Park Plaza Mall property
and not require the Company to sell the Temple Mall partnership interest and
loan
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<PAGE> 48
prior to the closing of a transaction with Purchaser; rather, it was
contemplated that the Temple Mall partnership interest and loan would remain as
assets of the Company.
PURCHASER'S MAY 9 PROPOSAL
The negotiations following the April 26 proposal resulted in a revised
proposal letter from Purchaser, dated May 9, 2000, formulated as the purchase of
all of the Properties, the Circle Tower property, the Peach Tree Mall legal
claim (described on page 55), the Club Associates note receivable and the
Company's interest in VenTek for total consideration of $205 million consisting
of approximately $80 million in cash and the assumption of approximately $125
million in mortgage debt, secured by several of the assets to be purchased. The
May 9 proposal also included provisions for the grant of a 45-day
non-solicitation period by the Company to Purchaser upon its delivery of a
mezzanine financing commitment of at least $30 million to the Company.
THE COMPANY'S RESPONSE TO THE MAY 9 PROPOSAL
Following receipt of the May 9 proposal, there were continued telephonic
conferences between the parties, including on some occasions a representative of
the Investment Banker. On May 16, 2000, a meeting was held at which Mr. Ackman
and a representative of the Investment Banker were present on behalf of the
Company, and the Executives and a representative of UBS Warburg were present on
behalf of the Purchaser. In the course of these negotiations, Mr. Ackman
determined that Purchaser had assigned relatively low values to the Peach Tree
Mall legal claim and the West 3rd Street parking lot in preparing its proposals
and that the Circle Tower property was more valuable to the Company than to
Purchaser due to significantly increased costs which would result from the
transfer of that property. Accordingly, Mr. Ackman asked Purchaser to revise its
proposal to exclude the purchase of these three assets by Purchaser from the
proposed transaction. In addition, Mr. Ackman asked Purchaser to provide in its
proposal for the management by Partners of the Company's remaining assets upon
completion of a transaction with Purchaser.
PURCHASER'S MAY 18 PROPOSAL
The May 9 proposal was subsequently amended by a letter dated May 18, 2000,
which proposed to exclude the Peach Tree Mall legal claim, West 3rd Street
parking lot and the Circle Tower property from the assets to be purchased by
Purchaser and offered a decreased purchase price of $195.2 million. The May 18
proposal included provisions for Partners to manage for reduced fees the assets
remaining in the Company after the consummation of the transaction.
THE COMPANY'S RESPONSE TO THE MAY 18 PROPOSAL
A special telephonic meeting of the Board of Trustees of the Company was
held on May 19, 2000 to consider the May 18 proposal. Representatives of the
Investment Banker participated at the meeting. After an extensive discussion
among the Board, the Investment Banker and Company counsel of the terms and
conditions of the May 9 proposal and the May 18 proposal, the Board authorized
the Representatives to continue to negotiate with Purchaser an acceptable price
for the assets proposed to be purchased by Purchaser pursuant to the May 18
proposal. The Board also authorized the Company to enter into an exclusivity
arrangement with Purchaser with respect to Purchaser's right to purchase real
estate assets of the Company for a period not to exceed 60 days; if, however, in
that period the Board determined it had a fiduciary obligation to pursue another
offer, it could do so. The purpose of the exclusivity arrangement was to permit
Purchaser a reasonable period of time to explore obtaining the financing
required to complete the proposed transaction, and to expend the necessary
efforts and funds to obtain those financing commitments.
Additional discussions were held between the Company and Purchaser,
including a meeting at which Mr. Scully and the Executives were in attendance on
May 30, 2000. Thereafter, further negotiations between the Representatives and
Purchaser were held. During the course of these negotiations,
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<PAGE> 49
the parties determined that $250,000 would be an appropriate and reasonable
annual fee for the management of the Company's remaining assets. In addition, it
was determined that Purchaser was assigning a very low value to the Company's
VenTek interest and the Company requested that Purchaser revise its proposal to
include the option to acquire, subject to certain contingencies, only a 20%
interest in this asset and not the Company's entire interest in this asset. This
20% interest was regarded by the parties as comprising further compensation to
Partners for the management of the Company's VenTek interest.
PURCHASER'S MAY 31 PROPOSAL
The negotiations resulted in a new proposal letter from Purchaser dated May
31, 2000 pursuant to which Purchaser offered total consideration of $199.2
million for the assets subject to the May 18 proposal, other than all of the
Company's VenTek interest, which had been reduced to 20% of the Company's
interest in this asset. In addition, the May 31 proposal provided for the
management by Partners for two years of the Company's remaining properties for a
fee of $250,000 per year.
THE COMPANY'S RESPONSE TO THE MAY 31 PROPOSAL
Upon receipt of the May 31 proposal, further discussions were held,
primarily telephonic discussions between the Representatives and Mr. Friedman.
In the course of these discussions, Mr. Ackman reconsidered his prior view that
Purchaser had undervalued the West 3rd Street parking lot, and requested that
Purchaser reinclude this asset in its proposal. Due to the inclusion of this
additional asset and further negotiations, the proposed purchase price under
discussion increased to $205 million. At this point, Purchaser revised the May
31 proposal into the form of a proposed letter of intent.
THE COMPANY'S CONSIDERATION OF THE PROPOSED LETTER OF INTENT
At its regularly scheduled meeting on June 13, 2000, the Board was updated
with respect to the status of negotiations with Purchaser and the proposed
letter of intent under discussion and negotiation with Purchaser. In attendance
for that part of the meeting at which the proposal was discussed and acted upon
were the following Board Members: Messrs. Ackman, Altobello, Berkowitz,
Garchick, Schuchman, Snider and Williams. The Board acknowledged that the
Investment Banker was engaged to and did solicit indications of interest in the
sale of the Company; that significant time and resources had been devoted to
exploring the possible sale of the Company to a third party and no firm offer
had been obtained. The Board also acknowledged that the Investment Banker had
assisted the Representatives in their negotiations with Purchaser and its
advisors; however, the Investment Banker had not provided a written report to
the Company, nor did it express its views on what it believed would be a "fair"
offer.
The Board concluded that there were two alternatives regarding the
disposition of the real estate assets of the Company:
- To pursue a bulk sale of properties; or
- To continue on the path of marketing different classes of properties or
individual properties to an assortment of potential buyers over an
indefinite period of time.
After extensive deliberation the Board determined that a bulk sale proposal
had the following advantages:
- A bulk sale would be more efficient and less costly than numerous
individual property sales due to the transactional costs, the legal
expense and management time involved in multiple sales; and
- A bulk sale would ensure disposition of the properties in a short period
of time as opposed to an extended sales program which would be carried out
over an indefinite period of time and during which there would be
continued expense, use of management time and maintenance of the assets,
as well as market risks of diminished real estate values and other
uncertainties.
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<PAGE> 50
In addition, the Purchaser bulk sale proposal was found to have the
following advantages:
- In the opinion of the Representatives, and as a result of their
negotiations with Purchaser, the Purchaser proposal represented fair and
reasonable consideration for the properties to be purchased.
- The Purchaser proposal would yield a significant amount of cash proceeds
to the Company, as opposed to other consideration in the form of
securities or other non-liquid assets of the acquiring party, the
valuation of which would be uncertain.
- The Purchaser proposal was not contingent upon other significant events,
such as the sale of the Park Plaza Mall property, other than obtaining the
financing of the purchase consideration.
- Although the Company's real estate properties had been marketed for sale
for an extended period of time, the Purchaser proposal was the only firm
offer, subsequent to the sale of the Marathon properties in 1999, that the
Company had received to date for a significant amount of the Company's
real estate properties, other than the Northeastern Proposal described
above.
- Purchaser was very familiar with the properties under consideration and
the normal due diligence review period required by a purchaser unfamiliar
with the properties would be reduced, both lessening time delays and
uncertainties with respect to reaching a definitive agreement.
- The Board had the ability to terminate the proposed letter of intent with
Purchaser in the event of a superior offer.
The Board also considered the following potentially negative factors in its
deliberations concerning the proposed letter of intent:
- The risk that Purchaser would not be able to obtain the requisite
financing and otherwise perform under the proposed letter of intent.
- The exclusivity provisions of the proposed letter of intent would not
permit the Company, with certain exceptions which might have involved
payments to Purchaser, to dispose of the Properties during the period
between the signing of the letter of intent and the closing of the Asset
Sale.
- The appearance of conflicts of interest with respect to a bulk sale of
properties of the Company to an entity with respect to which a Trustee and
officers of the Company were principals.
Prior to approving the proposed letter of intent with Purchaser, the Board
considered the conflicts of interest involving Purchaser and the Executives. The
Board was aware that the Executives were principals in Partners, which had been
engaged to manage the properties of the Company, and that the Executives were
also principals of Purchaser as Purchaser. The Board considered that the
Executives had a conflict of interest during the negotiations which culminated
in the Sale Contract, as the Executives had gained knowledge through their
employment with the Company regarding the properties that were the subject of
the Purchaser purchase proposal and were negotiating on behalf of Purchaser, and
it was in their best interest to obtain the price and terms for the sale most
favorable to Purchaser. This was in conflict with the interests of the Company,
which desired to obtain the price and terms for the sale most favorable to the
Company. On the other hand, each of the Representatives of the Company who
conducted the negotiations with Purchaser on behalf of the Company has extensive
experience in the real estate industry and was a member of the Executive
Committee of the Board, to which approval of all dispositions and financings of
the Company's real estate properties had been delegated by the Board. Each of
the Representatives was knowledgeable regarding the real estate properties of
the Company. Other than Mr. Friedman, none of the Trustees of the Company,
including the Representatives, or their affiliates had an interest in, or a
relationship with, Purchaser of any of its affiliates.
THE COMPANY'S DETERMINATION WITH RESPECT TO THE ASSET SALE
Based on the consideration of the foregoing factors and on the information
previously provided by the Investment Banker at the May 19, 2000 Board meeting
called to consider the Purchaser proposal, as
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well as some additional considerations, including those reflected in "Risks
Relating to Proposal Two: Consent to the Asset Sale," beginning on page 16, the
Board determined, at its June 13, 2000 meeting, by the unanimous vote of the
Board members present, that entering into the proposed letter of intent with
Purchaser was fair and reasonable to the Beneficiaries and in the best interest
of the Company. The Board of Trustees considered whether to obtain, and
determined not to retain a third party to render, a fairness opinion regarding
the proposed Asset Sale because it (i) believed the Company had ample
opportunity to determine the fair market value of the Properties by widely
marketing the Properties and the Company for an extended period of time and (ii)
wanted to avoid the expense of a fairness opinion. In connection with its
decision to sell assets in 1998, the Company had been engaged in evaluating the
market value of, and soliciting offers with respect to the purchase of, most of
the properties of the Company. One of the results of this sales program was the
knowledge obtained by the Board with respect to the fair value of the properties
of the Company. Furthermore, the Board of the Company is comprised of persons
who have extensive experience in the real estate industry apart from their role
as Trustees of the Company. No independent appraisals of the Properties were
obtained in connection with the Asset Sale. The proposed consideration to be
paid to the Company in connection with the Asset Sale was determined as a result
of negotiations between the Representatives and Purchaser. The Investment Banker
assisted the Representatives in their negotiations with Purchaser and its
advisors. The Board authorized the Representatives to continue to negotiate with
Purchaser with respect to, and to enter into, the proposed letter of intent with
Purchaser.
This discussion of the information and factors considered and given weight
by the Board of Trustees is not intended to be exhaustive, but is believed to
include all material factors considered by the Board of Trustees. In reaching
the determination to approve and recommend that the Beneficiaries consent to the
Asset Sale, the Board of Trustees did not undertake a separate analysis of each
of the factors considered, nor did it find it practical to and it did not assign
any relative or specific weight to any of the factors which were considered, and
individual Trustees may have given differing weights to different factors.
OTHER PROPOSALS DURING THE PURCHASER NEGOTIATIONS PRIOR TO THE EXECUTION OF THE
LETTER OF INTENT
On or about May 19, 2000, Mr. Ackman received from Northeastern Security
Development Corp. ("Northeastern Security"), a private real estate firm that had
previously purchased some parking assets from the Company in 1998, a written
expression of interest for all of the parking assets of the Company and the 55
Public Square office building in Cleveland, Ohio for an aggregate price of $110
million (the "Northeastern Proposal"), which represented an increase from a
previous expression of interest for $100 million. This investor had not
conducted due diligence on the properties at the time the proposal was made. The
Northeastern Proposal was forwarded to the members of the Board on or about May
22, 2000. At this time, no exclusivity or non-solicitation period was in effect
with respect to Purchaser's proposals. Mr. Ackman discussed the Northeastern
Proposal with several members of the Board and concluded that the proposal was
for the acquisition of properties that were among the most saleable of the
Company's properties and did not include an offer for the Company's less
saleable properties. Mr. Ackman believed, based on his discussions with
Northeastern Security, that the Northeastern Proposal could not be improved upon
but could be pursued in the event that the proposed Letter of Intent with
Purchaser did not result in a completed sale. Given the status of the
negotiations with respect to the Purchaser proposal, the Representatives
provisionally determined not to pursue further discussions regarding the
Northeastern Proposal. Northeastern did ultimately enter into a contract to
purchase from the Company the Huntington Garage in December 2000 as described in
"Events Subsequent to Sale Contract Involving Certain Properties" beginning on
page 50.
THE LETTER OF INTENT
Effective June 20, 2000, Partners, on behalf of its affiliate, Purchaser,
and the Company entered into the Letter of Intent for the sale of the Properties
and a note receivable secured by a mortgage on an
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apartment property for total consideration of $205 million consisting of cash
and the assumption of the first mortgage indebtedness on the Properties.
The Letter of Intent provided for a transaction which contained the
following principal elements as respects the assets of the Company:
- The sale of the Properties by the Company to Purchaser for approximately
$205.0 million (approximately $80 million in cash and $125 million in
assumed mortgage debt, prior to expenses and closing adjustments).
- The Properties would include:
- 55 Public Square and CEI Office Building -- Cleveland, Ohio
- 55 Public Square Garage -- Cleveland, Ohio
- West 3rd Street Parking Lot -- Cleveland, Ohio
- North Valley Tech Center -- Thornton, Colorado
- Two Rivers Business Center -- Clarksville, Tennessee
- Westgate Town Center -- Abilene, Texas
- Pecanland Mall -- Monroe, Louisiana
- Huntington Garage -- Cleveland, Ohio
- Long Street Garage -- Columbus, Ohio
- Madison and Wells Garage -- Chicago, Illinois
- Printers Alley Garage -- Nashville, Tennessee
- 5th and Marshall Garage -- Richmond, Virginia
- Club Associates' note receivable, face amount of approximately $1.5
million.
- Ancillary assets including furniture, fixtures and equipment and
reserve and escrow accounts related to the Properties.
- Net operating income from the Properties from June 1, 2000 to the date
of sale less (a) debt service on the Properties, (b) capital
expenditures committed subsequent to May 9, 2000 and (c) 66.6% of asset
management fees paid to Partners from June 1, 2000 until the closing of
the transaction.
- The Company would retain ownership of the following assets:
- Unrestricted cash and Treasury bills
- Convertible preferred investment in HQ Global Workplaces, Inc.
- Severance and prior trustees escrow account
- Park Plaza Mall -- Little Rock, Arkansas
- Circle Tower -- Indianapolis, Indiana
- Temple Mall 50% partnership interest and loan -- Temple, Texas (sold
in August 2000)
- Peach Tree Mall legal claim (see description on page 55)
- the VenTek interests
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- The Company would remain liable for the following obligations:
- 8.2% convertible perpetual preferred shares; $33,725,000 approximate
face amount (reduced to $24,620,000 as of June 30, 2000)
- 8.875% publicly-traded senior notes; $12,500,000 approximate face
amount
- Dallas management office lease
- Certain liabilities arising out of the Properties arising prior to
June 1, 2000, except for certain potential liabilities of the Westgate
Town Center
- Corporate expenses and liabilities not related to the Properties
- Property level mortgage debt on retained assets
- Other ordinary course liabilities
- Subsequent to the closing of the Asset Sale, Partners would continue
to manage the Company's remaining assets for $250,000 per year for two
years.
The Letter of Intent provided that if Purchaser obtained a mutually
satisfactory mezzanine financing commitment of approximately $31.0 million for
the transaction by July 5, 2000, the Company would not, for a period of 45 days
thereafter, solicit or initiate any competing transaction proposals. During
these 45 days, the Company and Purchaser were to negotiate a definitive purchase
and sale agreement while Purchaser concurrently secured equity financing to
obtain the funding necessary to close the transaction. The Letter of Intent
further provided that if, after Purchaser obtained a mutually satisfactory
mezzanine financing commitment, and the Company thereafter entered into a
definitive agreement in connection with a competing transaction proposal with
respect to at least $30.0 million of assets, the Company would reimburse
Purchaser for certain of its reasonable fees and expenses, subject to a maximum
of $750,000.
PROPOSALS SUBSEQUENT TO THE LETTER OF INTENT
Subsequent to the announcement of the June 20, 2000 Letter of Intent, the
Company was approached by several parties indicating unsolicited interest in the
Company or specific Company assets, as follows:
- One interested party was a private investment company which ultimately
declined to pursue negotiations once the announcement of the Purchaser's
mezzanine financing commitment was made on July 6, 2000. The party had not
conducted due diligence at the time of the preliminary discussions. This
potential purchaser indicated to the Company that it could not justify
making an offer to match or exceed that made by Purchaser and did not
specify the properties in which it might be interested. No price was
discussed and no firm offers or proposals were made.
- A private real estate firm contacted the Company and indicated interest
in the five principal parking properties of the Company, for which it had
discussed an offer in the range of $72.5 million. The party had not
conducted due diligence at the time of the preliminary discussions.
- In addition, subsequent to the announcement of the Letter of Intent, the
Company received an unsolicited written indication of interest with
respect to the purchase of the Pecanland Mall in Monroe, Louisiana and
unsolicited indications of interest with respect to the Madison and Wells
Garage in Chicago, Illinois.
The exclusivity provisions of the Letter of Intent would not permit the
Company, with some exceptions which might involve payments to Purchaser, to
dispose of the Properties during the period between the date of delivery of the
mezzanine financing commitment and the closing of the Asset Sale. In connection
with the Company's receipt of the foregoing unsolicited proposals for specific
properties and the Northeastern Proposal, the Representatives consulted with
Purchaser as to whether Purchaser would modify and resubmit the purchase
proposal set forth in the Letter of Intent to exclude any of
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such properties and were informed by Purchaser that it would not. The Board had
already determined that the bulk property sale transaction with Purchaser was
fair and reasonable, provided the advantages to the Company outlined above and
was preferable to a program of individual property sales. The discussions with
these firms regarding specific asset sales were terminated as those proposals
were deemed to not be sufficiently advantageous to the Company to justify
jeopardizing the proposed bulk property sale to Purchaser and therefore
depriving the Company of the benefits of the transaction with Purchaser which
were the subject of the Letter of Intent. The Company ceased negotiations with
these firms after the July 5, 2000 commencement of the 45-day non-solicitation
period.
On June 22, 2000, litigation was commenced against the Company and others
concerning the Asset Sale. See "Litigation Related to the Asset Sale" beginning
on page 52. On June 26, the Company issued a press release announcing the filing
of the litigation. In the press release, a representative of the Company stated,
among other things: "No party has offered terms superior to those proposed by
[Purchaser], but should any third party do so, the Board would consider such a
proposal."
COMMENCEMENT OF NON-SOLICITATION PERIOD UNDER LETTER OF INTENT
On July 6, 2000, the Company announced that Purchaser informed the Company
that Purchaser had obtained a mezzanine financing commitment from PW Real Estate
Investments Inc., an affiliate of Paine Webber Real Estate Securities, Inc., for
approximately $31 million. As a result, in accordance with the Letter of Intent,
the Company was obligated not to solicit or initiate any competing transaction
proposals for 45 days, during which the Company and Purchaser negotiated a
definitive purchase and sale agreement while Purchaser endeavored to secure the
equity financing necessary for it to close the proposed transaction. Paine
Webber Incorporated, an affiliate of Paine Webber Real Estate Securities, Inc.,
had been retained in 1999 by the Company and First Union Management, Inc., an
affiliate of the Company, in connection with the transactions related to the
Imperial Parking Corporation spinoff, which were completed in March 2000. At the
time of the engagement of PW Real Estate Investments, Inc. by Purchaser, Paine
Webber Incorporated was no longer engaged by the Company.
At its regularly scheduled meeting on August 2, 2000, the Board received an
update with respect to the status of the Purchaser proposal. Purchaser and its
advisors, PaineWebber Incorporated, provided the Board with a detailed status
report of Purchaser's efforts to secure the equity financing in the approximate
amount of $50 million in order to commit to close the proposed transaction.
Purchaser and its advisors requested the Board to grant an extension of the
45-day exclusivity period, which had commenced on July 6, 2000. After the
Purchaser's representatives and advisors were excused from the meeting, the
Board discussed the Company's alternatives, including the pursuit of previous
proposals it had received for specific properties or groups of properties, such
as the Northeastern Proposal, that might still be available to the Company.
After extensive deliberations, the Board authorized the Company to grant a
limited extension of the exclusivity period to Purchaser in return for certain
concessions, including the agreement of Purchaser to make a substantial deposit
to be applied to the payment of the purchase price for the Asset Sale, and which
would be partially forfeitable upon Purchaser's non-performance, and delegated
to its Executive Committee the authority to approve the terms of any such
extension.
As authorized by the Board, the Executive Committee approved an amendment
to the Letter of Intent effective August 17, 2000, whereby the exclusivity
period was extended from 45 to 60 days. Thus, this extended from August 20, 2000
to September 4, 2000 the exclusivity period and the period within which
Purchaser and the Company were to negotiate a definitive agreement for
Purchaser's purchase of the Properties from the Company. The actions of the
Executive Committee were later ratified by the Board.
THE SALE CONTRACT
A special meeting of the Board of Trustees was held on August 23, 2000, to
consider and approve the terms of the Sale Contract. In attendance at the
meeting were the following Board members:
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Ms. Tighe and Messrs. Ackman, Berkowitz, Klafter, Scully, Shuchman and Williams.
A representative of the Investment Banker was also in attendance. A draft of the
Sale Contract, in substantially final form, was circulated to the Board of
Trustees in advance of the meeting. At the meeting, the Investment Banker
presented a summary of its activities with respect to soliciting proposals for
the sale of the Company. The Board, on behalf of the Company, had retained
experienced real estate counsel that had no prior history of dealings with the
Executives as managers of the Company, to assist the Representatives in
negotiation and documentation of the terms of the Sale Contract between the
Company and Purchaser. Counsel for the Company reviewed with the Board the
provisions of the proposed Sale Contract. In addition to the factors considered
in connection with the approval by the Board of the Letter of Intent as outlined
above in "Negotiations with Respect to Purchaser's Proposals", beginning on page
39 the Board considered the following additional factors as advantages with
respect to the approval of the Sale Contract:
- The Company and its affiliates, as Seller under the Sale Contract, were
required to provide very limited representations with respect to the
Properties; thus the Company was not subject to the potential liability
with respect to the standard expanded representations and warranties that
would likely have been required to be provided to a potential purchaser
not as familiar with the Properties as was the Purchaser.
- The Purchaser would be purchasing the Properties generally on an "as is"
basis.
- The Board had the ability to terminate the Sale Contract in the event of
a superior offer.
The Board also considered the following potentially negative factors in its
deliberations concerning the Asset Sale:
- The risk that Purchaser would not be able to obtain the requisite
financing, including consents to assumption of mortgages or replacement
financing, under the Sale Contract.
- The exclusivity and indemnification provisions and the termination fees
provided in the Sale Contract.
- The litigation pending with respect to the Asset Sale. See "-- Litigation
Related to the Asset Sale" beginning on page 52.
- The appearance of conflicts of interest with respect to a bulk sale of
properties of the Company to an entity with respect to which a Trustee
and officers of the Company were principals.
Among the modifications made by the Sale Contract with respect to the
Properties to be sold referenced in the Letter of Intent were the following:
- The Company could continue its efforts to sell the Huntington Garage,
Cleveland, Ohio and could sell vacant land at the Pecanland Mall. If and
to the extent those properties are sold, the Purchaser would receive a
credit towards the payment of the purchase price in the amount of the net
cash proceeds of such sales.
- The Long Street Garage in Columbus, Ohio was subject to a right of first
refusal held by a third party. If this right was exercised, this Property
will be eliminated from the Asset Sale and the purchase price would be
reduced by $5.2 million.
- The Letter of Intent had provided for the option, subject to certain
contingencies, of the management company to receive a 20% interest in
VenTek. There was no provision in the Sale Contract for the right of
Purchaser or Partners to receive an interest in VenTek.
The litigation pending with respect to the Asset Sale, although considered
by the Board of Trustees, had no impact on the pricing of the transaction, which
had already been provided for in the Letter of Intent, the execution of which
preceded the filing of the litigation.
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After fully considering the matter and weighing the factors described
above, as well as the risks attendant to the transaction, including those
reflected in "Risks Relating to Proposal Two: Consent to the Asset Sale",
beginning on page 16, the Board of Trustees determined, by the unanimous vote of
the Board members in attendance and by an Action in Writing dated August 28,
2000 executed by all of the Board members (other than Mr. Friedman), that
entering into the Sale Contract was fair and reasonable to the Beneficiaries and
in the best interests of the Company. In making these determinations, the Board
took into account the information provided by the Investment Banker. The Board
of Trustees again considered, as they had prior to the approval of the Letter of
Intent, whether to obtain, and determined not to retain a third party to render,
a fairness opinion regarding the Asset Sale because it (i) believed the Company
had ample opportunity to determine the fair market value of the Properties by
widely marketing the Properties and the Company for an extended period of time
and (ii) wanted to avoid the expense of a fairness opinion. The proposed
consideration to be paid to the Company in connection with the Asset Sale was
determined as a result of negotiations between the Representatives and
Purchaser. The Company believes that the terms of the Sale Contract are at least
as favorable to the Company as those that would have been obtained from an
unrelated third party as purchaser. The Investment Banker assisted the
Representatives in their negotiations with Purchaser and its advisors. The
Investment Banker was engaged to and did solicit indications of interest in the
purchase of the Company, as described above. The Investment Banker did not
provide a written report to the Company, nor did it express its views on what it
believed would be a "fair" offer. The Company is not aware of what advice, if
any, the advisors of Purchaser provided to it in connection with the Asset Sale.
The Company believes that the Asset Sale is fair to unaffiliated holders of
the Company's Common Shares and Preferred Shares. Except as otherwise set forth
in this Proxy Statement, the effects of the Asset Sale on the Company's
affiliates that are security holders will not differ from the effects of the
Asset Sale on the Company's unaffiliated shareholders.
The Asset Sale is not structured so that approval of at least a majority of
unaffiliated security holders is required. A majority of Trustees who are not
employees of the Company have not retained an unaffiliated representative to act
solely on behalf of unaffiliated security holders for purposes of negotiating
the terms of the Asset Sale and/or preparing a report concerning the fairness of
the Asset Sale. The Asset Sale was approved by a majority of the Trustees of the
Company who are not employees.
The Board unanimously authorized the Company to enter into the Sale
Contract with Purchaser. Mr. Friedman, a member of the Board of Trustees and a
principal of Partners and one of the managing members of Radiant, did not
participate in the Board deliberations and approvals with respect to the Asset
Sale. As more than 70% of the Trustees have approved the Sale Contract, Section
12.2 of the Declaration of Trust provides that approval of the Sale Contract by
shareholders will occur upon the consent of the holders of at least a majority
of the outstanding Shares.
This discussion of the information and factors considered and given weight
by the Board of Trustees is not intended to be exhaustive, but is believed to
include all material factors considered by the Board of Trustees. In reaching
the determination to approve and recommend that the Beneficiaries consent to the
Asset Sale, the Board of Trustees did not undertake a separate analysis of each
of the factors considered, nor did it find it practical to and it did not assign
any relative or specific weight to any of the factors which were considered, and
individual Trustees may have given differing weights to different factors.
At the time the Sale Contract was executed, the Company and Purchaser
formally terminated the Letter of Intent.
EVENTS SUBSEQUENT TO SALE CONTRACT INVOLVING CERTAIN PROPERTIES
The Company entered into a contract dated October 26, 2000 to sell the
Huntington Garage property in Cleveland, Ohio to Northeastern Security for a
purchase price of $21,250,000. Northeastern
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Security has made a deposit of $1,000,000 to be applied against the purchase
price. The sale is scheduled to close in December 2000 and is required to close
no later than January 2001.
Following the execution of the Sale Contract, the Company notified the
party holding the right of first refusal for the purchase of the Long Street
Garage in Columbus, Ohio of the terms and conditions of the offer by the
Purchaser. Such party failed to exercise its right of first refusal within the
time frame permitted and as a result the Long Street Garage is among the
Properties that will be sold to Purchaser.
INTERESTS OF MANAGEMENT OR TRUSTEES IN THE ASSET SALE
ASSET MANAGEMENT AGREEMENT
In March 2000, the Trust amended the employment agreements of each of the
Executives. The amended agreements provided that after (i) the Impark spin-off
and (ii) a sale or financing of Park Plaza Mall (the "Park Plaza Financing"),
each Executive may terminate his or her employment with the Trust on or after
June 1, 2000, and then shall be entitled to receive a severance payment from the
Company of $1,001,000 for Mr. Friedman and $630,000 for each of Mr. Schonberger
and Ms. Zahner. The Impark spin-off and the Park Plaza Financing occurred and
each Executive terminated his or her employment agreement and received the
severance payment on or about June 1, 2000.
Simultaneously with the execution of the amended employment agreements in
March 2000, the Trust entered into an asset management agreement (the "Asset
Management Agreement") with Partners, which is owned and controlled by the
Executives. The Asset Management Agreement became effective on June 1, 2000 when
the employment of each Executive with the Trust was terminated. As compensation
for its services, Partners receives an annual fee of $1,500,000, from which are
paid the salaries of the Executives and other employees of Partners as well as
its overhead, including the leasing of its office space.
In addition, if the Company terminates the Asset Management Agreement under
certain circumstances within certain time periods, then Partners would also
receive a termination fee of between $500,000 and $750,000, unless the Asset
Management Agreement was terminated for default. However, in connection with the
Sale Contract, the Asset Management Agreement was amended by several amendments
dated May 31, 2000, June 16, 2000, August 17, 2000, September 15, 2000 and
October 23, 2000, respectively. The effect of these amendments was to extend,
most recently to January 16, 2001, the date prior to which either party may
notify the other party of its intention to terminate the Asset Management
Agreement, and in the case of any such termination the Asset Management
Agreement will terminate 30 days thereafter and the Company will not be
responsible for any incentive fee or termination payments otherwise provided for
thereunder. There can be no assurance that the Asset Management Agreement will
not be terminated prior to February 15, 2001. During the effectiveness of the
Asset Management Agreement and only until the consummation of the Asset Sale,
Partners will be responsible for conducting and overseeing the business and
financial affairs of the Company.
The Asset Management Agreement has a two-year term; however, the Company
has the option of (i) extending the term for one more year and (ii) terminating
the Asset Management Agreement (A) for default, (B) in the event of a merger,
consolidation or other similar business combination transaction, (C) in the
event that the remaining equity of the Company has a fair market value of less
than $20,000,000 or (D) prior to February 15, 2001, on 30 days' written notice.
ASSET MANAGEMENT AGREEMENT MODIFICATIONS
The parties have agreed to modifications to the Asset Management Agreement
that shall take effect upon the consummation of the Asset Sale, whereupon
Partners shall manage only the following properties: Park Plaza Mall and Circle
Tower, as well as property accounts receivables and rent settlements, and the
Executives shall cease to be officers of the Company. The annual management fees
under the Asset Management Agreement shall be $250,000. The term of the modified
Agreement shall be for two years, unless earlier terminated. If the Company
terminates the modified Asset Management Agreement
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prior to the expiration of the term without cause, the Company is required to
pay Partners the remainder of the unpaid annual fees which would have been paid
through the balance of the term.
REIMBURSEMENT OF PURCHASER
In those circumstances under the Sale Contract where Seller is obligated to
reimburse Purchaser for certain fees and expenses, none of the reimbursement is
to be paid to Messrs. Friedman or Schonberger, Ms. Zahner or any entity in which
any of them have an interest. See "Terms of the Sale Contract -- Effect of
Termination" beginning on page 63.
LITIGATION RELATED TO THE ASSET SALE
On June 22, 2000, a complaint was filed in New York Supreme Court, County
of New York, against the Company, its trustees and certain former trustees,
Partners and its principals by a purported shareholder of the Company in
connection with the Asset Sale (the "Brickell Lawsuit"). On July 12, 2000, a
complaint against the same defendants, making similar allegations, was commenced
by another purported shareholder of the Company in the Court of Common Pleas of
Cuyahoga County, Ohio (Donald Cunningham v. Friedman, et al.). Both of these
lawsuits are purported class actions brought on behalf of all shareholders of
the Company. In these complaints, plaintiffs allege that the terms of the
proposed Asset Sale are unfair and that the Company's officers and trustees
breached their fiduciary duties to the Company's shareholders by agreeing to a
transaction that fails to maximize shareholder value. Specifically, the lawsuits
allege that Partners, as a party to the Asset Management Agreement with the
Company, was made privy to inside information regarding the Company's assets and
that this allowed Purchaser to negotiate the purchase of the most valuable
assets of the Company at the lowest possible price, to the detriment of the
Company's shareholders. The complaints further allege that Purchaser and the
Company were not engaging in arm's length negotiations and that Purchaser is
acting in its own self interest at the expense of the interests of the Company's
shareholders. Additionally, the complaints allege, Purchaser has material
conflicts of interest. The lawsuits seek preliminary and permanent injunctive
relief against the consummation of the Asset Sale in addition to unspecified
damages, costs and attorney's fees.
The Company believes that these lawsuits are without merit. The Company has
retained counsel with regard to these lawsuits and has given plaintiffs' counsel
the opportunity to review documents concerning the background to the Asset Sale.
In the event that plaintiffs continue the actions, the Company will seek
vigorously to defend the actions.
On October 27, 2000, counsel to the Company received a letter from
plaintiff's counsel (the "Letter") stating that their analysis of the documents
provided by the Company indicated that the sale process, pricing, and
disclosures of the Company with respect to the proposed Asset Sale were all
deficient and that the Brickell Lawsuit is meritorious. With respect to the sale
process, the Letter asserted that the Company did not respond to the
Northeastern Proposal, as described on page 45, leading plaintiff's counsel to
believe that "there was never a level playing field" and that the Company
"impermissibly favor[ed] [Purchaser's] bid." The Letter further asserted that
the alleged refusal to negotiate with this third party "cast doubt on whether
[the Company's] directors discussed its sale with any potential purchasers."
The Letter further asserted that the preliminary proxy statement of the
Company filed September 22, 2000 with the Commission was inadequate because it
failed to disclose the breakdown of the $205 million purchase price, the
underlying financial information for the "Identified Acquisitions" or the
methodologies used to determine their individual values. The Letter further
asserted that the preliminary proxy statement made inadequate disclosures
concerning the "Identified Acquisitions" with respect to the five parking garage
properties. The Letter also asserted a failure to disclose the management
agreements concerning those properties, any relationship between the operators
and the Company's largest shareholders and future benefits shareholders may
receive from operation of the garages. A number of other disclosure failures
were asserted, including failure to disclose the estimated net
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operating income from the purchased assets that would be passed to Radiant as
part of the Asset Sale, the value of the parking equipment allegedly to be
transferred with the parking properties, the effect on the value of the
Company's stock if, after the Asset Sale, it fails to qualify as a REIT and is
delisted from the NYSE, and the role of the Company's largest shareholders in
the Asset Sale and "what interests [they] may have going forward."
Finally, the Letter asserted that the value to be received by the Company
in the Asset Sale is inadequate. The Letter estimated that $150 million of the
proceeds are attributable to real estate assets, which the Letter estimated to
have a basis as high as $225 million. The Letter did not refer to the support
for this estimate. The Letter also asserted that "[g]iven the recent renaissance
of most central business districts, [plaintiff's counsel] does not believe that
these properties have done anything but appreciate significantly over the past
two or three years and are undervalued," and that many of the subject properties
are undergoing extensive rehabilitation and repositioning, which will increase
future returns to be enjoyed by Radiant. The Letter further asserted that there
should be complete disclosure about the properties, including of appraisals by
competent third parties.
The Company believes that the allegations set forth in the Letter are
without merit and continues to believe that the Brickell Lawsuit is without
merit. The Company believed at the time the Board approved the Sale Contract and
continues to believe that the Asset Sale is fair and reasonable and in the best
interest of the Company and its shareholders. The Company further believes that
the assertions in the Letter with respect to disclosure are untrue or regard
matters which are either immaterial or have been properly disclosed in this
Proxy Statement.
If the Brickell Lawsuit were to delay the consummation of the Asset Sale
or, directly or indirectly, cause it not to occur, this could be materially
harmful to the Company, as the Board believes that the Company may not be able
to replace the Sale Contract with an agreement to sell the Properties on terms
and at a price as favorable to the Company as the Sale Contract.
USE OF PROCEEDS OF THE ASSET SALE
Under the Sale Contract, the aggregate purchase price for the Properties is
$205 million. The Company expects to receive approximately $199 million in
aggregate consideration for the Properties. The downward adjustments to the
aggregate purchase price of $205 million that result in the $199 million in
aggregate consideration to the Company are estimated to be at closing of the
Asset Sale as follows: projected net operating income to Purchaser from the
Properties from June 1, 2000, less debt service, capital expenditures committed
subsequent to May 9, 2000 and 66.6% of asset management fees paid to Partners
from June 1, 2000 to closing: $660,000; reserve fund provided by a municipality
for construction of improvements to 5th and Marshall Garage, in Richmond,
Virginia: $2.3 million; prior Pecanland Mall outlot sale: $530,000; the
Company's share of estimated closing costs (maximum $2.0 million); and legal and
accounting fees and miscellaneous costs and adjustments: $1.0 million. Of the
approximately $199 million, it is expected that approximately $74 million will
be in cash and approximately $125 million will be from the assumption or
repayment of mortgage indebtedness on the Properties. See "Terms of the Sale
Contract -- Assets to be Transferred" on page 60 and "-- Possible Seller
Financing" beginning on page 61. The Company is in the process of exploring
alternative uses for the net cash proceeds to be received, including, without
limitation:
- making new investments, including investments in real estate or non-real
estate assets or businesses;
- implementing or continuing a common or preferred share repurchase or
similar program; and
- distributing such net proceeds to the Beneficiaries, including, but not
necessarily limited to, amounts required to satisfy certain REIT
distribution requirements resulting from previous asset sales and net
income in 2000, if any.
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<PAGE> 60
PLANS FOR THE COMPANY SUBSEQUENT TO THE ASSET SALE
The Company's long-term economic goal is to increase the per share net
asset value of the Company at the highest possible rate, without undue risk. The
Company continues to monitor the benefits of, and the restrictions imposed by,
maintaining its REIT status. The Company presently desires and intends to
maintain its status as a REIT for federal income tax purposes but, if
appropriate, would consider other organizational structures.
New Board of Trustees. From September 2000 through December 2000, a
restructuring of the Board of Trustees of the Company occurred. Mr. Friedman,
appointed Trustee in November 1998, and six of the nine nominees of Gotham who
were elected as Trustees at the May 1998 Special Meeting (see "Background of the
Asset Sale -- 1998 Change in Control" beginning on page 33, resigned and three
new persons were appointed Trustees. The current restructured Board is comprised
of seven persons, four of whom own or are affiliated with entities that own
significant amounts of Shares.
Strategic Alternatives. The current Board is engaged in a process of
considering alternatives for the strategic direction of the Company, but has not
determined to pursue any specific major strategic initiative. The following is a
summary of activities that the Company believes, based on discussions at the
Board level, that it will consider after the Asset Sale:
- The Company has explored various acquisition, investment and business
combination transactions and will most likely continue to explore these
transactions. These transactions may include, without limitation, the
acquisition of assets in exchange for securities of the Company and
business combination transactions in which the Company is not the
surviving entity. Parties to these transactions may also include existing
shareholders of the Company or entities in which these shareholders have
significant interests. The Company believes that, subsequent to the
completion of the Asset Sale, it will be a more attractive acquisition
candidate due to the disposition of the Properties and the addition to its
balance sheet of approximately $80 million in liquidity. However, there
can be no assurance that any of these discussions will lead to any of
these transactions occurring subsequent to the Asset Sale.
- The Company may either continue or expand its Share repurchase program.
The Board recently authorized the expansion of the Share repurchase
program and may further expand such program after the Asset Sale.
- The Company will consider making new investments in operating assets,
including investments in real estate or non-real estate assets or
businesses.
- Although the Company has retained a broker to solicit indications of
interest in the purchase of the Park Plaza property, the Company will
likely continue to hold the two real estate properties that it will own
after the Asset Sale, Park Plaza and Circle Tower, having a combined book
value of $59.8 million as of September 30, 2000.
The foregoing list of potential activities is not intended to be an
exhaustive list and the Company is committed to considering any reasonable
proposal which could help the Company achieve its long-term economic goals. The
Board of Trustees has not determined whether or not to change the investment
policies of the Company concerning the types of assets in which it will make
investments; however, the investment authority of the Trustees set forth in the
Declaration of Trust was amended at the 1999 Special Meeting of Beneficiaries to
modify the Trustees' prior investment limitations.
The Company is not aware of understandings or determinations, other than as
disclosed in this Proxy Statement, as to the general direction of the Company
after the Asset Sale. Determinations concerning material matters with respect to
the Company will continue to be made by the Board of Trustees or its Executive
Committee. Certain members of the Board of Trustees are principals in Gotham,
Apollo and Magten, and those individuals, as Trustees, have taken part in
discussions about the post-sale operations of the Company. The Company does not
plan to hire a full-time Chief Executive Officer after the Asset Sale.
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<PAGE> 61
After the Asset Sale, the Asset Management Agreement will provide, among
other things, for the management by Partners of the real estate properties
remaining in the Company for a period of two years for an annual fee of
$250,000, and that the Executives shall cease to be officers of the Company. The
Company does not plan to hire a full-time Chief Executive Officer after the
Asset Sale.
Remaining Assets. The Company's remaining assets after the Asset Sale will
consist primarily of the following (with approximate September 30, 2000 book
values in parentheses): two real estate properties, Park Plaza, a shopping mall
located in Little Rock, Arkansas ($59,800,000) and Circle Tower, an office
building located in Indianapolis, Indiana ($2,200,000); unrestricted cash
($96,300,000); restricted cash ($2,400,000); U.S. Treasury bills ($199,400,000);
a preferred stock investment in HQ Global Workplaces, Inc. ($10,500,000);
accounts receivable ($3,500,000); and VenTek inventory ($5,400,000). The Company
has made no firm decision regarding selling its remaining real estate assets,
although it has retained a broker to solicit indications of interest in the
purchase of the Park Plaza property. There are no plans for major improvements
that the Company is considering for the properties that will remain after the
Asset Sale. In addition the Company has a damage claim referred to as the Peach
Tree Mall claim, described in the following paragraph. The Company does not
anticipate selling its non-real estate assets in the near term, and has no
immediate plans to do so. Liabilities of the Company after the Asset Sale will
consist primarily of a mortgage loan collateralized by the Park Plaza property
($42,400,000); notes payable collateralized by the treasury bills
($150,100,000); the Company's 8 7/8% senior notes ($12,500,000); and accounts
payable and accrued liabilities ($16,300,000). The Company has provided
performance guarantees for the manufacturing and installation of transit ticket
vending equipment with respect to VenTek. The guarantees of $5.3 million and
$6.2 million expire in February 2001 and 2002, respectively.
Peach Tree Mall Claim. The Company, as one Plaintiff in a class action
composed of numerous businesses and individuals, has pursued legal action
against the State of California associated with the 1986 flood of Sutter Buttes
Center, formerly Peach Tree Center. In September 1991, the court ruled in favor
of the plaintiffs on the liability portion of the inverse condemnation suit,
which the State of California appealed. However, in the third quarter of 1999,
the 1991 ruling in favor of the Company and the other plaintiffs was reversed by
the State of California appeals court, which remanded the case to the trial
court for further proceedings. The California Supreme Court refused to accept an
appeal by the plaintiffs of the appellate court's decision. Accordingly, the
Company expensed $1.2 million in deferred legal fees which the earlier court
ruling in favor of the Company had allowed for recovery. After the remand of the
case to the trial court, the Company and the other plaintiffs determined to
pursue a retrial before that court. The retrial of the litigation is currently
scheduled to commence on January 16, 2001. Much of the preparation for the
retrial has been concluded, and the Company expects the retrial to commence as
scheduled. The likelihood of success at the retrial of the Company and the other
plaintiffs depends on many factors, including the rulings on the applicable
legal standards made by the appellate court. Accordingly, it is not possible to
predict the likelihood of a favorable outcome at the retrial with any certainty.
The Company has been informed by a consulting firm retained by the Company to
evaluate its claims that the amount of its potential damage claims is in the
order of magnitude of $33 million, plus attorneys' fees and compounded
market-rate interest from 1986, the time that the damage occurred; however, the
Company is unable to predict at this time whether or not it will recover any
amount of its damage claims in this legal proceeding.
HQ Global Workplaces Investment. The Company is evaluating possible new
investment opportunities, including investments in real estate or non-real
estate assets or businesses. As an example of the Company's acquisition of such
interests, in June 2000, the Company invested $10 million in the convertible
preferred stock of HQ Global Workplaces, Inc., a company created by the
combination of HQ Global Workplaces and VANTAS and which is a provider of
flexible officing solutions. It is privately owned and its controlling
shareholder is Frontline Capital Group, a public company. Gotham LP was the
beneficial owner of approximately 6.37% of the common stock of Frontline Capital
Group as of June 29, 2000. The convertible preferred stock investment accrues a
13.5% payable-in-kind dividend which increases annually. The preferred stock and
accrued PIK dividends are convertible into common stock if and when HQ
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<PAGE> 62
Global Workplaces conducts an initial public offering. In addition, the Company
received warrants with a nominal exercise price to acquire approximately 0.40%
of the outstanding common stock of HQ Global Workplaces on a fully diluted
basis. This investment was reviewed and approved by an independent committee of
the Board of Trustees prior to being approved by the full board of the Company,
due to the ownership interest of Gotham LP in Frontline Capital Group.
Reverse Share Split. At the 1999 Special Meeting, shareholders approved an
amendment to the Declaration of Trust providing authority to the Board of
Trustees to effectuate, from time to time, reverse and forward splits of the
Shares. The Board of Trustees of the Company has considered a share combination
or reverse split of the Shares (the "Reverse Split"), whereby shareholders would
receive one Share for a number of Shares owned. It is anticipated that a Reverse
Split with respect to the Shares will be made effective by the Board of Trustees
after the record date for the Meeting. The precise timing and ratio of the
Reverse Split has not been determined.
Asset Management Agreement. After the Asset Sale, the Asset Management
Agreement will provide, among other things, for the management by Partners of
the real estate properties remaining in the Company for a period of two years,
for an annual fee of $250,000 and that the Executives shall cease to be officers
of the Company.
THE PARTIES
FIRST UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS
The Company is a REIT whose primary business has been to buy, manage,
improve cash flow of and own retail, apartment, office and parking properties
throughout the United States and Canada. The Company and FUMI have an
organizational structure commonly referred to as "stapled," where the Shares are
"stapled to" a proportionately equal interest in the common stock of FUMI, with
some exceptions. The Shares may not be issued or transferred without their
"stapled" counterparts in FUMI. The common stock of FUMI is held in trust for
the benefit of the shareholders. The primary asset of FUMI is VenTek.
As of September 30, 2000, the Company owned, including under long-term
ground leases, real estate assets consisting of: three shopping centers, five
office properties and seven parking facilities. The Asset Sale will reduce the
Company's real estate property holdings to one shopping center and one office
property.
The Company's principal offices are located at 125 Park Avenue, New York,
New York 10017 (telephone number (212) 905-1100).
SELLER
In addition to the Company, six of its direct and indirect subsidiaries own
specific Properties. These six subsidiaries are 55 Public LLC, North Valley
Tech, LLC, Printers Alley Garage, LLC and Southwest Shopping Centers Co. I,
L.L.C., all Delaware limited liability companies, First Union Madison L.L.C., an
Illinois limited liability company and First Westgate Mall, L.P., a Texas
limited partnership. As part of the financing of the Westgate Town Center in
September 2000, the interests in this property formerly owned by the Company and
First Union Commercial Properties Expansion Company were conveyed to First
Westgate Mall, L.P., whose general and limited partners are wholly owned by the
Company.
PURCHASER
Purchaser is a limited liability company whose three managing members,
Daniel Friedman, David Schonberger and Anne Zahner, serve as officers of the
Company. These three individuals are also the principals of Partners, which
manages the assets of the Company under the Asset Management Agreement. The Sale
Contract contains a provision permitting assignment to an entity wholly owned by
Purchaser, Landmark Realty Advisors LLC and a minority equity investor, provided
that such assignee
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<PAGE> 63
shall have a net worth of at least $40 million. Purchaser has agreed to assign
its interest in the Sale Contract to Radiant Ventures I on or before the closing
of the Asset Sale. Purchaser is the managing member of Radiant Ventures I. The
principal equity investors in Radiant Ventures I are Purchaser, which is the
managing member, and Landmark Equity Trust VII, which is the principal
non-managing member, (owning approximately 89% of the total ownership interests
in Radiant Ventures I). Radiant Ventures I is required to obtain Landmark Equity
Trust VII's consent prior to making major decisions relating to Radiant Ventures
I.
Landmark Equity Trust VII is an affiliate of Landmark Equity Fund VII, a
real estate investment fund formed in 1997 with $400 million of committed
capital. The underlying investors for Landmark Equity Fund VII include pension
funds, insurance companies, endowments, foreign investors and individuals, none
of which are affiliated with Partners or the Company. Landmark Realty Advisors
LLC is the advisor to Landmark Equity Trust VII. Landmark Realty Advisors LLC
manages real estate funds with committed capital exceeding $800 million.
Landmark Realty Advisors LLC is an affiliate of Landmark Partners, a diversified
alternative investment firm. Since 1990 Landmark Partners has participated in
the formation of twelve alternative investment funds with committed capital
exceeding $2.9 billion.
Landmark Equity Trust VII will fund its equity investment in Radiant
Ventures I by drawing on equity that has been committed by its investors. Such
commitments, when drawn, are sufficient to fund Landmark Equity Trust VII's
equity investment in Radiant Ventures I. Landmark Equity Trust VII is obligated
to contribute up to $55.0 million in capital to Radiant Ventures I, which
capital will be used by Radiant Ventures I as one of its sources of funds to
acquire the Properties. Landmark Equity Trust VII will own approximately 89% of
the ownership interests in Radiant Ventures I.
PURCHASER'S SOURCES OF FUNDS
Purchaser's sources of funds for the $205 million purchase price to be paid
by Purchaser to the Seller for the Properties, as well as Purchaser's expenses
for the Asset Sale, are expected to be approximately as follows: $59.0 million
of equity; $14.2 million of new loans; $116.1 million of assumed loans; a credit
of $530,000 as a result of the sale of a vacant outlot; and a credit of the
amount of the net proceeds from the sale of the Huntington Garage property.
- Of the approximately $59.0 million in equity, approximately $52.8 million
is being provided by Landmark Equity Trust VII; $5.2 million is being
provided by minority investors; and $1.0 million is being provided by the
Executives.
- Of the $14.2 million of new loans, $7.7 million is being provided by
PaineWebber Incorporated and shall be secured by mortgages on the
following properties: Two Rivers Business Center in Clarksville,
Tennessee; West 3rd Street Parking Lot in Cleveland, Ohio; and the 5th
and Marshall Garage in Richmond, Virginia. An additional $6.5 million is
expected to be provided by the Salomon Brothers Realty Corp. on the North
Valley Tech Center property in Thornton, Colorado and will be secured by
that property, in addition to the existing mortgage loan of $16 million.
- The $116.1 million of assumed mortgage loans represent Purchaser's
assumption of the mortgage loans encumbering the Properties, except for
the following: the $7.8 million loan on the Huntington Garage property,
as Purchaser is not purchasing that property; and the two mortgages on
the Long Street Garage properties in Columbus, Ohio, which total $1.4
million.
- The credit of $530,000 is as a result of the Company's sale of a vacant
outlot which is part of the Property known as Pecanland Mall.
- The amended Sale Contract provides that the credit to Purchaser with
respect to the sale of the Huntington Garage for the $21,250,000 contract
price is to be the net proceeds of that sale, which are estimated to be
approximately $20.9 million.
In addition, Purchaser will assume the liabilities associated with the
ownership, operation and use of the properties after May 31, 2000 other than
capital expenditures committed before May 10, 2000. The
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<PAGE> 64
amount of such capital expenditures committed before May 10, 2000 and unpaid at
September 30, 2000 was $3.3 million. The liabilities assumed include
environmental liabilities arising after May 31, 2000 to the extent Seller is not
insured for such liabilities. At the closing, Purchaser will be entitled to a
credit against the purchase price to the extent that the revenues received from
the ownership, operation and use of the Properties after May 31, 2000 exceeds
the expenses (including capital expenditures) of the ownership, operation and
use of the Properties after May 31, 2000. If the expenses exceed the revenues,
the purchase price will be increased by such amount.
The net transaction expenses, fees, closing adjustments and reserve
requirements of the Purchaser to be incurred in connection with the transaction
are expected to be approximately $5.6 million, which includes approximately
$530,000 of estimated expenses used in determining the net proceeds of the
Huntington Garage sale.
FIRST MORTGAGE FINANCING TO BE ASSUMED
The following schedule provides certain information with respect to the
mortgage debt to be assumed by the Purchaser:
<TABLE>
<CAPTION>
MAY 31, 2000 MATURITY DATE
COLLATERAL LENDER BALANCE($) INTEREST RATE (MM/YY)
---------- ------------------- ------------ ------------- ---------------
<S> <C> <C> <C> <C>
55 Public Square ORIX Real Estate 21,100,000 LIBOR + 325 bp 09/02
Capital Markets
North Valley Tech Center Salomon Brothers 16,000,000 New Blended Rate of LIBOR 07/02
Realty Corp. + 325 bp
Pecanland Mall TIAA 37,913,058 12.25% + participation 12/17
Madison and Wells Garage General Electric 30,000,000 LIBOR + 275 bp Extended to new
Capital Corp. 3-year term
Printers Alley Garage Southtrust Bank 4,000,000 LIBOR + 200 bp 07/01
</TABLE>
In addition, a mortgage loan secured by the Westgate Town Center in the
principal amount of $8.5 million, of which $7.5 million was advanced at the time
of closing in September 2000, has been obtained by the Company. This mortgage
debt shall be assumed by Purchaser as part of the Asset Sale.
NEW FIRST MORTGAGE FINANCING TO BE OBTAINED
The following schedule provides certain information with respect to new
first mortgage loans to be provided:
<TABLE>
<CAPTION>
PRINCIPAL
COLLATERAL LENDER AMOUNT INTEREST RATE TERM
---------- ------------------- ------------ ------------------------- ---------------
<S> <C> <C> <C> <C>
West Third Street Lot PW Real Estate $7,700,000 LIBOR + 250 bp Three years
Two Rivers Business Center Investments Inc. with 2 one-year
Fifth and Marshall Garage options
North Valley Tech Center Salomon Brothers $6,500,000 New Blended Rate of LIBOR Term -- No
Realty Corp. + 325 bp on entire change
(This is an $22,500,000
increase
to the existing
loan.)
</TABLE>
BACK-UP FINANCING SOURCES AVAILABLE TO PURCHASER
The following schedule provides certain information with respect to some of
the sources of backup financing that are available to Purchaser (in addition to
the financing which may be provided by Seller;
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<PAGE> 65
see "Terms of the Sale Contract -- Possible Seller Financing beginning on page
61) in the event additional financing is required:
<TABLE>
<CAPTION>
PRINCIPAL
COLLATERAL LENDER AMOUNT INTEREST RATE TERM
---------- ------------------- ------------ ------------- ---------------
<S> <C> <C> <C> <C>
Pecanland Mall PW Real Estate $46,000,000 LIBOR + 250 bp Three years
Investments Inc. with 2 one-year
options
Partnership Interests PW Real Estate $31,000,000 15% Two years with
Investments Inc. one 6-month
(Mezzanine Loan) option
</TABLE>
TERMS OF THE SALE CONTRACT
The terms and conditions of the Asset Sale are contained in the Sale
Contract, the documents with respect to which are attached to this Proxy
Statement as Appendices A, B, C and D, and is incorporated herein by reference.
The description in this Proxy Statement of the terms and conditions of the Asset
Sale is subject to the more complete information set forth in the Sale Contract.
THE BENEFICIARIES ARE URGED TO READ THE SALE CONTRACT CAREFULLY IN ITS ENTIRETY.
THE PURCHASE PRICE
The aggregate purchase price under the Sale Contract is $205 million
payable as follows: (i) $1 million (the "Initial Deposit"), upon the execution
of the Sale Contract, (ii) $6 million (the "First Additional Deposit") on
September 29, 2000, (iii) $3 million (the "Second Additional Deposit" and,
together with the Initial Deposit and the First Additional Deposit, the
"Deposit") no later than 3 business days after the Company has delivered
confirmation of the Beneficiaries' approval of the Sale Contract and (iv) the
balance, which is expected to include the assumption of the mortgages on certain
Properties (as described below), at the closing. Purchaser has paid to Seller
the Initial Deposit and the First Additional Deposit.
The Company has entered into a contract to sell a Property, the Huntington
Garage, Cleveland, Ohio to Northeastern Security, an entity not affiliated with
Purchaser or the Company. The sale is scheduled to close on or before January
2001. Upon the closing of the Asset Sale, the Purchaser will receive a credit in
the amount of the net proceeds received or expected to be received from the sale
of the Huntington Garage property towards the $205 million purchase price. The
credit to Purchaser under the Sale Contract with respect to the Huntington
Garage sale will equal the contract sales price of $21,250,000 less certain
expenses of the Company in connection with the sale, which amount of net
proceeds is expected to be approximately $20.9 million. The Purchaser will also
receive a credit of approximately $530,000 toward the $205 million purchase
price as a result of the Company's sale of a vacant outlot which is part of the
Property known as Pecanland Mall. In addition, the Purchaser will receive
additional credits toward the purchase price in the event the Company is
successful in selling to other parties prior to closing the remaining vacant
land at Pecanland Mall. The amount of the credit will be the proceeds received
by the Company from the sale after deduction of Seller's fees, expenses and
other costs.
The Purchaser has the right to a reduction in the purchase price in the
event it elects not to purchase certain individual Properties. This right may be
exercised by Purchaser in the following circumstances: (i) Seller electing not
to permit a Phase II environmental study of a Property after Purchaser's
environmental consultant has advised that one be performed, (ii) following
casualty losses greater than $500,000 to all Properties or on any Property,
Purchaser's equity investors or mezzanine lender withdraw their funding for a
Property that has suffered a casualty and Seller elects not to replace the
withdrawn financing, (iii) following Seller's failure to deliver sufficient
estoppel certificates from tenants of a Property, the lender providing mortgage
financing or Purchaser's mezzanine lender elect not to provide financing for the
Property and Seller declines to provide financing for the Property or (iv)
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<PAGE> 66
Seller's failure or refusal to eliminate certain matters affecting title to a
Property. In any of such events the amount of the reduction in the purchase
price will be the amount of the purchase price allocated to such Property in the
Sale Contract.
ASSETS TO BE TRANSFERRED
The Properties proposed to be sold in the Asset Sale are (i) four office
properties, the 55 Public Square Building and the CEI Building in Cleveland,
Ohio, the North Valley Tech Center in Thornton, Colorado and the Two Rivers
Business Center in Clarksville, Tennessee, (ii) two shopping center properties,
the Westgate Town Center, Abilene, Texas and the Pecanland Mall in Monroe,
Louisiana, (iii) six parking garages, two located in Cleveland, Ohio and one
located in each of Chicago, Illinois, Columbus, Ohio, Nashville, Tennessee and
Richmond, Virginia and (iv) one parking lot in Cleveland, Ohio. The Asset Sale
also includes a note receivable in the outstanding principal amount of
approximately $1.5 million bearing interest at 10% and maturing in 2008 secured
by a mortgage on an apartment property in Atlanta, Georgia as well as the
furniture, fixtures and equipment used in the operation of the Properties and
the leases, contracts and books and records of the Sellers related to the
Properties. The Letter of Intent had provided that Purchaser would have the
right to receive a 20% interest in VenTek. There is no provision in the Sale
Contract for the right of Purchaser to receive an interest in VenTek. As
permitted under the Sale Contract, the Company entered into a contract to sell
the Huntington Garage property to a third party unaffiliated with Purchaser or
the Company. See, "The Purchase Price." A vacant outlot at the Pecanland Mall
has been removed from the Properties because it was sold. The remaining vacant
land at Pecanland Mall may be removed from the Properties under the
circumstances described in "The Purchase Price" beginning on page 59.
LIABILITIES TO BE ASSUMED
Certain of the Properties are encumbered by mortgages whose aggregate
outstanding principal balance as of May 31, 2000 was approximately $118.2
million. See chart in "The Asset Sale" on page 33, above. In addition, a
mortgage loan in the principal amount of $7.5 million was obtained in September
2000 by the Company secured by the Westgate Town Center, and this mortgage debt
will be assumed by Purchaser as part of the Asset Sale. Under certain
circumstances where the holder of the existing mortgage on a Property does not
permit the assumption of its mortgage, the Seller may provide the financing for
the purchase of such Property. See "-- Possible Seller Financing" beginning on
page 61. Based on written assurances made by the Purchaser to the Company under
the Sale Contract, the Company does not expect that it will be required to
provide financing to Purchaser in connection with the Asset Sale.
In addition, Purchaser will assume the liabilities associated with the
ownership, operation and use of the Properties after May 31, 2000 other than
capital expenditures committed before May 10, 2000. The amount of such capital
expenditures committed before May 10, 2000 and unpaid at July 31, 2000 was
approximately $2.8 million. The liabilities assumed include environmental
liabilities arising after May 31, 2000 to the extent Seller is not insured for
such liabilities. At the closing, Purchaser will be entitled to a credit against
the purchase price to the extent that the revenues received from the ownership,
operation and use of the Properties after May 31, 2000 exceeds the expenses
(including capital expenditures) of the ownership, operation and use of the
Properties after May 31, 2000. If the expenses exceed the revenues, the purchase
price will be increased by such amount.
Seller has agreed to pay one-half of up to $4 million in fees associated
with the lenders' charges for assumption or prepayment of the mortgages
encumbering the Properties and the title, survey and recording charges, transfer
and sales taxes associated with the conveyance of the Properties. If the amount
exceeds $4 million, the Purchaser will pay the excess.
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AMENDMENTS TO THE SALE CONTRACT
The First Amendment to the Sale Contract was made effective on September
29, 2000, to acknowledge that Purchaser had made the First Additional Deposit,
bringing the total Deposit to $7.0 million, and to provide that if Purchaser was
unable to obtain acceptable financing with respect to the assumption or
replacement of the mortgage loans on the Properties, Purchaser would have the
right to terminate the Sale Contract on or before October 26, 2000. The effect
of this amendment was that, if Purchaser so terminated the Sale Contract, the
Deposit would be returned to Purchaser less the amount of $125,000 which would
be retained by the Company. If Purchaser did not so terminate the Sale Contract,
the Deposit would not be refundable due to financing contingencies. Purchaser
did not so terminate the Sale Contract on or before October 26, 2000.
The Second Amendment to Sale Contract was effective on October 26, 2000,
and memorialized Purchaser's confirmation that it had obtained firm commitments
for the "acceptable financing" referenced above. In addition, it acknowledged
the contract of Seller to sell the Huntington Garage property to a third party
and provided that Purchaser would receive a credit against the Purchase Price in
the amount of the net proceeds of said sale.
The Third Amendment to Sale Contract was made effective December , 2000,
and memorialized the change in the Closing Date under the Sale Contract from
December 29, 2000 to February 28, 2001. The Third Amendment provides that the
Company is responsible for the payment of any extension fees charged to
Purchaser by the existing mortgage lenders whose loans are to be assumed by
Purchaser or the lenders to the Purchaser as a result of a change in the Closing
Date subsequent to February 28, 2001.
POSSIBLE SELLER FINANCING
In certain circumstances the Seller is obligated to provide financing for
the Purchaser's purchase of the Properties and in other circumstances the Seller
may elect to provide financing for the Purchaser's purchase of the Properties,
other than with respect to the Long Street property. The Seller is obligated to
provide Seller financing in the event the Properties, other than with respect to
the Long Street property, suffer casualty losses in excess of $500,000 and, as a
result, the existing mortgage holder refuses to allow the Purchaser to assume
the mortgage on a Property or the Purchaser's proposed mortgage lender for a
Property refuses to fund its mortgage commitment. The maximum amount of such
financing Seller is obligated to provide for all Properties is $30 million,
except if a casualty is suffered by the Pecanland Mall, in which event the
maximum amount is $46 million. The term of this Seller financing will be two
years at an initial interest rate of 11% for the first six months, increasing to
12% after six months for the remainder of the term. The Seller will be granted a
first lien on the Properties financed.
The Seller is also obligated to provide financing in the event that the
holder of any existing mortgage on the Properties, other than with respect to
the Long Street property, does not consent to the Purchaser assuming such
mortgage, subject to the following limitations: (a) the total amount of
obligatory Seller financing does not exceed $30 million reduced by any Seller
financing Seller has provided as a result of casualty losses as described above,
and (b) Seller is not obligated to provide financing for the Pecanland Mall. The
maximum term of any Seller financing provided under these circumstances is 180
days and will be at an interest rate of 11% for the first 120 days and 15% for
the final 60 days. The Seller will be granted a first lien on the Properties
financed.
Purchaser has provided written assurances to the Company that it has
obtained firm commitments for acceptable financing either in the form of a
consent to Purchaser's assumption of existing mortgages or new mortgage loans
with respect to all of the Properties it will purchase. Based on such written
assurances made by the Purchaser to the Company under the Sale Contract, the
Company does not expect that it will be required to provide financing to
Purchaser in connection with the Asset Sale.
The Seller may elect to provide (or cause a third party to provide) Seller
financing for a Property in the following circumstances: (a) as a result of a
casualty, the Purchaser's equity investors or mezzanine
61
<PAGE> 68
lender withdraw their or its financing for a Property, other than with respect
to the Long Street property, or (b) as a result of the Seller having failed to
provide the required minimum number of estoppel certificates for a Property, the
Purchaser's mortgage lender or mezzanine lender for such Property withdraws its
financing for such Property. In addition, if the Seller extends the closing date
beyond February 28, 2001 as a result of the special meeting of shareholders to
approve the Sale Contract not having been held, the Seller may elect to provide
Seller financing to replace the financing being provided by any lender to
Purchaser who either refuses to extend its financing commitment beyond January
31, 2001 or charges an extension fee for closing beyond February 28, 2001.
REIMBURSEMENT OF CERTAIN EXPENSES
Seller has agreed to pay up to one-half of up to $4 million in fees
associated with the lenders' charges for assumption or prepayment of the
mortgages encumbering the Properties and the title, survey and recording
charges, transfer and sales taxes associated with the conveyance of the
Properties. If the amount exceeds $4 million, the Purchaser will pay the excess.
REPRESENTATIONS AND WARRANTIES
The Sale Contract contains various representations and warranties of Seller
and Purchaser. The respective representations and warranties of Seller and
Purchaser will survive the closing for six months.
The representations of Seller relate generally to: corporate organization,
existence and authorization, enforceability and related matters; conflicts,
defaults and requisite consents; and absence of brokerage fees.
The representations of Purchaser relate generally to authorization,
enforceability and related matters; conflicts, defaults and requisite consents;
and absence of brokerage fees.
INDEMNIFICATION
Purchaser has agreed to indemnify, defend and hold Seller harmless from and
against losses, claims, costs and expenses, including reasonable attorneys' fees
and expenses (collectively, "Losses") arising from: (a) Purchaser's inspection
of the Properties, (b) Purchaser's failure to pay or perform any liabilities
assumed by it as part of the Asset Sale and (c) the claims of persons alleging
they are owed commissions or fees as a result of acting on behalf of the
Purchaser in the Asset Sale.
Seller has agreed to indemnify, defend and hold Purchaser and related
parties harmless from and against Losses arising from claims of persons alleging
they are owed commissions or fees as a result of acting on behalf of the Seller
in the Asset Sale and to indemnify Purchaser from and against Losses arising
from claims by the shareholders.
CONDUCT PENDING CLOSING
Seller has agreed to continue to operate and maintain the Properties
consistent with current practice and to not terminate the Asset Management
Agreement except in the case of Partners' default. In the management of the
Properties by Partners pursuant to the Asset Management Agreement, Seller
recognizes that Partners will consult with Purchaser and be subject to
Purchaser's supervision. In addition, Seller has agreed not to enter into
contracts for operation or maintenance of the Properties unless they can be
cancelled without penalty on 30 days' written notice.
Seller may not enter into, amend or terminate any lease or ground lease or
accept the surrender of any existing tenancy or approve any sublease without the
consent of Purchaser unless it is terminating the lease of a tenant (other than
an anchor tenant of a shopping center property) for a monetary default.
62
<PAGE> 69
EXCLUSIVITY
With the exception of the outlots at Pecanland Mall, the Huntington Garage
and the Long Street Garage, Seller may not, directly or indirectly, solicit or
initiate any discussions with any person or entity other than Purchaser with a
view toward the sale of the Properties. The Company may, however, respond to,
pursue and negotiate a bona fide proposal, which is neither solicited nor
initiated by Seller, to directly or indirectly purchase any or all of the
Properties if the Board of Trustees or a committee thereof has determined that
(a) the alternative proposal may be more favorable to the shareholders and (b)
the party making the alternative proposal is reasonably likely to have the
financial resources to complete the transaction.
CONDITIONS TO THE CLOSING
The closing is conditioned upon consent to the Asset Sale by the
shareholders on or prior to February 23, 2001 and is subject to further
extension in certain circumstances at the election of Purchaser or Seller, but
in no event later than April 30, 2001.
In addition, the closing is conditioned upon Seller delivering to Purchaser
estoppel certificates in a specified form from a certain portion of the tenants
of the shopping center and office properties, the lessors under the ground
leases of three properties and the net lessees of the parking facility
properties. If Purchaser's lender refuses to fund as a result of the missing
estoppel certificates for any Property, Seller has the option to provide such
funding on equal or better terms, in which event Purchaser will be required to
purchase such Property. If Seller refuses to provide such financing, Purchaser
may elect to eliminate such Property from the Asset Sale with an adjustment in
the purchase price for the remaining Properties.
The closing is also conditioned on the receipt of any antitrust clearances
the parties determine are necessary, and the Asset Management Agreement
remaining in place and being amended, as provided in the Sale Contract, unless
there has been a default by Partners. See "Interests of Management or Trustees
in the Asset Sale -- Asset Management Agreement" on page 51.
THE CLOSING
The closing will occur on a date (the "Closing Date") within two business
days after the consent by the Beneficiaries, but in no event later than February
28, 2001; except that, under certain circumstances, Purchaser may extend the
Closing Date to a date not later than March 30, 2001 and under certain
circumstances Seller may extend the Closing Date to a date not later than April
30, 2001.
TERMINATION
Either party may terminate the Sale Contract if any condition to that
party's obligation to close is not met on or before the Closing Date, if the
other party defaults under the Sale Contract, if the meeting of Beneficiaries
for approval of the sale has not been held prior to the second business day
before the Closing Date, or the Beneficiaries do not approve the sale at the
meeting held for such purpose. The Purchaser may terminate the Sale Contract if
Seller extends the Closing Date beyond February 28, 2001. In addition, the Sale
Contract will terminate upon notice from Seller if the Board of Trustees of the
Company or a committee thereof determines that the Company has a fiduciary duty
to accept, approve or recommend an alternative proposal.
EFFECT OF TERMINATION
If Seller terminates the Sale Contract because Purchaser has defaulted
under the Sale Contract, then, as a sole remedy, Seller may retain the Deposit.
If Purchaser terminates the Sale Contract because Seller has defaulted under the
Sale Contract, Seller must return to Purchaser the entire Deposit paid by
Purchaser.
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<PAGE> 70
If the Sale Contract is terminated because the Beneficiaries did not
approve the sale or, at the option of Seller, upon notice from Seller as a
result of not having held the Meeting by prior to the second business day before
the Closing Date or the determination of Seller's Board or a committee thereof
that the Company has a fiduciary duty to accept, approve or recommend an
alternative proposal, then in addition to the return of the Deposit, Seller
shall reimburse Purchaser for certain fees and expenses up to a maximum of $3.0
million (the "Expense Reimbursement"). If the Sale Contract is terminated after
an extension of the Closing Date beyond February 28, 2001, the maximum Expense
Reimbursement will be $3.5 million. In addition, if the Sale Contract is
terminated because of the determination of Seller's Board or a committee thereof
that the Company has a fiduciary duty to accept, approve or recommend an
alternative proposal, Seller is obligated to reimburse Purchaser for up to an
additional $2 million of fees and expenses paid to or payable to Purchaser's
equity investors.
If the Sale Contract is terminated as a result of Seller's failure to clear
title exceptions, Purchaser's election to terminate the Sale Contract upon
Seller's extension of the Closing Date beyond December 29, 2000 or Purchaser's
election to terminate as a result of Seller's failure to hold a vote of the
Beneficiaries to approve the Sale Contract by February 28, 2001, Seller shall
reimburse Purchaser for one-half of certain fees and expenses up to a maximum of
one-half of the applicable maximum Expense Reimbursement. Alternatively, if
Seller obtains Beneficiary consent to the Asset Sale and Seller defaults under
the Sale Contract, then, in lieu of its other remedies, Purchaser may obtain
specific performance of the Sale Contract or prosecute an action for damages in
an amount not to exceed $10 million.
In those circumstances where Seller is obligated to reimburse Purchaser for
certain fees and expenses, none of the reimbursement is to be paid to Messrs.
Friedman or Schonberger, Ms. Zahner or any entity in which any of them has an
interest.
TERMS OF THE VOTING AGREEMENTS
In connection with the Sale Contract, each of Gotham and Apollo, in its
capacity as a shareholder, has signed a Voting Agreement to vote all of its
Shares held as of the Record Date, which Shares, in the aggregate, represent
approximately 21.52% of the Company's Shares, to consent to the Asset Sale.
Gotham and Apollo each agreed to vote all of their respective Shares (i) to
consent to the Asset Sale, (ii) against any action that would result in a breach
of the Sale Contract or its Voting Agreement and (iii) against any sale of the
Properties to any party other than Purchaser. Additionally, each of Gotham and
Apollo agreed to appoint Purchaser as its proxy to vote all of its Shares with
respect to the sale of the Properties at any meeting of the Beneficiaries called
to consider the Asset Sale. Each Voting Agreement will terminate upon the
termination of the Sale Contract in accordance with its terms or upon certain
amendments, modifications or waivers of the Sale Contract.
In addition, Magten, which beneficially owns 8.14% of the Shares, has
agreed to vote those Shares with respect to which it has voting control to
consent to the Asset Sale, subject to certain conditions. The agreement of
Magten will terminate upon termination of either of the Voting Agreements.
The above summary of each Voting Agreement does not purport to be complete
and is subject to the provisions of each of the Voting Agreements, which are
attached as exhibits to the Company's Current Report on Form 8-K, filed with the
Commission on September 27, 2000 and which are incorporated herein by reference.
ACCOUNTING TREATMENT OF THE ASSET SALE
The Asset Sale will be reflected on the Company's financial statements as a
sale of the assets with a net gain of approximately $28 million recognized for
the difference between the total proceeds under the Sale Contract and the book
value of the net assets sold.
64
<PAGE> 71
FEDERAL INCOME TAX CONSEQUENCES OF THE ASSET SALE
The following is a summary of the material federal income tax consequences
of the Asset Sale. The summary is not intended to be tax advice to any person,
nor is it binding upon the Internal Revenue Service. In addition, no information
is provided herein with respect to the tax consequences of the Asset Sale under
applicable state, local, or foreign tax laws.
The Company will recognize gain or loss on the Asset Sale equal to the
difference between the amount realized by the Company from the Asset Sale and
the Company's adjusted tax basis in the assets sold. The amount realized by the
Company on the Asset Sale will equal the sum of the money received by the
Company, plus the amount of the liabilities assumed by Purchaser, plus the
amount of any liabilities to which the sold assets are subject. The Company will
be subject to federal income taxation on any gain it recognizes on the Asset
Sale unless the Company distributes to its Beneficiaries an amount equal to the
amount of the gain or chooses to apply ordinary tax losses available against the
gain. At this time, the Company anticipates recognizing a gain of approximately
$12 million on the Asset Sale.
With respect to any gain the Company recognizes on the Asset Sale, the
Company may make, as a capital gain distribution, a distribution necessary to
satisfy in whole or in part certain REIT distribution requirements resulting
from the Asset Sale. In addition, the Company may choose to apply ordinary tax
losses available against all or part of the gain. If the Company makes a capital
gain distribution, the Company generally will not be taxed on the gain, but
instead the Beneficiaries will recognize a long-term capital gain in the amount
of that distribution. For individuals, long-term capital gains are taxed at
rates lower than ordinary income, generally at 20% or 25% depending on the
nature of the capital gain.
The Company believes that it will have sufficient available cash to make a
capital gain distribution equal to any gain it recognizes on the Asset Sale in
the event it chooses to do so. If the Company fails to make a required capital
gain distribution, then the following tax results will occur. The Company will
be taxed on the undistributed capital gain to the extent that the undistributed
gain exceeds available ordinary tax losses. Pursuant to an election the Company
anticipates it would make in such event, the Beneficiaries: (i) would recognize
a long-term capital gain in the amount of the Company's undistributed capital
gain; (ii) would be given a tax credit equal to the tax paid by the Company on
the undistributed capital gain (which credit generally should eliminate any tax
on the gain referred to in clause (i) and, in the case of the Beneficiaries who
are individuals, result in an excess credit that either can be used to shelter
capital gains from other sources or can result in a tax refund), and (iii) would
increase their basis in the Shares by the excess of the amount of capital gain
referred to in clause (i) over the amount of the tax credit referred to in
clause (ii).
The Company urges each of the Beneficiaries to consult its tax advisor
regarding the specific tax consequences to the Beneficiary of a capital gain
distribution by the Company or, as discussed in the immediately preceding
paragraph, if the Company recognizes a capital gain on the Asset Sale and does
not make a capital gain distribution.
In the event that the Asset Sale occurs during a tax year with respect to
which the Company does not retain its REIT status, it is anticipated that the
gain on the Asset Sale, to the extent that the undistributed gain exceeds
available ordinary tax losses, will be taxed at the normal federal and state
corporate rates and any distributions associated with the Asset Sale that the
shareholders receive will be taxed as normal dividend income.
GOVERNMENT AND REGULATORY APPROVALS
To the Company's knowledge, consummation of the Asset Sale does not require
any regulatory approvals other than receipt of appropriate federal antitrust
clearances deemed necessary by the parties to the Sale Contract and the federal
filings required under applicable United States securities laws in connection
with this Proxy Statement.
65
<PAGE> 72
NO DISSENTERS' RIGHTS
Under Ohio law, the Beneficiaries do not have dissenters' rights to receive
payment for their Shares as a result of the Asset Sale.
REQUIRED VOTE FOR PROPOSAL
In accordance with the provisions of Article X of the Declaration of Trust,
the affirmative vote of a majority of the outstanding Shares as of the Record
Date is required to consent to the Asset Sale.
RECOMMENDATION OF THE BOARD OF TRUSTEES
THE BOARD OF TRUSTEES HAS UNANIMOUSLY RECOMMENDED A VOTE FOR THE ASSET
SALE.
66
<PAGE> 73
PRO FORMA FINANCIAL DATA OF FIRST UNION
REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS
The Pro Forma Combined Balance Sheet of the Company as of September 30,
2000, reflects two adjustment columns: the proposed Asset Sale to Purchaser and
the sale of the Huntington Garage property. The Pro Forma Combined Statement of
Operations for the year ended December 31, 1999 reflects six adjustment columns:
the properties sold by the Company prior to December 31, 1999, the sale of the
Crossroads Center property in April 2000, the spinoff of Impark in March 2000,
the sale of Temple Mall in August 2000, the proposed Asset Sale to Purchaser and
the sale of the Huntington Garage property. The Pro Forma Combined Statement of
Operations for the nine months ended September 30, 2000, reflects five
adjustment columns: the spinoff of Impark, the sale of the Crossroads Center
property, the sale of Temple Mall, the proposed Asset Sale to Purchaser and the
sale of the Huntington Garage property.
The Pro Forma Combined Balance Sheet of the Company assumes the proposed
Asset Sale to Purchaser and the sale of the Huntington Garage property occurred
on September 30, 2000, and the Pro Forma Combined Statements of Operations
assume that all transactions occurred at the beginning of the periods presented.
The Pro Forma Combined Statement of Operations for the twelve months ended
December 31, 1999 and for the nine months ended September 30, 2000 are not
necessarily indicative of the actual results that would have occurred had the
pro forma transactions been consummated on the first day of the respective
periods or of future operations of the Company. The Pro Forma financial
statements do not take into consideration the increase in the Company's
liquidity or possible uses of those funds.
The Pro Forma Combined Balance Sheet and Pro Forma Combined Statements of
Operations should be read in conjunction with the Notes to Pro Forma Combined
Financial Statements.
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<PAGE> 74
FIRST UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS
PRO FORMA COMBINED BALANCE SHEET SEPTEMBER 30, 2000
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
------------------------------------
SALE OF
SALE OF PROPERTIES
HUNTINGTON TO
HISTORICAL GARAGE PURCHASER PRO FORMA
---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
ASSETS
Investments in real estate
Land...................................................... $ 47,292 $(1,600) $ (39,607) $ 6,085
Buildings and improvements................................ 249,583 (6,602) (179,383) 63,598
--------- ------- --------- ---------
296,375 (8,202) (218,990) 69,683
Less -- Accumulated depreciation.......................... (69,172) 3,457 57,997 (7,718)
--------- ------- --------- ---------
Total investments in real estate...................... 227,703 (4,745) (160,993) 61,965(3)
Mortgage loans and notes receivable......................... 1,483 (1,483)
Other assets
Cash and cash equivalents-- unrestricted.................. 21,441 13,004(1) 61,825(2) 96,270
-- restricted..................... 4,512 (2,154) 2,358(4)
Accounts receivable and prepayments, net of allowances.... 3,550 (20) (23) 3,507
Investments............................................... 209,914 209,914
Inventory................................................. 5,438 5,438
Unamortized debt issue costs.............................. 1,844 (94) (1,329) 421
Other..................................................... 1,006 (641) 365
--------- ------- --------- ---------
Total assets.......................................... $ 476,891 $ 8,145 $(104,798) $ 380,238
========= ======= ========= =========
LIABILITIES AND SHAREHOLDER'S EQUITY
Liabilities
Mortgage loans............................................ $ 166,764 $(7,692)(1) $(116,669)(2) $ 42,403
Notes payable............................................. 150,113 150,113
Senior notes.............................................. 12,538 12,538
Accounts payable and accrued liabilities.................. 13,243 3,042(2) 16,285
Deferred items............................................ 3,040 (3,040)
--------- ------- --------- ---------
Total liabilities..................................... 345,698 (7,692) (116,667) 221,339
--------- ------- --------- ---------
Shareholders' equity
Preferred shares of beneficial interest................... 23,171 23,171
Shares of beneficial interest............................. 41,046 41,046
Additional paid in capital................................ 216,269 216,269
Undistributed loss from operations........................ (149,299) 15,837 11,869 (121,587)
--------- ------- --------- ---------
Total shareholders' equity............................ 131,193 15,837 11,869 158,899
--------- ------- --------- ---------
Total liabilities and shareholders' equity............ $ 476,891 $ 8,145 $(104,798) $ 380,238
========= ======= ========= =========
</TABLE>
---------------
(1)Projected to receive approximately $13 million from the sale, after
assumption of debt of approximately $7.7 million (at September 30, 2000), and
expenses related to the sale.
(2)Projected to receive approximately $61.8 million from the sale, after
assumption of debt of approximately $116.7 million (at September 30, 2000),
expenses related to the sale, other adjustments and approximately $2.3
million of cash expected to be transferred to Radiant for the Richmond Garage
construction. Approximately $3.3 million of additional capital expenditures
required to be paid by First Union are included in accounts payable and
accrued liabilities.
(3)The balance consists primarily of investments in real estate at Circle Tower
of approximately $2.2 million and Park Plaza of approximately $59.8 million.
(4)The balance of restricted cash consists of a severance escrow of
approximately $1.2 million and Park Plaza escrow balances of approximately
$1.2 million.
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<PAGE> 75
FIRST UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS
PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
---------------------------------------------------------
PROPERTIES SOLD SALE OF
PRIOR TO CROSSROADS SPINOFF OF TEMPLE MALL
HISTORICAL DECEMBER 31, 1999 (1) IMPARK SALE (2)
---------- ----------------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Revenues
Rents................................. $109,839 $(53,647) $(11,378)
Sales................................. 6,643
Interest -- Mortgage loans............ 463
-- Short-term investments.... 2,649 (567) (7) $(1,950)
Equity in income from joint venture... 64 $(64)
Management fees....................... 332
Other Income.......................... 784
-------- -------- -------- ------- ----
120,774 (54,214) (11,385) (1,950) (64)
-------- -------- -------- ------- ----
Expenses
Property operating.................... 36,224 (21,342) (1,844)
Cost of goods sold.................... 8,670
Real estate taxes..................... 9,937 (3,709) (1,987)
Depreciation and amortization......... 25,331 (11,283) (1,691)
Interest -- Mortgage loans............ 28,264 (11,221) (4,327)
-- Notes payable............. 4,232 (4,193)
-- Senior notes.............. 1,113
-- Bank loans and other...... 4,833 (3,253)
General and administrative............ 14,664
Unrealized loss on carrying value of
assets identified for disposition
and impaired assets................. 9,800
-------- -------- -------- ------- ----
143,068 (55,001) (9,849) -- --
-------- -------- -------- ------- ----
Loss before capital gain, extraordinary
loss, discontinued operations and
preferred dividend.................... $(22,294) $ 787 $ (1,536) $(1,950) $(64)
======== ======== ======== ======= ====
Per share data
Basic weighted average shares........... 38,827
========
Diluted weighted average shares......... 38,836
========
Loss before capital gain, extraordinary
loss, discontinued operations and
preferred dividend, basic and
diluted............................... $ (0.57)
========
<CAPTION>
PRO FORMA ADJUSTMENTS
-----------------------
SALE OF
PROPOSED PROPERTIES
HUNTINGTON TO
SALE PURCHASER PRO FORMA
---------- ---------- ---------
<S> <C> <C> <C>
Revenues
Rents................................. $(2,231) $(29,812) $ 12,771
Sales................................. 6,643
Interest -- Mortgage loans............ 463
-- Short-term investments.... (87) 38
Equity in income from joint venture... --
Management fees....................... 332
Other Income.......................... 784
------- -------- --------
(2,231) (29,899) 21,031
------- -------- --------
Expenses
Property operating.................... (78) (8,574) 4,386
Cost of goods sold.................... 8,670
Real estate taxes..................... (356) (3,068) 817
Depreciation and amortization......... (242) (7,742) 4,373
Interest -- Mortgage loans............ (690) (9,074) 2,952
-- Notes payable............. 39
-- Senior notes.............. 1,113
-- Bank loans and other...... 1,580
General and administrative............ 14,664
Unrealized loss on carrying value of
assets identified for disposition
and impaired assets................. 9,800
------- -------- --------
(1,366) (28,458) 48,394
------- -------- --------
Loss before capital gain, extraordinary
loss, discontinued operations and
preferred dividend.................... $ (865) $ (1,441) $(27,363)
======= ======== ========
Per share data
Basic weighted average shares........... 38,827
========
Diluted weighted average shares......... 38,836
========
Loss before capital gain, extraordinary
loss, discontinued operations and
preferred dividend, basic and
diluted............................... $ (0.70)
========
</TABLE>
---------------
(1) Crossroads was sold in April 2000.
(2) Temple Mall was sold in August 2000.
69
<PAGE> 76
FIRST UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS
PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
------------------------------------------------------------------
SALE OF
SALE OF SALE OF SALE OF PROPERTIES
SPINOFF OF CROSSROADS TEMPLE MALL HUNTINGTON TO
HISTORICAL IMPARK (1) SALE (2) GARAGE PURCHASER PRO FORMA
---------- ---------- ---------- ----------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues
Rents....................... $37,195 $(3,170) $(1,785) $(22,677) $ 9,563
Sales....................... 6,642 6,642
Interest -- Mortgage loans.. 193 $(42) (114) 57
-- Short-term
investments...... 7,654 $(490) (4) (156) 7,004
Dividends................... 450 450
Equity in loss from joint
venture................... (148) 148
Other Income................ 179 (6) 173
------- ----- ------- ---- ------- -------- -------
52,165 (490) (3,180) 106 (1,785) (22,947) 23,869
------- ----- ------- ---- ------- -------- -------
Expenses
Property operating.......... 10,306 (655) (27) (6,389) 3,235
Cost of goods sold.......... 6,410 6,410
Real estate taxes........... 4,324 (707) (267) (2,711) 639
Depreciation and
amortization.............. 9,170 (730) (201) (6,687) 1,552
Interest -- Mortgage loans.. 13,330 (2,571) (501) (8,602) 1,656
-- Notes payable... 4,922 (47) (1) 4,874
-- Senior notes.... 835 835
General and administrative.. 10,059 10,059
------- ----- ------- ---- ------- -------- -------
59,356 (4,663) (1,043) (24,390) 29,260
------- ----- ------- ---- ------- -------- -------
Loss before capital gains,
extraordinary loss and
preferred dividend.......... $(7,191) $(490) $ 1,483 $106 $ (742) $ 1,443 $(5,391)
======= ===== ======= ==== ======= ======== =======
Per share data
Basic weighted average
shares...................... 42,229 42,229
======= =======
Diluted weighed average
shares...................... 48,258 48,258
======= =======
Loss before capital gains,
extraordinary loss and
preferred dividend, basic
and diluted................. $ (0.17) $ (0.13)
======= =======
</TABLE>
---------------
(1)Crossroads was sold in April 2000.
(2)Temple Mall was sold in August 2000.
70
<PAGE> 77
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS
DISTRIBUTION OF IMPARK
In March 2000, the Company distributed all common stock of Impark to its
shareholders. One share of Impark common stock was distributed for every 20 of
the Company common shares of beneficial interest held on March 20, 2000.
Approximately 2.1 million shares of Impark common stock were distributed. As
part of the spin-off, the Company repaid Impark's bank credit facility of
approximately $24.2 million, contributed approximately $7.5 million of cash,
contributed its 14 Canadian parking properties and $6.7 million for a parking
development located in San Francisco, California.
SALE OF CROSSROADS SHOPPING CENTER
In April 2000, the Company sold Crossroads Shopping Center for $80.1
million, of which approximately $78.1 million was applied against a loan payable
to the purchaser, the assumption of the first mortgage debt on the property and
other liabilities. The Company recognized a gain on the sale of approximately
$59 million, less an extraordinary loss on extinguishment of debt of
approximately $2.4 million.
SALE OF TEMPLE MALL
In August 2000, the Company received approximately $2.4 million
representing its 50% non-controlling ownership interest in the net proceeds from
the sale of Temple Mall. The Company accounted for its interest in Temple Mall
as an investment in a joint venture using the equity method of accounting. The
Company recognized a gain from the investment in a joint venture of
approximately $.8 million. Temple Mall was sold for approximately $25.7 million,
of which approximately $19.5 million was applied against the first mortgage debt
on the mall. In addition, the joint venture repaid its $1.2 million note payable
to the Company from cash reserves.
CONTRACT FOR SALE OF PROPERTIES
In September 2000, the Company signed two sales contracts for a significant
asset sale to Purchaser. The proposed transactions contemplate the sale of
certain real estate assets (the "Purchased Assets") for a sales price of
approximately $205 million (which includes approximately $125 million in assumed
mortgage debt at September 30, 2000) and subject to certain adjustments
including the Company's share of certain transaction costs.
The Purchased Assets include:
- 55 Public Square and CEI Office Buildings -- Cleveland, Ohio
- 55 Public Square Garage -- Cleveland, Ohio
- West Third Street Parking Lot -- Cleveland, Ohio
- North Valley Tech Center -- Thornton, Colorado
- Two Rivers Business Center -- Clarksville, Tennessee
- Westgate Shopping Center -- Abilene, Texas
- Pecanland Mall -- Monroe, Louisiana
- Huntington Garage -- Cleveland, Ohio
- Long Street Garage -- Columbus, Ohio
- Madison and Wells Garage -- Chicago, Illinois
- Printers Alley Garage -- Nashville, Tennessee
- 5th and Marshall Garage -- Richmond, Virginia
- Club Associates' note receivable, face amount of approximately $1.5
million.
- Ancillary assets including Furniture, Fixtures, and Equipment, and
reserve and escrow accounts of the purchased assets.
- Net operating income from all of the Purchased Assets from June 1, 2000
less (a) debt service on the Purchased Assets, (b) capital expenditures
committed subsequent to May 9, 2000 and
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(c) 66.6% of asset management fees paid to Partners from June 1, 2000
until the closing of the transaction
The Company would retain ownership of the following assets:
- Unrestricted cash and Treasury bills
- Convertible preferred investment in HQ Global Workplaces
- Severance and prior trustees escrow account
- Park Plaza Mall -- Little Rock, Arkansas
- Circle Tower -- Indianapolis, Indiana
- Peach Tree Mall legal claim
In addition, the Company would retain ownership of VenTek.
The Company will remain liable for the following obligations:
- 8.2% convertible preferred shares
- 8.875% Publicly-traded senior notes
- Dallas management office lease (the Company has sub-leased this space)
- Certain liabilities relating to the Purchased Assets arising prior to
June 1, 2000, except for certain potential liabilities of the Westgate
Shopping Center
- Corporate expenses and liabilities not related to the Purchased Assets
- Property level mortgage debt on retained assets
- Other ordinary course liabilities
Partners would continue to manage the Company's remaining assets for
$250,000 per year for two years.
The sales contracts are subject to several conditions, including the
consent of shareholders of the Company. The closing, if it occurs, is expected
to occur during the fourth quarter of 2000, although it may be extended under
certain circumstances to a date not later than April 29, 2001.
In October 2000, the Trust signed a definitive purchase agreement for the
sale of the Huntington Garage property in Cleveland, Ohio to Northeastern
Security, a private real estate investment firm headquartered in New York. The
purchase price is $21,250,000 and the purchaser has made a non-refundable
deposit of $1,000,000 to be applied to the purchase price at closing. The sale
is expected to close no later than January 2001.
This property is among those that Purchaser agreed to acquire from the
Trust under the Sale Contract. Under the Sale Contract Purchaser and the Trust
had agreed that the Trust was permitted to sell the Huntington Garage property
to a third party.
The Sale Contract as amended provides that Purchaser will receive a credit
towards the $205 million purchase price equal to the net sales price realized by
the Trust from the sale of the Huntington Garage.
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SELECTED COMBINED FINANCIAL DATA OF FIRST UNION REAL ESTATE EQUITY AND
MORTGAGE INVESTMENTS
Set forth below is selected combined financial data of the Company for the
nine months ended September 30, 2000 and 1999 and for the years ended December
31, 1999, 1998, 1997, 1996 and 1995. The selected combined financial data for
the nine-month periods has been derived from, and should be read in conjunction
with, the unaudited combined financial statements, accompanying notes and the
management's discussion and analysis section included in the Company's quarterly
reports on Form 10-Q for the periods ended September 30, 2000 and 1999. The
selected combined financial data for the twelve-month periods has been derived
from, and should be read in conjunction with, the audited combined financial
statements, accompanying notes and management's discussion and analysis section
included in the Company's Annual Reports on Form 10-K for the years ended
December 31, 1999, 1998, 1997, 1996 and 1995.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
------------------- ----------------------------------------------------
2000 1999 1999 1998(1) 1997(1) 1996(1) 1995(1)
-------- -------- -------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING RESULTS
Revenues (2).................................... $ 52,165 $ 91,448 $120,774 $148,062 $110,539 $ 81,867 $ 79,205
Interest expense (2)............................ 19,087 30,439 38,442 48,197 27,748 23,426 22,397
Depreciation and amortization (2) (3)........... 9,170 19,401 25,331 27,603 18,787 15,890 14,276
Income (loss) before unrealized loss on carrying
value of assets identified for disposition and
impaired assets, capital gains, net,
extraordinary loss, cumulative effect of
accounting changes, loss from discontinued
operations and preferred dividend (2) (4) (5)
(6) (7)....................................... (7,191) (7,679) (12,494) (27,769) 7,278 1,681 881
Unrealized loss on carrying value of assets
identified for disposition and impaired assets
(6)........................................... -- (9,002) (9,800) (36,000) -- -- (14,000)
Capital gains, net.............................. 59,913 27,907 28,334 10,346 1,468 -- 31,577
Extraordinary loss from early extinguishment of
debt (7)...................................... (5,459) -- (5,508) (2,399) (226) (286) (910)
Cumulative effect of change in accounting for
internal lease costs (3)...................... -- -- -- -- -- -- (4,325)
Loss from discontinued operations (4)........... -- (1,763) (6,836) (27,696) (2,844) -- --
Net income (loss) before preferred dividend..... 47,263 9,463 (6,304) (83,518) 5,676 1,395 13,223
Preferred dividend.............................. (1,933) (2,124) (2,833) (2,999) (4,831) (845) --
Net income (loss) applicable to shares of
beneficial interest........................... 45,330 7,339 (9,137) (86,517) 845 550 13,223
Net income (loss) applicable to shares of
beneficial interest, basic.................... $ 1.09 $ 0.21 $ (0.24) $ (2.81) $ 0.03 $ 0.03 $ 0.73
Net income (loss) applicable to shares of
beneficial interest, diluted.................. $ 0.98 $ 0.21 $ (0.24) $ (2.81) $ 0.03 $ 0.03 $ 0.73
Basic weighted average shares................... 42,229 35,520 38,827 30,772 24,537 17,172 18,059
Stock options, treasury method................ -- -- -- 243 571 367 --
Restricted shares, treasury method............ -- -- 9 -- 307 167 58
Conversion of preferred shares................ 6,029 4,465 -- -- -- -- --
Diluted weighted average shares............... 48,258 39,985 38,836 31,015 25,415 17,705 18,117
FINANCIAL POSITION AT END OF PERIOD
Gross investment in real estate assets........ $296,875 $517,206 $324,251 $798,230 $746,867 $458,963 $449,080
Total assets.................................. 476,891 605,002 502,792 786,684 790,226 413,054 376,144
Debt (8)...................................... 329,415 339,488 283,217 553,576 458,637 254,868 258,454
Shareholders' equity.......................... 131,193 197,407 169,710 150,696 235,310 124,957 77,500
OTHER DATA
Net cash provided by (used for)
Operations.................................... $ 4,588 $ 13,310 $ 9,409 $ 5,919 $ 15,940 $ 11,085 $ 12,989
Investing..................................... (103,779) 151,750 112,089 (52,429) (112,233) (47,002) (28,345)
Financing..................................... 69,717 (132,338) (109,128) 72,781 110,124 35,466 15,783
Property net operating income (9)............... 22,797 48,411 61,651 77,049 53,055 47,349 44,086
EBIDA (9)....................................... 19,133 40,037 48,446 45,032 48,982 40,152 37,554
Funds from (used in) operations after preferred
dividends (9)................................. (617) 4,214 7,894 (13,784) 21,150 16,010 14,291
Preferred dividends declared.................... 1,933 2,124 2,833 2,999 4,831 845 --
Dividends declared.............................. 6,583 6,583 13,166 3,478 11,651 7,684 7,542
Dividends declared per share.................... $ 0.16 $ 0.16 $ 0.31 $ 0.11 $ 0.44 $ 0.44 $ 0.41
</TABLE>
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---------------
(1) As a result of First Union's review of lives assigned to real estate assets
for calculation of depreciation expense during the fourth quarter of 1998,
reduced asset lives have been assigned effective January 1, 1998.
Consequently, First Union has restated its Combined Financial Statements for
the years ended December 31, 1995 through 1998.
(2) In September 1997, First Union acquired the interests of its joint venture
partners in eight shopping malls and 50% of another mall. In 1999, First
Union sold 27 properties. In 2000, First Union sold one shopping mall and a
50% interest in another mall.
(3) In December 1995, First Union changed its method to directly expense
internal leasing costs and recorded a $4.3 million noncash charge for the
cumulative effect of the accounting change as of the beginning of 1995.
(4) The results of Impark have been classified as discontinued operations for
1997, 1998, 1999 and 2000. Impark was spun off to the shareholders of the
Trust in March 2000. In 1998, Impark recognized a $15 million reduction of
goodwill.
(5) In 1998, the loss before unrealized loss on carrying value of assets
identified for disposition and impaired assets, capital gains, net,
extraordinary loss, cumulative effect of accounting change and loss from
discontinued operations and preferred dividend included expenses of $17.6
million related to the proxy contest and the resulting change in the
composition of the Trust's Board of Trustees. In 1995, income before
unrealized loss on carrying value of assets identified for disposition and
impaired assets, capital gains, net, extraordinary loss, cumulative effect
of accounting change and loss from discontinued operations and preferred
dividend included $1.6 million of litigation and proxy expenses.
(6) For the nine months ended September 30, 1999, the Trust recognized $9
million in losses on the carrying value of assets identified for disposition
and impaired assets. For the years ended December 31, 1999, 1998 and 1995,
the Trust recognized a $9.8 million, $36 million and $14 million loss on the
carrying value of assets identified for disposition and impaired assets.
(7) In 2000, the Trust repaid a $10.6 million deferred obligation resulting in a
prepayment penalty of $3.1 million and they also recognized an extraordinary
loss on the early extinguishment of debt of $2.4 million in connection with
the sale of Crossroads Mall. In 1999, the Trust repaid $46 million in
mortgage debt resulting in a prepayment penalty of $5.5 million. In 1998,
the Trust repaid approximately $87.5 million of its 8 7/8% Senior Notes
resulting in $1.6 million in unamortized issue costs and solicitation fees
being expensed. Also, in the fourth quarter of 1998, the Trust renegotiated
its bank agreement and $90 million note payable resulting in $.8 million of
deferred costs being expensed. In 1997 and 1996, the Trust renegotiated its
bank credit agreements, resulting in a $226,000 and $286,000 charge,
respectively, related to the write-off of unamortized costs. In November
1995, the Trust repaid approximately $36 million of mortgage debt resulting
in a $910,000 charge for the write-off of unamortized costs and prepayment
premiums.
(8) Included in debt are senior notes, notes payable, bank loans and mortgage
loans.
(9) In addition to net income, First Union believes that three additional
measures of operating performance -- property net operating income, EBIDA
(as defined below) and funds from operations -- are helpful in understanding
First Union's financial performance. Property net operating income (as
defined below) measures the performance of First Union's real estate assets
and is often used by investors and others in valuing real estate assets.
EBIDA is used by lenders and others as an indication of an entity's ability
to incur and service debt, to make capital expenditures and to fund other
cash needs. Funds from operations (as defined below) is widely used by
industry analysts as the appropriate measure of the performance of an equity
REIT and provides a relevant basis for comparison among REITs. None of
property net operating income, EBIDA or funds from operations (1) represent
net income or cash flow from operations as defined by generally accepted
accounting principles, (2) should be considered as an alternative to net
income as a measure of operating performance or cash flows from operating,
investing and financing activities, or (3) should be considered as an
alternative to cash flows as a measure of liquidity. First Union's
calculations of property net operating income, EBIDA and funds from
operations may not be comparable to similarly titled measures of other
REITs. In addition, all of these measures of operating performance exclude
depreciation and amortization expenses and property net operating income and
EBIDA also exclude interest expense. These excluded items are significant
components in understanding and assessing First Union's financial
performance.
Property net operating income is defined as rents and sales, less
property operating expenses, cost of goods sold and real estate taxes.
This supplemental measure is determined before debt service and
depreciation and amortization expense.
EBIDA is calculated by starting with the line that appears on the income
statement for income (loss) before capital gains or loss, extraordinary
loss, cumulative effect of accounting change, loss from discontinued
operations and preferred dividend. Interest expense and the noncash
charges for depreciation and amortization are added back and preferred
dividend is deducted. For the nine months ended September 30, 1999 and
the years ended December 31, 1999, 1998 and 1995, EBIDA is calculated
before the $9 million, $9.8 million, $36 million and $14 million
unrealized loss on the carrying value of assets identified for
disposition and impaired assets, respectively.
Funds from operations is a multi-step calculation:
Income (loss) before capital gain or loss, extraordinary loss and
cumulative effect of accounting changes, plus
Noncash charges for depreciation and amortization of First Union and the
joint venture interest, plus
Amortization allocated to the minority interest and depreciation and
amortization of debt issuance costs and other corporate assets, less
Preferred dividend.
Funds from operations is calculated before the unrealized loss on the
carrying value of assets identified for disposition and impaired assets.
First Union adopted this definition of funds from operations in 1997 as
recommended by the National Association of Real Estate Investment Trusts
(NAREIT), which does not add back depreciation and amortization of debt
issuance costs and other corporate assets. Previously, First Union added
back all depreciation and amortization. Accordingly, funds from
operations and dividend payout as a percentage of funds from operations
for the years 1995 through 1996 have been restated to conform to the
NAREIT definition.
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PROPOSAL THREE: AMENDMENTS TO THE COMPANY'S
DECLARATION OF TRUST
The Board of Trustees has determined that, effective upon consummation of
the Asset Sale, certain changes to the Declaration of Trust would be appropriate
to enable the Board of Trustees to take certain actions without having to obtain
shareholder approval. Accordingly, the Amendments to Sections 12.2 and 2.8 of
the Declaration of Trust are proposed for shareholder approval.
In the event that Proposal Two is approved, the Amendments proposed in
Proposal Three, if also approved, would take effect upon consummation of the
Asset Sale. In the event that Proposal Two is not approved or the Asset Sale
does not occur, the Amendments to the Declaration of Trust proposed in Proposal
Three would not become effective, whether or not they were approved. The Company
intends to consummate the Asset Sale upon the approval of Proposal Two, whether
or not Proposal Three is approved.
The following information describes, (i) the existing provisions of the
Declaration of Trust covered by the Proposal, and (ii) the effects of the
Amendments.
REQUIREMENT OF SHAREHOLDER APPROVAL FOR SALE OF TRUST PROPERTY
Under Section 12.2 of the Declaration of Trust as currently in effect, no
sale, exchange or other disposition of more than 50% of the Trust's property, or
the sale of the whole or any part of the Trust's property for any shares, bonds
or other securities or obligations of the purchaser as a step in proceedings
that would result in the merger, consolidation, dissolution or termination of
the Trust, shall be made without the consent of the Board and the shareholders
in the manner therein specified. The Asset Sale is being proposed for approval
by shareholders pursuant to the aforementioned provisions of Section 12.2 of the
Declaration of Trust.
The Board of Trustees believes that the foregoing requirement, and any
requirement of shareholder approval with respect to the sale of all or part of
the property of the Trust, will be unduly burdensome on the Trust due to the
relatively small amount of real estate properties anticipated to be held by the
Trust subsequent to consummation of the Asset Sale. The Board of Trustees
believes that, subsequent to the Asset Sale, the Board may determine to dispose
of property of the Trust, in whole or in part, including properties acquired
subsequent to the Asset Sale, without the necessity of obtaining shareholder
approval.
Accordingly, the Board of Trustees has recommended that Section 12.2 of the
Declaration of Trust be amended to eliminate the requirement of shareholder
approval with respect to the sale or disposition of the property of the Company,
as opposed to the current requirement of shareholder approval for the sale or
disposition of 50% or more of the property of the Trust.
Section 12.2 of the Declaration of Trust, as proposed to be amended, would
allow the Trustees, effective subsequent to the Asset Sale, to sell, exchange,
transfer or otherwise dispose of any or all property of the Trust in one or more
transactions, which may or may not be related. Disposition of any property will
be approved by the Trustees applying their business judgment to determine
whether the sale is in the best interest of the Trust and the shareholders. The
Trustees have not established guidelines or criteria to make such
determinations.
Section 12.2 of the Declaration of Trust, as proposed to be amended and
restated, is attached hereto as Appendix E.
TRANSFER OF TRUST PROPERTY TO NON-REIT
Under Section 2.8 of the Declaration of Trust as currently in effect, the
Trustees are required to receive shareholder approval with respect to a transfer
of the Trust property or any part or parts thereof to another business entity in
exchange for the shares of that entity. In addition, no transfer of substan-
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tially all of the Trust property is permitted to be made to any business entity
other than a REIT or an entity receiving similar tax treatment to a REIT.
The Trustees believe that, subsequent to the Asset Sale, these requirements
of shareholder approval and the prohibition against transfer of property to a
non-REIT will be unduly restrictive to the Trust. Consistent with the amendments
to Section 11.19 and Section 12.2, the Board of Trustees has determined to
propose that the Declaration of Trust be amended to allow the Trustees,
subsequent to the Asset Sale, to transfer all or any part of the Trust property
to another entity without obtaining shareholder approval. In addition, the
entity to which the property is transferred would not be required to be a REIT
or receive equivalent tax treatment.
Section 2.8 of the Declaration of Trust, as proposed to be amended and
restated, is attached hereto as Appendix E.
POSSIBLE DETRIMENTS OF PROPOSAL
Subsequent to the Asset Sale, the Board of Trustees may determine that it
is in the best interest of the Trust to dispose of part or all of the remaining
properties of the Trust. These or other actions may be deemed to be actions
which cause the Trust to fail to qualify as a REIT for federal income tax
purposes. In the event that the Company was no longer a REIT, among other
consequences, the Company would no longer be required to distribute to its
shareholders, as dividends, 90% of its taxable income.
In addition, pursuant to the Amendments, the Board of Trustees may
determine to sell, exchange, transfer or otherwise dispose of any or all
property of the Trust in one or more transactions, which may or may not be
related, without the consent of the shareholders. This authority would extend to
the sale, exchange, transfer or disposition of properties of the Trust acquired
subsequent to the Asset Sale.
EFFECTIVENESS OF THE AMENDMENT
In the event that Proposal Two is approved, the Amendments proposed in
Proposal Three, if also approved, would take effect upon consummation of the
Asset Sale. In the event that Proposal Two is not approved or the Asset Sale
does not occur, the Amendments to the Declaration of Trust proposed in Proposal
Three would not become effective, whether or not it was approved. The Company
intends to consummate the Asset Sale upon the approval of Proposal Two, whether
or not Proposal Three is approved.
RECOMMENDATION OF THE BOARD OF TRUSTEES
THE BOARD OF TRUSTEES HAS UNANIMOUSLY RECOMMENDED A VOTE FOR THE ADOPTION
OF THE PROPOSED AMENDMENTS.
SELECTION OF AUDITORS
The Company has selected Arthur Andersen LLP as its independent public
accountants for its fiscal year ending December 31, 2000. Arthur Andersen LLP
has been the Company's auditor since the founding of the Trust in 1961. A
representative of Arthur Andersen LLP is expected to be present at the Meeting
and will have the opportunity to make a statement if he or she so desires and to
respond to appropriate Beneficiary questions.
COST OF PROXIES AND SOLICITATIONS
The Company will bear the cost of preparing and mailing this Proxy
Statement, the accompanying proxy and any other related materials. The Company
has engaged Beacon Hill Partners ("Beacon Hill") to assist in the search for
beneficiaries and distribution of proxies, at a fee of $5,000 plus reimbursement
of its out-of-pocket expenses. The Company will also pay the standard charges
and expenses of brokerage houses, or other nominees or fiduciaries, for
forwarding such materials to, and obtaining the
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proxies from, beneficiaries for whose account they hold registered title to
Shares of the Company. In addition to use of the mail, proxies may be solicited
personally, by telephone or otherwise, by Trustees, officers and regular
employees of the Company without receiving additional compensation, as well as
by employees of Beacon Hill. The Company will pay the expense of such
solicitation.
FORM 10-K ANNUAL REPORT
A COPY OF THE TRUST'S ANNUAL REPORT ON FORM 10-K AS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999,
WILL BE FURNISHED WITHOUT CHARGE TO BENEFICIARIES UPON WRITTEN REQUEST DIRECTED
TO ROSALIE SOUDERS, FIRST UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS,
1212 AVENUE OF THE AMERICAS, 18TH FLOOR, NEW YORK, NEW YORK 10036.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Trust's
Trustees and executive officers, and persons who own beneficially more than 10%
of the Shares of the Trust, to file reports of ownership and changes of
ownership with the Securities and Exchange Commission and the New York Stock
Exchange. Copies of all filed reports are required to be furnished to the Trust
pursuant to Section 16(a). Based solely on the reports received by the Trust and
on written representations from reporting persons, the Trust believes that the
Trustees, executive officers, and greater than 10% beneficial owners complied
with all applicable filing requirements during the fiscal year ended December
31, 1999.
BENEFICIARY PROPOSALS
Any Beneficiary proposals intended to be presented at the 2001 Annual
Meeting of Beneficiaries must be received by the Company for inclusion in the
Company's proxy statement and form of proxy relating to that meeting on or
before [JULY 18, 2001]. In addition, under the Company's By-laws, Beneficiaries
must comply with specified procedures to nominate Trustees or introduce an item
of business at an annual meeting. Nominations or an item of business to be
introduced at an annual meeting must be submitted in writing and received by the
Company generally not less than 120 days in advance of an annual meeting. To be
in proper written form, a shareholder's notice must contain the specific
information required by the Company's By-laws. A copy of the Company's By-laws
which describes the advance notice procedures can be obtained from the Company.
Any such proposals should be sent to the following address: First Union Real
Estate Equity and Mortgage Investments, 125 Park Avenue, New York, New York
10017, Attention: Neil H. Koenig, Interim Chief Financial Officer.
MARKET FOR THE SHARES
The Company's common shares are traded on the New York Stock Exchange (the
"NYSE") under the symbol "FUR." On June 21, 2000, the trading date preceding the
public announcement of the proposed Asset Sale, the high and low sale prices per
share for the Company's Shares, as reported by the NYSE, were $2.8125 and
$2.4375, respectively.
EXPERTS
The Company's balance sheets as of December 31, 1999 and 1998, and the
Company's statements of income and comprehensive income, statements of changes
in cash and statements of shareholders' equity for the years ended December 31,
1999, 1998, and 1997 appearing in the Company's Annual Report on Form 10-K for
the year ended December 31, 1999, have been audited by Arthur Andersen LLP,
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independent public accountants, as indicated in their reports with respect
thereto, and are incorporated herein by reference in reliance upon the authority
of said firm as experts in giving said reports.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange
Act, and in accordance therewith files reports and other information with the
Commission. Reports, proxy material and other information concerning the Company
can be inspected and copied at the offices of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549 or at its regional offices, Citicorp
Center, 500 West Madison Street, Chicago, Illinois 60661-2511 and Seven World
Trade Center, Suite 1300, New York, New York 10048. Copies of such material can
be obtained from the Public Reference Section of the Commission at Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates.
Information regarding the operation of the Public Reference Section of the
Commission may be obtained by calling the Commission at 1 (800) SEC-0330. In
addition, the Commission maintains a Web site on the Internet at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission, including the Company. The Company's outstanding Shares and
outstanding Series A Cumulative Redeemable Preferred Shares of Beneficial
Interest, $1.00 par value per share, are listed on the NYSE under the symbols,
"FUR" and "FURPrA," respectively, and all such reports, proxy material and other
information filed by the Company with the NYSE may be inspected at the offices
of the NYSE at 20 Broad Street, New York, New York 10005.
No person is authorized to give any information or make any representation
about the proposals contained in this Proxy Statement that is different from or
in addition to the information contained in this Proxy Statement or any of the
attached or incorporated documents. The information contained in this document
speaks only as of the date of this document unless the information specifically
indicates that another date applies.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The reports filed by the Company with the Commission (File No. 1-6249)
pursuant to Section 13(a) or 15(d) of the Exchange Act since December 31, 1997,
including, but not limited to, the following reports filed in 2000, are
incorporated by reference into this Proxy Statement:
1. First Union's Annual Report on Form 10-K, as amended, for the fiscal
year ended December 31, 1999;
2. First Union's Quarterly Report on Form 10-Q for the fiscal quarter ended
March 31, 2000;
3. First Union's Quarterly Report on Form 10-Q for the fiscal quarter ended
June 30, 2000;
4. First Union's Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 2000.
5. First Union's Current Report on Form 8-K dated February 16, 2000;
6. First Union's Current Report on Form 8-K dated May 11, 2000;
7. First Union's Current Report on Form 8-K dated June 7, 2000;
8. First Union's Current Report on Form 8-K dated June 30, 2000; and
9. First Union's Current Report on Form 8-K dated September 27, 2000.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Proxy Statement and
prior to the date of the Meeting shall be deemed to be incorporated by reference
into this Proxy Statement and to be a part hereof from the date of the filing of
such documents. Any statement contained in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this
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Proxy Statement to the extent that a statement contained herein, or in any other
subsequently filed document which is or is deemed to be incorporated by
reference herein, modifies or supersedes any such statement. Any such statement
so modified or superseded will not be deemed, except as so modified or
superseded, to constitute a part of this Proxy Statement.
The Company will provide without charge to each person, including any
beneficial owner, to whom this Proxy Statement is delivered, on the oral or
written request of such person, a copy of any of the foregoing documents
incorporated herein by reference (other than the exhibits to such documents
unless such exhibits are specifically incorporated by reference into such
documents). Requests should be directed to First Union Real Estate Equity and
Mortgage Investments, 125 Park Avenue, New York, New York 10017, Attention: Neil
H. Koenig, Interim Chief Financial Officer, telephone (212) 905-1100.
By Order of the Board of Trustees
William A. Ackman
Chairman of the Board of Trustees
FIRST UNION REAL ESTATE EQUITY
AND MORTGAGE INVESTMENTS
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APPENDIX A
CONTRACT OF SALE
AGREEMENT (this "Agreement") made as of this 15th day of September, 2000,
by and among 55 Public LLC ("55 Public"), a Delaware limited liability company,
North Valley Tech, LLC ("North Valley Tech"), a Delaware limited liability
company, Southwest Shopping Centers Co. I, L.L.C ("Southwest Centers"), a
Delaware limited liability company, First Union Madison L.L.C. ("First Union
Madison"), an Illinois limited liability company, Printers Alley Garage, LLC
("Printers Alley"), a Delaware limited liability company, First Union Real
Estate Equity and Mortgage Investments ("FUR"), an Ohio unincorporated
association in the form of a business trust, First Union Commercial Properties
Expansion Company ("FUCP"), a Delaware corporation, each having an address at
551 Fifth Avenue, Suite 1416, New York, New York 10176 (collectively, "Sellers"
and individually, a "Seller") and Radiant Investors LLC, a Delaware limited
liability company, having an address at c/o Radiant Partners LLC, 551 Fifth
Avenue, Suite 1416, New York, New York 10176 ("Purchaser").
W I T N E S S E T H :
WHEREAS, 55 Public is the owner of 55 Public (office building), Cleveland,
Ohio ("55 Public Office Building") and 55 Public (garage), Cleveland, Ohio ("55
Public (Garage)"), as more particularly described in Schedules A-1 and A-2
annexed hereto and made a part hereof; and
WHEREAS, FUR is the owner of CEI Building, Cleveland Ohio ("CEI"), as more
particularly described in Schedule A-3 annexed hereto and made a part hereof;
and
WHEREAS, FUR and FUCP, collectively, are the owners of Westgate Shopping
Center, Abilene, Texas ("Westgate Shopping Center"), as more particularly
described in Schedule A-4 annexed hereto and made a part hereof (sometimes
herein FUR and FUCP are collectively referred to as "First Westgate"); and
WHEREAS, Southwest Centers is the owner of Pecanland Mall, Monroe,
Louisiana ("Pecanland Mall"), as more particularly described on Schedule A-5 and
the land adjacent to Pecanland Mall ("Pecanland Mall Adjacent Land"), as more
particularly described in Schedule A-6 annexed hereto and made a part hereof;
and
WHEREAS, FUR (i) has fee simple title to a portion of and (ii) is the
tenant under that certain ground lease ("Huntington Garage Ground Lease")
covering the remaining portion of the Huntington Garage, Cleveland, Ohio
("Huntington Garage"), as more particularly described in Schedule A-7 annexed
hereto and made a part hereof; and
WHEREAS, First Union Madison is the owner of Madison and Wells Garage,
Chicago, Illinois ("Madison and Wells Garage"), as more particularly described
in Schedule A-8 annexed hereto and made a part hereof; and
WHEREAS, Printers Alley is the owner of Printers Alley Garage, Nashville,
Tennessee ("Printers Alley Garage"), as more particularly described in Schedule
A-9 annexed hereto and made a part hereof; and
WHEREAS, FUR is the owner of 5th and Marshall Garage, Richmond, Virginia
("5th and Marshall Garage"), as more particularly described in Schedule A-10
annexed hereto and made a part hereof; and
WHEREAS, FUR is the owner of West Third Street Parking Lot, Cleveland, Ohio
("West Third Street Lot"), as more particularly described in Schedule A-11
annexed hereto and made a part hereof; and
WHEREAS, North Valley Tech is the tenant under that certain ground lease
covering North Valley Tech Center, Thornton, Colorado ("North Valley Tech Center
Ground Lease"), as more particularly described in Schedule A-12 annexed hereto
and made a part hereof; and
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WHEREAS, FUR is the tenant under that certain ground lease covering Two
Rivers Business Center, Clarksville, Tennessee ("Two Rivers Business Center
Ground Lease"), as more particularly described in Schedule A-13 annexed hereto
and made a part hereof (the North Valley Tech Center Ground Lease, the Two
Rivers Business Center Ground Lease and the Huntington Garage Ground Lease are
collectively referred to as the "Ground Leases" and the land demised under each
Ground Lease shall hereinafter be referred to individually and collectively as
the "Ground Lease Land") (the leasehold estates of North Valley Tech and FUR
with respect to the North Valley Tech Center Ground Lease, the Two Rivers
Business Center Ground Lease and the Huntington Garage Ground Lease are
collectively referred to as the "Leasehold Estates"); and
WHEREAS, the land demised and described in Schedules A-1, A-2, A-3, A-4,
A-5, A-6, A-7, A-8, A-9, A-10, A-11, A-12 and A-13 are collectively referred to
as the "Land"; and
WHEREAS, each Seller desires to sell to Purchaser, and Purchaser desires to
purchase from each Seller, all of such Seller's right, title and interest in and
to its Property (as hereinafter defined)
NOW THEREFORE, in consideration of the mutual covenants contained herein
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, Sellers and Purchaser agree as follows:
1. Sale-Purchase. (a) Each Seller agrees to sell, assign and convey to
Purchaser, and Purchaser agrees to purchase from such Seller, subject to
the terms and conditions of this Agreement:
(1) said Seller's respective (i) fee simple title in and to 55
Public (Office Building), 55 Public (Garage), CEI, Westgate Shopping
Center, Pecanland Mall, Pecanland Mall Adjacent Land, Huntington Garage,
Madison and Wells Garage, Printers Alley Garage, 5th and Marshall
Garage, West Third Street Lot; and (ii) interest in and to the Leasehold
Estates together with the buildings and improvements located on the Land
and Seller's right, title and interest, under each Ground Lease, in and
to the buildings and improvements located on the Ground Lease Land
(collectively, the "Buildings" and the Buildings, the Land and the
Ground Lease Land are hereinafter collectively referred to as the
"Premises"), and all of said Seller's respective right, title and
interest, if any, in, to and under (A) all easements, rights of way,
privileges, tenements, hereditaments, appurtenances, strips, gores and
other rights pertaining to its Premises (including, without limitation,
the easements, access rights and other rights provided in reciprocal
access and easement agreements and operating agreements affecting the
Premises) (collectively, the "Appurtenances"); (B) any land in the bed
of any street, road, avenue, alley, passage, common areas and other
rights-of-way, open or proposed, public or private, in front of or
adjoining its Premises or any portion thereof, and any award to be made
in lieu thereof and in and to any unpaid award for damage to said
Premises by reason of change of grade of any street occurring after the
Proration Date (as hereinafter defined) (collectively, the "Adjoining
Land"); (C) the fixtures, equipment, machinery, furniture, furnishings,
maintenance vehicles and equipment, tools, appliances, supplies and
other items of personal property of every kind and description (and
replacements and substitutions thereof), now owned or hereafter acquired
by such Seller and contained in or on, or used in connection with, the
ownership, maintenance, use, occupancy and operation of its Premises
(collectively, the "Personalty"); (D) all leases, subleases, lettings,
licenses and other occupancy agreements and agreements governing the use
of garage or parking lot spaces, and all amendments, modifications,
supplements, additions, extensions and renewals thereof as permitted
hereunder, and, except as expressly provided herein, security and other
deposits thereunder affecting its Premises (collectively, "Leases"); (E)
subject to the provisions of Section 21 hereof, all service agreements,
maintenance agreements, supply agreements, union agreements and any
other contracts and agreements affecting the Premises and all income
therefrom (collectively, "Contracts"); (F) any assignable licenses,
permits, approvals and certificates required or used in or relating to
the ownership, use, maintenance, occupancy or operation of any part of
the Premises (the "Licenses"); (G) all existing surveys, blueprints,
drawings, plans and specifications (including,
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without limitation, structural, HVAC, mechanical and plumbing plans and
specifications) and other documentation for or with respect to the
Premises or any part thereof, all construction contracts and
subcontracts; all warranties or guaranties given in connection with work
performed at or on the Premises; all available tenant lists and data,
all available lists of parkers and data, correspondence with past,
present and prospective tenants, parkers, vendors, suppliers, utility
companies and other third parties, booklets, manuals and promotional and
advertising materials concerning the Premises or any part thereof, all
trade names and trade marks pertaining to the Premises, and such other
existing books, records and documents (including, without limitation,
those relating to ad valorem taxes and leases) used in connection with
the operation of the Premises or any part thereof (collectively, the
"Intangible Property") and (H) all of Sellers' right, title and interest
in and to all restricted, reserve and escrow accounts held by the
mortgagees under those Mortgages (as hereinafter defined) which
Purchaser shall assume at Closing (collectively, the "Escrow Accounts").
The Land, the Buildings (or, as the case may be, a Seller's interest in
a Building as tenant under a Ground Lease), the Leasehold Estates, the
Appurtenances, the Adjoining Land, the Personalty, the Leases, the
Contracts, the Licenses, the Escrow Accounts and the Intangible Property
are hereinafter collectively referred to as the "Properties" and, with
respect to each Premises, the "Property"; and
(2) that certain promissory note dated February, 1997, in the
original principal amount of $1,800,000, made by Club Associates, a
Georgia limited partnership, to FUR (the "Club Associates Note"), the
mortgage or deed of trust securing the repayment of the Club Associates
Note (the "Club Associates Mortgage") and such other documents or
instruments executed and delivered in connection therewith (the "Club
Associates Collateral Documents"; collectively with the Club Associates
Note and the Club Associates Mortgage, the "Club Associates Loan
Documents").
The Properties and the Club Associates Loan Documents are hereinafter
collectively referred to as the "Sale Assets".
(b) Notwithstanding that (i) the Pecanland Mall Adjacent Land is
included in the Properties being sold hereunder, Southwest Centers has
previously sold the parcel described on Schedule A-6-1 ("Schedule A-6-1
Parcel") and shall be entitled to sell all or any part of the balance of
the Pecanland Mall Adjacent Land (and all Property pertaining thereto) at
or prior to the Closing provided that Purchaser shall receive a credit at
the Closing against that portion of the Purchase Price payable to Southwest
Centers (x) with respect to the Schedule A-6-1 Parcel, in the amount of
$531,227, and (y) with respect to any portion of the balance of the
Pecanland Mall Adjacent Land (and the Property pertaining thereto) that
shall be sold prior to the Closing, in an amount equal to the Net Sales
Price (as hereinafter defined) received by Southwest Centers from each such
sale (collectively, "Pecanland Mall Adjacent Land Credit"); and (ii) the
Huntington Garage is included in the Properties being sold hereunder, FUR
shall be entitled to sell the Huntington Garage at or prior to the Closing
provided that Purchaser shall receive a credit at the Closing against that
portion of the Purchase Price payable to FUR in an amount equal to the Net
Sales Price received by FUR from said sale ("Huntington Garage Credit"). A
contract that FUR shall desire to execute for the sale of the Huntington
Garage (the "Huntington Contract") shall be subject to the prior approval
of Purchaser, such approval shall not be unreasonably withheld or delayed,
it being agreed that if the gross purchase price for the sale of the
Huntington Garage shall be less than $20,000,000 or those obligations of
FUR which survive the closing of such sale are not otherwise customary and
standard obligations in connection with the sale of a garage property,
Purchaser shall be deemed to have been reasonable if Purchaser shall
disapprove the Huntington Contract. If FUR shall deliver to Purchaser a
term sheet for the sale of the Huntington Garage and Purchaser shall
approve such term sheet, FUR shall thereafter have the right to enter into
the Huntington Contract so long as the Huntington Contract shall be upon
terms and conditions substantially similar to (or better than) the terms
set forth in the term sheet; provided, however, that Purchaser shall have
specifically consented (such consent not to be unreasonably withheld or
delayed) to those obligations that survive
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the closing of the sale of the Huntington Garage that Purchaser shall be
required to assume pursuant to the terms hereof, it being agreed that
Purchaser shall be deemed to be reasonable if any such provisions that
shall survive closing are not otherwise customary and standard obligations
with respect to the sale of a garage property. If FUR shall deliver to
Purchaser a copy of the Huntington Contract for Purchaser's approval,
Purchaser shall be deemed to have approved the Huntington Contract if
Purchaser shall fail to deliver to FUR within five (5) business days a
notice setting forth Purchaser's specific objections to the Huntington
Contract. The term "Net Sales Price" shall mean an amount equal to the sum
of (1) the gross sales price paid for the applicable Property, minus (2)
any and all fees, expenses, charges and other costs incurred by the Seller
in connection with the sale of said Property including, without limitation,
brokerage commissions, attorney's fees and disbursements, transfer and
similar taxes, sales and similar taxes, and title and recording charges.
2. Purchase Price. (a) Purchaser shall pay to Sellers for the Sale
Assets the sum of ONE HUNDRED NINETY NINE MILLION EIGHT HUNDRED THOUSAND
($199,800,000) DOLLARS (the "Purchase Price"), subject to apportionments to
be made as provided in this Agreement, which Purchase Price shall be
allocated among the Sale Assets in the manner set forth on Schedule B-1
annexed hereto and made a part hereof. Purchaser shall pay the Purchase
Price as follows:
(i) Within one (1) business day after Purchaser has received a
fully executed counterpart of this Agreement, SIX HUNDRED FIFTY THOUSAND
($650,000) DOLLARS by Purchaser, at its election, delivering its check
to Stroock & Stroock & Lavan LLP (the "Escrowee"), payable to the order
of "Stroock & Stroock & Lavan LLP, as Escrowee", subject to collection,
or by wire transfer to the Escrowee of immediately available Federal
funds in New York City (the "Initial Deposit"), provided, however, if
the Initial Deposit is not received by Escrowee within one (1) business
day after Purchaser has received a fully executed counterpart of this
Agreement, Sellers, at their option, may declare this Agreement, null,
void and of no force and effect, and may pursue its remedies against
Purchaser upon said Initial Deposit, or in any other manner permitted by
law, such remedies being cumulative;
(ii) By no later than September 29, 2000 (the "First Additional
Deposit Date"), TIME BEING OF THE ESSENCE, SIX MILLION ($6,000,000.00)
DOLLARS by Purchaser, at its election, delivering a certified check or
an official bank check to Escrowee, payable to the order of "Stroock &
Stroock & Lavan LLP, as Escrowee", or by wire transfer to the Escrowee
of immediately available Federal funds in New York City or by letter of
credit (the "First Additional Deposit");
(iii) By no later than three (3) business days after FUR shall
deliver the Shareholder Ratification to Purchaser (the "Second
Additional Deposit Date"), TIME BEING OF THE ESSENCE, THREE MILLION
($3,000,000) DOLLARS by Purchaser, at its election, delivering a
certified check or an official bank check to Escrowee, payable to the
order of "Stroock & Stroock & Lavan, LLP, as Escrowee", or by wire
transfer to the Escrowee of immediately available Federal funds in New
York City or by letter of credit (the "Second Additional Deposit", and
together with the Initial Deposit and the First Additional Deposit being
the "Deposit");
(iv) Subject to the provisions of Section 25 hereof, by Purchaser
assuming, at the Closing, all of the Sellers' liabilities and
obligations under those certain mortgages described in Schedule C
annexed hereto and made a part hereof and the promissory notes secured
thereby (collectively, the "Mortgages"), which Mortgages had an
aggregate outstanding principal balance as of the Proration Date (as
defined in Section 6A below) of approximately ONE HUNDRED SIXTEEN
MILLION EIGHT HUNDRED SEVEN THOUSAND NINE HUNDRED FIFTY EIGHT AND 90/100
($116,807,958.90) DOLLARS; and
(v) Subject to the provisions of Section 2(d) and Section 6 hereto,
SEVENTY THREE MILLION THREE HUNDRED FORTY TWO THOUSAND FORTY ONE AND
10/100
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($73,342,041.10) DOLLARS (the "Cash Balance"), allocated in the manner
set forth on Schedule B-2 annexed hereto and made a part hereof, and as
adjusted by the apportionments to be made as provided for in this
Agreement, payable at the Closing by wire transfer to Sellers, or such
persons or entities as Sellers may designate, of immediately available
Federal funds in New York City. Sellers shall provide wiring
instructions to Purchaser at least forty-eight (48) hours prior to
Closing.
(vi) (A) In the event Purchaser shall fail to make the First
Additional Deposit hereunder, no later than the First Additional Deposit
Date, TIME BEING OF THE ESSENCE, this Agreement shall thereupon
immediately terminate and be null, void and of no force and effect and
Escrowee shall disburse ONE HUNDRED TWENTY FIVE THOUSAND ($125,000)
DOLLARS of the Initial Deposit to Sellers, together with any interest
earned on such amount, and the balance of the Initial Deposit or FIVE
HUNDRED TWENTY FIVE THOUSAND ($525,000) DOLLARS to Purchaser, together
with any interest earned on such amount. In addition, Purchaser agrees
to deliver or cause to be delivered to Sellers all reports, studies,
memorandums, tests, evaluations and assessments (collectively, the
"Study") for each of the Properties obtained and/or conducted by or on
behalf of Purchaser prior to and including the First Additional Deposit
Date, together with all reliance letters from each provider of same
which were obtained by Purchaser upon receipt of each Study. Purchaser
agrees to use its good faith, reasonable efforts to obtain a reliance
letter from the provider of each Study, which reliance letter shall
provide that the Study prepared by the provider may be relied upon by
the Seller that is the owner of the Property that is the subject of such
Study, any prospective or actual purchaser of such Property and any
prospective or actual lender that may provide financing to the owner of
such Property.
(B) Notwithstanding the provisions of Section 2(a)(vi)(A) to the
contrary, in the event that Purchaser (or an affiliate thereof),
enters into a Limited Liability Company Agreement (the "JV
Agreement"), with U.S. Trust Corporation, National Association, As
Trustees Under That Certain Agreement And Declaration Of Trust Dated
As Of September 4, 1997, As Amended, Known As Landmark Equity Trust
VII ("Landmark"), and such entity shall obtain commitments for
Acceptable Financing, as such term shall be defined in the JV
Agreement, for some or all of the Properties, after September 11,
2000, and pursuant to the terms of the JV Agreement, Purchaser (or an
affiliate thereof) is no longer obligated to return the Initial
Contribution #1 (as such term shall be defined in the JV Agreement),
then in the event Purchaser shall fail to make the First Additional
Deposit hereunder, no later than the First Additional Deposit Date,
TIME BEING OF THE ESSENCE, this Agreement shall immediately terminate
and be null, void and of no force and effect and Escrowee shall
disburse the Initial Deposit, together with any additional deposit
credited by Escrowee to this Agreement pursuant to the provisions of
Section 2(a)(vii) below, to Sellers, together with any interest
earned thereon. In addition, Purchaser shall deliver to Sellers each
Study and all reliance letters thereto in accordance with the
provisions of Section 2(a)(vi)(A). Notwithstanding the foregoing, if
Purchaser (or an affiliate thereof) is obligated to return the
Initial Contribution #1 prior to First Additional Deposit Date then
the provisions of this Section 2(vi)(B) shall no longer be
applicable.
(vii) Notwithstanding the provisions of Section 2(a)(vi) to the
contrary, in the event the right of first refusal is exercised to
acquire that property being sold to Purchaser under the Long Street
Contract (as defined in Section 20 below) any deposit then held under
the Long Street Contract, plus all interest earned thereon, shall be
credited by Escrowee (being the same escrowee as under the Long Street
Contract) as an additional deposit under this Agreement, to be deemed
part of the Deposit hereunder. Notwithstanding, should any deposit under
the Long Street Contract be credited against the Deposit hereunder prior
to the Purchaser making the First Additional Deposit hereunder such
deposit under the Long Street Contract shall be credited by Escrowee to
the Initial Deposit hereunder, and in the event this Agreement
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is terminated pursuant to the provisions of Section 2(a)(vi) above,
Escrowee shall either: (a) in the event the conditions set forth in
Section 2(a)(vi)(B) have not been satisfied, disburse One Hundred Twenty
Five Thousand ($125,000) Dollars of the Initial Deposit to Sellers,
together with any interest earned thereon, and the balance of the
Initial Deposit (or $525,000) plus the amount of any deposit credited
from the Long Street Contract, together with any interest earned on such
amounts, to Purchaser or (ii) in the event the conditions of Section
2(a)(vi)(B) have been satisfied, disburse the entire Initial Deposit and
the amount of any deposit credited from the Long Street Contract,
together with any interest earned thereon, to Sellers. In addition,
Purchaser shall deliver to Sellers each Study and all reliance letters
thereto in accordance with the provisions of Section 2(a)(vi)(A).
(b) Notwithstanding the provisions of Section 2(a) to the contrary,
Purchaser may, in lieu of delivering a check for the First Additional
Deposit and/or the Second Additional Deposit, deliver to Escrowee a clean,
irrevocable and unconditional letter of credit in the amount of the First
Additional Deposit or the Second Additional Deposit, as the case may be,
("Letter of Credit") issued for the benefit of Escrowee by a New York City
commercial bank which is a member of the New York City Clearing House
Association (the issuer of such Letter of Credit being called the "Issuing
Bank"), which Letter of Credit shall be presentable and payable at any
branch office of the Issuing Bank located in New York City, have an initial
term of not less than one (1) year and be in a form acceptable to Sellers.
If the Letter of Credit is delivered to Escrowee, then Escrowee shall hold
and draw upon the same in accordance with Section 23 of this Agreement. The
Letter of Credit shall also provide that:
(i) the Issuing Bank shall pay to Escrowee the full face amount of
the Letter of Credit upon presentation of the Letter of Credit, a sight
draft and a certificate executed by Escrowee stating that Escrowee is
entitled to draw upon the Letter of Credit in accordance with the terms
of this Agreement; and
(ii) If Purchaser shall fail to deliver to the Escrowee a
substitute Letter of Credit before twentieth (20th) day preceding the
expiration date of the Letter of Credit, then Escrowee shall have the
right to draw upon the Letter of Credit in the full face amount thereof
(and in any event shall draw upon the Letter of Credit not later than
ten (10) days prior to the expiration date of the Letter of Credit) and
Sellers shall have the right to direct Escrowee to draw down upon the
Letter of Credit, in which case, the Escrowee shall draw down upon the
Letter of Credit. Escrowee shall hold the cash proceeds thereof on
account of the Deposit hereunder, until the Closing occurs or this
Agreement is terminated and such proceeds are disposed in accordance
with the terms of this Agreement. If the Letter of Credit has been drawn
upon pursuant to the preceding sentence and the Closing shall occur,
then Escrowee shall pay to Sellers such proceeds and Purchaser shall
receive a credit in the amount of such proceeds against the portion of
the Purchase Price payable to Sellers. Upon a default by Purchaser,
beyond the expiration of any applicable notice and cure periods, under
this Agreement, Escrowee is hereby authorized and directed, at Sellers
direction, to draw on the Letter of Credit and distribute the proceeds
thereof in accordance with, and subject to, the provisions of Section 23
hereof (including, without limitation, the notice provisions thereof)
and the Sellers shall have the same remedies against such proceeds as
the Sellers have against the Additional Deposit. Purchaser shall not
receive any credit against the Purchase Price for the amount of the
Letter of Credit, unless and to the extent the Sellers receive the
proceeds thereof as provided in this Agreement. If the Escrowee has not
drawn upon the Letter of Credit on or before the Closing, then the
Escrowee shall also return to Purchaser at the Closing any original
counterpart of the Letter of Credit then held by the Escrowee. If the
Closing shall not occur and this Agreement is terminated, the Letter of
Credit (and any proceeds thereof) shall be disposed of in accordance
with the applicable provisions of this Agreement. Notwithstanding
anything to the contrary contained herein, if, at any time, the Letter
of Credit fails to comply
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with the provisions of this Section 2(b), then the Letter of Credit
shall immediately be replaced by Purchaser with a letter of credit that
complies with the provisions of this Section 2(b).
(c) With respect to the Westgate Shopping Center, it is anticipated
that a financing for the Westgate Shopping Center which will be secured by
a mortgage (the "Westgate Financing") will occur prior to the Closing. If
such financing of the Westgate Shopping Center shall occur prior to the
Closing, the outstanding principal balance of the Westgate Financing as of
the date of the closing of the Westgate Financing (which shall be in the
approximate amount of $7,500,000) shall be credited against the Purchase
Price to be paid for (and allocated to) the Westgate Shopping Center and
the Cash Balance that shall be payable by Purchaser shall be reduced by the
amount of the outstanding principal balance of the Westgate Financing as of
the date of the closing of the Westgate Financing; provided, however, that
the amount of any and all escrows established with and made to the holder
of the Westgate Financing at the time of the closing of the Westgate
Financing shall be added to the Cash Balance that shall be payable by
Purchaser. Purchaser shall have the right to approve the terms and
conditions of the Westgate Financing, which consent shall not be
unreasonably withheld, conditioned or delayed. All costs and expenses that
shall have been incurred in connection with obtaining, and, if applicable,
closing such Westgate Financing, including, without limitation, attorneys
fees and brokerage expenses shall be borne by First Westgate. In addition,
if First Westgate is required to deliver an agreement (which may be in the
form of a guaranty or indemnification), respecting the terms and conditions
of the Winn-Dixie Lease and/or K-Mart Lease at the Westgate Shopping
Center, to the holder of the Westgate Financing, First Westgate shall
deliver same; and Purchaser, at Closing, shall cause Indemnitor, as defined
in Section 14(b)(xii) hereof, to provide to First Westgate a complete and
unconditional indemnification, in form reasonably acceptable to First
Westgate, against all liability that First Westgate shall incur on account
of First Westgate having delivered such agreement. For the avoidance of
doubt, the proceeds of the Westgate Financing shall be retained by First
Westgate; the outstanding principal balance of the Westgate Financing as of
the date of the closing of the Westgate Financing shall be credited against
the Purchase Price to be paid for the Westgate Shopping Center and the Cash
Balance that shall be payable by Purchaser shall be reduced by the amount
of the outstanding principal balance of the Westgate Financing as of the
date of the closing of the Westgate Financing.
(d) Notwithstanding any provisions in this Agreement to the contrary,
it shall not be a condition to the Closing hereunder that the Mortgages be
assumed by and assigned to the Purchaser. In the event that the consent to
the assignment to, and assumption by, the Purchaser of a Mortgage shall not
be obtained from the holder of such Mortgage, then the Cash Balance payable
at the Closing, subject to the provisions of Section 25 hereof, shall be
increased by the amount of the outstanding principal balance of such
Mortgage as of the Proration Date.
(e) As additional consideration for the conveyance of the Sale Assets
to Purchaser, Purchaser shall assume as of the Closing all liabilities
arising out of (i) except as set forth in Section (2)(e)(ii) below, the
ownership, operation and use of the Sale Assets from and after the
Proration Date as though Purchaser acquired title to the Sale Assets at
11:59 p.m. on said date, (ii) Capital Expenditures(as herein defined) for
the Properties committed to by each Seller and/or any of their respective
agents and/or authorized representatives after May 9, 2000, (which shall
include, without limitation, those expenditures set forth on Schedule D
annexed hereto), (iii) the value of the Capital Expenditures for the
Properties committed to by each Seller and/or any of their respective
agents and/or authorized representatives prior to May 9, 2000 which shall
not have been performed by Sellers prior to the Closing Date and for which
Purchaser shall have received a closing adjustment pursuant to Section
6A(l) hereof and (iv) subject to the provisions of Section 21(j), all
environmental liabilities which shall arise from and after the Proration
Date, (collectively, "Assumed Liabilities"), and shall indemnify each
Seller from and against any and all losses, liabilities, costs, damages,
claims and expenses (including reasonable attorneys' fees and expenses)
which such Seller may incur by reason of, or arising out of, or resulting
from any or all Assumed Liabilities; provided, however, Assumed Liabilities
shall not include any and all accrued and/or unpaid Pur-
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chaser Expenses (as such term is defined in Section 6B(b) hereof), which
accrued and unpaid Purchaser Expenses shall remain the obligation of
Sellers to satisfy. Each Seller shall be responsible for the payment of all
Capital Expenditures that such Seller and/or its authorized agents or
representatives shall have committed to on or before May 9, 2000 with
respect to the Property owned by such Seller, including, without
limitation, those expenditures set forth on Schedule E annexed hereto. For
purposes of this Agreement, the term "Capital Expenditures" shall mean
collectively, (A) those expenses set forth on Schedule D and Schedule E and
(B) to the extent not otherwise set forth on Schedule D or Schedule E (1)
expenses which in accordance with generally accepted accounting principles
cannot be expensed within the year in which such cost shall be incurred,
(2) tenant improvement costs that a Seller shall be required to pay for
pursuant to a Lease and (3) brokerage commissions that a Seller shall be
required to pay with respect to a Lease; provided, however, that for
purposes of this Agreement, Sellers shall have no obligation to pay for any
tenant improvement costs or brokerage commissions that shall be payable by
a Seller on account of a Lease or a renewal, extension, expansion or
modification of a Lease that was entered into or exercised after May 9,
2000. The obligation of Purchaser under this Section 2(e) shall survive the
Closing. Sellers and Purchaser shall, from time to time, update Schedule D
and Schedule E to reflect new information as it is available, and
appropriate monetary adjustments shall be made as needed.
(f) Except as otherwise set forth in Section 2(a)(vi) above, the party
hereunder that shall be entitled to receive the Deposit shall receive all
interest that shall have accrued thereon, and no interest on the Deposit
that shall be delivered to Sellers shall be deemed to be credited against
the Purchase Price.
(g) The Deposit, together with all interest thereon, shall be held by
Escrowee in accordance with Section 23 hereof.
3. Permitted Encumbrances. Subject to the terms and provisions of this
Agreement, title to each Property shall be sold, assigned and conveyed by
Sellers to Purchaser, and Purchaser shall accept same, subject only to the
following matters as they pertain to the applicable Property (collectively,
the "Permitted Encumbrances"):
(a) the state of facts shown on the applicable surveys described on
Schedule F annexed hereto and made a part hereof (the "Surveys") and any
other state of facts which the Surveys brought down to date might disclose
or that any other accurate survey might show;
(b) the applicable Mortgages and all liens and security interests
created thereby or in connection therewith;
(c) the applicable Leases;
(d) all of the title exceptions specifically set forth on Schedule G-2
attached hereto and made a part hereof (other than those items listed on
the Title Reports set forth in Schedule G-1 hereto that shall be marked
with the words "omit"):
(e) right, lack of right, or restricted right of any owner of a
Property to construct and/or maintain (and the right of any Governmental
Authority (as herein defined) to require the removal of) any vault or
vaulted area, in or under the streets, sidewalks or other areas abutting
said Property and any applicable licensing statute, ordinance and
regulation, and the terms of any license pertaining thereto;
(f) all presently existing and future liens of (i) real estate taxes
and (ii) water rates, water meter charges and vault taxes, water frontage
charges and sewer taxes, rents and charges provided that the same shall be
apportioned as provided in this Agreement;
(g) all violations of laws, ordinances, codes, orders, restrictions,
requirements or regulations of any Governmental Authority applicable to any
Property whether or not noted in the records of or issued by, any
Governmental Authority, existing on the Closing Date; "Governmental
Authority"
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means any agency, instrumentality, department, commission, court, tribunal
or board of any government, whether foreign or domestic and whether
national, federal, state, provincial or local;
(h) such matters as the Title Company (as hereinafter defined) shall
be willing, without special premium to Purchaser, with respect to the title
insurance policies issued by the Title Company to Purchaser and any lender
with respect to an applicable Property on the Closing Date (collectively,
the "Title Insurance Policies"), to omit as exceptions to coverage or, with
respect to Title Insurance Policies issued to Purchaser only, except with
insurance against collection out of or enforcement against the applicable
Property;
(i) variations between the tax lot lines and the legal description of
the Properties set forth on Schedules A-1 et seq. attached hereto;
(j) all present and future laws, ordinances, codes, orders,
restrictions, requirements and regulations, including, without limitation,
zoning, building and environmental laws, ordinances, codes, restrictions,
requirements and regulations, of all Governmental Authorities having or
asserting jurisdiction over the Property and the use thereof;
(k) so long as the Title Company shall omit the same from the Title
Insurance Policies, any financing statements, chattel mortgages,
conditional bills of sale or other form of security interest against
personalty, encumbering personalty not owned by Sellers or filed more than
five (5) years prior to the Closing Date;
(l) in addition to those Permitted Encumbrances described in Section
3(d) above, all other utility company rights, easements and franchises to
maintain and operate lines, poles, wires, cables, pipes, distribution boxes
and other fixtures and facilities in, over, under and upon the Premises;
(m) in addition to the state of facts described in Subsection (a) of
this Section 3, all other projections and/or encroachments of retaining
walls, steps, fences or similar projections of objects on, under or above
any adjoining streets of the Premises (or any property adjoining the
Premises), or within any set-back areas, and encroachments of similar
elements projecting from adjoining property over the Premises and
variations between the lines of record title and fences, retaining walls,
hedges, and the like;
(n) in addition to those Permitted Encumbrances described in Section
3(d) above, all other covenants, conditions, restrictions, easements,
reservations and agreements of record, provided same are not violated by
the existing structures or the present uses; and
(o) subject to Section 4(a), all other liens affecting the Property
except for the following (collectively, the "Seller Title Exceptions"):
(i) liens arising from any of the shareholder lawsuits described in
Section 22 hereof;
(ii) liens arising from claims by any broker for a commission, fee
or other compensation in connection with this transaction if the same
arose by, through or on account of any alleged act of a Seller or any
Seller's representatives (other than Radiant Partners LLC ("Radiant"));
(iii) liens arising from any affirmative action or omission by a
Seller which (A) pertains to a Property or any other asset which is the
subject of the Asset Management Agreement (as hereinafter defined), and
(B) was undertaken without the actual knowledge of Radiant;
(iv) liens arising from any action by a Seller which do not pertain
to the Sale Assets;
(v) liens arising from the use, ownership and management of a
Property which Seller, pursuant to Section 4(c), Section 6A(f) and
Section 6A(l) hereof, shall be responsible to pay for; and
(vi) any fines, judgments and/or penalties payable in conjunction
with any violations noted in the records of any Governmental Authority
against a Property prior to the Proration Date.
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(p) Notwithstanding anything in Section 3(a) above to the contrary, in
the event that any Survey for a Property brought down to date after the
date hereof ("New Survey"), discloses a state of facts in which the Title
Company will not issue a Title Policy (both terms as defined below) for
such Property with an appropriate survey endorsement thereto, Purchaser may
either (i) elect to accept said Seller's Property subject to such New
Survey, without abatement of the Purchase Price, or (ii) elect not to
accept said Seller's Property, in which event the Purchase Price pursuant
to Section 2(a) hereof shall be reduced by the portion of the Purchase
Price that is allocated to such Property pursuant to Schedule B-1 and the
Cash Balance shall be reduced by the portion of the Cash Balance allocated
to such Property pursuant to Schedule B-2.
4. Title Insurance.
(a) Purchaser acknowledges that it has previously received the title
reports set forth on Schedule G-1 (individually, a "Title Report" and
collectively the "Title Reports"). Based on Purchaser's review of the Title
Reports, as of the date hereof, and their acceptance of same, there are no
Title Objections (as hereinafter defined) set forth therein which do not
constitute Permitted Encumbrances other than as set forth on Schedule G-2
attached hereto. Purchaser shall at its own cost and expense, order updates
of each Title Report from First American Title Insurance Company (the
"Title Company") and shall instruct the Title Company to furnish a copy of
each such updated Title Report (individually and collectively, the
"Commitment") to Seller's attorneys, Stroock & Stroock & Lavan LLP, 180
Maiden Lane, New York, New York 10038, Attn: Peter A. Miller, Esq.,
simultaneously with its delivery of same to Purchaser or its attorneys.
Notwithstanding anything to the contrary contained herein, if any Seller is
unable to eliminate any exceptions to title which are not Permitted
Encumbrances or which the Title Company refuses to omit from the Commitment
("Title Objections") by the Closing Date, Sellers may, in accordance with
the provisions of Section 5 hereof, adjourn the Closing, from time to time,
in order to attempt to eliminate such Title Objections. No Seller shall be
required to bring any action or institute any proceeding, or to otherwise
incur any costs or expenses in order to attempt to eliminate any Title
Objections or to otherwise cause title to its Property to be in accordance
with the terms of this Agreement on the Closing Date, except as otherwise
set forth in Subsection 4(c) hereof. If, pursuant to the terms of this
Agreement, any Seller does not elect or is unable to eliminate any such
other Title Objections, then, subject to the provisions of Subsections 4(b)
and 4(c) hereof, Purchaser may, by notice given to Sellers by the date
which is the earlier of the Closing Date or thirty (30) days after the
applicable Seller shall have delivered a notice to Purchaser stating that
it will not eliminate such other Title Objections, either (i) elect to
accept said Seller's Property subject to such other Title Objections,
without any abatement of the Purchase Price, or (ii) elect not to accept
said Seller's Property, in which event the Purchase Price pursuant to
Section 2(a) hereof shall be reduced by the portion of the Purchase Price
that is allocated to such Property pursuant to Schedule B-1 and the Cash
Balance shall be reduced by the portion of the Cash Balance allocated to
such property pursuant to Schedule B-2 and Sellers shall be required to
reimburse Purchaser for certain expenses in accordance with the provisions
of Section 16(d) hereof.
(b) If on the Closing Date there are any liens or encumbrances which a
Seller is obligated to satisfy under this Agreement or shall otherwise
elect to satisfy, said Seller may use any part of the Cash Balance portion
of the Purchase Price allocated to its Property or Properties to discharge
the same, either by payment or by procuring a bond satisfactory to the
Title Company.
(c) If, at the Closing, any Property is subject to a Seller Title
Exception in a liquidated amount that may be satisfied by the payment of
money only, Purchaser shall bond such Seller Title Exceptions up to an
aggregate of $5,000,000, in which case, such Seller Title Exceptions shall
not be deemed to constitute a Title Objection provided that the Title
Company shall omit the same from the applicable Title Insurance Policy, and
provided further that the Seller that shall be the owner of the Property
affected by such Seller Title Exception shall continue to remain liable for
such Seller Title Exception(s). The disposition of a Seller Title Exception
shall require the consent of the Title Company, Purchaser and the affected
Seller. Notwithstanding the foregoing, Purchaser may, with-
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out Seller's consent, dispose of a Seller Title Exception provided such
Seller is fully and unconditionally released from all liability thereunder
at no expense or cost whatsoever to such Seller and a Seller shall have the
right to dispose of a Seller Title Exception without Purchasers' consent,
provided that settlement of such Seller Title Exception shall (i) result in
the release of the bond posted by Purchaser respecting the Seller Title
Exception, as described above, or (ii) if such bond shall continue to
secure other obligations, the settlement of such Seller Title Exception
shall not result in a draw down of the bond posted by Purchaser, and if
such bond shall not continue to secure other obligations, the bond shall be
released to Purchaser, or (iii) Seller shall deposit with Purchaser the
amount of money required for the settlement of such Seller Title Exception
prior to entering into such settlement thereof. Purchaser, to the extent of
the funds that a Seller shall so deliver to Purchaser, shall, at the
direction of such Seller, make a settlement directly to the party with whom
such settlement shall be reached. In the event that all Seller Title
Exceptions, which may be satisfied by the payment of money only, exceed
$5,000,000, in the aggregate, Sellers may (i) provide one or more bonds in
excess of the bonds to be provided by Purchaser, as described immediately
above, so that the Title Company shall omit the same from the applicable
Title Insurance Policy or (ii) elect to terminate this Agreement, in which
event Purchaser shall be entitled to a return of, and Sellers shall
promptly cause the Deposit to be delivered to Purchaser. Upon such return
and delivery, this Agreement shall terminate and no party to this Agreement
shall have any further obligations hereunder other than those arising under
Sections 10, 16(d) and 23 hereof. Notwithstanding anything in this
Subsection 4(c) to the contrary, if Sellers pursuant to the terms of the
immediately preceding sentence, shall elect to terminate this Agreement,
Purchaser shall have the right, to be exercised within five (5) days after
Purchaser's receipt of Sellers' election to terminate this Agreement
pursuant to this Section 4(c), to render Sellers' termination notice null
and void, in which case, the Closing shall occur hereunder (x) without any
reduction of the Purchase Price on account of the aggregate amount of the
Seller Title Exceptions being greater than $5,000,000; provided that FUR
and/or Sellers that shall be the owners of the Property(ies) affected by
such Seller Title Exceptions shall continue to be liable for such Seller
Title Exception; provided, however, FUR and/or Sellers shall not have any
liability to Purchaser to the extent that the amount of the Seller Title
Exceptions shall be greater than $5,000,000 in the aggregate or (y) to
remove the subject Property from the transaction pursuant to the provisions
of Section 4(a)(ii). If Purchaser shall elect to terminate this Agreement
pursuant to the terms of this Section 4(c) and such termination shall not
have been rendered null and void pursuant to the preceding sentence, Seller
shall be required to reimburse Purchaser for certain expenses in accordance
with the provisions of Section 16(d) hereof. In addition, if a Property is
subject to a lien which was filed against a Property with the consent of
the respective Seller or arising out of an affirmative act of Seller (each
a "Consensual Lien") and such Consensual Lien is in a liquidated amount
that may be satisfied by the payment of money only, then the applicable
Seller shall (i) be obligated to discharge the same by payment or bonding
and (ii) shall cause the Title Company to omit the same from the applicable
Title Policy, without regard to the provisions of this Section 4(c)
relating to Purchaser's obligation to bond any Sellers Title Exceptions up
to an aggregate of $5,000,000.
(d) If the Report discloses judgments, bankruptcies or other returns
against other persons having names the same as, or similar to, that of a
Seller, said Seller shall, if requested, deliver to the Title Company
affidavits showing that such judgments, bankruptcies or other returns are
not against such Seller in order to induce the Title Company to omit
exceptions with respect to such judgments, bankruptcies or other returns or
to insure over the same.
5. Closing Date. (a) Subject to the satisfaction of all of the
Conditions to Closing, as set forth in Section 20 hereof, the closing of
title (the "Closing") shall take place at 10:00 A.M. on the earlier to
occur of (A) the second (2nd) business day after FUR shall notify the
Purchaser that it has received the Shareholder Ratification (as hereinafter
defined in Section 16(a) hereof) and (B) December 29, 2000. The Closing
shall occur at the office of the Escrowee, 180 Maiden Lane, New York, New
York or at the offices of Purchaser's lender or its attorneys. Except as
hereinafter set forth, TIME SHALL BE OF THE ESSENCE, with respect to
Purchaser's and Sellers' obligation to
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close hereunder as of December 29, 2000. Notwithstanding the foregoing, if
the closing of the sale of the Huntington Garage shall have occurred prior
to December 29, 2000, Purchaser shall have the right to adjourn the
Closing, at any time and from time to time to a date no later than the
earlier of (i) forty five (45) days after the date that FUR shall notify
Purchaser that it has received the Shareholder Ratification and (ii)
January 31, 2001. TIME SHALL BE OF THE ESSENCE, with respect to Purchaser's
obligation to close hereunder as of such date or if Sellers, in accordance
with the terms of this Section 5(a) shall have adjourned the Closing, as of
the date that the Closing shall have been adjourned to by Sellers. Solely
in the event that FUR has not held a shareholders meeting to obtain the
Shareholder Ratification, Sellers, subject to Section 5(b) below, shall
have the right to adjourn the Closing, from time to time, to any date prior
to April 30, 2001; provided that if Sellers shall have the right and shall
desire to adjourn the Closing to a date after December 29, 2000 and such
proposed adjourned date shall be later of (i) the last date that any lender
providing mezzanine financing to Purchaser or any lender agreeing to
provide mortgage financing for a Property shall be obligated to close its
respective loan, or (ii) as to any Mortgage where the holder of such
Mortgage has consented to Purchaser's assumption of such Mortgage, the last
date that such holder's consent to such assignment shall be effective, each
such lender shall agree to extend its outside closing date. Notwithstanding
the provisions of this Section 5(a) to the contrary, if Sellers shall have
the right and shall desire to adjourn the Closing to a date later than
December 29, 2000, Purchaser shall have the right, by notice to Sellers, to
elect to terminate this Agreement, on December 29, 2000 or February 28,
2001 (provided that the Reasonable Expense Cap shall not be further
increased pursuant to Section 16(b) for any adjournment of the Closing by
Sellers past the date that Purchaser shall so elect to terminate) in which
case, Purchaser shall be entitled to a return of the Deposit and Sellers
shall reimburse Purchaser for certain expenses in accordance with the
provisions of Section 16(d) hereof.
(b) If Sellers shall have the right and shall desire to adjourn the
Closing to a date later than December 29, 2000 and any of Purchaser's
prospective lenders or the holders of any existing Mortgages shall require
that Purchaser pay a fee as a condition to granting its consent to extend
its outside closing date and Purchaser, pursuant to Section 5(a) shall not
have elected to terminate this Agreement, Sellers, in their sole and
absolute discretion, shall have the right to determine whether Purchaser
shall pay such extension fees. If Sellers shall elect that Purchaser pay
all extension fees (i) Sellers shall be required to pay, at such time, a
portion of such extension fee to the lender providing the mezzanine
financing to Purchaser in the aggregate amount of 50% of the first $300,000
of extension fees that Purchaser shall, from time to time, be required to
pay to such lender in order to extend the outside date, from time to time,
and 85% of any extension fees that Purchaser shall be required to pay to
such lender, from time to time, in excess of $300,000 and (ii) Sellers
shall be required to pay, at such time, a portion of such extension fees to
the lender providing mortgage financing to Purchaser or consenting to an
assumption of a Mortgage in the aggregate amount of 50% of the first
$300,000 of extension fees that Purchaser shall, from time to time, be
required to pay in the aggregate, to such lenders that shall be providing
mortgage financing in order to extend the outside date from time to time
and 85% of any extension fees that Purchaser shall be required to pay to
such lenders, from time to time, in excess of $300,000. Purchaser shall be
required to pay the balance of all such extension fees. If a lender shall
state that it will not extend its outside date or if Sellers shall advise
Purchaser, in writing, that Sellers do not elect that Purchaser pay to a
lender the extension fee that such lender is requiring that Purchaser pay,
Sellers shall have the right, to provide (or to cause another party to
provide) to Purchaser at the Closing, financing on the same or better terms
than those terms that such lender was otherwise prepared to provide to
Purchaser, including any origination and/or termination fees. Further, if
Sellers shall elect to provide (or cause another party to provide) to
Purchaser such financing, as set forth in the immediately preceding
sentence, in such case, such Sellers shall then pay any and all break-up
fees required by such lenders which break-up fees shall be credited against
Reasonable Expenses, if any, for which Sellers are obligated to reimburse
Purchaser in accordance with the provisions of Section 16 hereof.
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(c) If a lender shall not extend its outside date or if Sellers shall
not elect to pay the fees for such extension, if any, and Sellers shall not
have elected to provide Purchaser with the financing that such lender would
otherwise have provided to Purchaser, in such case, TIME SHALL BE OF THE
ESSENCE, with respect to Sellers' obligation to close hereunder as of
December 29, 2000 or, if Purchaser, in accordance with the terms of Section
5(a) shall have adjourned the Closing, as of the date that the closing
shall have been adjourned to by Purchaser. If Sellers shall fail to close
hereunder as of such date as to which TIME SHALL BE OF THE ESSENCE as to
Sellers' obligation to close hereunder because FUR has not held a
shareholders meeting to obtain the Shareholder Ratification, this Agreement
shall terminate (provided Sellers obligations under Section 24(b) shall
continue until such termination) and Sellers shall be required to reimburse
Purchaser in accordance with the provisions of Section 16(b) hereof.
(d) If the Purchase Price shall not be received by Sellers by 5:00
p.m. (New York time) on the Closing Date (as defined below), the Closing
Date for purposes of this Agreement, shall be deemed to have occurred on
the next succeeding business day. If requested by Purchaser, Sellers shall
endeavor to "pre-close" this transaction on one or more business days
preceding the Closing. Upon payment of the balance of the Purchase Price by
Purchaser, in the manner provided in Section 2 hereof, Sellers and
Purchaser shall contemporaneously therewith deliver to each other the
documents referred to in Section 14 hereof. The date on which the Closing
shall take place is hereinafter referred to as the "Closing Date".
6. Apportionments.
A. For purposes of this Agreement, the "Proration Date" shall be May
31, 2000, as of 11:59 p.m. on such date, so that Purchaser shall be
treated, for purposes of this Section 6A, as if Purchaser was the owner of
each Property and was entitled to any revenues and was responsible for any
expenses from and after June 1, 2000 (other than as provided in Subsection
6A(l) hereof). Any apportionments and prorations which are not expressly
provided for below shall be made in accordance with the customs of the
respective municipalities or counties, as applicable, in which the
respective Properties are located. Purchaser and Sellers shall prepare a
schedule of adjustments for each Premises ("Schedule of Adjustments") prior
to the Closing Date. Such adjustments, if and to the extent known as of the
Closing, shall be paid at Closing by Purchaser to each Seller for whom the
prorations for its Property or Properties result in a net credit to said
Seller or by a Seller to Purchaser if the prorations for its Property or
Properties result in a net credit to Purchaser, by increasing or reducing,
as the case may be, the amount of the portion of the Cash Balance to be
paid by Purchaser at the Closing to each Seller. Any such adjustments not
capable of being determined as of the Closing shall be paid by Purchaser to
the applicable Sellers, or by the applicable Sellers to Purchaser, as the
case may be, in cash as soon as practicable following the Closing. Any
apportionment or proration errors made at the Closing are subject to
correction if written notice thereof is given within one hundred eighty
(180) days after the Closing. Purchaser and Sellers shall each act promptly
and reasonably in connection with determining the prorations under this
Section 6. This Section 6 shall survive the Closing.
(a) (i) Interest on each Mortgage (whether or not such Mortgage
shall be assumed by Purchaser at Closing) shall be prorated on an
accrual basis. All interest payable under the Mortgages accruing and not
paid prior to the Proration Date shall be the obligation of Sellers, and
Purchaser shall be credited with an amount equal to such accrued and
unpaid interest. Purchaser shall be responsible for all interest payable
under the Mortgages and accruing after the Proration Date;
(ii) If, at Closing, a Mortgage shall be assumed by Purchaser,
Purchaser shall pay to Sellers at Closing the amount of monies that were
in the tax and insurance reserve account and/or tenant
collections/lockbox account held by the holder of such Mortgage as of
the Proration Date, which accounts were, as of the Proration Date, in
the approximate aggregate amount of $1,311,097, as more particularly set
forth on Schedule H attached hereto. (Hereinaf-
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ter the tax and insurance reserve account and tenant collections/lockbox
account shall be referred to collectively as the "tax and insurance
reserve account"). In the event that a Mortgage shall not be assumed by
Purchaser at Closing, Seller shall be entitled to receive all monies in
such tax and insurance reserve account that shall be released by the
holder of such Mortgage, provided that in the event that the amount any
such tax and insurance reserve that is released to Sellers shall be
greater than the amount of the balance of such tax and insurance reserve
account as of the Proration Date, the amount of such excess shall be
credited against the Cash Balance due from Purchaser at Closing and if
the amount of any such tax and insurance reserve released to Sellers
shall be less than the amount of the balance of such tax and insurances
reserve account as of the Proration Date, the amount of the Cash Balance
due from Purchaser at Closing shall be increased by the amount of such
difference. Sellers and Purchaser shall, from time to time, update
Schedule H to reflect new information as it is available.
(iii) Except as otherwise set forth in Subsection 6A(a)(ii)
above and Subsection 6A(a)(iv) below, Purchaser shall be entitled
to all monies held in any operating reserve account, ground rent
reserve account, and any other reserves, escrows or escrow
deposits (collectively, the "Other Escrows") made with, or held
by, each holder of a Mortgage, as of March 31, 2000 (which
balance of such Other Escrows, as of March 31, 2000, was in the
approximate amount of $1,000,000 in the aggregate, as more
particularly set forth on Schedule I attached hereto) whether or
not the respective Mortgage shall be assumed by Purchaser at the
Closing. Accordingly, if a Mortgage shall be assumed by Purchaser
and the amount of monies held in the Other Escrows as of the
Closing Date is less than the amount of monies that was held in
the Other Escrows as of March 31, 2000, Purchaser shall be
entitled to a credit against the Cash Balance due at Closing in
the amount of such difference and if the amount of the Other
Escrows as of the Proration Date shall be greater than the amount
of the Other Escrows as of March 31, 2000, Sellers shall be
entitled to a credit against the Cash Balance due at Closing in
the amount of such excess. Further, if a Mortgage shall not be
assumed by Purchaser at the Closing, each Seller shall be
entitled to retain the monies in the Other Escrows which are
released to such Seller by the holder of the respective Mortgage
and Purchaser shall be entitled to a credit against the Cash
Balance due at Closing in the amount of the Other Escrows held by
the holder of such Mortgage as of March 31, 2000 and in the event
that the amount of the Other Escrows released to a Seller in
accordance with the terms of the immediately preceding sentence
shall be greater than the amount of the Other Escrows as of the
Proration Date, the amount of such excess shall also be credited
against the Cash Balance due at Closing. Sellers and Purchaser
shall, from time to time, update Schedule I to reflect new
information as it is available.
(iv) Purchaser shall be entitled to all monies held in any
capital expenditure reserve ("Capital Expenditures Escrow") made
with or held by, each holder of a Mortgage, as of March 31, 2000
(which Capital Expenditures Escrow were in the approximate amount
$2,541,620.75, as of March 31, 2000 in the aggregate, as more
particularly set forth on Schedule J attached hereto), whether or
not the respective Mortgage shall be assumed by Purchaser at the
Closing. Accordingly, if a Mortgage shall be assumed by Purchaser
and the amount of monies held in the Capital Expenditures Escrow
is less than the amount of monies that was held in such Capital
Expenditures Escrow as of March 31, 2000, Purchaser shall be
entitled to a credit against the Cash Balance due at Closing in
the amount of such difference and if the amount of the Capital
Expenditures Escrow as of the Proration Date shall be greater
than the amount of the Capital Expenditures Escrow as of March
31, 2000, Sellers shall be entitled to a credit against the Cash
Balance due at Closing in the amount of such excess. Further, if
a Mortgage shall not be assumed by Purchaser at the Closing,
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the Seller of the Property that was encumbered by such Mortgage
shall be entitled to retain the monies in the Capital
Expenditures Escrow which are released to such Seller by the
holder of the such Mortgage, but, in such case, Purchaser shall
be entitled to a credit against the Cash Balance due at Closing
in the amount of the Capital Expenditures Escrow as of March 31,
2000 and, in the event that the amount of the Capital
Expenditures Escrow released to a Seller in accordance with the
terms of the immediately preceding sentence shall be greater than
the amount of the Capital Expenditures Escrow as of the Proration
Date, the amount of such excess shall also be credited against
the Cash Balance due at Closing. Sellers and Purchaser shall from
time to time, update Schedule J to reflect new information as it
is available.
(v) Upon the purchase of Madison and Wells Garage by First
Union Madison, an escrow in the approximate amount of $600,000
("Madison Escrow") was established to secure the obligation of
the prior owner of Madison and Wells Garage to pay for any
increase in real estate taxes which are assessed for the period
prior to the sale of such Property. Prior to the Closing, First
Union Madison shall be entitled to use the Madison Escrow for the
purposes for which it was intended and to draw upon funds in the
Madison Escrow to accomplish same. At the Closing, First Union
Madison shall assign to Purchaser, all of First Union Madison's
rights and obligations under the Madison Escrow, if permitted by
the terms of the Madison Escrow, or, if First Union Madison shall
not be permitted to make such assignment by the terms of the
Madison Escrow, First Union Madison shall return all remaining
funds in the Madison Escrow to the prior owner of Madison and
Wells Garage.
(b) Rentals. "Rental" or "Rentals" as used herein includes fixed
monthly rentals, additional rentals, percentage rentals, escalation
rentals, retroactive rentals, operating cost pass-throughs, parking
charges, utility charges, common area maintenance or management charges,
administrative charges, and other sums and charges payable by Tenants
(as hereinafter defined) under the Leases (all tenants, licensees,
occupants and such other parties occupying space pursuant to a Lease
shall herein be referred to individually as a "Tenant" or collectively
as the "Tenants"). Subject to the provisions of Subsections 6(c) and
6(d) hereof, Rentals shall be prorated at the Closing. Sellers shall be
entitled to all Rentals accruing on or prior to the Proration Date and
Purchaser shall be entitled to all Rentals accruing after the Proration
Date. Purchaser shall not be entitled to any credit or adjustment for
any free rent or abated rent accruing after the Proration Date.
(c) Delinquent Rentals. Fixed monthly rentals are delinquent when
payment thereof is due on or prior to the Proration Date but has not
been made by the Proration Date (any such fixed monthly rentals that
shall not be paid prior to the Proration Date being "Delinquent
Rentals"). Delinquent Rentals shall be prorated between Purchaser and
each Seller as of the Proration Date but shall not be paid or credited
until they are actually collected by Purchaser or a Seller, as the case
may be. Any fixed monthly rentals collected by Purchaser or a Seller, as
the case may be, after the Proration Date less any costs of collection
(including reasonable attorneys fees) reasonably allocable thereto shall
be applied first to Delinquent Rentals, if any, and paid to the
applicable Seller promptly upon receipt thereof in the amount of such
Delinquent Rentals, then to fixed monthly rentals that shall accrue
after the Proration Date and paid to Purchaser (but only at or after the
Closing). Notwithstanding the foregoing, if a Tenant shall be disputing
the amount of the Delinquent Rentals that such Tenant shall owe to the
applicable Seller, in such case, prior to the resolution of such
dispute, such Seller, to the extent of such disputed Delinquent Rentals,
shall not be entitled to receive payment of such Delinquent Rentals.
Following the resolution of any dispute with a Tenant regarding the
amount of Delinquent Rentals that such Tenant shall owe to the
applicable Tenant, Purchaser shall pay to the applicable Seller, an
amount equal to the lesser of (i) the amount of Delinquent Rentals that
it is ultimately determined that such Tenant shall owe to the applicable
Seller and (ii) the
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amount of payments of fixed monthly rentals that Purchaser shall have
received pursuant to this Section 6(c). Sellers shall have the right to
settle and/or compromise any dispute with a Tenant regarding any
disputed Delinquent Rentals and in no event shall Purchaser have the
right to settle and/or compromise any such dispute. Purchaser shall use
reasonable efforts to collect Delinquent Rentals but shall have no
obligation to commence a legal proceeding to collect such sums. Each
Seller retains the right after the Closing to bring an action for
damages against tenants for the recovery of Delinquent Rentals,
provided, however, in no event shall any such action involve the
termination of such tenant's Lease or the eviction of such tenant. The
parties confirm that all amounts due and payable in respect of Leases
which have expired or otherwise terminated prior to the Proration Date
shall be the sole property of the applicable Seller and, notwithstanding
anything to the contrary contained herein, such Seller may take such
actions as it desires to collect such amounts. Notwithstanding the
provisions of this Subsection 6(c) to the contrary, any amount collected
by any Seller applicable to the period of time prior to the Proration
Date in connection with any such action shall be retained by said
Seller. Each Seller and Purchaser shall from time to time for a period
of one (1) year following the Closing, and upon request of the other
party, provide the requesting party with reasonably detailed information
regarding the status of such party's collection of Delinquent Rentals.
(d) Operating Cost Pass-Throughs, Etc. Operating cost
pass-throughs, utility charges, common area maintenance charges,
administrative charges, percentage rentals, additional rentals and other
retroactive rental escalations, sums or charges payable by Tenants which
accrue as of the Proration Date but are not then due and payable or
collected ("Pass-Throughs"), shall be prorated as of the Proration Date;
provided, however, no payment or credit thereof shall be made to the
applicable Seller unless and until Purchaser and/or Seller collects same
from the Tenants. All such amounts payable by Tenants for the period
accruing prior to the Proration Date shall belong to the applicable
Seller and all such amounts payable by Tenants for the period accruing
after the Proration Date shall belong to Purchaser. Any Pass-Throughs
collected by Purchaser or a Seller, as the case may be, after the
Proration Date (less any costs of collection, including reasonable
attorneys fees reasonably allocable thereto) shall be applied (i) first,
if a Tenant making a payment shall designate the receivable against
which such payment shall be applied, in accordance with such Tenant's
written direction, and (ii) second, against such fiscal or calendar
period for which the Pass-Throughs pertain and in which the Proration
Date shall occur, it being agreed that the Pass-Throughs shall be
allocated between Seller and Purchaser based upon the portion of such
fiscal or calendar period that shall occur prior to the Proration Date
and the portion of such fiscal or calendar period that shall occur after
the Proration Date, (iii) third, to the period that occurs after the
period described in clause (ii) above and (iv) fourth, to the period
that occurs prior to the period described in clause (ii) above.
(e) Taxes. Real estate taxes (including business improvement
district charges) on a Property (excluding taxes paid directly to the
taxing authority by Tenants or parties to a reciprocal easement
agreement) shall be prorated based on the actual current tax bill. If
such tax bill has not yet been received by the Closing Date, then
Purchaser and each Seller shall estimate the real estate taxes based
upon Purchaser's and such Seller's good faith estimate of the change in
the amount of the previous year's tax bill and Purchaser and Seller
shall after the Closing re-prorate the real estate taxes as soon as the
actual current tax bill is available. All amounts payable for real
estate taxes accruing through the Proration Date shall be the obligation
of the applicable Seller and all amounts payable for real estate taxes
accruing after the Proration Date shall be the obligation of Purchaser.
If, after the Closing Date, any additional or supplemental real estate
taxes are assessed against a Property by reason of back assessments,
corrections to previous tax bills or other events occurring prior to the
Proration Date, Purchaser and the applicable Seller shall re-prorate the
real estate taxes following the Closing. Any delinquent taxes on a
Property shall be paid at the Closing from funds accruing to the
applicable Seller.
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(f) Operating Expenses. All utility service charges and fees for
sewer, water, electricity, heat and air conditioning service, other
utilities, fuel oil, elevator maintenance, taxes other than real estate
taxes such as rental taxes, reciprocal easement agreement charges and
fees, management fees (except that only two-thirds of the amount of
management fees payable to Radiant Partners LLC shall be used for
proration purposes), insurance, other ordinary and customary expenses
incurred by a Seller in operating its Property that said Seller
reasonably and customarily pays, and all other costs incurred in the
ordinary course of business of such Seller in connection with the
operation of its Property, shall be prorated on an accrual basis. The
applicable Seller shall be responsible for all such expenses that accrue
through the Proration Date and Purchaser shall be responsible for all
such expenses which are payable or accrue after the Proration Date. Such
Seller shall be credited with an amount equal to any prepaid expenses
which relate to the period after the Proration Date and Purchaser shall
be credited with an amount equal to any unpaid expenses which relate to
the period prior to the Proration Date, but only if such expenses shall
have been paid for by Sellers after the Proration Date and prior to the
Closing Date. Operating expenses that have been paid directly by a
tenant shall not be prorated.
(g) Tenant Deposits. Purchaser shall be credited with and the
applicable Seller shall be debited with the sum of all Tenant security
deposits (and any interest due to Tenants thereon) required to be held
by Sellers pursuant to the terms of the respective Leases, as more
specifically set forth on Schedule K attached hereto; provided, however,
Sellers shall be entitled to retain any administrative fees allowed by
law that shall have accrued on such Tenant security deposits as of the
Proration Date. Sellers and Purchaser shall, from time to time, update
Schedule K to reflect new information as it is available.
(h) Ground Leases. Rents and other charges due to the landlords
under the Ground Leases shall be prorated as of the Proration Date. In
addition, the Sellers shall receive a credit against the Purchase Price
for any security deposit (and any interest due thereon) deposited by
Sellers with the landlords under the Ground Leases.
(i) License and Permit Fees. Periodically recurring governmental
fees for transferable Licenses issued in respect of any Premises for the
use of any part thereof, if assignable and to the extent assigned, shall
be prorated between Purchaser and the applicable Seller as of the
Proration Date on an accrual basis. Said Seller shall be responsible for
all amounts due thereunder which accrue through the Proration Date and
Purchaser shall be responsible for all amounts which accrue after the
Proration Date.
(j) Club Associates Note Interest. Interest due or paid, as the
case may be, under the Club Associates Note shall be prorated as of the
Proration Date.
(k) Pecanland Mall Adjacent Land Credit; Huntington Garage Credit.
Purchaser shall be entitled to a credit in the amount of $531,227
arising out of the sale of the Schedule A-6-1 Parcel which occurred
prior to the date hereof. In addition, if applicable, Purchaser, at the
Closing, shall be entitled to the Pecanland Mall Adjacent Land Credit
and the Huntington Garage Credit.
(l) Capital Expenditures. If (i) any Seller, prior to the Proration
Date, shall have paid for any Capital Expenditures that shall have been
committed to after May 9, 2000, such Seller shall be entitled to a
credit in the aggregate amount of such payments, (ii) any Seller at any
time after the Proration Date, shall have paid for any Capital
Expenditures that shall have been committed to by any Seller prior to
May 9, 2000, Purchaser shall be entitled to a credit at Closing in the
aggregate amount of such payments, (iii) any Capital Expenditures for
the Properties committed to by each Seller and/or any of their
respective agents and/or authorized representatives prior to May 9, 2000
shall not have been performed by a Seller prior to the Closing Date,
Purchaser shall be entitled to a credit at Closing in the amount of the
value of such Capital Expenditures that shall not have been performed
and (iv) if any Capital Expendi-
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tures of the nature described in clauses (2) and (3) of the definition
of Capital Expenditures which were committed to prior to May 9, 2000
shall remain unpaid as of the Proration Date, Purchaser shall be
entitled to a credit in an amount equal to the aggregate amount of such
unpaid Capital Expenditures but only if such unpaid Capital Expenditures
shall have been paid for by Sellers after the Proration Date and prior
to the Closing Date.
(m) Other Accounts. Purchaser shall be entitled to a credit at
Closing in an amount of $2,513,517 ("Richmond Fund") plus all interest
earned thereon, less all hard and soft costs of construction that shall
have been paid or shall be payable as of the Closing Date in connection
with certain improvements to be made or being made to the 5th and
Marshall Garage. Notwithstanding anything herein to the contrary, the
improvements to the 5th and Marshall Garage shall not be considered a
Capital Expenditure pursuant to Subsection 6A(l) above.
(n) Other. Any other customary adjustments made in connection with
the sale of properties similar in type to the applicable Property shall
be prorated between Purchaser and each Seller as of the Proration Date.
B. (a) Supplementing the provisions of Section 6A above, as to any
Property, if the aggregate amount of Purchaser Revenue (as hereinafter
defined) that Seller shall receive after the Proration Date shall be
greater than the amount of Purchaser Expenses (as hereinafter defined)
that such Seller shall have incurred and/or paid for after the Proration
Date, the Purchase Price for such Property shall be decreased by the
amount of such excess. In the alternative, as to any Property, if the
aggregate amount of the Purchaser Revenue that Seller shall receive
after the Proration Date shall be less than the amount of Purchaser
Expenses that Seller shall have incurred and/or paid for after the
Proration Date, the Purchase Price for such Property shall be increased
by the amount such Purchaser Expenses exceed Purchaser Revenue.
(b) For purposes of this Agreement, the term "Purchaser Revenue"
shall mean all revenues that a Seller shall receive from the operation
of a Property after the Proration Date which Purchaser, pursuant to the
provisions of Section 6A above, shall be entitled to receive and the
term "Purchaser Expenses" shall mean all expenses arising from the use,
operation and management of a Property, including Capital Expenditures,
which a Seller shall have incurred (whether or not payment shall have
been made) from and after the Proration Date (or in the case of Capital
Expenditures, including, without limitation, tenant improvement expenses
from and after May 9, 2000).
7. Assessments. If, on the Proration Date, the Premises or any part
thereof shall be or shall have been affected by an assessment or
assessments which are or may become payable in annual installments, and the
first installment is then a charge or lien or has been paid, then for the
purposes of this Agreement all the unpaid installments shall be deemed to
be due and payable and to be a lien upon the Premises and shall be paid and
discharged by the applicable Seller as of the Closing Date.
8. Condition of the Sale Assets.
(a) Sellers will permit Purchaser, for itself or on behalf of, or in
conjunction with its prospective lenders or equity investors and each of
their respective agents and representatives, the right to inspect the
Buildings and review the books, records and Property files of the Sellers
and to conduct or cause to be conducted such tests, evaluations and
assessments of the Property as may be necessary, appropriate or desirable
in connection with the acquisition of the Properties, provided, however,
that all such inspections, tests, evaluations and assessments
(collectively, "Inspection Activities") shall hereafter be subject to the
following conditions:
(i) No Inspection Activity which involves boring, digging, drilling
or other physical intrusion of the Property shall be conducted without
the prior written consent of the Sellers, which consent shall not be
unreasonably withheld or delayed.
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(ii) Purchaser shall promptly restore the Property, at Purchaser's
sole cost and expense, to the state and condition it was in prior to
being disturbed or damaged by any Inspection Activity.
(iii) Any Inspection Activity conducted with respect to a Building
shall not be unreasonably intrusive and shall not have any adverse
effect on the structural integrity of the Building.
(iv) No Inspection Activity shall be conducted inside the space
demised to any Tenant or otherwise in any manner that would interfere
with the business or operations conducted by any Tenant.
(v) Purchaser shall indemnify and hold harmless the Sellers and
their respective members, trustees, directors, officers, employees and
agents from and against any and all liability, claims, losses, damages,
injuries to persons or to property and expenses (including, without
limitation, reasonable legal fees and disbursements) suffered by the
Sellers or their respective members, trustees, directors, offices,
employees or agents by reason of or resulting from the Inspection
Activities.
(vi) All Inspection Activities shall be conducted in compliance
with all applicable federal, state and local laws, rules, regulations,
ordinances, orders and permits.
(vii) With respect to any inspections that Purchaser shall perform
after the date hereof, Purchaser and/or its contractors shall procure
the following insurance coverage to cover the risks associated with the
Inspection Activities, in the minimum amounts set forth below:
(A) Workers Compensation Insurance in accordance with
statutory requirements and Employer's Liability Insurance with a
minimum limit of $500,000 each accident;
(B) Commercial General Liability Insurance (occurrence
form), including premises, contractual liability,
products/completed operations, independent contractors and broad
form property damage coverage with the following limits of
liability: Bodily Injury -- $1,000,000 each occurrence; Property
Damage -- $1,000,000 each occurrence or $2,000,000 combined
single limit;
(C) Comprehensive Automobile Liability Insurance, including
coverage for all owned, non-owned and hired automobiles used in
the performance of the work with the following minimum limits of
liability: Bodily Injury -- $1,000,000 each occurrence; Property
Damage -- $1,000,000 each occurrence or $2,000,000 combined
single limit; and
(D) Environmental/Pollution Liability, including bodily
injury and property damage liability associated with the removal
and/or disposal of hazardous wastes and/or materials with the
following minimum limits of liability: Bodily
Injury -- $2,000,000 each occurrence; Property
Damage -- $2,000,000 each occurrence or $4,000,000 combined
single limit.
All insurance shall provide for thirty (30) days written notice
prior to cancellation, shall name the applicable Seller as an additional
insured, and shall provide that all liability coverage is primary and
without the right of contribution from insurance carried by such Seller.
Prior to commencing any Inspection Activity at or on a Property,
Purchaser shall submit to the applicable Seller a binder of such
insurance or certificates thereof with the same force and effect as a
binder.
(viii) Prior to commencing any environmental Inspection Activity at
or on the Property after the date hereof, Purchaser shall provide the
applicable Seller at least five (5) business days advance notice of its
intent to have such Inspection Activity performed.
(ix) Each Seller shall at all times during the course of any
Inspection Activities and after their completion have the right to
inspect all Inspection Activities of Purchaser and its contrac-
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tors and their subcontractors at or on the Property. Each Seller shall
also have the right to inspect and copy all studies, reports, test
results, data and other information and material collected or generated
in the course of any Inspection Activities.
(x) Notwithstanding the provisions of Section 8(a)(i) hereof, no
environmental Inspection Activity other than a Phase I environmental
site assessment shall be performed without the prior written consent of
the applicable Seller.
(xi) The rights granted to Purchaser under this Subsection 8(a) are
solely for informational purposes, shall in no event be construed to
modify the provisions of Subsection 8(b) hereof nor shall any
information obtained through such Inspection Activity be a basis for
Purchaser not performing its obligations under this Agreement.
(b) Purchaser agrees to accept the Sale Assets in their "as is",
"where is" condition on the date hereof, subject to (i) reasonable use,
wear, tear and natural deterioration between the date hereof and the
Closing Date, and (ii) the provisions of Section 9 hereof. Purchaser (i)
has or will examine, inspect and investigate to the full satisfaction of
Purchaser, the physical nature and condition of the Sale Assets, (ii) has
or will independently investigate, analyze and appraise the value and
profitability of the Sale Assets, and (iii) has reviewed such other
documents and materials as Purchaser has deemed advisable. Purchaser
acknowledges that, except as specifically set forth in this Agreement,
neither Sellers, nor any real estate broker, employee, servant, agent,
consultant, accountant, attorney or representative of any Seller has made
any representations or warranties whatsoever regarding the subject matter
of this Agreement or the transactions contemplated hereby, including
without limitation, with respect to the physical nature or condition of the
Sale Assets, the revenues generated by or expenses associated with the Sale
Assets, zoning laws, building codes, laws and regulations, environmental
matters, the violation of any laws, ordinances, rules, regulations or
orders of any Governmental Authority, water, sewer or other utilities,
rents or other income, expenses applicable to the Sale Assets, capital
expenditures, leases, existing or future operations of the Sale Assets or
any other matter or thing affecting or related to the Sale Assets or the
operation thereof. In executing, delivering and/or performing this
Agreement, Purchaser has not relied upon and does not rely upon, and no
Seller shall be liable or bound in any manner by, express or implied
warranties, guaranties, promises, statements, representations or
information pertaining to any of the matters set forth above in this
Section 8 or otherwise made or furnished by any Seller or by any real
estate broker, employee, servant, agent, consultant, accountant, attorney
or any other person representing or purporting to represent any Seller to
whomever made or given, directly or indirectly, verbally or in writing,
unless such warranties, guaranties, promises, statements, representations
or information are expressly and specifically set forth in this Agreement.
(c) Purchaser waives and releases Sellers from any present or future
claims arising from or relating to the presence or alleged presence of any
Hazardous Materials (as hereinafter defined) in, on, under or about the
Properties, including, without limitation, any claims under (i) any
Environmental Laws (as hereinafter defined), (ii) any other federal, state
or local law, ordinance, rule or regulation, now or hereafter in effect,
that deals with or otherwise in any manner relates to, environmental
matters of any kind, (iii) this Agreement, or (iv) the common law. The
terms and provisions of this Subsection 8(c) shall survive the Closing.
"Environmental Laws" mean all federal, state, local and foreign
environmental, health and safety laws, codes and ordinances and all rules
and regulations promulgated thereunder, including, without limitation laws
relating to emissions, discharge, releases or threatened releases of
pollutants, contaminants, chemicals, or industrial, toxic or hazardous
substances or wastes into the environment (including, without limitation,
air, surface water, ground water, land surface or subsurface strata) or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of pollutants,
contaminants, chemicals, or industrial, solid, toxic or hazardous
substances or wastes. As used in this Agreement, the term "Hazardous
Materials" includes, without limitation, (i) all substances which are
designated pursuant to Section 311(b)(2)(A) of the Federal Water Pollution
Control Act ("FWPCA"), 33 U.S.C. sec.1251 et seq.; (ii) any element,
compound, mixture, solution, or
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substance which is designated pursuant to Section 102 of the Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA"), 42
U.S.C. sec.9601 et seq.; (iii) any hazardous waste having the
characteristics which are identified under or listed pursuant to Section
3001 of the Resource Conservation and Recovery Act ("RCRA"), sec.6901 et
seq.; (iv) any toxic pollutant listed under Section 307(a) of the FWPCA;
(v) any hazardous air pollutant which is listed under Section 112 of the
Clean Air Act, 42 U.S.C. sec.7401 et seq.; (vi) any imminently hazardous
chemical substance or mixture with respect to which action has been taken
pursuant to Section 7 of the Toxic Substance Control Act, 15 U.S.C.
sec.2601 et seq.; and (vii) petroleum, petroleum products, petroleum
by-products, petroleum decomposition by-products, and waste oil; (viii)
"hazardous materials" within the meaning of the Hazardous Materials
Transportation Act, 49 U.S.C. sec.1802 et seq., (ix) any hazardous
substance or material identified or regulated by or under any applicable
provisions of the laws of the State in which the applicable Property is
located; (x) asbestos or any asbestos containing materials; (xi) any
radioactive material or substance; (xii) all toxic wastes, hazardous wastes
and hazardous substances as defined by, used in, controlled by or subject
to all implementing regulations adopted and publications promulgated
pursuant to the foregoing statutes; and (xiii) any other hazardous or toxic
substance or pollutant identified in or regulated under any other
applicable federal, state or local laws.
(d) Notwithstanding anything in this Section 8 to the contrary, in the
event any Phase I environmental site assessment performed at a Property
recommends that a Phase II environmental site assessment be performed on
such Property, and the Seller of such Property notifies Purchaser that such
Seller does not consent to the Phase II environmental site assessment being
performed thereon, Purchaser must, within five (5) days after receipt of
such Seller's notice pursuant to this Section 8(d), elect to either
continue with this transaction without any abatement or adjustment to the
Purchase Price or not purchase such Property that is the subject of the
Phase II environmental assessment. If Purchaser shall elect not to purchase
such Property, the Purchase Price pursuant to Section 2(a) hereof shall be
reduced by the portion of the Purchase Price that is allocated to such
Property pursuant to Schedule B-1 and the Cash Balance shall be reduced by
the portion of the Cash Balance that is allocated to such Property pursuant
to Schedule B-2. In addition, Sellers shall be required to reimburse
Purchaser for certain expenses in accordance with the provisions of Section
16(d) hereof.
9. Casualty and Condemnation.
(a) If, prior to the Closing, all or any portion of a Property is
damaged by fire, the elements or any other casualty or is taken by eminent
domain or otherwise, then, notwithstanding anything to the contrary implied
or provided by law or in equity, Purchaser shall not have the right to
terminate this Agreement and (i) the parties shall proceed to the Closing
in accordance with this Agreement, (ii) all proceeds or awards received by
the applicable Seller, or such Seller's rights to such proceeds or awards,
from such taking or casualty (after deducting Seller's reasonable cost of
collecting the same and any reasonable expenses that Seller shall have
incurred in repairing or restoring the Property) shall be assigned by said
Seller to Purchaser at the Closing, and (iii) the Purchase Price shall be
abated to the extent of any deductible. Notwithstanding any provisions in
this Section 9 to the contrary, if (1) all or a portion of a Property is
damaged by fire, the elements or any other casualty, (2) the amount of such
casualty, together with the amount of the casualty, if any, affecting any
of the other Properties, shall be greater than $500,000 (the "Casualty
Threshold") and (3) such Property is either subject to a mortgage
commitment whereby the prospective lender will no longer finance such
Property due to the casualty thereon or encumbered by a Mortgage whereby
the holder of such Mortgage will no longer permit Purchaser to assume the
Mortgage due to the casualty thereon, Sellers shall provide financing to
Purchaser in an aggregate amount with respect to all of the Properties that
shall be damaged by a fire, the elements or other casualty equal to the
lesser of $30,000,000 and the amount by which the aggregate of the mortgage
commitments and Mortgages described in clause (3) shall be greater than the
Casualty Threshold; provided, however, if the Property described in clause
(3) shall be the Pecanland Mall, then Sellers shall provide
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financing to Purchaser in an aggregate amount with respect to all of the
Properties that shall be damaged by a fire, the elements or other casualty
equal to the lesser of $46,000,000 and the amount by which the aggregate of
the mortgage commitments and Mortgages described in clause (3) shall be
greater than the Casualty Threshold. The amount of the PMM Financing to be
provided for a Property shall not exceed the amount of Mortgage encumbering
the Property at the time of the casualty or the amount of the mortgage
commitment that Purchaser shall have received for such Property. Such
financing shall be upon similar terms and conditions of the PMM Financing
described in Section 25 hereof with the following exceptions: (a) the
maturity date of the PMM Financing shall be the second anniversary of the
Closing Date and (b) the interest rate for the first six (6) months shall
be equal to eleven percent (11%) per annum and shall thereafter be equal to
twelve percent (12%) per annum.
(b) In the event Purchaser's equity investors and/or mezzanine lenders
will no longer finance such Property due to the casualty thereon, Sellers
shall have the right, but not the obligation, to increase the amount of PMM
Financing to be provided under Section 9(a) above up to the amount of
funding which such equity investor(s) and/or mezzanine lender(s) was to
have financed with Purchaser. If Seller shall not elect to provide such
additional PMM Financing, Seller shall so notify Purchaser of such fact.
Purchaser must, within five (5) days after receipt of Seller's notice
pursuant to this Section 9(b), elect either to continue with this
transaction without any abatement or adjustment to the Purchase Price or to
not purchase such Property that shall be affected by a casualty. If
Purchaser shall fail to make the foregoing election within such five (5)
day period, Purchaser shall be deemed to have elected to continue with the
transaction without reduction or abatement of the Purchase Price. If
Purchaser shall elect not to purchase a Property, the Purchase Price
pursuant to Section 2(a) hereof shall be reduced by the portion of the
Purchase Price that is allocated to such Property pursuant to Schedule B-1
and the Cash Balance shall be reduced by the portion of the Cash Balance
that is allocated to such Property pursuant to Schedule B-2. In addition,
Sellers shall be required to reimburse Purchaser for certain expenses in
accordance with the provisions of Section 16(d) hereof.
10. Brokers.
(a) Purchaser and Sellers represent to each other that they have not
dealt with any broker or finder in connection with this transaction.
(b) Purchaser hereby agrees to indemnify, defend and hold each Seller
harmless from and against any and all claims, losses, liability, costs and
expenses (including reasonable attorneys' fees) resulting from any claim
that may be made against such Seller by any broker, or any other person
claiming a commission, fee or other compensation by reason of this
transaction, if the same shall arise by, through or on account of any
alleged act of Purchaser or Purchaser's representatives.
(c) Sellers hereby agree to indemnify, defend and hold Purchaser
harmless from and against any and all claims, losses, liability, costs and
expenses (including reasonable attorneys' fees) resulting from any claim
that may be made against Purchaser by any broker, or any other person
claiming a commission, fee or other compensation by reason of this
transaction, if the same shall arise by, through or on account of any
alleged act of a Seller or any Seller's representatives.
(d) The provisions of this Section 10 shall survive the Closing, or if
the Closing does not occur, the termination of this Agreement.
11. Tax Reduction Proceedings. If any Seller has heretofore filed
applications for the reduction of the assessed valuation of its Premises
and/or instituted certiorari proceedings to review such assessed valuations
for any tax years prior to the tax year of Closing, Purchaser acknowledges
and agrees that such Seller shall have sole control of such proceedings,
including the right to withdraw, compromise and/or settle the same or cause
the same to be brought on for trial and to take, conduct, withdraw and/or
settle appeals, and Purchaser hereby consents to such actions as said
Seller may take therein. Prior to the Closing, no Seller shall withdraw,
compromise or settle any
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such proceedings for any fiscal period in which the Proration Date occurs
or any subsequent fiscal period without the prior written consent of
Purchaser, which consent shall not be unreasonably withheld or delayed. Any
refund or tax savings for any year or years prior to the tax year in which
the Proration Date occurs shall belong solely to the applicable Seller. Any
tax savings or refund for the tax year in which the Proration Date occurs
shall be prorated in accordance with Section 6 hereof between the
applicable Seller and Purchaser after deduction of reasonable attorneys'
fees and other reasonable expenses related to the proceeding. Purchaser and
such Seller shall each execute all consents, receipts, instruments and
documents which may reasonably be requested in order to facilitate settling
such proceeding and collecting the amount of any refund or tax savings. If
Seller receives any tax refund or credit, Seller shall, after deducting the
reasonable expenses of the collection thereof, pay to Purchaser, promptly
after the receipt of such funds or credit, the portion, if any, of such
refund or credit to which the past and/or present Tenants of the Building
may be entitled (whether by way of refund or rent credit) under the terms
of their respective Leases or any other agreements). The provisions of this
Section 11 shall survive the Closing.
12. Recording Charges, Transfer Taxes, Mortgage Assumption Costs,
Title Insurance Charges, Survey Costs.
(a) At the Closing, Sellers and Purchaser agree to complete, sign,
acknowledge and file any and all forms required for the transactions
contemplated by this Agreement with respect to transfer taxes and sales
taxes.
(b) Sellers, on the one hand, and Purchaser, on the other hand, shall
each pay at the Closing, to the appropriate recipients and in the manner
required by said recipients, fifty (50%) percent of the following costs
associated with the transactions contemplated by this Agreement, provided,
however, in the event the aggregate amount of such costs shall exceed FOUR
MILLION ($4,000,000) DOLLARS, the Sellers shall, collectively, pay only TWO
MILLION ($2,000,000) DOLLARS in the aggregate and Purchaser shall pay the
entire remaining balance thereof:
(i) transfer or similar taxes;
(ii) sales or similar taxes;
(iii) costs incurred in connection with the assumption of the
Mortgages by Purchaser, including without limitation, consent and
assumption charges, and the attorney's fees and disbursements of
mortgagees' counsel, but excluding, however, (x) any fees, charges or
other costs imposed by the holders of the Mortgages by reason of any
mezzanine or other financing obtained by Purchaser, which shall be
Purchaser's sole responsibility and (y) any extensions and/or break-up
fees due to a lender providing the mezzanine financing to Purchaser or
to a lender providing mortgage financing to Purchaser or consenting to
an assumption of a Mortgage, upon an adjournment of the Closing by
Sellers to a date later than December 29, 2000, shall be handled in
accordance with the provisions of Section 5(b) above;
(iv) if a Mortgage is not assumed by Purchaser, costs incurred in
connection with the prepayment of said Mortgage including, without
limitation, prepayment fees, premiums and charges and the attorney's
fees and disbursements of mortgagee's counsel;
(v) title insurance premiums and costs;
(vi) survey costs; and
(vii) recording charges.
(c) Each party shall be responsible for the payment of its own
counsel's fees and disbursements and Purchaser shall be responsible for the
payment of all costs it incurs with respect to any mezzanine or other
financing that it obtains, except that if Seller, pursuant to Section 5,
Section 9 and/or Section 25 hereof, shall provide any PMM Financing to
Purchaser, Purchaser and such Seller shall each pay one-half (1/2) of the
costs and expenses that such Seller shall incur in connection with
providing such PMM Financing, including, without limitation, all reasonable
attorneys fees and disbursements.
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(d) The obligations arising pursuant to this Section 12 shall survive
the Closing.
13. Representations and Warranties.
(a) Each Seller, as to itself only, represents and warrants to
Purchaser that the following are true and correct as of the date hereof and
shall be true and correct in all material respects as of the Closing Date:
(i) This Agreement, including the provisions of Section 16 hereof,
constitutes the legal, valid and binding obligations of each Seller,
enforceable against each Seller in accordance with its terms. Each
Seller has taken all necessary action to authorize and approve the
execution and delivery of this Agreement and, subject to obtaining the
Shareholder Ratification (as hereinafter defined), will have taken all
necessary actions to sell the Properties to Purchaser, subject to and in
accordance with the terms of this Agreement, and the execution and
delivery of this Agreement and the performance by each Seller of its
obligations hereunder do not and will not (a) conflict with or violate
any law, rule, judgment, regulation, order, writ, injunction or decree
of any Governmental Authority with jurisdiction over such Seller or the
Sale Assets, including, without limitation, the United States of
America, any State in which the Sale Assets are located or any political
subdivision of either of the foregoing, or any decision or ruling of any
arbitrator in an arbitration to which said Seller is a party or by which
such Seller or its Property is bound or affected, or (b) violate or
constitute a default under any material document or instrument to which
such Seller is a party or is bound or any of said Seller's
organizational or governing documents.
(A) 55 Public, North Valley Tech, Southwest Centers and
Printers Alley are each a limited liability company duly
organized and validly existing under the laws of the State of
Delaware;
(B) First Union Madison is a limited liability company duly
organized and validly existing under the laws of the State of
Illinois;
(C) FUR is an unincorporated association in the form of a
business trust duly organized and created under the laws of the
State of Ohio; and
(D) FUCP is a corporation duly formed and validly existing
under the laws of the State of Delaware.
(ii) No Seller is a "foreign person" as defined in the Internal
Revenue Code Section 1445.
(iii) No Seller is a party as debtor to any insolvency or
bankruptcy proceeding or assignment for the benefit of creditors.
(iv) Each Seller has the full right and authority and has obtained
any and all corporate consents and board of trustees approvals required
to enter into this Agreement, and subject to obtaining the Shareholder
Ratification, will have obtained any and all corporate consents and
board of trustee approvals required to consummate or cause to be
consummated the sale and make or cause to be made transfers and
assignments contemplated herein; the persons signing this Agreement on
behalf of each Seller are authorized to do so; and this Agreement and
all of the documents to be delivered by Sellers at the Closing have been
authorized and properly executed and will constitute the valid and
binding obligations of Seller, enforceable against Seller in accordance
with their terms.
(b) Purchaser represents and warrants to Sellers that the following
are true and correct as of the date hereof and shall be true and correct in
all material respects as of the Closing Date:
(i) This Agreement constitutes the legal, valid and binding
obligation of Purchaser, enforceable against Purchaser in accordance
with its terms. Purchaser has taken all necessary action to authorize
and approve the execution and delivery of this Agreement and the
consummation of the transactions contemplated by this Agreement.
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(ii) The execution and delivery of this Agreement and the
performance by Purchaser of its obligations hereunder do not and will
not (a) conflict with or violate any law, rule, judgment, regulation,
order, writ, injunction or decree of any Governmental Authority with
jurisdiction over Purchaser, including, without limitation, the United
States of America, any State in which the Sale Assets are located or any
political subdivision of either of the foregoing, or any decision or
ruling of any arbitrator in an arbitration to which Purchaser is a party
or by which Purchaser is bound or affected, or (b) violate or constitute
a default under any material document or instrument to which Purchaser
is a party or is bound or any of Purchaser's organizational or governing
documents.
(c) The above-stated representations and warranties by Sellers and
Purchaser shall survive the Closing for six (6) months.
14. Deliveries to be made on the Closing Date.
(a) Seller's Documents: Sellers, pursuant to the provisions of this
Agreement, shall deliver or cause to be delivered to Purchaser on the
Closing Date the following instruments, documents and items:
(i) Duly executed and acknowledged bargain and sale deeds without
covenants (or their equivalent for the State in which the applicable
Property shall be located) (the "Deeds").
(ii) Duly executed certifications as to each Seller's non-foreign
status as prescribed in Section 18 hereof, if applicable.
(iii) Any consents of members, partners, shareholders or directors
of any Seller whose consent shall be required to authorize the sale of
the Properties to Purchaser, in form reasonably satisfactory to
Purchaser and the Title Company.
(iv) The Shareholder Ratification and the Board Consent.
(v) Duly executed counterparts of an Assignment and Assumption of
Leases for each Property in the form of Exhibit A annexed hereto and
made a part hereof.
(vi) Duly executed counterparts of an Assignment and Assumption for
each Ground Lease in the form of Exhibit B annexed hereto and made a
part hereof.
(vii) Intentionally Deleted.
(viii) The Leases, Contracts and Licenses affecting the Premises
that are in Sellers' possession (other than those that are held by
Radiant or any managing agent for the Premises and those Licenses that
must remain at the Premises).
(ix) The Estoppel Certificates required pursuant to Section 17
hereof.
(x) If required by Purchaser's mezzanine lender or any other lender
providing financing for a Property, an updated Rent Roll together with a
list of delinquent and unpaid rent, accompanied by an instrument
executed by the applicable Seller, addressed to Purchaser, pursuant to
which said Seller states, without representation or warranty, that it
has no actual knowledge that said Rent Roll is not true and correct in
all material respects as of the Closing Date. In addition, either such
instrument (or a separate instrument) shall contain a provision pursuant
to which Purchaser, acknowledges that it shall have no rights, remedies
or recourse of any nature whatsoever against Seller by reason of the
foregoing statement by Seller not being true, correct or complete in any
respect. In the event that Purchaser's mezzanine lender or any other
lender providing financing for a Property requires a certified updated
Rent Roll, as described above in this Section 14(a)(x), pursuant to
which Seller shall represent and warrant that is has no actual knowledge
that said Rent Roll is not true and correct in all material respects as
of the Closing Date, Purchaser shall cause to be provided to the Seller
of such Property a complete and unconditional indemnification from
Indemnitor, in form reasonably
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acceptable to Seller, against all liability that Seller shall incur on
account of such Seller having delivered such representation and
warranty.
(xi) A letter to the tenants of the Premises in the form annexed
hereto as Exhibit C.
(xii) Duly executed counterparts of all transfer tax and sales tax
returns required to be signed by Sellers.
(xiii) If the Closing shall not be a "New York style" closing, each
Seller shall deliver an indemnification to the Title Company pursuant to
which Seller shall indemnify the Title Company against any liens that
may arise from and after the Closing Date until the recordation of the
Deeds but only if, and to the extent that, such liens shall arise on
account of matters which such Seller pursuant to Section 6 hereof shall
be required to pay for. Such other documents, instruments and deliveries
as are otherwise required by this Agreement or required to record the
Deeds or reasonably required by Purchaser in order to consummate the
transactions contemplated hereby, provided that any such additional
documents, instruments and deliveries shall not result in any Seller
having any greater liabilities than are expressly provided herein.
(xiv) With respect to any security deposits which are other than
cash or that are in the form of a letter of credit (collectively, the
"Non-Cash Security Deposits"), appropriate duly executed instruments of
transfer or assignment of such Non-Cash Security Deposits which are
required to establish Purchaser as the new beneficiary thereunder. With
respect to any Non-Cash Security Deposit in the form of a letter of
credit, if such letter of credit shall not, pursuant to its terms, be
assignable, the applicable Seller shall cooperate with Purchaser to
obtain a replacement letter of credit with respect thereto in favor of
Purchaser, and, if a replacement letter of credit is not obtained and if
requested by Purchaser following the Closing, said Seller shall draw on
such letter of credit if the tenant for whom the same was given as a
security deposit shall default under its Lease and Seller shall remit
the proceeds thereof to Purchaser. Purchaser agrees to indemnify, defend
and hold said Seller harmless from and against any and all costs, loss,
damages and expenses of any kind or nature whatsoever (including
reasonable attorneys' fees and costs) but excluding consequential
damages arising out of or resulting from such Seller's presenting any
such letter of credit for payment in accordance with Purchaser's
request. The foregoing provisions shall survive the Closing.
(xv) Duly executed counterparts of each Assignment and Assumption
of Contracts and Permits, in the form of Exhibit D annexed hereto and
made a part hereof.
(xvi) A duly executed counterpart of a Blanket Bill of Sale and
Assignment in the form of Exhibit E annexed hereto and made a part
hereof pertaining to the Personalty, it being agreed that for purposes
of this Agreement, the Personalty shall be deemed to have no value.
(xvii) The Club Associates Note together with an allonge thereto
endorsing the same to the order of Purchaser. A duly executed
assignment, without recourse, warranty or representations, of the Club
Associates Mortgage together with an assignment, without recourse,
warranty or representations, of all of the Club Associates Collateral
Documents in form and substance reasonably satisfactory to Purchaser.
Originals of the Club Associates Note, the Club Associates Mortgage and
the Club Associates Collateral Documents shall be delivered to Purchaser
at Closing.
(xviii) Sellers shall furnish at Closing any and all information
that may be necessary or appropriate to enable the "real estate broker"
or "real estate reporting person," within the meaning of Section 6045(e)
of the Internal Revenue Code and the regulations promulgated thereunder,
to comply with the reporting requirement of Section 6045(e) of the
Internal Revenue Code.
(xix) [Intentionally deleted.]
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(xx) A duly executed counterpart of a modification to the asset
management agreement dated March , 2000, as amended, between FUR and
Radiant Partners, LLC ("Asset Management Agreement") in the form of
Exhibit F annexed hereto and made a part hereof (the "Asset Management
Agreement Modification").
(xxi) Seller shall obtain and deliver to Purchaser at Closing all
local customary documents required in connection with a sale of a
Property, including such tax and other documents as may be necessary to
record the applicable Deed or Assignment and Assumption of Ground Lease.
To the extent any sums are required to be withheld or paid in connection
with such sale, Purchaser is authorized to withhold from the Purchase
Price the amount of tax and recording charges required to be paid,
subject to Section 12(b) hereof, which apportioned amount shall be
applied as necessary to pay the appropriate amounts and to record the
subject deed. Sellers and Purchaser shall jointly retain local counsel
in the various States in which the Property shall be located, to advise
each party as to how to comply with the provisions of this Subsection
14(a)(xxi). The cost of such local counsel shall be borne equally
between Purchaser, on the one hand, and Sellers on the other.
(b) Purchaser's Documents: Purchaser, pursuant to the provisions of
this Agreement, shall deliver or cause to be delivered to Seller on the
Closing Date the following instruments, documents and items:
(i) Duly executed counterparts of each Assignment and Assumption of
Leases.
(ii) Duly executed counterparts of each Blanket Bill of Sale and
Assignment.
(iii) Duly executed counterparts of all transfer tax and sales tax
returns required to be signed by Purchaser.
(iv) A consent or resolution of the members, partners, directors and
shareholders, as applicable, of Purchaser authorizing the purchase of the
Sale Assets, in a form reasonably satisfactory to Sellers.
(v) The Mortgage Assumption Instrument (as hereinafter defined) in
recordable form.
(vi) Such other documents, instruments and deliveries as are otherwise
required by this Agreement or required to record the Mortgage Assumption
Instrument or reasonably required by Sellers in order to consummate the
transactions contemplated hereby.
(vii) Duly executed counterparts of each Assignment and Assumption of
Contracts and Permits.
(viii) A duly executed counterpart of the Asset Management Agreement
Modification.
(ix) Intentionally Deleted.
(x) A duly executed counterpart of the Assignment and Assumption of
Ground Lease for each of the Ground Leases.
(xi) In the event that Southwest Centers shall have executed a
contract of sale prior to the Closing to sell any portion of the Pecanland
Mall Adjacent Land or FUR shall have executed a contract of sale prior to
the Closing to sell the Huntington Garage ("Huntington Contract"), and the
sale contemplated thereby shall not have closed prior to the Closing, then
Southwest Centers or FUR, as applicable, shall execute and deliver to
Purchaser at Closing an instrument, in form reasonably satisfactory to
Southwest Centers or FUR, as the case may be, pursuant to which Southwest
Centers or FUR, as applicable, shall assign such contract to Purchaser and
Purchaser shall execute and deliver to Southwest Centers or FUR, as
applicable, an instrument, in form reasonably satisfactory to Southwest
Centers or FUR, as the case may be, pursuant to which Purchaser shall
assume the obligations of Southwest Centers or FUR under such contract.
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(xii) If the sale of any portion of the Pecanland Mall Adjacent Land
or the Huntington Garage shall close prior to the Closing Date, the entity
which shall own one hundred (100%) percent of the beneficial interests in
and to all of the Properties, as of the Closing Date, and has a net worth
of at least Forty Million ($40,000,000) Dollars (the "Indemnitor") shall
deliver to FUR an agreement in form and substance reasonably satisfactory
to FUR, pursuant to which such parties shall indemnify and hold FUR
harmless from and against any loss, cost, damage, claim or expense which
FUR shall suffer or incur on account of any matter under the Huntington
Contract (provided such obligations of FUR which survive the closing of the
Huntington Garage sale are otherwise customary and standard obligations in
connection with the sale of a garage property) or the contract for the sale
of the Pecanland Mall Adjacent Land which shall survive the closing of the
sale of the Huntington Garage and/or the Pecanland Mall Adjacent Land.
(xiii) Evidence, reasonably satisfactory to Sellers, that Purchaser
and/or a Permitted Assignee (as such term is defined in Section 35 hereof)
has a net worth of at least $40,000,000.
15. Default by Purchaser or Sellers.
(a) If (i) Purchaser shall default in the payment of the Purchase
Price, (ii) Purchaser shall otherwise default in the performance of any of
the other terms and provisions of this Agreement on the part of Purchaser
to be performed, and the Closing does not occur as a result thereof, and
such default shall continue for five (5) business days after written notice
to Purchaser (provided, however, notwithstanding the foregoing, time shall
be of the essence with respect to Purchaser's obligation to pay the First
Additional Deposit in accordance with Subsection 2(a)(ii) hereof, the
Second Additional Deposit in accordance with Subsection 2(a)(iii) hereof
and to close hereunder on such date set for Closing as to which TIME SHALL
BE OF THE ESSENCE pursuant to Section 5 hereof), (iii) Purchaser shall
default, beyond the expiration of any applicable notice and cure period,
under the terms of the Long Street Contract, or (iv) (A) Purchaser shall
commence any case, proceeding or other action under any laws relating to
bankruptcy, insolvency, reorganization or relief of debtors, or seeks to
have an order for relief entered with respect to it, or seeks to be
adjudicated a bankrupt or insolvent, or seeks reorganization, arrangement,
adjustment, liquidation, dissolution, composition or other relief with
respect to it or its debts, or seeks the appointment of a receiver,
trustee, custodian or other similar official for it or all or any
substantial part of its property, or (B) Purchaser otherwise takes any
action indicating its consent to, approval of, or acquiescence in, or in
furtherance of, any of the acts described in clause (iv)(A), above, then in
any of such cases, Purchaser shall be deemed to be in default hereunder.
Purchaser acknowledges that if Purchaser shall default under this Agreement
as aforesaid, Sellers will suffer substantial adverse financial
consequences as a result thereof. Accordingly, Sellers, as their sole and
absolute remedy against Purchaser, shall have the right to retain the
Deposit and which Deposit shall constitute full and complete liquidated
damages, it being agreed that Sellers' damages are difficult, if not
impossible, to ascertain, and thereafter Purchaser and Sellers shall have
no further rights or obligations under this Agreement, except those
expressly provided herein to survive the termination of this Agreement.
Notwithstanding the foregoing, in the event Purchaser's default is the
failure to pay the First Additional Deposit when required by Subsection
2(a)(ii) hereof, Escrowee shall return the Initial Deposit in accordance
with the terms of Subsection 2(a)(vi)(A) or Subsection 2(a)(vi)(B) hereof,
as applicable. In the event there is more than one Purchaser (by virtue of
a permitted assignment) and at least one but less than all of the
Purchasers have committed a default or other act described in clauses (i),
(ii), (iii) or (iv) of this Subsection 15(a), Sellers shall nonetheless be
entitled to terminate this Agreement with respect to all Purchasers and
retain the entire Deposit.
(b) Except as provided in Section 16 hereof, and subject to the
provisions thereof, (i) if any Seller shall default in conveying such
Seller's Property to Purchaser pursuant to the terms hereof on the Closing
Date or (ii) if any Seller shall default hereunder for any other reason and
such default shall continue for five (5) business days after written notice
to such Seller, Purchaser may, as its sole remedy, elect to either (x)
terminate this Agreement, and direct the Escrowee to return the Deposit to
Purchaser and Purchaser and Sellers shall thereafter have no further rights
or
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obligations under the Agreement, except those expressly provided herein to
survive the termination of this Agreement, or (y) prosecute an action for
specific performance of this Agreement by such Seller or an action for
damages, but in no event shall Purchaser seek, or be entitled to collect,
damages against Sellers exceeding Ten Million ($10,000,000) Dollars in the
aggregate. Any such action for specific performance must be commenced
against Sellers within ninety (90) days after the date that Sellers shall
default hereunder, it being understood that if Purchaser shall fail to
commence an action for specific performance within such period of time,
Purchaser shall be deemed to have waived its right to commence an action
for specific performance of this Agreement. Notwithstanding anything
hereinabove in this Section 15(b) to the contrary, if FUR shall default,
beyond the expiration of any applicable notice and cure period, under the
terms of the Long Street Contract, Purchaser may, as its sole remedy,
prosecute an action for specific performance of this Agreement by FUR,
provided all conditions to closing hereunder have been satisfied and this
Agreement has not been terminated pursuant to the terms hereof.
16. Termination and Expense Reimbursement.
(a) The obligations of Sellers to transfer the Sale Assets pursuant to
this Agreement are contingent upon FUR, at FUR's sole cost and expense,
obtaining approval for the sale contemplated hereby and any amendments to
the organizational or governing documents of FUR necessary to consummate
the sale contemplated hereby from shareholders of FUR holding the requisite
number of shares in accordance with the organizational and governing
documents of FUR (collectively, the "Shareholder Ratification") and this
Agreement shall terminate, (i) if at a meeting called for the purpose of
voting on such sale and such amendments, the shareholders of FUR do not
approve the sale contemplated hereby and all of such amendments, upon the
date of such meeting, (ii) at the option of FUR, upon the date FUR delivers
notice of termination to Purchaser, if such meeting of the shareholders of
FUR has not been held on or prior to the date (the "Shareholder Approval
Deadline") which is three business days prior to the date as to which time
is of the essence with respect to Purchaser's obligation to close pursuant
to Section 5, (iii) at the option of Purchaser, upon the date Purchaser
delivers notice of termination to FUR, if such meeting of the shareholders
of FUR has not been held on or prior to the date which is three business
days prior to the date as to which time is of the essence with respect to
Sellers' obligation to close pursuant to Section 5, or (iv) at the option
of FUR, to be exercised prior to the Shareholder Ratification, upon the
date FUR delivers notice of termination to Purchaser, if the Board of
Trustees of FUR, or a committee thereof, determines, after consultation
with outside legal counsel, that it has a fiduciary duty under applicable
law to accept, approve or recommend an Alternative Proposal (as defined in
Section 24 below); and thereupon FUR shall promptly cause the Deposit to be
returned to Purchaser and neither party shall have any further obligation
to the other party under this Agreement, other than the obligations of FUR
under this Section 16 and except for those provisions which are expressly
stated herein to survive termination of this Agreement. Sellers make no
representation or warranty herein that the Shareholder Ratification shall
be obtained. The Board of Trustees of FUR shall recommend to the
shareholders of FUR that they approve the sale contemplated hereby and any
amendments to the organizational or governing documents of FUR necessary to
consummate the sale contemplated hereby, unless the Board of Trustees of
FUR, or a committee thereof, determines, after consultation with outside
legal counsel, that it has a fiduciary duty under applicable law to accept,
approve or recommend an Alternative Proposal (as defined in Section 24
below).
(b) If this Agreement is terminated pursuant to Section 5(c), Section
16(a)(i), Section 16(a)(ii), Section 16(a)(iv), Section 18(b) or Section
20(b)(v), then Sellers shall be deemed unable to perform; provided that in
lieu of any other remedies set forth in this Agreement (which Purchaser
shall not be entitled to) except for the additional remedies, if any, set
forth in Sections 16(c) and 16(d)(ii), FUR shall, in addition to causing
the Deposit to be returned to Purchaser, reimburse Purchaser, as
Purchaser's sole and exclusive remedy (subject to the additional remedy set
forth in Section 16(c)), only for up to an amount equal to the Reasonable
Expense Cap (as defined below) of documented out-of-pocket fees and
expenses actually and reasonably incurred by Purchaser in
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connection with this Agreement and the sale contemplated hereby
(collectively, "Reasonable Expenses"), provided that such Reasonable
Expenses shall not include, and the term Reasonable Expenses shall not
include, any fees or expenses paid or payable, directly or indirectly, to
Purchaser's equity investors or any of such equity investors' respective
lenders, equity investors or affiliates. For the avoidance of doubt,
subject to the Reasonable Expense Cap, the term Reasonable Expenses shall
include, but not be limited to, the commitment fees paid or payable to
Purchaser's lenders pursuant to binding debt commitments and all Reasonable
Expenses in connection therewith. The "Reasonable Expense Cap" shall be an
amount equal to (i) the sum of (a) $3 million, (b) an additional $250,000
if the Sellers adjourn the Closing pursuant to Section 5(a) to a date later
than December 29, 2000, and (c) an additional $250,000 if the Sellers
adjourn the Closing pursuant to Section 5(a) to a date later than February
28, 2001, less (ii) (a) the amount of any fees paid, directly or
indirectly, to Purchaser's lenders by Sellers pursuant to Section 5, (b) if
Sellers shall elect to provide (or cause another party to provide)
financing to Purchaser pursuant to Section 5(b), the amount of any fees
which Sellers would otherwise have been required to pay, directly or
indirectly, to Purchaser's lenders had Sellers elected that Purchaser pay
extension fees to Purchaser's lenders, and (c) any amounts reimbursed
pursuant to Section 16(d)(ii).
(c) If this Agreement shall have been terminated pursuant to Section
16(a)(iv), then FUR, in addition to the payments that shall be required to
be made pursuant to Section 16(b) above, shall reimburse Purchaser (or pay
directly to Purchaser's equity investors at their request), up to an
additional $2 million of any previously unreimbursed documented
out-of-pocket fees and expenses (not constituting Reasonable Expenses)
actually and reasonably incurred by Purchaser and paid or payable to
Purchaser's equity investors pursuant to the binding equity commitments,
copies of which have been provided to Sellers.
(d) (i) If this Agreement is terminated pursuant to Section 4(c) (and
not rendered null and void in accordance with terms of Section 4(c)),
Section 5(a) and Section 16(a)(iii), then Sellers shall be deemed unable
to perform; provided that in lieu of any other remedies set forth in
this Agreement (which Purchaser shall not be entitled to), FUR shall, in
addition to causing the Deposit to be returned to Purchaser, reimburse
Purchaser, as Purchaser's sole and exclusive remedy, only for one-half
of all Reasonable Expenses; provided that such reimbursement shall not
exceed one-half of the Reasonable Expense Cap.
(ii) If Purchaser shall elect not to purchase a particular Property
or Properties pursuant to Section 4(a), Section 4(c), Section 8(d),
Section 9(b) and Section 17 hereof, and the Purchase Price is reduced by
the portion of the Purchase Price that is allocated to such
Property(ies), as set forth in Section 4(a), Section 4(c), Section 8(d),
Section 9(b) and Section 17; then in lieu of any other remedies set
forth in this Agreement (which Purchaser shall not be entitled to), FUR
shall reimburse Purchaser, as Purchaser's sole and exclusive remedy,
only for those Reasonable Expenses allocated to such Property, to be set
forth on Schedule N, which Schedule N shall be reasonably agreed to by
Sellers and Purchaser by a date no later than September 29, 2000, and
shall be attached hereto and made a part hereof; provided that such
reimbursements shall not exceed, in the aggregate for all the
Properties, one-half of the Reasonable Expense Cap.
(e) Purchaser hereby covenants and agrees that no amounts reimbursed
to Purchaser (or paid directly to Purchaser's equity investors) pursuant to
Section 16(b), 16(c) or 16(d) shall be paid, directly or indirectly, to or
for the benefit of Dan Friedman, David Schonberger or Anne Zahner or any
entity in which any of them has an interest (other than actual documented
third party expenses which have been paid by any of them). Any and all
Reasonable Expenses or other amounts reimbursable pursuant to Section
16(b), Section 16(c) or Section 16(d) shall be paid promptly and in no
event later than 30 days after the termination of this Agreement.
(f) For the avoidance of doubt, in the case of a default occurring
after the date of obtaining the Shareholder Ratification, unless and until
this Agreement shall have been terminated pursuant to Section 4(a), Section
4(c) (and not rendered null and void in accordance with the terms of
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Section 4(c)), Section 5(a), Section 5(c), Section 16(a), Section 18(b) and
Section 20(b)(v), the parties shall be entitled to pursue the remedies
provided for in Section 15.
17. Estoppel Certificates.
As to (a) each Property that is not a parking lot or a parking garage,
the Seller of each applicable Property shall use commercially reasonable
efforts to deliver to Purchaser lease estoppel certificates (the "Tenant
Estoppel Certificates"), in a form reasonably required by the lender that
shall be providing mortgage financing for such Property (or in such other
form or containing such other information as such tenant's lease shall
require such tenant to provide), from (i) all tenants occupying 5,000
square feet of space or more and (ii) from tenants under leases
constituting not less than 80% of the balance of the occupied square
footage of such Property, (b) the North Valley Tech Center Ground Lease,
the Two Rivers Business Center Ground Lease and the Huntington Garage
Ground Lease, North Valley Tech and FUR shall use commercially reasonable
efforts to deliver to Purchaser an estoppel certificate from the landlord
under the Ground Leases, in a form reasonably required by the lender that
shall be providing mortgage financing for such Property (or in such other
form or containing such other information as the applicable Ground Lease
shall require such landlord to provide) and (c) each Property that is a
parking lot or a parking garage that is net leased to a tenant thereof,
such Seller shall use commercially reasonable efforts to deliver to
Purchaser a Tenant Estoppel Certificate from the tenant under such Lease,
in a form reasonably required by the lender that shall be providing
financing for such Property (or in such other form or containing such other
information as such tenant's lease shall require such tenant to provide).
Notwithstanding the immediately preceding sentence to the contrary, any
estoppel certificate that shall be delivered to Purchaser from a tenant
which is not in the form reasonably required by the lender that shall be
providing financing for such Property (or in such other form or containing
such other information as such tenant's lease shall require such tenant to
provide), shall qualify as an acceptable estoppel certificate provided that
the Tenant's Estoppel Certificates confirms the material terms set forth in
the lender's form of Tenant Estoppel Certificate. If Seller shall satisfy
the condition described in clause (a)(i), clause (a)(ii), clause (b) and
clause (c) above but Seller, on or before the Closing, is unable to deliver
Tenant Estoppel Certificates from each of the tenants of such Property, the
applicable Seller shall deliver to Purchaser, at Closing, a certificate
("Seller's Certificate"), executed by such Seller, whereby such Seller
shall state, to the best of its knowledge, for the remaining tenants, the
following: (a) the rent and other charges payable by each tenant under its
respective lease and the amount, if any, of the security deposit(s) held by
Seller; (b) the term of the respective lease(s) and (c) that the respective
tenant is not in default under any of the terms of its lease or if in
default the nature of such default. The Seller's Certificate shall survive
the Closing for a period of six (6) months. A Seller's Certificate with
respect to any tenant shall expire and be of no force and effect upon
Purchaser's receipt of a Tenant Estoppel Certificate consistent with the
information set forth in the Seller's Certificate. In addition, Seller
shall not have any liability on account of any statement in a Seller's
Estoppel Certificate which shall be untrue in any material respect if
Purchaser or Radiant shall know or, in connection with its management of
the Properties, should have known that such statement was untrue. If a
Seller for a particular Property shall fail to deliver the minimum number
of Tenant Estoppel Certificates that shall be required to be delivered
pursuant to clause (a)(i) or clause (a)(ii) above or North Valley Tech or
FUR shall fail to deliver the ground lease estoppel certificates that shall
be required to be delivered pursuant to clause (b) above or the Sellers
shall fail to deliver the Tenant Estoppel Certificate that shall be
required to be delivered pursuant to clause (c) above and, as a result
thereof the lender providing the mortgage financing for such Property or
the lender providing mezzanine financing shall elect not to provide
financing for such Property, in such case FUR shall have the right to elect
to provide (or to cause another party to provide) to Purchaser the
financing that such lender was otherwise prepared to provide to Purchaser,
it being agreed that if FUR shall make such election, such loan shall be
provided upon the same or better terms to Purchaser than those terms that
were offered by Purchaser's mezzanine lender or mortgage lender. If Seller
shall not elect to provide such financing, in such case, Purchaser, as its
sole and absolute remedy, shall have the right to elect not to
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purchase such Property. If Purchaser shall make such election, the Purchase
Price pursuant to Section 2(a) shall be reduced by the portion of the
Purchase Price that is allocated to such Property pursuant to Schedule B-1
and the Cash Balance shall be reduced by the portion of the Cash Balance
that is allocated to such Property pursuant to Schedule B-2. In addition,
the Seller of the Property that Purchaser shall elect not to purchase
pursuant to this Section 17 shall reimburse Purchaser for certain expenses
in accordance with the provisions of Section 16(d) hereof.
18. Governmental Compliance.
(a) FIRPTA Compliance. Sellers shall comply with the provisions of the
Foreign Investment in Real Property Tax Act, Internal Revenue Code of 1986,
as amended, Section 1445, as the same may from time to time be amended, or
any successor or similar law (collectively, the "FIRPTA Code"). On the
Closing Date, Sellers shall deliver to Purchaser certifications as to each
Seller's non-foreign status which complies with the provisions of Section
1445(b)(2) of the FIRPTA Code, and shall comply with any temporary or final
regulations promulgated with respect thereto and any relevant revenue
procedures or other officially published announcements of the Internal
Revenue Service of the U.S. Department of the Treasury in connection
therewith. If any Seller shall fail to deliver the foregoing certification
to Purchaser at the Closing, Purchaser shall have the right to withhold ten
percent (10%) of the portion of the Purchase Price allocated to said
Seller's property and apply the same in accordance with the requirements of
the FIRPTA Code.
(b) HSR Compliance. Sellers and Purchaser will make as promptly as
practicable all filings necessary, if any, under the HSR Act (as
hereinafter defined) and other applicable federal, state and local
antitrust, competition and other similar laws (collectively, the "Antitrust
Laws") in order to obtain any required regulatory approvals, clearance or
expirations of waiting periods (collectively, "Antitrust Clearance") in
connection with the transactions contemplated by this Agreement. The term
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended. Subject to the limitations contained in the last sentence
of this Subsection 18(b), Sellers and Purchaser shall each use their
reasonable best efforts to resolve such objections, if any, as any
governmental or regulatory authorities with jurisdiction over the
enforcement of any Antitrust Laws may assert under any such Antitrust Laws
with respect to the transactions contemplated by this Agreement. The
parties shall consult with each other when dealing with such authorities
and before submitting any application or other written communication to any
such authority.
19. Merger. Except as otherwise expressly provided to the contrary in
this Agreement, no representations, warranties, covenants or other
obligations of Sellers set forth in this Agreement shall survive the
Closing, and no action based thereon shall be commenced after the Closing.
The delivery and acceptance of the Deeds at the Closing, without the
simultaneous execution and delivery of a specific agreement which by its
terms shall survive the Closing, shall be deemed to constitute full
compliance by the parties with all of the terms, conditions and covenants
of this Agreement on their part to be performed except for those terms,
conditions and covenants which this Agreement expressly provides will be
performed after the Closing.
20. Conditions to Closing.
(a) Conditions to Purchaser's Obligation to Close. Purchaser's
obligation to close hereunder shall be subject to the following conditions:
(i) Sellers shall have performed, satisfied and complied with, or
tendered performance of, in all material respects, all of the terms,
conditions and covenants required by this Agreement to be performed or
complied with by Sellers on or before the Closing Date and FUR, the
seller under the Long Street Contract, shall have performed, satisfied
and complied with, or tendered performance of, in all material respects,
all of the covenants, agreements and conditions required by the Long
Street Contract. For purposes of this Agreement, the Long Street
Contract shall mean that certain Contract of Sale between FUR, as
seller, and Purchaser, as purchaser, dated as of the date hereof,
respecting the purchase of that certain property known as Long
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Street Garage, located in Columbus, Ohio. Except if the Long Street
Contract is terminated pursuant to the terms thereof, Purchaser shall
have no obligation to close hereunder unless FUR, as seller under the
Long Street Contract, shall simultaneously close herewith.
Notwithstanding anything to the contrary in the foregoing sentence or
any other provision of this Agreement, if for any reason FUR is unable
to convey to Purchaser its right, title and interest in and to the Club
Associates Loan Documents in accordance with the terms of this
Agreement, then the Club Associates Loan Documents shall no longer be
deemed to be a Sale Asset; however Purchaser shall nevertheless be
obligated to close hereunder on the acquisition of the other Sale
Assets, in which case the Purchase Price and the Cash Balance due at the
Closing shall be reduced by the outstanding principal balance of the
Club Associates Note as of the Closing Date.
(ii) All representations and warranties of Sellers in this
Agreement shall be true and correct in all material respects as of the
date of this Agreement and as of the Closing Date.
(iii) Any and all Antitrust Clearance required in connection with
the transactions contemplated by this Agreement shall have been
obtained.
(iv) Seller shall have obtained the Shareholder Ratification
pursuant to Section 16(a) hereof and the Board Consent.
(v) The management of the Properties by Radiant shall be
undisturbed through the Closing Date, except as may be permitted under
the Asset Management Agreement by reason of Radiant's default
thereunder.
(vi) No party other than Purchaser shall have any conditional or
unconditional right and/or option to purchase any Property or have any
rights of first refusal for any Property.
The foregoing conditions under this Subsection 20(a), except for the
condition in clauses (iii) and (iv), are for the benefit of Purchaser only,
and Purchaser may, in its sole discretion, waive any or all of such
conditions and close title under this Agreement without any abatement of,
or credit against, the Purchase Price.
(b) Conditions to Sellers' Obligation to Close. Sellers' obligation to
close hereunder shall be subject to the following conditions:
(i) Purchaser shall have performed, satisfied and complied with, or
tendered performance of, in all material respects, all of the terms,
conditions and covenants required by this Agreement and the Long Street
Contract to be performed or complied with by Purchaser on or before the
Closing Date. Seller shall have no obligations to close hereunder unless
Purchaser closes simultaneously herewith on the Long Street Contract,
unless by its term the Long Street Contract has been terminated.
(ii) All representations and warranties of Purchaser in this
Agreement shall be true and correct in all material respects as of the
date of this Agreement, and as of the Closing Date.
(iii) If a holder of a Mortgage shall permit Purchaser to purchase
a Property subject to the lien of such Mortgage, Purchaser and the
holder of such Mortgage shall have executed and delivered at the
Closing, in recordable form and otherwise in a form satisfactory to
Sellers, an instrument pursuant to which such Purchaser shall assume the
applicable Seller's liabilities and obligations, as mortgagor, under
such Mortgage (each a "Mortgage Assumption Instrument") and an
instrument ("Release") pursuant to which the applicable Seller, as
mortgagor, all principals and affiliates of such Seller (including,
without limitation, FUR), all guarantors and indemnitors under
guaranties and indemnities of said Seller's liabilities or obligations
under such Mortgage (collectively, the "Seller Parties") shall be fully
and completely unconditionally released from all liability and
obligations under said Mortgage, guaranties and indemnities. In the
event that Purchaser is unable to obtain a Release with respect to a
Property, Purchaser shall cause Indemnitor to provide to the Seller of
such Property and the other Seller
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Parties (a) a complete and unconditional indemnification, in a form
reasonably acceptable to such Seller and the other Seller Parties,
against all liability and obligations under said mortgage, guaranties
and indemnities which may be asserted against any of the Seller Parties,
other than with respect to those obligations of such Seller Parties
which shall have accrued prior to the Proration Date and which pursuant
to the terms of such Mortgage shall expressly survive the repayment of
such Mortgage and (b) if applicable, that certain indemnification
referred to in Section 2(c) above.
(iv) Any and all Antitrust Clearance required in connection with
the transactions contemplated by this Agreement shall have been
obtained.
(v) No judgment, injunction, order, decree or action by an federal,
state or local government, court, or administrative or regulatory agency
of competent authority preventing the sale contemplated hereby shall
have become final and unappealable or shall be in effect as of the date
as to which time is of the essence with respect to Purchaser's
obligation to close pursuant to Section 5(a), it being understood that
if this condition shall not be satisfied at Closing, this Agreement
shall terminate and be null, void and of no further force and effect and
FUR shall reimburse Purchaser for certain of its expenses in accordance
with the provisions of Section 16(b) hereof.
The foregoing conditions under this Subsection 20(b), except for the
condition in clause (iv), are for the benefit of Sellers only, and Sellers may,
in their sole discretion, waive any or all of such conditions and close title
under this Agreement without any increase in the Purchase Price.
21. Prior to Closing.
(a) Insurance. Until Closing, Sellers shall maintain all of the
insurance policies described on Schedule L-1 in full force and effect or
shall obtain replacement policies that shall provide substantially
equivalent coverage.
(b) Operation. Until Closing, each Seller shall operate and maintain
its Property substantially in accordance with its current practices with
respect to the operation and maintenance of such Property and shall not
terminate the Asset Management Agreement expect as a result of Radiant's
default, beyond the expiration of all applicable notice and cure periods
thereunder. The parties acknowledge that to the extent not inconsistent
with (i) the Asset Management Agreement, including, without limitation, the
oversight powers of the Board of Trustees of FUR, or (ii) the fiduciary
duties and other obligations of the principals of Radiant Partners, LLC to
FUR as officers and/or directors of FUR, Radiant Partners, LLC shall
exercise its rights and obligations under the Asset Management Agreement
(x) consistent with the provisions of any asset management agreement to be
entered into by Radiant Partners, LLC or its affiliates with the Purchaser
(the "Purchaser Management Agreement"); (y) subject to Purchaser's
supervision (in particular such supervision as provided for under the
Purchaser Management Agreement); and (z) without limiting the generality of
the foregoing, by routinely consulting with Purchaser as to its activities
under the Asset Management Agreement and reasonably taking the views of
Purchaser into account.
(c) New Contracts. Between the date hereof and the Closing, each
Seller will enter into only those Contracts which said Seller reasonably
determines are necessary to carry out its obligations under Subsection
21(b) and which shall be cancellable on not more than thirty (30) days'
written notice (without penalty, unless said Seller agrees to pay any such
termination penalty at Closing).
(d) New Leases; Lease Extensions. Between the date hereof and the
Closing Date, Sellers will not execute any new Leases or amend, terminate
(except upon a monetary default by the tenant thereunder excluding any
anchor tenant of a shopping center Property for which Purchasers consent
shall be required) or accept the surrender of any existing tenancies or
approve any subleases without the prior written consent of Purchaser, which
consent shall not be unreasonably withheld, conditioned or delayed,
provided, however, Purchaser's consent shall be deemed to have been given
if Purchaser does not respond to a Seller within five (5) business days
after Purchaser's
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receipt of written notice from such Seller requesting Purchaser's consent
to a matter that is the subject of the provisions of this Section 21(d).
Between the date hereof and the Closing Date, Sellers will not modify,
amend or terminate any of the Ground Leases without the prior written
consent of Purchaser, which consent shall not be unreasonably withheld,
conditioned or delayed.
(e) Employees. From and after the date hereof through and including
the Closing or earlier termination of this Agreement, Sellers shall not
hire any Employees without the prior written consent of Purchaser. Each
Seller shall notify Purchaser reasonably promptly if Seller hires any
Employees.
(f) Contracts. At the Closing, Purchaser shall assume the Contracts.
As used herein, the term "Contracts" shall include any new contracts
entered into from and after the date hereof. Sellers shall notify in
writing the vendors under those Contract(s) which Purchaser has not agreed
to assume as of Closing that, provided that Closing occurs hereunder, the
applicable Seller shall terminate such Contracts, effective as of the
Closing Date; provided however, if any such non-assumed Contract does not
permit Sellers to terminate same prior to Closing, Purchaser shall be
required at Closing to assume all obligations thereunder until the
effective date of the termination.
(g) Sellers shall not, between the date hereof and the Closing Date,
amend, modify, extend, renew, replace, supplement or consolidate any of the
Mortgages without the consent of Purchaser.
(h) FUR shall not, between the date hereof and the Closing Date,
amend, modify or extend the Club Associates Note, the Club Associates
Mortgage or the Club Associates Collateral Documents in any manner or
accept any prepayment of funds due thereunder.
(i) Sellers shall not initiate, consent to or approve any action with
respect to zoning, or, unless required by law, any other governmental rules
or regulations applicable to any part of the Properties.
(j) Seller(s) maintains real estate environmental liability insurance,
as more fully described on Schedule L-2. Notwithstanding the foregoing,
Purchaser shall assume responsibility for the amount of any deductible
applicable to the environmental liability insurance policies. Purchaser and
each Seller agree to cooperate with the other and to perform, execute and
deliver, such documents and instruments as may be reasonably necessary in
connection with any claim or other matter arising under or relating to any
of the environmental insurance policies. The provisions of this Subsection
21(j) shall survive the closing.
Notwithstanding anything in this Agreement to the contrary, including this
Section 21, if Radiant shall take any action with respect to a Property, whether
or not such action shall be permitted pursuant to the terms of the Asset
Management Agreement or Radiant shall fail to take an action which Radiant shall
be required to take pursuant to the terms of the Asset Management Agreement, in
such case, Purchaser shall be deemed to have consented to all actions that
Radiant shall have taken or shall have failed to take and in no event shall
Sellers be deemed to be in default under this Agreement on account thereof.
22. Shareholder Lawsuits. To the extent of claims by shareholders of
FUR against the Purchaser, to the fullest extent allowed by law FUR hereby
indemnifies Purchaser from and against any and all damages, liability,
loss, cost and expense (including, without limitation, reasonable
attorney's fees and disbursements) incurred in connection with such claims;
provided, that the foregoing indemnification shall not extend, directly or
indirectly, to Radiant Partners LLC or its principals, except that nothing
in this Agreement shall modify any pre-existing obligation of FUR to
indemnify Radiant Partners LLC or its principals. To effect the
indemnification provided herein, FUR covenants and agrees that it has and
shall maintain a net worth of at least $30,000,000 through the later of (A)
30 days after the Closing Date or (B) the resolution, after all appeals, of
claims by shareholders of FUR against Purchaser. The provisions of this
Section 22 shall survive the Closing of title.
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23. Deposit.
(a) The Deposit shall be deposited with the Escrowee and shall be held
in escrow pursuant to the terms of this Agreement. Escrowee shall cause the
Deposit to be deposited into an interest bearing account. Escrowee shall
pay the Deposit to Sellers at the Closing upon the consummation thereof or
otherwise to Sellers or Purchaser in accordance with this Agreement,
subject, however, to the provisions of Subsection 2(b) hereof. If either
party makes a demand upon Escrowee for delivery of the Deposit, Escrowee
shall give notice to the other party of such demand. If a notice of such
demand shall have been sent to the other party and a notice of objection to
the proposed payment is not received from said other party within seven (7)
business days after the giving of notice by Escrowee, Escrowee is hereby
authorized to deliver the Deposit to the party who made the demand. If
Escrowee receives a notice of objection within said period, then Escrowee
shall continue to hold the Deposit and thereafter pay it to the party
entitled when Escrowee receives (i) a notice from the objecting party
withdrawing the objection, or (ii) a notice signed by both parties
directing disposition of the Deposit, or (iii) a judgment or order of a
court of competent jurisdiction directing the payment of the Deposit.
(b) The parties further agree that:
(i) Except for its gross negligence or willful misconduct, Escrowee
shall be protected in relying upon the accuracy, acting in reliance upon
the contents, and assuming the genuineness of any notice, demand,
certificate, signature, instrument or other document which is given to
Escrowee verifying the truth or accuracy of any such notice, demand,
certificate, signature, instrument or other document;
(ii) Escrowee shall not be bound in any way by any other contract
or understanding between the parties hereto, whether or not Escrowee has
knowledge thereof or consents thereto unless such consent is given in
writing;
(iii) Escrowee's sole duties and responsibilities shall be to hold
and disburse the Deposit in accordance with this Agreement; provided,
however, that Escrowee shall have no responsibility for the clearing or
collection of the check representing the Deposit;
(iv) Escrowee shall not be liable for any action taken or omitted
by Escrowee in good faith and believed by Escrowee to be authorized or
within its rights or powers conferred upon it by this Agreement, except
for damage caused by the gross negligence or willful misconduct of
Escrowee.
(v) Upon the disbursement of the Deposit in accordance with this
Agreement, Escrowee shall be relieved and released from any liability
under this Agreement;
(vi) Escrowee may resign at any time upon at least ten (10) days
prior written notice to the parties hereto. If, prior to the effective
date of such resignation, the parties hereto shall all have approved, in
writing, a successor escrow agent, then upon the resignation of
Escrowee, Escrowee shall deliver the Deposit to such successor escrow
agent. From and after such resignation and the delivery of the Deposit
to such successor escrow agent, Escrowee shall be fully relieved of all
of its duties, responsibilities and obligations under this Agreement,
all of which duties, responsibilities and obligations shall be performed
by the appointed successor escrow agent. If for any reason the parties
hereto shall not approve a successor escrow agent within such period,
Escrowee may bring any appropriate action or proceeding for leave to
deposit the Deposit with a court of competent jurisdiction, pending the
approval of a successor escrow agent, and upon such deposit Escrowee
shall be fully relieved of all of its duties, responsibilities and
obligations under this Agreement;
(vii) Seller and Purchaser hereby agree to, jointly and severally,
indemnify, defend and hold Escrowee harmless from and against any
liabilities, damages, losses, costs or expenses incurred by, or claims
or charges made against, Escrowee (including reasonable counsel fees
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and court costs) by reason of Escrowee's acting or failing to act in
connection with any of the matters contemplated by this Agreement or in
carrying out the terms of this Agreement, except as a result of
Escrowee's gross negligence or willful misconduct;
(viii) In the event that a dispute shall arise in connection with
this Agreement, or as to the rights of any of the parties in and to, or
the disposition of, the Deposit, Escrowee shall have the right to (w)
hold and retain all or any part of the Deposit until such dispute is
settled or finally determined by litigation, arbitration or otherwise,
or (x) deposit the Deposit in an appropriate court of law, following
which Escrowee shall thereby and thereafter be relieved and released
from any liability or obligation under this Agreement, or (y) institute
an action in interpleader or other similar action permitted by
shareholders in the State of New York, or (z) interplead any of the
parties in any action or proceeding which may be brought to determine
the rights of the parties to all or any part of the Deposit; and
(ix) Escrowee shall not have any liability or obligation for loss
of all or any portion of the Deposit by reason of the insolvency or
failure of the institution or depository with whom the escrow account is
maintained.
24. Exclusivity; Shareholder Approval and Press Releases
(a) From and after the date hereof, no authorized officer, trustee,
manager or director of FUR shall, directly or indirectly, solicit or
initiate any discussions with any person or entity other than Purchaser or
Purchaser's agents with a view toward the sale of all or any portion (other
than the Pecanland Mall Adjacent Land (and the Property pertaining thereto)
and the Huntington Garage) of the Sale Assets by Sellers. Notwithstanding
the foregoing, FUR may respond to, pursue (including by providing
information relating to Sellers and the Sale Assets which is non-public,
confidential and/or proprietary in nature ("Evaluation Material") subject
to a customary confidentiality agreement) and negotiate a bona fide
proposal (an "Alternative Proposal") by any person or entity other than
Purchaser, which is neither solicited nor initiated by an authorized
officer, trustee, manager or director of FUR, to purchase, directly or
indirectly (including, without limitation, by way of a merger, combination,
consolidation, share exchange, tender offer or similar business combination
transaction), any or all of the Sale Assets if the Board of Trustees of FUR
or a committee thereof has determined that (i) such Alternative Proposal
may be more favorable to the shareholders of FUR than the sale contemplated
hereby, taking into account price, timing, closing conditions, the
likelihood of completion and any other factors deemed relevant by the Board
of Trustees of FUR or such committee, and (ii) the person or entity making
the Alternative Proposal is reasonably likely to have the financial
resources to consummate the transactions contemplated by such Alternative
Proposal. FUR shall notify Purchaser if it responds to, pursues or
negotiates an Alternative Proposal, shall provide Purchaser with a copy of
any such written Alternative Proposal and shall keep Purchaser reasonably
informed of the status of any such negotiations.
(b) FUR shall use its reasonable best efforts to (i) prepare and file
and clear with the Securities and Exchange Commission the proxy statement
and any amendments or supplements thereto required to obtain the approval
of the shareholders of FUR to the sale contemplated hereby and any
amendments to the organizational or governing documents of FUR necessary to
consummate the sale contemplated hereby as promptly as practicable and, in
any event, before the date that would allow sufficient time to declare a
record date, mail proxy statements, solicit proxies and conduct a meeting
of FUR's shareholders in accordance with all applicable laws, rules and
regulations and FUR's organizational and governing documents by no later
than the Shareholder Approval Deadline, and (ii) duly call, give notice of,
convene and hold such meeting on or before the Shareholder Approval
Deadline.
(c) FUR and Purchaser shall consult with each other before issuing any
press release or otherwise making any public statements with respect to the
sale contemplated hereby and shall not issue any such press release or make
any such public statement prior to such consultation, except
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as may be required or advisable under applicable law, rules or regulations
(including, without limitation, the rules and regulations of the New York
Stock Exchange).
25. PMM Financing. (a) Notwithstanding anything in this Agreement to
the contrary (but subject to Section 25(b) hereof), in the event that the
consent to the assumption by, and assignment to, Purchaser of a Mortgage is
not obtained from the holder of such Mortgage (each such Mortgage being an
"Unassumable Mortgage"), Purchaser and Seller shall remain obligated to
close hereunder subject to the terms of this Agreement, provided however:
(i) Sellers and/or its affiliates shall provide mortgage financing
to Purchaser ("PMM Financing") in an aggregate amount equal to the
lesser of (1) the aggregate outstanding principal balance of the
Unassumable Mortgages as of the Proration Date and (2) the amount of
Thirty Million Dollars ($30,000,000) less any PMM Financing that Sellers
shall provide in accordance with the provisions of Section 9 hereof;
(ii) as to any Property that is encumbered by an Unassumable
Mortgage, the amount of the PMM Financing to be provided shall be in an
amount requested by Purchaser, provided, however, as to any Property,
the amount of the PMM Financing to be provided may not, without Sellers
consent, be greater than the amount set forth on Schedule M with respect
to the applicable Property.
(iii) the PMM Financing shall have a term of 120 days, which term
may be extended by Purchaser for an additional 60 days;
(iv) the PMM Financing shall be payable as interest only on the
principal balance of such PMM Financing, calculated at the interest rate
of 11% per annum for the first 120 days of the term and 15% per annum
for the additional 60 days of the term;
(v) in the event of a default under the PMM Financing, the interest
rate under such PMM Financing shall be payable at the lesser of: (a) 500
basis points in excess of the then prevailing interest rate or (b) the
maximum interest rate permitted by law; and
(vi) the PMM Financing shall be secured by, among other things, a
first mortgage lien on the Property, which was subject to the
Unassumable Mortgage(s), including, but not limited to, all buildings
and furniture, fixtures and equipment located thereon. The PMM Financing
shall be upon terms and conditions reasonably acceptable to Sellers.
(b) Notwithstanding the foregoing, if the holder of the Mortgage
encumbering the Pecanland Mall shall not consent to Purchaser's assumption
of the Mortgage encumbering the Pecanland Mall, in no event shall Sellers
have any obligation to provide any PMM Financing to Purchaser with respect
to the Pecanland Mall and in such case, Purchaser and Seller shall remain
obligated to close hereunder subject to the terms of this Agreement.
26. Notices. All notices, requests, demands and other communications
provided for by this Agreement shall be in writing and shall be deemed to
have been given (a) when hand delivered, or (b) if sent same day or
overnight recognized commercial courier service, when received, or (c)
three (3) business days after being mailed in any general or branch office
of the United States Postal Service, enclosed in a registered or certified
postpaid envelope, addressed to the address of the parties stated below or
to such changed address as such party may have fixed by notice:
To each Seller:
c/o Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, N.Y. 10004-1980
Attention: Steven G. Scheinfeld, Esq.
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with a copy to:
Stroock & Stroock & Lavan LLP
180 Maiden Lane
New York, New York 10038-4982
Attention: Peter A. Miller, Esq.
To Purchaser:
c/o Radiant Partners LLC
551 Fifth Avenue, Suite 1416
New York, New York 10176
with a copy to:
Goldberg Weprin & Ustin LLP
1501 Broadway
New York, New York 10036
Attention: Andrew W. Albstein, Esq.
To Escrowee:
Stroock & Stroock & Lavan LLP
180 Maiden Lane
New York, New York 10038-4982
Attention: Peter A. Miller, Esq.
provided, that any notice of change of address shall be effective only upon
receipt.
27. Amendments. This Agreement may not be modified or terminated
orally or in any manner other than by an agreement in writing signed by all
the parties hereto or their respective successors in interest.
28. Governing Law; Construction. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York (except
to such matters of real estate law that must be governed by the law of the
State in which a particular Property is located), without giving effect to
principles of conflicts of law.
29. No Offer. This document is not an offer by Sellers, and under no
circumstances shall this Agreement have any binding effect upon Purchaser
or Sellers unless and until Purchaser and Sellers shall each have executed
this Agreement and delivered to each other executed counterparts of this
Agreement.
30. Partial Invalidity. If any provision of this Agreement is held to
be invalid or unenforceable as against any person or under certain
circumstances, the remainder of this Agreement and the applicability of
such provision to other persons or circumstances shall not be affected
thereby. Each provision of this Agreement shall be valid and enforceable to
the fullest extent permitted by law.
31. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall constitute an original, but all of which,
taken together, shall constitute but one and the same instrument.
32. No Third Party Beneficiaries. The warranties, representations,
agreements and undertakings contained herein shall not be deemed to have
been made for the benefit of any person or entity other than the parties
hereto.
33. Memorandum of Contract. Purchaser covenants and agrees that in no
event will Purchaser record or cause to be recorded this Agreement or any
memorandum hereof and that Purchaser's breach of this provision shall
represent a default of the nature governed by Subsection 15(a) hereof
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and Sellers shall have all of the rights and remedies provided under
Subsection 15(a) including, without limitation, the option of terminating
this Agreement and retaining the Deposit as liquidated damages.
34. Waiver. No failure or delay of either party in the exercise of any
right given to such party hereunder or the waiver by any party of any
condition hereunder for its benefit (unless the time specified herein for
exercise of such right, or satisfaction of such condition, has expired)
shall constitute a waiver of any other or further right nor shall any
single or partial exercise of any right preclude other or further exercise
thereof or any other right. The waiver of any breach hereunder shall not be
deemed to be a waiver of any other or any subsequent breach hereof.
35. Assignment. Purchaser shall not have the right to assign its
rights or obligations under this Agreement without the prior written
consent of Sellers, except that Purchaser may assign such rights and
obligations to one or more entities with a net worth of at least
$40,000,000 and with respect to which Radiant and/or its principals shall
have an economic interest and maintains and/or participates in managerial
control and direction of the business activities and operations of said
entity (each such entity shall hereinafter be called a "Permitted
Assignee"). Sellers hereby approve an assignment of Purchaser's rights and
obligations under this Agreement to an entity wholly owned by Radiant,
Landmark Realty Advisors LLC and a minority equity investor, provided that
such assignee shall have a net worth of at least $40,000,000. In the event
of any proposed transfer or assignment to a Permitted Assignee, the
transfer or assignment shall not be deemed effective unless and until the
proposed transferee or assignee executes, acknowledges and delivers to
Sellers an instrument of assumption in form and consent reasonably
satisfactory to Sellers pursuant to which it assumes and agrees to perform
all obligations of Purchaser under this Agreement with respect to the
applicable Property, including, but not limited to, all obligations of
Purchaser which survive the Closing hereunder, agrees to be bound by all
other terms and provisions of this Agreement insofar as they pertain to
such Property, confirms that all representations and warranties made by
Purchaser in this Agreement are true, accurate and complete as they pertain
to such transferee or assignee (subject to any exceptions thereto that are
reasonably acceptable to Sellers), and provides the addresses and
telecopier numbers to which Notices to such transferee or assignee should
be sent. In addition, in the event that Purchaser assigns its rights and
obligations under this Agreement, in accordance with the provisions of this
Section 35, to more than one entity, the Closing for all of the Properties
must occur on the same Closing Date. Notwithstanding the above to the
contrary, at Closing, Purchaser can direct that each Seller deliver a deed
to any entity, with respect to such Property, as Purchaser shall designate,
so long as such entity is owned one hundred (100%), directly or indirectly,
by Purchaser or a Permitted Assignee.
36. Interpretation. Words of any gender used in this Agreement shall
include any other gender and words in the singular shall include the
plural, and vice versa, unless the context requires otherwise. The words
"herein," "hereof," "hereunder" and other similar compounds of the words
"here" when used in this Agreement shall refer to the entire Agreement and
not to any particular provision or section. As used in this Agreement, the
term "business day" means every day other than (i) Saturdays and Sundays,
(ii) all days observed by the Federal or New York State governments as
legal holidays, and (iii) all days on which commercial banks in New York
State are required by law to be closed.
37. Construction. This Agreement shall be given a fair and reasonable
construction in accordance with the intentions of the parties hereto. Each
party hereto acknowledges that it has participated in the drafting of this
Agreement, and any applicable rule of construction to the effect that
ambiguities are to be resolved against the drafting party shall not be
applied in connection with the construction or interpretation hereof. Each
party has been represented by independent counsel in connection with this
Agreement. For purposes of construction of this Agreement, provisions which
are deleted or crossed out shall be treated as if never included herein.
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38. Access to Books and Records. For a period of one (1) year after
the Closing, Purchaser shall give Sellers and their representatives access,
during normal business hours and upon reasonable prior notice to Purchaser,
to such books, accounts, records and Leases relating to the Properties and
the other Sale Assets (including the right, at Sellers' expense, to make
photostatic copies of same) as are reasonably necessary to enable Sellers
to verify any rights or obligations of Sellers or Purchaser under this
Agreement which survive the Closing and to enable Sellers to respond to any
tax inquiries or audits, or to comply with any other obligations to
Governmental Authorities.
39. Binding Effect. This Agreement is binding upon, and shall inure to
the benefit of, the parties and each of their respective successors and
permitted assigns, if any.
40. Waiver of Jury Trial. Each of Purchaser and Sellers hereby
irrevocably waive all right to trial by jury in any action, proceeding or
counterclaim arising out of or relating to this Agreement.
41. Collectibility of Checks. If the Initial Deposit or Additional
Deposit is paid by check and said check fails collection in due course,
Sellers, at their option, may declare this Agreement null, void and of no
force and effect, and may pursue its remedies against Purchaser upon said
check, or in any other manner permitted by law, such remedies being
cumulative.
42. Section Headings. The headings of the various sections of this
Agreement have been inserted only for the purpose of convenience and are
not part of this Agreement and shall not be deemed in any manner to modify,
expand, explain or restrict any of the provisions of this Agreement.
43. Federal I.D. Number/Social Security Number. 55 Public's Federal
I.D. Numbers is 34-6513657; North Valley Tech's Federal I.D. Number is
34-6513657; Southwest Centers' Federal I.D. Number is 34-1841344; First
Union Madison's Federal I.D. Number is 34-6513657; Printers Alley's Federal
I.D. Number is 34-6513657; FUR's Federal I.D. Number is 34-6513657; and
FUCP's Federal I.D. Number is . Purchaser's Federal I.D. Number
is being applied for.
44. Incorporation by Reference; Inconsistency. The Schedules and
Exhibits to this Agreement are incorporated herein by reference and made a
part hereof.
45. Acquisition of Ownership Interest. Sellers and Purchaser agree
that it may be more advantageous with respect to a particular Property for
Purchaser to acquire a one hundred (100%) percent ownership interest in the
applicable Seller entity and/or a constituent member or principal of such
entity (or, at Purchaser's election, structure such a purchase whereby
Seller shall retain a record ownership interest but not a beneficial
interest or economic interest in such entity) in lieu of acquiring fee
simple title to the Property. In the event Purchaser shall so elect to
acquire such ownership interest in lieu of acquiring fee title with respect
to a particular Property and provided that there is no material adverse
effect to the applicable Seller, then the parties agree to cooperate with
each other and perform, execute and deliver, such documents and instruments
as may be reasonable and customary to effect such acquisition.
46. (a) Notwithstanding anything contained in this Agreement to the
contrary, this Agreement is made and executed on behalf of FUR, 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 FUR shall have any liability in
his personal or individual capacity, but instead, all parties shall look
solely to the property and assets of FUR for satisfaction of claims of any
nature arising or in connection with this Agreement.
(b) Notwithstanding anything contained in this Agreement to the
contrary, Sellers acknowledge and agree that they have not relied upon any
representations, warranties or statements made or information provided by
Purchaser, and that Sellers have relied on, inter alia, information
provided by Radiant Partners LLC and its principals. In the event of any
dispute regarding information received by Sellers from Radiant Partners LLC
or its principals, Sellers will not seek to enforce any remedy to which
they are entitled against Purchaser, but will look solely to the assets of
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Radiant Partners LLC and its principals, including, but not limited to
their respective direct and indirect interests in the Purchaser. Except for
Radiant Partners LLC and its principals, neither the Purchaser nor any
holder of a legal or beneficial interest in the Purchaser shall have any
obligation to Seller arising out of this Agreement except for the
contractual obligations of Purchaser set forth in this Agreement.
47. Entire Agreement. This Agreement contains the entire agreement
between the parties respecting the matters herein set forth and supersedes
(i) any and all prior agreements between the parties hereto, except with
respect to that certain letter agreement, dated April 28, 2000, between FUR
and Radiant Partners LLC ("April 28, Letter"), which April 28 Letter shall
survive the Closing hereunder, and (ii) that certain letter of intent,
dated June 20, 2000, by and among Radiant Partners LLC, as purchaser, and
FUR, as seller, respecting such matters. This Agreement may not be modified
or amended except by written agreement signed by all parties hereto.
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement on
the day and year first above written.
SELLERS:
55 PUBLIC LLC, a Delaware limited liability
company
By: 55 PUBLIC REALTY CORP., a Delaware
corporation, Managing Member
By: /s/ WILLIAM A. SCULLY
-------------------------------------------
Name: William A. Scully
Title: Authorized Signatory
NORTH VALLEY TECH LLC, a Delaware limited
liability company
By: NVT Corp., a Delaware corporation, its
Managing Member
By: /s/ WILLIAM A. SCULLY
-------------------------------------------
Name: William A. Scully
Title: Authorized Signatory
SOUTHWEST SHOPPING CENTERS CO. I, L.L.C.,
a Delaware limited liability company
By: First Union Southwest L.L.C., a Delaware
limited liability company, its manager
By: First Southwest I, Inc., a Delaware
corporation, its manager
By: /s/ WILLIAM A. SCULLY
---------------------------------------
Name: William A. Scully
Title: Authorized Signatory
FIRST UNION MADISON L.L.C., an Illinois limited
liability company
By: First Union Real Estate Equity and Mortgage
Investments, and Ohio business trust, its
member
By: /s/ WILLIAM A. SCULLY
-------------------------------------------
Name: William A. Scully
Title: Authorized Signatory
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<PAGE> 129
PRINTER'S ALLEY GARAGE, LLC, a Delaware
limited liability company
By: First Union Real Estate Equity and Mortgage
Investments, an Ohio business trust, its
managing member
By: /s/ WILLIAM A. SCULLY
-------------------------------------------
Name: William A. Scully
Title: Authorized Signatory
FIRST UNION REAL ESTATE EQUITY AND
MORTGAGE INVESTMENTS, an Ohio business trust
By: /s/ WILLIAM A. SCULLY
---------------------------------------------
Name: William A. Scully
Title: Authorized Signatory
FIRST UNION COMMERCIAL PROPERTIES
EXPANSION COMPANY
By: /s/ WILLIAM A. SCULLY
---------------------------------------------
Name: William A. Scully
Title: Authorized Signatory
PURCHASER:
RADIANT INVESTORS LLC, a Delaware limited
liability company
By: /s/ DANIEL P. FRIEDMAN
---------------------------------------------
Name: Daniel P. Friedman
Title: Managing Member
Receipt of Deposit is hereby acknowledged,
subject to collection
STROOCK & STROOCK & LAVAN LLP
By: /s/ PETER A. MILLER
--------------------------------------------------------
Name: Peter A. Miller, Partner
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APPENDIX B
CONTRACT OF SALE
AGREEMENT (this "Agreement") made as of this 15th day of September, 2000,
between First Union Real Estate Equity and Mortgage Investments, an Ohio
unincorporated association in the form of a business trust, having an address at
551 Fifth Avenue, Suite 1416, New York, New York 10176 ("Seller" and sometimes
referred to herein as "FUR") and Radiant Investors LLC, a Delaware limited
liability company, having an address at c/o Radiant Partners LLC, 551 Fifth
Avenue, Suite 1416, New York, New York 10176 ("Purchaser").
W I T N E S S E T H :
WHEREAS, Seller is the owner of Long Street Garage, Columbus, Ohio ("Long
Street Garage"), as more particularly described in Schedule A annexed hereto and
made a part hereto, and
WHEREAS, the land demised and described in Schedule A is referred to as the
"Land"; and
WHEREAS, Seller desires to sell to Purchaser, and Purchaser desires to
purchase from Seller, all of Seller's right, title and interest in and to the
Property (as hereinafter defined)
NOW THEREFORE, in consideration of the mutual covenants contained herein
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, Seller and Purchaser agree as follows:
1. Sale-Purchase. (a) Seller agrees to sell, assign and convey to
Purchaser, and Purchaser agrees to purchase from Seller, subject to the
terms and conditions of this Agreement, fee simple title in and to the Long
Street Garage together with the buildings and improvements located on the
Land (the "Building"; and the Building and the Land are hereinafter
collectively referred to as the "Premises"), and all of Seller's right,
title and interest, if any, in, to and under (A) all easements, rights of
way, privileges, tenements, hereditaments, appurtenances, strips, gores and
other rights pertaining to the Premises (including, without limitation, the
easements, access rights and other rights provided in reciprocal access and
easement agreements and operating agreements affecting the Premises)
(collectively, the "Appurtenances"); (B) any land in the bed of any street,
road, avenue, alley, passage, common areas and other rights-of-way, open or
proposed, public or private, in front of or adjoining the Premises or any
portion thereof, and any award to be made in lieu thereof and in and to any
unpaid award for damage to said Premises by reason of change of grade of
any street occurring after the Proration Date (as hereinafter defined)
(collectively, the "Adjoining Land"); (C) the fixtures, equipment,
machinery, furniture, furnishings, maintenance vehicles and equipment,
tools, appliances, supplies and other items of personal property of every
kind and description (and replacements and substitutions thereof), now
owned or hereafter acquired by Seller and contained in or on, or used in
connection with, the ownership, maintenance, use, occupancy and operation
of the Premises (collectively, the "Personalty"); (D) all leases,
subleases, lettings, licenses and other occupancy agreements and agreements
governing the use of garage or parking lot spaces, and all amendments,
modifications, supplements, additions, extensions and renewals thereof as
permitted hereunder, and, except as expressly provided herein, security and
other deposits thereunder affecting the Premises (collectively, "Leases");
(E) subject to the provisions of Section 21 hereof, all service agreements,
maintenance agreements, supply agreements, union agreements and any other
contracts and agreements affecting the Premises and all income therefrom
(collectively, "Contracts"); (F) any assignable licenses, permits,
approvals and certificates required or used in or relating to the
ownership, use, maintenance, occupancy or operation of any part of the
Premises (the "Licenses"); and (G) all existing surveys, blueprints,
drawings, plans and specifications (including, without limitation,
structural, HVAC, mechanical and plumbing plans and specifications) and
other documentation for or with respect to the Premises or any part
thereof, all construction contracts and subcontracts; all warranties or
guaranties given in connec-
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tion with work performed at or on the Premises; all available tenant lists
and data, all available lists of parkers and data, correspondence with
past, present and prospective tenants, parkers, vendors, suppliers, utility
companies and other third parties, booklets, manuals and promotional and
advertising materials concerning the Premises or any part thereof, all
trade names and trade marks pertaining to the Premises, and such other
existing books, records and documents (including, without limitation, those
relating to ad valorem taxes and leases) used in connection with the
operation of the Premises or any part thereof (collectively, the
"Intangible Property"). The Land, the Building, the Appurtenances, the
Adjoining Land, the Personalty, the Leases, the Contracts, the Licenses,
and the Intangible Property are hereinafter collectively referred to as the
"Property" or the "Sale Assets".
2. Purchase Price. (a) Purchaser shall pay to Seller for the Sale
Assets the sum of FIVE MILLION TWO HUNDRED THOUSAND ($5,200,000) DOLLARS
(the "Purchase Price"), subject to apportionments to be made as provided in
this Agreement. Purchaser shall pay the Purchase Price as follows:
(i) Within one (1) business day after Purchaser has received a
fully executed counterpart of this Agreement, THREE HUNDRED FIFTY
THOUSAND ($350,000) DOLLARS by Purchaser, at its election, delivering
its check to Stroock & Stroock & Lavan LLP (the "Escrowee"), payable
to the order of "Stroock & Stroock & Lavan LLP, as Escrowee", subject
to collection, or by wire transfer to the Escrowee of immediately
available Federal funds in New York City (the "Deposit"), provided,
however, if the Deposit is not received by Escrowee within one (1)
business day after Purchaser has received a fully executed
counterpart of this Agreement, Sellers, at their option, may declare
this Agreement, null, void and of no force and effect, and may pursue
its remedies against Purchaser upon said Deposit, or in any other
manner permitted by law, such remedies being cumulative;
(ii) FOUR MILLION EIGHT HUNDRED FIFTY THOUSAND ($4,850,000)
DOLLARS (the "Cash Balance"), as adjusted by the apportionments to be
made as provided for in this Agreement, payable at the Closing by
wire transfer to Seller, or such persons or entities as Seller may
designate, of immediately available Federal funds in New York City.
Seller shall provide wiring instructions to Purchaser at least
forty-eight (48) hours prior to Closing
(b) Notwithstanding any provisions in this Agreement to the contrary,
it shall not be a condition to the Closing hereunder that the Mortgage be
assumed by and assigned to the Purchaser; it being expressly understood
that Seller shall pay off such Mortgage contemporaneously with the Closing
hereunder.
(c) As additional consideration for the conveyance of the Sale Assets
to Purchaser, Purchaser shall assume as of the Closing all liabilities
arising out of (i) except as set forth in Section (2)(c)(ii) below, the
ownership, operation and use of the Sale Assets from and after the
Proration Date as though Purchaser acquired title to the Sale Assets at
11:59 p.m. on said date, (ii) Capital Expenditures(as herein defined) for
the Properties committed to by Seller and/or any of its respective agents
and/or authorized representatives after May 9, 2000, (which shall include,
without limitation, those expenditures set forth on Schedule C annexed
hereto), and (iii) subject to the provisions of Section 21(i), all
environmental liabilities which shall arise from and after the Proration
Date, (collectively, "Assumed Liabilities"), and shall indemnify Seller
from and against any and all losses, liabilities, costs, damages, claims
and expenses (including reasonable attorneys' fees and expenses) which
Seller may incur by reason of, or arising out of, or resulting from any or
all Assumed Liabilities; provided, however, Assumed Liabilities shall not
include any and all accrued and/or unpaid Purchaser Expenses (as such term
is defined in Section 6B(b) hereof), which accrued and unpaid Purchaser
Expenses shall remain the obligation of Seller to satisfy. For purposes of
this Agreement, the term "Capital Expenditures" shall mean those expenses
set forth on Schedule C and to the extent not otherwise set forth on
Schedule C (1) expenses which in accordance with
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generally accepted accounting principles cannot be expensed within the year
in which such cost shall be incurred, (2) tenant improvement costs that
Seller shall be required to pay for pursuant to a Lease and (3) brokerage
commissions that Seller shall be required to pay with respect to a Lease;
provided, however, that for purposes of this Agreement, Seller shall have
no obligation to pay for any tenant improvement costs or brokerage
commissions that shall be payable by a Seller on account of a Lease or a
renewal, extension, expansion or modification of a Lease that was entered
into or exercised after May 9, 2000. The obligation of Purchaser under this
Section 2(c) shall survive the Closing. Seller and Purchaser shall, from
time to time, update Schedule C to reflect new information as it is
available, and appropriate monetary adjustments shall be made as needed.
(d) The party hereunder that shall be entitled to receive the Deposit
shall receive all interest that shall have accrued thereon, and no interest
on the Deposit that shall be delivered to Seller shall be deemed to be
credited against the Purchase Price.
(e) The Deposit, together with all interest thereon, shall be held by
Escrowee in accordance with Section 23 hereof.
3. Permitted Encumbrances. Subject to the terms and provisions of this
Agreement, title to the Property shall be sold, assigned and conveyed by
Seller to Purchaser, and Purchaser shall accept same, subject only to the
following matters as they pertain to the applicable Property (collectively,
the "Permitted Encumbrances"):
(a) the state of facts shown on the survey described on Schedule D
annexed hereto and made a part hereof (the "Survey") and any other state of
facts which the Survey brought down to date might disclose or that any
other accurate survey might show;
(b) the applicable Leases;
(c) all of the title exceptions specifically set forth on Schedule E-2
attached hereto and made a part hereof (other than those items listed on
the Title Report set forth in Schedule F-1 hereto that shall be marked with
the words "omit");
(d) right, lack of right, or restricted right of Seller to construct
and/or maintain (and the right of any Governmental Authority (as herein
defined) to require the removal of) any vault or vaulted area, in or under
the streets, sidewalks or other areas abutting the Property and any
applicable licensing statute, ordinance and regulation, and the terms of
any license pertaining thereto;
(e) all presently existing and future liens of (i) real estate taxes
and (ii) water rates, water meter charges and vault taxes, water frontage
charges and sewer taxes, rents and charges provided that the same shall be
apportioned as provided in this Agreement;
(f) all violations of laws, ordinances, codes, orders, restrictions,
requirements or regulations of any Governmental Authority applicable to the
Property whether or not noted in the records of or issued by, any
Governmental Authority, existing on the Closing Date; "Governmental
Authority" means any agency, instrumentality, department, commission,
court, tribunal or board of any government, whether foreign or domestic and
whether national, federal, state, provincial or local;
(g) such matters as the Title Company (as hereinafter defined) shall
be willing, without special premium to Purchaser, with respect to the title
insurance policy issued by the Title Company to Purchaser and any lender
with respect to the Property on the Closing Date (collectively, the "Title
Insurance Policy"), to omit as exceptions to coverage or, with respect to
the Title Insurance Policy issued to Purchaser only, except with insurance
against collection out of or enforcement against the Property;
(h) variations between the tax lot lines and the legal description of
the Property set forth on Schedule A;
(i) all present and future laws, ordinances, codes, orders,
restrictions, requirements and regulations, including, without limitation,
zoning, building and environmental laws, ordinances, codes,
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restrictions, requirements and regulations, of all Governmental Authorities
having or asserting jurisdiction over the Property and the use thereof;
(j) so long as the Title Company shall omit the same from the Title
Insurance Policy, any financing statements, chattel mortgages, conditional
bills of sale or other form of security interest against personalty,
encumbering personalty not owned by Seller or filed more than five (5)
years prior to the Closing Date;
(k) in addition to those Permitted Encumbrances described in Section
3(d) above, all other utility company rights, easements and franchises to
maintain and operate lines, poles, wires, cables, pipes, distribution boxes
and other fixtures and facilities in, over, under and upon the Premises;
(l) in addition to the state of facts described in Subsection (a) of
this Section 3, all other projections and/or encroachments of retaining
walls, steps, fences or similar projections of objects on, under or above
any adjoining streets of the Premises (or any property adjoining the
Premises), or within any set-back areas, and encroachments of similar
elements projecting from adjoining property over the Premises and
variations between the lines of record title and fences, retaining walls,
hedges, and the like;
(m) in addition to those Permitted Encumbrances described in Section
3(d) above, all other covenants, conditions, restrictions, easements,
reservations and agreements of record, provided same are not violated by
the existing structures or the present uses; and
(n) subject to Section 4(a), all other liens affecting the Property
except for the following (collectively, the "Seller Title Exceptions"):
(i) liens arising from any of the shareholder lawsuits described in
Section 22 hereof;
(ii) liens arising from claims by any broker for a commission, fee
or other compensation in connection with this transaction if the same
arose by, through or on account of any alleged act of Seller or any of
Seller's representatives (other than Radiant Partners LLC ("Radiant"));
(iii) liens arising from any affirmative action or omission by
Seller which (A) pertains to the Property or any other asset which is
the subject of the Asset Management Agreement (as hereinafter defined),
and (B) was undertaken without the actual knowledge of Radiant;
(iv) liens arising from any action by a Seller which do not pertain
to the Sale Assets;
(v) liens arising from the use, ownership and management of the
Property which Seller, pursuant to Section 4(c), Section 6A(f) and
Section 6A(l) hereof, shall be responsible to pay for; and
(vi) any fines, judgments and/or penalties payable in conjunction
with any violations noted in the records of any Governmental Authority
against the Property prior to the Proration Date.
4. Title Insurance.
(a) Purchaser acknowledges that it has previously received the title
report set forth on Schedule E-1 (the "Title Report"). Based on Purchaser's
review of the Title Report, as of the date hereof, and their acceptance of
same, there are no Title Objections (as hereinafter defined) set forth
therein which do not constitute Permitted Encumbrances other than as set
forth on Schedule E-2 attached hereto. Purchaser shall at its own cost and
expense, order an update of the Title Report from First American Title
Insurance Company (the "Title Company") and shall instruct the Title
Company to furnish a copy of such updated Title Report (the "Commitment")
to Seller's attorneys, Stroock & Stroock & Lavan LLP, 180 Maiden Lane, New
York, New York 10038, Attn: Peter A. Miller, Esq., simultaneously with its
delivery of same to Purchaser or its attorneys. Notwithstanding anything to
the contrary contained herein, if Seller is unable to eliminate any
exceptions to title which are not Permitted Encumbrances or which the Title
Company refuses to omit from the Commitment ("Title
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Objections") by the Closing Date, Seller may, in accordance with the
provisions of Section 5 hereof, adjourn the Closing, from time to time, in
order to attempt to eliminate such Title Objections. Seller shall not be
required to bring any action or institute any proceeding, or to otherwise
incur any costs or expenses in order to attempt to eliminate any Title
Objections or to otherwise cause title to the Property to be in accordance
with the terms of this Agreement on the Closing Date, except as otherwise
set forth in Subsection 4(c) hereof. If, pursuant to the terms of this
Agreement, Seller does not elect or is unable to eliminate any such other
Title Objections, then, subject to the provisions of Subsections 4(b) and
4(c) hereof, Purchaser may, by notice given to Seller by the date which is
the earlier of the Closing Date or thirty (30) days after Seller shall have
delivered a notice to Purchaser stating that it will not eliminate such
other Title Objections, either (i) elect to accept the Property subject to
such other Title Objections, without any abatement of the Purchase Price,
or (ii) terminate this Agreement, in which event, Escrowee shall disburse
the Deposit hereunder to Purchaser. Upon termination of this Agreement
pursuant to the provisions to this Section 4(a) neither party hereto shall
have any further obligations hereunder other than those arising under
Section 10 and 23 hereunder.
(b) If on the Closing Date there are any liens or encumbrances which
Seller is obligated to satisfy under this Agreement or shall otherwise
elect to satisfy, Seller may use any part of the Cash Balance portion of
the Purchase Price to discharge the same, either by payment or by procuring
a bond satisfactory to the Title Company.
(c) If the Property is subject to a lien which was filed against the
Property with the consent of Seller or arising out of an affirmative act of
Seller (each a "Consensual Lien") and such Consensual Lien is in a
liquidated amount that may be satisfied by the payment of money only, then
Seller shall (i) be obligated to discharge the same by payment or bonding
and (ii) shall cause the Title Company to omit the same from the Title
Policy.
(d) If the Title Report discloses judgments, bankruptcies or other
returns against other persons having names the same as, or similar to, that
of Seller, Seller shall, if requested, deliver to the Title Company
affidavits showing that such judgments, bankruptcies or other returns are
not against Seller in order to induce the Title Company to omit exceptions
with respect to such judgments, bankruptcies or other returns or to insure
over the same.
5. Closing Date. (a) Subject to the satisfaction of all of the
Conditions to Closing, as set forth in Section 20 hereof, the closing of
title (the "Closing") shall take place at 10:00 A.M. on the earlier to
occur of (A) the second (2nd) business day after FUR shall notify the
Purchaser that it has received the Shareholder Ratification (as hereinafter
defined in Section 16 hereof) and (B) December 29, 2000. The Closing shall
occur, at the office of the Escrowee, 180 Maiden Lane, New York, New York
or at the offices of Purchaser's lender or its attorneys. Except as
hereinafter set forth, TIME SHALL BE OF THE ESSENCE, with respect to
Purchaser's and Seller's obligation to close hereunder as of December 29,
2000. TIME SHALL BE OF THE ESSENCE, with respect to Purchaser's obligation
to close hereunder as of December 29, 2000 or if Seller, in accordance with
the terms of this Section 5(a) shall have adjourned the Closing, as of the
date that the Closing shall have been adjourned to by Seller. Solely in the
event that FUR has not held a shareholder meeting to obtain the Shareholder
Ratification, Seller, subject to Section 5(b) below, Seller shall have the
right to adjourn the Closing, from time to time, to any date prior to April
30, 2001.
(b) Intentionally deleted.
(c) If a lender shall not extend its outside date, TIME SHALL BE OF
THE ESSENCE, with respect to Seller's obligation to close hereunder as of
December 29, 2000 or, if Purchaser, in accordance with the terms of Section
5(a) shall have adjourned the Closing, as of the date that the closing
shall have been adjourned to by Purchaser. If Seller shall fail to close
hereunder as of such date as to which TIME SHALL BE OF THE ESSENCE as to
Seller's obligation to close hereunder, this Agreement shall terminate and
the Deposit shall be disbursed to Purchaser, together with all interest
earned thereon.
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(d) If the Purchase Price shall not be received by Sellers by 5:00
p.m. (New York time) on the Closing Date (as defined below), the Closing
Date for purposes of this Agreement, shall be deemed to have occurred on
the next succeeding business day. If requested by Purchaser, Seller shall
endeavor to "pre-close" this transaction on one or more business days
preceding the Closing. Upon payment of the balance of the Purchase Price by
Purchaser, in the manner provided in Section 2 hereof, Seller and Purchaser
shall contemporaneously therewith deliver to each other the documents
referred to in Section 14 hereof. The date on which the Closing shall take
place is hereinafter referred to as the "Closing Date".
6. Apportionments.
A. For purposes of this Agreement, the "Proration Date" shall be May 31,
2000, as of 11:59 p.m. on such date, so that Purchaser shall be treated,
for purposes of this Section 6A, as if Purchaser was the owner of the
Property and was entitled to any revenues and was responsible for any
expenses from and after June 1, 2000 (other than as provided in Subsection
6A(l) hereof). Any apportionments and prorations which are not expressly
provided for below shall be made in accordance with the customs of the
respective municipalities or counties, as applicable, in which the Property
is located. Purchaser and Seller shall prepare a schedule of adjustments
for each Premises ("Schedule of Adjustments") prior to the Closing Date.
Such adjustments, if and to the extent known as of the Closing, shall be
paid at Closing by Purchaser to Seller for whom the prorations for the
Property result in a net credit to Seller or by Seller to Purchaser if the
prorations for the Property result in a net credit to Purchaser, by
increasing or reducing, as the case may be, the amount of the portion of
the Cash Balance to be paid by Purchaser at the Closing to Seller. Any such
adjustments not capable of being determined as of the Closing shall be paid
by Purchaser to Seller, or by Seller to Purchaser, as the case may be, in
cash as soon as practicable following the Closing. Any apportionment or
proration errors made at the Closing are subject to correction if written
notice thereof is given within one hundred eighty (180) days after the
Closing. Purchaser and Seller shall each act promptly and reasonably in
connection with determining the prorations under this Section 6. This
Section 6 shall survive the Closing.
(a) (i) Interest on the Mortgage (as described in Schedule B annexed
hereto and made a part hereof) shall be prorated on an accrual basis. All
interest payable under the Mortgage accruing and not paid prior to the
Proration Date shall be the obligation of Seller, and Purchaser shall be
credited with an amount equal to such accrued and unpaid interest.
Purchaser shall be responsible for all interest payable under the Mortgage
and accruing after the Proration Date;
(ii) At Closing, Seller shall be entitled to receive all monies in
any tax and insurance reserve account that shall be released by the
holder of the Mortgage, provided that in the event that the amount any
such tax and insurance reserve that is released to Seller shall be
greater than the amount of the balance of such tax and insurance reserve
account as of the Proration Date, the amount of such excess shall be
credited against the Cash Balance due from Purchaser at Closing and if
the amount of any such tax and insurance reserve released to Seller
shall be less than the amount of the balance of such tax and insurances
reserve account as of the Proration Date, the amount of the Cash Balance
due from Purchaser at Closing shall be increased by the amount of such
difference. Seller and Purchaser shall, from time to time, update
Schedule G to reflect new information as it is available.
(iii) Except as otherwise set forth in Subsection 6A(a)(ii) above
and Subsection 6A(a)(iv) below, at Closing, Purchaser shall be entitled
to all monies held in any operating reserve account, ground rent reserve
account, and any other reserves, escrows or escrow deposits
(collectively, the "Other Escrows") made with, or held by, the holder of
the Mortgage, as of March 31, 2000. Seller shall be entitled to retain
the monies in the Other Escrows which are released to Seller by the
holder of the Mortgage and Purchaser shall be entitled to a credit
against the Cash Balance due at Closing in the amount of the Other
Escrows held by the holder of the Mortgage as of March 31, 2000 and in
the event that the amount of the Other Escrows
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released to Seller in accordance with the terms of the immediately
preceding sentence shall be greater than the amount of the Other Escrows
as of the Proration Date, the amount of such excess shall also be
credited against the Cash Balance due at Closing.
(iv) At Closing, Purchaser shall be entitled to all monies held in
any capital expenditure reserve ("Capital Expenditures Escrow") made
with or held by, the holder of the Mortgage, as of March 31, 2000.
Seller shall be entitled to retain the monies in the Capital
Expenditures Escrow which are released to Seller by the holder of the
Mortgage, but, in such case, Purchaser shall be entitled to a credit
against the Cash Balance due at Closing in the amount of the Capital
Expenditures Escrow as of March 31, 2000 and, in the event that the
amount of the Capital Expenditures Escrow released to Seller in
accordance with the terms of the immediately preceding sentence shall be
greater than the amount of the Capital Expenditures Escrow as of the
Proration Date, the amount of such excess shall also be credited against
the Cash Balance due at Closing.
(b) Rentals. "Rental" or "Rentals" as used herein includes fixed
monthly rentals, additional rentals, percentage rentals, escalation
rentals, retroactive rentals, operating cost pass-throughs, parking
charges, utility charges, common area maintenance or management charges,
administrative charges, and other sums and charges payable by Tenants (as
hereinafter defined) under the Leases (all tenants, licensees, occupants
and such other parties occupying space pursuant to a Lease shall herein be
referred to individually as a "Tenant" or collectively as the "Tenants").
Subject to the provisions of Subsections 6(c) and 6(d) hereof, Rentals
shall be prorated at the Closing. Seller shall be entitled to all Rentals
accruing on or prior to the Proration Date and Purchaser shall be entitled
to all Rentals accruing after the Proration Date. Purchaser shall not be
entitled to any credit or adjustment for any free rent or abated rent
accruing after the Proration Date.
(c) Delinquent Rentals. Fixed monthly rentals are delinquent when
payment thereof is due on or prior to the Proration Date but has not been
made by the Proration Date (any such fixed monthly rentals that shall not
be paid prior to the Proration Date being "Delinquent Rentals"). Delinquent
Rentals shall be prorated between Purchaser and Seller as of the Proration
Date but shall not be paid or credited until they are actually collected by
Purchaser or Seller, as the case may be. Any fixed monthly rentals
collected by Purchaser or Seller, as the case may be, after the Proration
Date less any costs of collection (including reasonable attorneys fees)
reasonably allocable thereto shall be applied first to Delinquent Rentals,
if any, and paid to Seller promptly upon receipt thereof in the amount of
such Delinquent Rentals, then to fixed monthly rentals that shall accrue
after the Proration Date and paid to Purchaser (but only at or after the
Closing). Notwithstanding the foregoing, if a Tenant shall be disputing the
amount of the Delinquent Rentals that such Tenant shall owe to Seller, in
such case, prior to the resolution of such dispute, Seller, to the extent
of such disputed Delinquent Rentals, shall not be entitled to receive
payment of such Delinquent Rentals. Following the resolution of any dispute
with a Tenant regarding the amount of Delinquent Rentals that such Tenant
shall owe to the applicable Tenant, Purchaser shall pay to Seller, an
amount equal to the lesser of (i) the amount of Delinquent Rentals that it
is ultimately determined that such Tenant shall owe to Seller and (ii) the
amount of payments of fixed monthly rentals that Purchaser shall have
received pursuant to this Section 6(c). Seller shall have the right to
settle and/or compromise any dispute with a Tenant regarding any disputed
Delinquent Rentals and in no event shall Purchaser have the right to settle
and/or compromise any such dispute. Purchaser shall use reasonable efforts
to collect Delinquent Rentals but shall have no obligation to commence a
legal proceeding to collect such sums. Seller retains the right after the
Closing to bring an action for damages against tenants for the recovery of
Delinquent Rentals, provided, however, in no event shall any such action
involve the termination of such tenant's Lease or the eviction of such
tenant. The parties confirm that all amounts due and payable in respect of
Leases which have expired or otherwise terminated prior to the Proration
Date shall be the sole property of the applicable Seller and,
notwithstanding anything to the contrary contained herein, Seller may take
such actions as it desires to collect such amounts. Notwithstanding the
provisions of this Subsection 6(c) to the
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contrary, any amount collected by Seller applicable to the period of time
prior to the Proration Date in connection with any such action shall be
retained by Seller. Seller and Purchaser shall from time to time for a
period of one (1) year following the Closing, and upon request of the other
party, provide the requesting party with reasonably detailed information
regarding the status of such party's collection of Delinquent Rentals.
(d) Operating Cost Pass-Throughs, Etc. Operating cost pass-throughs,
utility charges, common area maintenance charges, administrative charges,
percentage rentals, additional rentals and other retroactive rental
escalations, sums or charges payable by Tenants which accrue as of the
Proration Date but are not then due and payable or collected
("Pass-Throughs"), shall be prorated as of the Proration Date; provided,
however, no payment or credit thereof shall be made to Seller unless and
until Purchaser and/or Seller collects same from the Tenants. All such
amounts payable by Tenants for the period accruing prior to the Proration
Date shall belong to the applicable Seller and all such amounts payable by
Tenants for the period accruing after the Proration Date shall belong to
Purchaser. Any Pass-Throughs collected by Purchaser or Seller, as the case
may be, after the Proration Date (less any costs of collection, including
reasonable attorneys fees reasonably allocable thereto) shall be applied
(i) first, if a Tenant making a payment shall designate the receivable
against which such payment shall be applied, in accordance with such
Tenant's written direction, and (ii) second, against such fiscal or
calendar period for which the Pass-Throughs pertain and in which the
Proration Date shall occur, it being agreed that the Pass-Throughs shall be
allocated between Seller and Purchaser based upon the portion of such
fiscal or calendar period that shall occur prior to the Proration Date and
the portion of such fiscal or calendar period that shall occur after the
Proration Date, (iii) third, to Pass-Throughs for the period that occurs
after the period described in clause (ii) above and (iv) fourth, to the
period that occurs prior to the period described in clause (ii) above.
(e) Taxes. Real estate taxes (including business improvement district
charges) on the Property (excluding taxes paid directly to the taxing
authority by Tenants or parties to a reciprocal easement agreement) shall
be prorated based on the actual current tax bill. If such tax bill has not
yet been received by the Closing Date, then Purchaser and Seller shall
estimate the real estate taxes based upon Purchaser's and Seller's good
faith estimate of the change in the amount of the previous year's tax bill
and Purchaser and Seller shall after the Closing re-prorate the real estate
taxes as soon as the actual current tax bill is available. All amounts
payable for real estate taxes accruing through the Proration Date shall be
the obligation of Seller and all amounts payable for real estate taxes
accruing after the Proration Date shall be the obligation of Purchaser. If,
after the Closing Date, any additional or supplemental real estate taxes
are assessed against a Property by reason of back assessments, corrections
to previous tax bills or other events occurring prior to the Proration
Date, Purchaser and Seller shall re-prorate the real estate taxes following
the Closing. Any delinquent taxes on a Property shall be paid at the
Closing from funds accruing to the applicable Seller.
(f) Operating Expenses. All utility service charges and fees for
sewer, water, electricity, heat and air conditioning service, other
utilities, fuel oil, elevator maintenance, taxes other than real estate
taxes such as rental taxes, reciprocal easement agreement charges and fees,
management fees, insurance, other ordinary and customary expenses incurred
by a Seller in operating the Property that Seller reasonably and
customarily pays, and all other costs incurred in the ordinary course of
business of Seller in connection with the operation of the Property, shall
be prorated on an accrual basis. Seller shall be responsible for all such
expenses that accrue through the Proration Date and Purchaser shall be
responsible for all such expenses which are payable or accrue after the
Proration Date. Seller shall be credited with an amount equal to any
prepaid expenses which relate to the period after the Proration Date and
Purchaser shall be credited with an amount equal to any unpaid expenses
which relate to the period prior to the Proration Date, but only if such
expenses shall have been paid by Seller after the Proration Date and prior
to the Closing Date. Operating expenses that have been paid directly by a
tenant shall not be prorated.
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(g) Tenant Deposits. Purchaser shall be credited with and Seller shall
be debited with the sum of any Tenant security deposits (and any interest
due to Tenants thereon) held by Seller pursuant to the terms of the
respective Leases; provided, however, Seller shall be entitled to retain
any administrative fees allowed by law that shall have accrued on such
Tenant security deposits as of the Proration Date.
(h) Intentionally deleted.
(i) License and Permit Fees. Periodically recurring governmental fees
for transferable Licenses issued in respect of the Premises for the use of
any part thereof, if assignable and to the extent assigned, shall be
prorated between Purchaser and Seller as of the Proration Date on an
accrual basis. Seller shall be responsible for all amounts due thereunder
which accrue through the Proration Date and Purchaser shall be responsible
for all amounts which accrue after the Proration Date.
(j) Capital Expenditures. If (i) Seller, prior to the Proration Date,
shall have paid for any Capital Expenditures that shall have been committed
to after May 9, 2000, Seller shall be entitled to a credit in the aggregate
amount of such payments, (ii) Seller at any time after the Proration Date,
shall have paid for any Capital Expenditures that shall have been committed
to by Seller prior to May 9, 2000, Purchaser shall be entitled to a credit
at Closing in the aggregate amount of such payments, (iii) any Capital
Expenditures for the Property committed to by Seller and/or any of its
respective agents and/or authorized representatives prior to May 9, 2000
shall not have been performed by Seller prior to the Closing Date,
Purchaser shall be entitled to a credit at Closing in the amount of the
value of such Capital Expenditures that shall not have been performed and
(iv) if any Capital Expenditures of the nature described in clauses (2) and
(3) of the definition of Capital Expenditures which were committed to prior
to May 9, 2000 shall remain unpaid as of the Proration Date, Purchaser
shall be entitled to a credit in an amount equal to the aggregate amount of
such unpaid Capital Expenditures but only if such unpaid Capital
Expenditures shall have been paid for by Seller after the Proration Date
and prior to the Closing Date.
(k) Other. Any other customary adjustments made in connection with the
sale of properties similar in type to the Property shall be prorated
between Purchaser and Seller as of the Proration Date.
B. (a) Supplementing the provisions of Section 6A above, as to the
Property, if the aggregate amount of Purchaser Revenue (as hereinafter
defined) that Seller shall receive after the Proration Date shall be
greater than the amount of Purchaser Expenses (as hereinafter defined) that
Seller shall have incurred and/or paid for after the Proration Date, the
Purchase Price for the Property shall be decreased by the amount of such
excess. In the alternative, as to the Property, if the aggregate amount of
the Purchaser Revenue that Seller shall receive after the Proration Date
shall be less than the amount of Purchaser Expenses that Seller shall have
incurred and/or paid for after the Proration Date, the Purchase Price for
the Property shall be increased by the amount such Purchaser Expenses
exceed Purchaser Revenue.
(b) For purposes of this Agreement, the term "Purchaser Revenue" shall
mean all revenues that Seller shall receive from the operation of the
Property after the Proration Date which Purchaser, pursuant to the
provisions of Section 6A above, shall be entitled to receive and the term
"Purchaser Expenses" shall mean all expenses arising from the use,
operation and management of a Property, including Capital Expenditures,
which Seller shall have incurred (whether or not payment shall have been
made) from and after the Proration Date (or in the case of Capital
Expenditures, including, without limitation, tenant improvement expenses
from and after May 9, 2000).
7. Assessments. If, on the Proration Date, the Premises or any part
thereof shall be or shall have been affected by an assessment or
assessments which are or may become payable in annual installments, and the
first installment is then a charge or lien or has been paid, then for the
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purposes of this Agreement all the unpaid installments shall be deemed to
be due and payable and to be a lien upon the Premises and shall be paid and
discharged by Seller as of the Closing Date.
8. Condition of the Sale Assets.
(a) Seller will permit Purchaser, for itself or on behalf of, or in
conjunction with its prospective lenders or equity investors and each of
their respective agents and representatives, the right to inspect the
Building and review the books, records and Property files of Seller and to
conduct or cause to be conducted such tests, evaluations and assessments of
the Property as may be necessary, appropriate or desirable in connection
with the acquisition of the Property, provided, however, that all such
inspections, tests, evaluations and assessments (collectively, "Inspection
Activities") shall hereafter be subject to the following conditions:
(i) No Inspection Activity which involves boring, digging, drilling
or other physical intrusion of the Property shall be conducted without
the prior written consent of Seller, which consent shall not be
unreasonably withheld or delayed.
(ii) Purchaser shall promptly restore the Property, at Purchaser's
sole cost and expense, to the state and condition it was in prior to
being disturbed or damaged by any Inspection Activity.
(iii) Any Inspection Activity conducted with respect to the
Building shall not be unreasonably intrusive and shall not have any
adverse effect on the structural integrity of the Building.
(iv) No Inspection Activity shall be conducted inside the space
demised to any Tenant or otherwise in any manner that would interfere
with the business or operations conducted by any Tenant.
(v) Purchaser shall indemnify and hold harmless Seller and its
members, trustees, directors, officers, employees and agents from and
against any and all liability, claims, losses, damages, injuries to
persons or to property and expenses (including, without limitation,
reasonable legal fees and disbursements) suffered by Seller or its
members, trustees, directors, offices, employees or agents by reason of
or resulting from the Inspection Activities.
(vi) All Inspection Activities shall be conducted in compliance
with all applicable federal, state and local laws, rules, regulations,
ordinances, orders and permits.
(vii) With respect to any inspections that Purchaser shall perform
after the date hereof, Purchaser and/or its contractors shall procure
the following insurance coverage to cover the risks associated with the
Inspection Activities, in the minimum amounts set forth below:
(A) Workers Compensation Insurance in accordance with statutory
requirements and Employer's Liability Insurance with a minimum limit
of $500,000 each accident;
(B) Commercial General Liability Insurance (occurrence form),
including premises, contractual liability, products/completed
operations, independent contractors and broad form property damage
coverage with the following limits of liability: Bodily Injury --
$1,000,000 each occurrence; Property Damage -- $1,000,000 each
occurrence or $2,000,000 combined single limit;
(C) Comprehensive Automobile Liability Insurance, including
coverage for all owned, non-owned and hired automobiles used in the
performance of the work with the following minimum limits of
liability: Bodily Injury -- $1,000,000 each occurrence; Property
Damage -- $1,000,000 each occurrence or $2,000,000 combined single
limit; and
(D) Environmental/Pollution Liability, including bodily injury
and property damage liability associated with the removal and/or
disposal of hazardous wastes and/or materials with the following
minimum limits of liability: Bodily Injury -- $2,000,000 each occur-
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rence; Property Damage -- $2,000,000 each occurrence or $4,000,000
combined single limit.
All insurance shall provide for thirty (30) days written notice
prior to cancellation, shall name Seller as an additional insured, and
shall provide that all liability coverage is primary and without the
right of contribution from insurance carried by Seller. Prior to
commencing any Inspection Activity at or on the Property, Purchaser
shall submit to Seller a binder of such insurance or certificates
thereof with the same force and effect as a binder.
(viii) Prior to commencing any environmental Inspection Activity at
or on the Property after the date hereof, Purchaser shall provide Seller
at least five (5) business days advance notice of its intent to have
such Inspection Activity performed.
(ix) Seller shall at all times during the course of any Inspection
Activities and after their completion have the right to inspect all
Inspection Activities of Purchaser and its contractors and their
subcontractors at or on the Property. Seller shall also have the right
to inspect and copy all studies, reports, test results, data and other
information and material collected or generated in the course of any
Inspection Activities.
(x) Notwithstanding the provisions of Section 8(a)(i) hereof, no
environmental Inspection Activity other than a Phase I environmental
site assessment shall be performed without the prior written consent of
Seller.
(xi) The rights granted to Purchaser under this Subsection 8(a) are
solely for informational purposes, shall in no event be construed to
modify the provisions of Subsection 8(b) hereof nor shall any
information obtained through such Inspection Activity be a basis for
Purchaser not performing its obligations under this Agreement.
(b) Purchaser agrees to accept the Sale Assets in their "as is",
"where is" condition on the date hereof, subject to (i) reasonable use,
wear, tear and natural deterioration between the date hereof and the
Closing Date, and (ii) the provisions of Section 9 hereof. Purchaser (i)
has or will examine, inspect and investigate to the full satisfaction of
Purchaser, the physical nature and condition of the Sale Assets, (ii) has
or will independently investigate, analyze and appraise the value and
profitability of the Sale Assets, and (iii) has reviewed such other
documents and materials as Purchaser has deemed advisable. Purchaser
acknowledges that, except as specifically set forth in this Agreement,
neither Seller, nor any real estate broker, employee, servant, agent,
consultant, accountant, attorney or representative of any Seller has made
any representations or warranties whatsoever regarding the subject matter
of this Agreement or the transactions contemplated hereby, including
without limitation, with respect to the physical nature or condition of the
Sale Assets, the revenues generated by or expenses associated with the Sale
Assets, zoning laws, building codes, laws and regulations, environmental
matters, the violation of any laws, ordinances, rules, regulations or
orders of any Governmental Authority, water, sewer or other utilities,
rents or other income, expenses applicable to the Sale Assets, capital
expenditures, leases, existing or future operations of the Sale Assets or
any other matter or thing affecting or related to the Sale Assets or the
operation thereof. In executing, delivering and/or performing this
Agreement, Purchaser has not relied upon and does not rely upon, and Seller
shall not be liable or bound in any manner by, express or implied
warranties, guaranties, promises, statements, representations or
information pertaining to any of the matters set forth above in this
Section 8 or otherwise made or furnished by Seller or by any real estate
broker, employee, servant, agent, consultant, accountant, attorney or any
other person representing or purporting to represent Seller to whomever
made or given, directly or indirectly, verbally or in writing, unless such
warranties, guaranties, promises, statements, representations or
information are expressly and specifically set forth in this Agreement.
(c) Purchaser waives and releases Seller from any present or future
claims arising from or relating to the presence or alleged presence of any
Hazardous Materials (as hereinafter defined) in, on, under or about the
Property, including, without limitation, any claims under (i) any Environ-
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mental Laws (as hereinafter defined), (ii) any other federal, state or
local law, ordinance, rule or regulation, now or hereafter in effect, that
deals with or otherwise in any manner relates to, environmental matters of
any kind, (iii) this Agreement, or (iv) the common law. The terms and
provisions of this Subsection 8(c) shall survive the Closing.
"Environmental Laws" mean all federal, state, local and foreign
environmental, health and safety laws, codes and ordinances and all rules
and regulations promulgated thereunder, including, without limitation laws
relating to emissions, discharge, releases or threatened releases of
pollutants, contaminants, chemicals, or industrial, toxic or hazardous
substances or wastes into the environment (including, without limitation,
air, surface water, ground water, land surface or subsurface strata) or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of pollutants,
contaminants, chemicals, or industrial, solid, toxic or hazardous
substances or wastes. As used in this Agreement, the term "Hazardous
Materials" includes, without limitation, (i) all substances which are
designated pursuant to Section 311(b)(2)(A) of the Federal Water Pollution
Control Act ("FWPCA"), 33 U.S.C. sec.1251 et seq.; (ii) any element,
compound, mixture, solution, or substance which is designated pursuant to
Section 102 of the Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA"), 42 U.S.C. sec.9601 et seq.; (iii) any hazardous
waste having the characteristics which are identified under or listed
pursuant to Section 3001 of the Resource Conservation and Recovery Act
("RCRA"), sec.6901 et seq.; (iv) any toxic pollutant listed under Section
307(a) of the FWPCA; (v) any hazardous air pollutant which is listed under
Section 112 of the Clean Air Act, 42 U.S.C. sec.7401 et seq.; (vi) any
imminently hazardous chemical substance or mixture with respect to which
action has been taken pursuant to Section 7 of the Toxic Substance Control
Act, 15 U.S.C. sec.2601 et seq.; and (vii) petroleum, petroleum products,
petroleum by-products, petroleum decomposition by-products, and waste oil;
(viii) "hazardous materials" within the meaning of the Hazardous Materials
Transportation Act, 49 U.S.C. sec.1802 et seq., (ix) any hazardous
substance or material identified or regulated by or under any applicable
provisions of the laws of the State in which the Property is located; (x)
asbestos or any asbestos containing materials; (xi) any radioactive
material or substance; (xii) all toxic wastes, hazardous wastes and
hazardous substances as defined by, used in, controlled by or subject to
all implementing regulations adopted and publications promulgated pursuant
to the foregoing statutes; and (xiii) any other hazardous or toxic
substance or pollutant identified in or regulated under any other
applicable federal, state or local laws.
9. Casualty and Condemnation.
(a) If, prior to the Closing, all or any portion of the Property is
damaged by fire, the elements or any other casualty or is taken by eminent
domain or otherwise, then, notwithstanding anything to the contrary implied
or provided by law or in equity, Purchaser shall not have the right to
terminate this Agreement and (i) the parties shall proceed to the Closing
in accordance with this Agreement, (ii) all proceeds or awards received by
Seller, or Seller's rights to such proceeds or awards, from such taking or
casualty (after deducting Seller's reasonable cost of collecting the same
and any reasonable expenses that Seller shall have incurred in repairing or
restoring the Property) shall be assigned by Seller to Purchaser at the
Closing, and (iii) the Purchase Price shall be abated to the extent of any
deductible.
10. Brokers.
(a) Purchaser and Seller represent to each other that they have not
dealt with any broker or finder in connection with this transaction.
(b) Purchaser hereby agrees to indemnify, defend and hold Seller
harmless from and against any and all claims, losses, liability, costs and
expenses (including reasonable attorneys' fees) resulting from any claim
that may be made against such Seller by any broker, or any other person
claiming a commission, fee or other compensation by reason of this
transaction, if the same shall arise by, through or on account of any
alleged act of Purchaser or Purchaser's representatives.
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(c) Seller hereby agrees to indemnify, defend and hold Purchaser
harmless from and against any and all claims, losses, liability, costs and
expenses (including reasonable attorneys' fees) resulting from any claim
that may be made against Purchaser by any broker, or any other person
claiming a commission, fee or other compensation by reason of this
transaction, if the same shall arise by, through or on account of any
alleged act of Seller or any of Seller's representatives.
(d) The provisions of this Section 10 shall survive the Closing, or if
the Closing does not occur, the termination of this Agreement.
11. Tax Reduction Proceedings. If Seller has heretofore filed
applications for the reduction of the assessed valuation of the Premises
and/or instituted certiorari proceedings to review such assessed valuations
for any tax years prior to the tax year of Closing, Purchaser acknowledges
and agrees that Seller shall have sole control of such proceedings,
including the right to withdraw, compromise and/or settle the same or cause
the same to be brought on for trial and to take, conduct, withdraw and/or
settle appeals, and Purchaser hereby consents to such actions as Seller may
take therein. Prior to the Closing, Seller shall not withdraw, compromise
or settle any such proceedings for any fiscal period in which the Proration
Date occurs or any subsequent fiscal period without the prior written
consent of Purchaser, which consent shall not be unreasonably withheld or
delayed. Any refund or tax savings for any year or years prior to the tax
year in which the Proration Date occurs shall belong solely to Seller. Any
tax savings or refund for the tax year in which the Proration Date occurs
shall be prorated in accordance with Section 6 hereof between Seller and
Purchaser after deduction of reasonable attorneys' fees and other
reasonable expenses related to the proceeding. Purchaser and Seller shall
each execute all consents, receipts, instruments and documents which may
reasonably be requested in order to facilitate settling such proceeding and
collecting the amount of any refund or tax savings. If Seller receives any
tax refund or credit, Seller shall, after deducting the reasonable expenses
of the collection thereof, pay to Purchaser, promptly after the receipt of
such funds or credit, the portion, if any, of such refund or credit to
which the past and/or present Tenants of the Building may be entitled
(whether by way of refund or rent credit) under the terms of their
respective Leases or any other agreements). The provisions of this Section
11 shall survive the Closing.
12. Recording Charges, Transfer Taxes, Mortgage Assumption Costs,
Title Insurance Charges, Survey Costs.
(a) At the Closing, Seller and Purchaser agree to complete, sign,
acknowledge and file any and all forms required for the transactions
contemplated by this Agreement with respect to transfer taxes and sales
taxes.
(b) Purchaser, on the one hand and Seller, on the other hand shall
each pay at the Closing, to the appropriate recipients and in the manner
required by said recipients, fifty (50%) percent of the following costs
associated with the transactions contemplated by this Agreement:
(i) transfer or similar taxes;
(ii) sales or similar taxes;
(iii) any extension and/or break up fees due to a lender
providing the mezzanine financing to Purchaser or to a lender
providing mortgage financing to Purchaser, upon an adjournment of the
Closing by Seller to a date later than December 29, 2000;
(iv) costs incurred in connection with the prepayment of the
Mortgage including, without limitation, prepayment fees, premiums and
charges and the attorney's fees and disbursements of mortgagee's
counsel;
(v) title insurance premiums and costs;
(vi) survey costs; and
(vii) recording charges;
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(c) Each party shall be responsible for the payment of its own
counsel's fees and disbursements and Purchaser shall be responsible for
the payment of all fees, charges and other costs it incurs with respect
to any mezzanine or other financing that it obtains.
(d) The obligations arising pursuant to this Section 12 shall
survive the Closing.
13. Representations and Warranties.
(a) Seller, as to itself only, represents and warrants to Purchaser
that the following are true and correct as of the date hereof and shall
be true and correct in all material respects as of the Closing Date:
(i) This Agreement, including the provisions of Section 16
hereof, constitutes the legal, valid and binding obligations of
Seller, enforceable against Seller in accordance with its terms.
Seller has taken all necessary action to authorize and approve the
execution and delivery of this Agreement and, subject to (A)
obtaining the Shareholder Ratification (as hereinafter defined) and
(B) the Right of First Refusal (as said term is defined Section 20)
not having been exercised by the Tenant at the Property, will have
taken all necessary actions to sell the Property to Purchaser,
subject to and in accordance with the terms of this Agreement, and
the execution and delivery of this Agreement and the performance by
Seller of its obligations hereunder do not and will not (a) conflict
with or violate any law, rule, judgment, regulation, order, writ,
injunction or decree of any Governmental Authority with jurisdiction
over Seller or the Sale Assets, including, without limitation, the
United States of America, any State in which the Sale Assets are
located or any political subdivision of either of the foregoing, or
any decision or ruling of any arbitrator in an arbitration to which
Seller is a party or by which Seller or the Property is bound or
affected, or (b) violate or constitute a default under any material
document or instrument to which Seller is a party or is bound or any
of Seller's organizational or governing documents.
(ii) FUR is an unincorporated association in the form of a
business trust duly organized and created under the laws of the State
of Ohio.
(iii) Seller is not a "foreign person" as defined in the
Internal Revenue Code Section 1445.
(iv) Seller is not a party as debtor to any insolvency or
bankruptcy proceeding or assignment for the benefit of creditors.
(v) Seller has the full right and authority and has obtained any
and all corporate consents and board of trustees approvals required
to enter into this Agreement, and subject to (A) obtaining the
Shareholder Ratification and (B) the Right of First Refusal, not
having been exercised by the Tenant at the Property, will have
obtained any and all corporate consents and board of trustee
approvals required to consummate or cause to be consummated the sale
and make or cause to be made transfers and assignments contemplated
herein; the person signing this Agreement on behalf of Seller is
authorized to do so; and this Agreement and all of the documents to
be delivered by Seller at the Closing have been authorized and
properly executed and will constitute the valid and binding
obligations of Seller, enforceable against Seller in accordance with
their terms.
(b) Purchaser represents and warrants to Seller that the following
are true and correct as of the date hereof and shall be true and correct
in all material respects as of the Closing Date:
(i) This Agreement constitutes the legal, valid and binding
obligation of Purchaser, enforceable against Purchaser in accordance
with its terms. Purchaser has taken all necessary action to authorize
and approve the execution and delivery of this Agreement and the
consummation of the transactions contemplated by this Agreement.
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(ii) The execution and delivery of this Agreement and the
performance by Purchaser of its obligations hereunder do not and will
not (a) conflict with or violate any law, rule, judgment, regulation,
order, writ, injunction or decree of any Governmental Authority with
jurisdiction over Purchaser, including, without limitation, the
United States of America, any State in which the Sale Assets are
located or any political subdivision of either of the foregoing, or
any decision or ruling of any arbitrator in an arbitration to which
Purchaser is a party or by which Purchaser is bound or affected, or
(b) violate or constitute a default under any material document or
instrument to which Purchaser is a party or is bound or any of
Purchaser's organizational or governing documents.
(c) The above-stated representations and warranties by Seller and
Purchaser shall survive the Closing for six (6) months.
14. Deliveries to be made on the Closing Date.
(a) Seller's Documents: Seller, pursuant to the provisions of this
Agreement, shall deliver or cause to be delivered to Purchaser on the
Closing Date the following instruments, documents and items:
(i) A duly executed and acknowledged bargain and sale deed
without covenants (or its equivalent for the State in which the
Property shall be located) (the "Deed").
(ii) A duly executed certification as to Seller's non-foreign
status as prescribed in Section 18 hereof, if applicable.
(iii) Any consents of members, partners, shareholders or
directors of Seller whose consent shall be required to authorize the
sale of the Property to Purchaser, in form reasonably satisfactory to
Purchaser and the Title Company.
(iv) The Shareholder Ratification and the Board Consent.
(v) Duly executed counterparts of an Assignment and Assumption
of Leases for the Property in the form of Exhibit A annexed hereto
and made a part hereof.
(vi) Intentionally deleted.
(vii) Duly executed counterparts of a Blanket Bill of Sale and
Assignment in the form of Exhibit D annexed hereto and made a part
hereof.
(viii) The Leases, Contracts and Licenses affecting the Premises
that are in Seller's possession (other than those that are held by
Radiant or any managing agent for the Premises and those Licenses
that must remain at the Premises).
(ix) The Estoppel Certificates required pursuant to Section 17
hereof.
(x) Intentionally deleted;
(xi) A letter to the tenants of the Premises in the form annexed
hereto as Exhibit B.
(xii) Duly executed counterparts of all transfer tax and sales
tax returns required to be signed by Seller.
(xiii) If the Closing shall not be a "New York style" closing,
Seller shall deliver an indemnification to the Title Company pursuant
to which Seller shall indemnify the Title Company against any liens
that may arise from and after the Closing Date until the recordation
of the Deed but only if, and to the extent that, such liens shall
arise on account of matters which Seller pursuant to Section 6 hereof
shall be required to pay for. Such other documents, instruments and
deliveries as are otherwise required by this Agreement or required to
record the Deed or reasonably required by Purchaser in order to
consummate the transactions contemplated hereby, provided that any
such additional
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documents, instruments and deliveries shall not result in Seller
having any greater liabilities than are expressly provided herein.
(xiv) With respect to any security deposits which are other than
cash or that are in the form of a letter of credit (collectively, the
"Non-Cash Security Deposits"), appropriate duly executed instruments
of transfer or assignment of such Non-Cash Security Deposits which
are required to establish Purchaser as the new beneficiary
thereunder. With respect to any Non-Cash Security Deposit in the form
of a letter of credit, if such letter of credit shall not, pursuant
to its terms, be assignable, Seller shall cooperate with Purchaser to
obtain a replacement letter of credit with respect thereto in favor
of Purchaser, and, if a replacement letter of credit is not obtained
and if requested by Purchaser following the Closing, Seller shall
draw on such letter of credit if the tenant for whom the same was
given as a security deposit shall default under its Lease and Seller
shall remit the proceeds thereof to Purchaser. Purchaser agrees to
indemnify, defend and hold Seller harmless from and against any and
all costs, loss, damages and expenses of any kind or nature
whatsoever (including reasonable attorneys' fees and costs) but
excluding consequential damages arising out of or resulting from
Seller's presenting any such letter of credit for payment in
accordance with Purchaser's request. The foregoing provisions shall
survive the Closing.
(xv) A duly executed counterpart of the Assignment and
Assumption of Contracts and Permits, in the form of Exhibit C annexed
hereto and made a part hereof.
(xvi) A duly executed counterpart of a Blanket Bill of Sale and
Assignment in the form of Exhibit D annexed hereto and made a part
hereof pertaining to the Personalty, it being agreed that for
purposes of this Agreement, the Personalty shall be deemed to have no
value.
(xvii) Seller shall furnish at Closing any and all information
that may be necessary or appropriate to enable the "real estate
broker" or "real estate reporting person," within the meaning of
Section 6045(e) of the Internal Revenue Code and the regulations
promulgated thereunder, to comply with the reporting requirement of
Section 6045(e) of the Internal Revenue Code.
(xviii) Seller shall obtain and deliver to Purchaser at Closing
all local customary documents required in connection with a sale of
the Property, including such tax and other documents as may be
necessary to record the Deed. Seller and Purchaser shall jointly
retain local counsel in the States in which the Property shall be
located, to advise each party as to how to comply with the provisions
of this Subsection 14(a)(xviii). The cost of such local counsel shall
be borne equally between Purchaser, on the one hand, and Seller on
the other.
(b) Purchaser's Documents: Purchaser, pursuant to the provisions of
this Agreement, shall deliver or cause to be delivered to Seller on the
Closing Date the following instruments, documents and items:
(i) A duly executed counterpart of the Assignment and Assumption
of Leases.
(ii) A duly executed counterpart of the Blanket Bill of Sale and
Assignment.
(iii) Duly executed counterparts of all transfer tax and sales
tax returns required to be signed by Purchaser.
(iv) A consent or resolution of the members, partners, directors
and shareholders, as applicable, of Purchaser authorizing the
purchase of the Sale Assets, in a form reasonably satisfactory to
Seller.
(v) Intentionally deleted.
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(vi) Such other documents, instruments and deliveries as are
otherwise required by this Agreement or required to record the
Mortgage Assumption Instrument or reasonably required by Seller in
order to consummate the transactions contemplated hereby.
(vii) A duly executed counterpart of the Assignment and
Assumption of Contracts and Permits.
15. Default by Purchaser or Seller.
(a) If (i) Purchaser shall default in the payment of the Purchase
Price, (ii) Purchaser shall otherwise default in the performance of any
of the other terms and provisions of this Agreement on the part of
Purchaser to be performed, and the Closing does not occur as a result
thereof, and such default shall continue for five (5) business days
after written notice to Purchaser (provided, however, notwithstanding
the foregoing, time shall be of the essence with respect to Purchaser's
obligation to close hereunder on such date set for Closing as to which
TIME SHALL BE OF THE ESSENCE pursuant to Section 5 hereof), or (iii) (A)
Purchaser shall commence any case, proceeding or other action under any
laws relating to bankruptcy, insolvency, reorganization or relief of
debtors, or seeks to have an order for relief entered with respect to
it, or seeks to be adjudicated a bankrupt or insolvent, or seeks
reorganization, arrangement, adjustment, liquidation, dissolution,
composition or other relief with respect to it or its debts, or seeks
the appointment of a receiver, trustee, custodian or other similar
official for it or all or any substantial part of its property, or (B)
Purchaser otherwise takes any action indicating its consent to, approval
of, or acquiescence in, or in furtherance of, any of the acts described
in clause (iii)(A), above, then in any of such cases, Purchaser shall be
deemed to be in default hereunder. Purchaser acknowledges that if
Purchaser shall default under this Agreement as aforesaid, Seller will
suffer substantial adverse financial consequences as a result thereof.
Accordingly, Seller, as its sole and absolute remedy against Purchaser,
shall have the right to retain the Deposit and which Deposit shall
constitute full and complete liquidated damages, it being agreed that
Seller's damages are difficult, if not impossible, to ascertain, and
thereafter Purchaser and Seller shall have no further rights or
obligations under this Agreement, except those expressly provided herein
to survive the termination of this Agreement.
(b) Except as provided in Section 16 hereof, and subject to the
provisions thereof, (i) if Seller shall default in conveying the
Property to Purchaser pursuant to the terms hereof on the Closing Date
(provided this Agreement has not been terminated pursuant to the terms
hereof), (ii) if Seller shall default hereunder for any other reason and
such default shall continue for five (5) business days after written
notice to Seller, Purchaser may, as its sole remedy, elect to either (x)
terminate this Agreement, and direct Escrowee to return the Deposit
Purchaser and Seller and Purchaser shall thereafter have no further
rights or obligations under the Agreement, except those expressly
provided herein to survive the termination of this Agreement, or (y)
prosecute an action for specific performance of this Agreement by
Seller. Any such action for specific performance must be commenced
against Seller within ninety (90) days after the date that Seller shall
default hereunder, it being understood that if Purchaser shall fail to
commence an action for specific performance within such period of time,
Purchaser shall be deemed to have waived its right to commence an action
for specific performance of this Agreement.
16. Termination and Expense Reimbursement.
The obligation of Seller to transfer the Sale Assets pursuant to this
Agreement are contingent upon FUR, at FUR's sole cost and expense,
obtaining approval for the sale contemplated hereby and any amendments to
the organizational or governing documents of FUR necessary to consummate
the sale contemplated hereby from shareholders of FUR holding the requisite
number of shares in accordance with the organizational and governing
documents of FUR (collectively, the "Shareholder Ratification") and this
Agreement shall terminate, (i) if at a meeting called for the purpose of
voting on such sale and such amendments, the shareholders of FUR do not
approve the
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sale contemplated hereby and all of such amendments, upon the date of such
meeting, (ii) at the option of FUR, upon the date FUR delivers notice of
termination to Purchaser, if such meeting of the shareholders of FUR has
not been held on or prior to the date (the "Shareholder Approval Deadline")
which is three business days prior to the date as to which time is of the
essence with respect to Purchaser's obligation to close pursuant to Section
5, (iii) at the option of Purchaser, upon the date Purchaser delivers
notice of termination to FUR, if such meeting of the shareholders of FUR
has not been held on or prior to the date which is three business days
prior to the date as to which time is of the essence with respect to
Seller's obligation to close pursuant to Section 5, or (iv) at the option
of FUR, to be exercised prior to the Shareholder Ratification, upon the
date FUR delivers notice of termination to Purchaser, if the Board of
Trustees of FUR, or a committee thereof, determines, after consultation
with outside legal counsel, that it has a fiduciary duty under applicable
law to accept, approve or recommend an Alternative Proposal (as defined in
Section 24 below); and thereupon FUR shall promptly cause the Deposit to be
returned to Purchaser. This Agreement shall then terminate and neither
party shall have any further obligation to the other party under this
Agreement, except for those provisions which are expressly stated herein to
survive termination of this Agreement. Seller makes no representation or
warranty herein that the Shareholder Ratification shall be obtained. The
Board of Trustees of FUR shall recommend to the shareholders of FUR that
they approve the sale contemplated hereby and any amendments to the
organizational or governing documents of FUR necessary to consummate the
sale contemplated hereby, unless the Board of Trustees of FUR, or a
committee thereof, determines, after consultation with outside legal
counsel, that it has a fiduciary duty under applicable law to accept,
approve or recommend an Alternative Proposal (as defined in Section 24
below).
17. Estoppel Certificates.
Seller shall use commercially reasonable efforts to deliver to
Purchaser a lease estoppel certificate (the "Tenant Estoppel Certificate")
from the Tenant under the Lease, in a form reasonably required by the
lender that shall be providing financing for the Property (or in such other
form or containing such other information as the Tenant's lease shall
require the tenant to provide). Notwithstanding the immediately preceding
sentence to the contrary, any estoppel certificate that shall be delivered
to Purchaser from the Tenant which is not in the form reasonably required
by the lender that shall be providing financing for the Property (or in
such other form or containing such other information as such Tenant's lease
shall require such tenant to provide), shall qualify as an acceptable
estoppel certificate provided that the Tenant's Estoppel Certificate
confirms the material terms set forth in the lender's form of Tenant
Estoppel Certificate. If Seller, on or before the Closing, is unable to
deliver a Tenant Estoppel Certificate from the Tenant of the Property,
Seller shall deliver to Purchaser, at Closing, a certificate ("Seller's
Certificate"), executed by Seller, whereby Seller shall state, to the best
of its knowledge, the following: (a) the rent and other charges payable by
the Tenant under its Lease and the amount, if any, of the security
deposit(s) held by Seller; (b) the term of the Lease and (c) that the
Tenant is not in default under any of the terms of its Lease or if in
default the nature of such default. The Seller's Certificate shall survive
the Closing for a period of six (6) months. A Seller's Certificate with
respect to the Tenant shall expire and be of no force and effect upon
Purchaser's receipt of a Tenant Estoppel Certificate consistent with the
information set forth in the Seller's Certificate. In addition, Seller
shall not have any liability on account of any statement in a Seller's
Estoppel Certificate which shall be untrue in any material respect if
Purchaser or Radiant shall know or, in connection with its management of
the Property, should have known that such statement was untrue. If Seller
is unable to deliver the Tenant's Estoppel Certificate and fails to deliver
a Seller's Certificate in the event such Tenant's Estoppel Certificate is
not obtained, and as a result thereof the lender providing the mortgage
financing for the Property or the lender providing mezzanine financing
shall elect not to provide the financing for the Property, Purchaser, as
its sole and absolute remedy, shall have the right to elect not to purchase
the Property. If Purchaser shall make such election, the Escrowee shall
deliver the Deposit hereunder to Purchaser. This Agreement shall then
terminate and neither party shall have
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any further obligation to the other party under this Agreement, except for
those provisions which are expressly stated to survive termination of this
Agreement.
18. Governmental Compliance.
(a) FIRPTA Compliance. Seller shall comply with the provisions of
the Foreign Investment in Real Property Tax Act, Internal Revenue Code
of 1986, as amended, Section 1445, as the same may from time to time be
amended, or any successor or similar law (collectively, the "FIRPTA
Code"). On the Closing Date, Seller shall deliver to Purchaser
certifications as to Seller's non-foreign status which complies with the
provisions of Section 1445(b)(2) of the FIRPTA Code, and shall comply
with any temporary or final regulations promulgated with respect thereto
and any relevant revenue procedures or other officially published
announcements of the Internal Revenue Service of the U.S. Department of
the Treasury in connection therewith. If Seller shall fail to deliver
the foregoing certification to Purchaser at the Closing, Purchaser shall
have the right to withhold ten percent (10%) of the portion of the
Purchase Price allocated to Seller's property and apply the same in
accordance with the requirements of the FIRPTA Code.
(b) HSR Compliance. Seller and Purchaser will make as promptly as
practicable all filings necessary, if any, under the HSR Act (as
hereinafter defined) and other applicable federal, state and local
antitrust, competition and other similar laws (collectively, the
"Antitrust Laws") in order to obtain any required regulatory approvals,
clearance or expirations of waiting periods (collectively, "Antitrust
Clearance") in connection with the transactions contemplated by this
Agreement. The term "HSR Act" shall mean the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended. Subject to the limitations
contained in the last sentence of this Subsection 18(b), Seller and
Purchaser shall each use their reasonable best efforts to resolve such
objections, if any, as any governmental or regulatory authorities with
jurisdiction over the enforcement of any Antitrust Laws may assert under
any such Antitrust Laws with respect to the transactions contemplated by
this Agreement. The parties shall consult with each other when dealing
with such authorities and before submitting any application or other
written communication to any such authority.
19. Merger. Except as otherwise expressly provided to the contrary in
this Agreement, no representations, warranties, covenants or other
obligations of Seller set forth in this Agreement shall survive the
Closing, and no action based thereon shall be commenced after the Closing.
The delivery and acceptance of the Deed at the Closing, without the
simultaneous execution and delivery of a specific agreement which by its
terms shall survive the Closing, shall be deemed to constitute full
compliance by the parties with all of the terms, conditions and covenants
of this Agreement on their part to be performed except for those terms,
conditions and covenants which this Agreement expressly provides will be
performed after the Closing.
20. Conditions to Closing.
(a) Conditions to Purchaser's Obligation to Close. Purchaser's
obligation to close hereunder shall be subject to the following
conditions:
(i) Seller shall have performed, satisfied and complied with, or
tendered performance of, in all material respects, all of the terms,
conditions and covenants required by this Agreement to be performed
or complied with by Seller on or before the Closing Date.
Notwithstanding anything to the contrary in any provision of this
Agreement, if for any reason FUR is unable to convey to Purchaser its
right, title and interest in and to the Property in accordance with
the terms of this Agreement due to the fact that the Tenant at the
Property has exercised its right to purchase the Property in
accordance with the terms and conditions of its Lease (the "Right of
First Refusal"), then this Agreement shall thereupon immediately
terminate and be null, void and of no force and effect, except for
those provisions which are expressly stated to survive termination of
this Agreement, and
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Escrowee shall disburse the Deposit, together with any interest
earned on such amount, to Purchaser. In addition, Purchaser agrees to
deliver or cause to be delivered to Seller each Study prepared for
the Property by or on behalf of Purchaser, together with all reliance
letters from each provider of same which were obtained by Purchaser
upon receipt of each Study.
(ii) All representations and warranties of Seller in this
Agreement shall be true and correct in all material respects as of
the date of this Agreement and as of the Closing Date.
(iii) Any and all Antitrust Clearance required in connection
with the transactions contemplated by this Agreement shall have been
obtained.
(iv) Seller shall have obtained the Shareholder Ratification
pursuant to Section 16(a) hereof and the Board Consent.
(v) The management of the Property by Radiant shall be
undisturbed through the Closing Date, except as may be permitted
under the Asset Management Agreement by reason of Radiant's default
thereunder.
The foregoing conditions under this Subsection 20(a), except for
the condition in clauses (iii) and (iv), are for the benefit of
Purchaser only, and Purchaser may, in its sole discretion, waive any or
all of such conditions and close title under this Agreement without any
abatement of, or credit against, the Purchase Price.
(b) Conditions to Seller's Obligation to Close. Seller's obligation
to close hereunder shall be subject to the following conditions:
(i) Purchaser shall have performed, satisfied and complied with,
or tendered performance of, in all material respects, all of the
covenants, agreements and conditions required by this Agreement.
(ii) All representations and warranties of Purchaser in this
Agreement shall be true and correct in all material respects as of
the date of this Agreement, and as of the Closing Date.
(iii) Intentionally deleted.
(iv) Any and all Antitrust Clearance required in connection with
the transactions contemplated by this Agreement shall have been
obtained.
(v) No judgment, injunction, order, decree or action by an
federal, state or local government, court, or administrative or
regulatory agency of competent authority preventing the sale
contemplated hereby shall have become final and unappealable or shall
be in effect as of the date as to which time is of the essence with
respect to Purchaser's obligation to close pursuant to Section 5(a),
it being understood that if this condition shall not be satisfied at
Closing, this Agreement shall terminate and be null, void and of no
further force and effect, and the Escrowee shall disburse the Deposit
to Purchaser.
The foregoing conditions under this Subsection 20(b), except for
the condition in clause (iv), are for the benefit of Seller only, and
Seller may, in its sole discretion, waive any or all of such conditions
and close title under this Agreement without any increase in the
Purchase Price.
21. Prior to Closing.
(a) Insurance. Until Closing, Seller shall maintain all of the
insurance policies described on Schedule H-1 in full force and effect or
shall obtain replacement policies that shall provide substantially
equivalent coverage.
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(b) Operation. Until Closing, Seller shall operate and maintain its
Property substantially in accordance with its current practices with
respect to the operation and maintenance of the Property.
(c) New Contracts. Between the date hereof and the Closing, Seller
will enter into only those Contracts which Seller reasonably determines
are necessary to carry out its obligations under Subsection 21(b) and
which shall be cancellable on not more than thirty (30) days' written
notice (without penalty, unless said Seller agrees to pay any such
termination penalty at Closing).
(d) New Leases; Lease Extensions. Between the date hereof and the
Closing Date, Seller will not execute any new Leases or amend, terminate
(except upon a monetary default by the tenant thereunder) or accept the
surrender of any existing tenancies or approve any subleases without the
prior written consent of Purchaser, which consent shall not be
unreasonably withheld, conditioned or delayed, provided, however,
Purchaser's consent shall be deemed to have been given if Purchaser does
not respond to a Seller within five (5) business days after Purchaser's
receipt of written notice from such Seller requesting Purchaser's
consent to a matter that is the subject of the provisions of this
Section 21(d).
(e) Employees. From and after the date hereof through and including
the Closing or earlier termination of this Agreement, Seller shall not
hire any Employees without the prior written consent of Purchaser. Each
Seller shall notify Purchaser reasonably promptly if Seller hires any
Employees.
(f) Contracts. At the Closing, Purchaser shall assume the
Contracts. As used herein, the term "Contracts" shall include any new
contracts entered into from and after the date hereof. Seller shall
notify in writing the vendors under those Contract(s) which Purchaser
has not agreed to assume as of Closing that, provided that Closing
occurs hereunder, the applicable Seller shall terminate such Contracts,
effective as of the Closing Date; provided however, if any such
non-assumed Contract does not permit Seller to terminate same prior to
Closing, Purchaser shall be required at Closing to assume all
obligations thereunder until the effective date of the termination.
(g) Seller shall not, between the date hereof and the Closing Date,
amend, modify, extend, renew, replace, supplement or consolidate the
Mortgage without the consent of Purchaser.
(h) Seller shall not initiate, consent to or approve any action
with respect to zoning, or, unless required by law, any other
governmental rules or regulations applicable to any part of the
Property.
(i) Seller maintains real estate environmental liability insurance,
as more fully described on Schedule F-2. Notwithstanding the foregoing,
Purchaser shall assume responsibility for the amount of any deductible
applicable to the environmental liability insurance policies. Purchaser
and Seller agree to cooperate with the other and to perform, execute and
deliver, such documents and instruments as may be reasonably necessary
in connection with any claim or other matter arising under or relating
to any of the environmental insurance policies. The provisions of this
Subsection 21(i) shall survive the closing.
22. Shareholder Lawsuits. To the extent of claims by shareholders of
FUR against the Purchaser, to the fullest extent allowed by law FUR hereby
indemnifies Purchaser from and against any and all damages, liability,
loss, cost and expense (including, without limitation, reasonable
attorney's fees and disbursements) incurred in connection with such claims;
provided, that the foregoing indemnification shall not extend, directly or
indirectly, to Radiant Partners LLC or its principals, except that nothing
in this Agreement shall modify any pre-existing obligation of FUR to
indemnify Radiant Partners LLC or its principals. To effect the
indemnification provided herein, FUR covenants and agrees that it has and
shall maintain a net worth of at least $30,000,000 through the later of (A)
30 days after the Closing Date or (B) the resolution, after all appeals, of
claims by
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shareholders of FUR against Purchaser. The provisions of this Section 22
shall survive the Closing of title.
23. Deposit.
(a) The Deposit shall be deposited with the Escrowee and shall be
held in escrow pursuant to the terms of this Agreement. Escrowee shall
cause the Deposit to be deposited into an interest bearing account.
Escrowee shall pay the Deposit to Seller at the Closing upon the
consummation thereof or otherwise in accordance with this Agreement. If
either party makes a demand upon Escrowee for delivery of the Deposit,
Escrowee shall give notice to the other party of such demand. If a
notice of such demand shall have been sent to the other party and a
notice of objection to the proposed payment is not received from said
other party within seven (7) business days after the giving of notice by
Escrowee, Escrowee is hereby authorized to deliver the Deposit to the
party who made the demand. If Escrowee receives a notice of objection
within said period, then Escrowee shall continue to hold the Deposit and
thereafter pay it to the party entitled when Escrowee receives (i) a
notice from the objecting party withdrawing the objection, or (ii) a
notice signed by both parties directing disposition of the Deposit, or
(iii) a judgment or order of a court of competent jurisdiction directing
the payment of the Deposit.
(b) The parties further agree that:
(i) Except for its gross negligence or willful misconduct,
Escrowee shall be protected in relying upon the accuracy, acting in
reliance upon the contents, and assuming the genuineness of any
notice, demand, certificate, signature, instrument or other document
which is given to Escrowee verifying the truth or accuracy of any
such notice, demand, certificate, signature, instrument or other
document;
(ii) Escrowee shall not be bound in any way by any other
contract or understanding between the parties hereto, whether or not
Escrowee has knowledge thereof or consents thereto unless such
consent is given in writing;
(iii) Escrowee's sole duties and responsibilities shall be to
hold and disburse the Deposit in accordance with this Agreement;
provided, however, that Escrowee shall have no responsibility for the
clearing or collection of the check representing the Deposit;
(iv) Escrowee shall not be liable for any action taken or
omitted by Escrowee in good faith and believed by Escrowee to be
authorized or within its rights or powers conferred upon it by this
Agreement, except for damage caused by the gross negligence or
willful misconduct of Escrowee;
(v) Upon the disbursement of the Deposit in accordance with this
Agreement, Escrowee shall be relieved and released from any liability
under this Agreement;
(vi) Escrowee may resign at any time upon at least ten (10) days
prior written notice to the parties hereto. If, prior to the
effective date of such resignation, the parties hereto shall all have
approved, in writing, a successor escrow agent, then upon the
resignation of Escrowee, Escrowee shall deliver the Deposit to such
successor escrow agent. From and after such resignation and the
delivery of the Deposit to such successor escrow agent, Escrowee
shall be fully relieved of all of its duties, responsibilities and
obligations under this Agreement, all of which duties,
responsibilities and obligations shall be performed by the appointed
successor escrow agent. If for any reason the parties hereto shall
not approve a successor escrow agent within such period, Escrowee may
bring any appropriate action or proceeding for leave to deposit the
Deposit with a court of competent jurisdiction, pending the approval
of a successor escrow agent, and upon such deposit Escrowee shall be
fully relieved of all of its duties, responsibilities and obligations
under this Agreement;
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(vii) Seller and Purchaser hereby agree to, jointly and
severally, indemnify, defend and hold Escrowee harmless from and
against any liabilities, damages, losses, costs or expenses incurred
by, or claims or charges made against, Escrowee (including reasonable
counsel fees and court costs) by reason of Escrowee's acting or
failing to act in connection with any of the matters contemplated by
this Agreement or in carrying out the terms of this Agreement, except
as a result of Escrowee's gross negligence or willful misconduct;
(viii) In the event that a dispute shall arise in connection
with this Agreement, or as to the rights of any of the parties in and
to, or the disposition of, the Deposit, Escrowee shall have the right
to (w) hold and retain all or any part of the Deposit until such
dispute is settled or finally determined by litigation, arbitration
or otherwise, or (x) deposit the Deposit in an appropriate court of
law, following which Escrowee shall thereby and thereafter be
relieved and released from any liability or obligation under this
Agreement, or (y) institute an action in interpleader or other
similar action permitted by stakeholders in the State of New York, or
(z) interplead any of the parties in any action or proceeding which
may be brought to determine the rights of the parties to all or any
part of the Deposit; and
(ix) Escrowee shall not have any liability or obligation for
loss of all or any portion of the Deposit by reason of the insolvency
or failure of the institution or depository with whom the escrow
account is maintained.
24. Exclusivity; Shareholder Approval and Press Releases
(a) From and after the date hereof, no authorized officer, trustee,
manager or director of FUR shall, directly or indirectly, solicit or
initiate any discussions with any person or entity other than Purchaser
or Purchaser's agents with a view toward the sale of all or any portion
of the Sale Assets by Seller. Notwithstanding the foregoing, FUR may
respond to, pursue (including by providing information relating to
Seller and the Sale Assets which is non-public, confidential and/or
proprietary in nature ("Evaluation Material") subject to a customary
confidentiality agreement) and negotiate a bona fide proposal (an
"Alternative Proposal") by any person or entity other than Purchaser,
which is neither solicited nor initiated by an authorized officer,
trustee, manager or director of FUR, to purchase, directly or indirectly
(including, without limitation, by way of a merger, combination,
consolidation, share exchange, tender offer or similar business
combination transaction), any or all of the Sale Assets if the Board of
Trustees of FUR or a committee thereof has determined that (i) such
Alternative Proposal may be more favorable to the shareholders of FUR
than the sale contemplated hereby, taking into account price, timing,
closing conditions, the likelihood of completion and any other factors
deemed relevant by the Board of Trustees of FUR or such committee, and
(ii) the person or entity making the Alternative Proposal is reasonably
likely to have the financial resources to consummate the transactions
contemplated by such Alternative Proposal. FUR shall notify Purchaser if
it responds to, pursues or negotiates an Alternative Proposal, shall
provide Purchaser with a copy of any such written Alternative Proposal
and shall keep Purchaser reasonably informed of the status of any such
negotiations. Notwithstanding anything herein to the contrary, FUR
retains the right to negotiate with the Tenant at the Property with
respect to the Right of First Refusal.
(b) FUR shall use its reasonable best efforts to (i) prepare and
file and clear with the Securities and Exchange Commission the proxy
statement and any amendments or supplements thereto required to obtain
the approval of the shareholders of FUR to the sale contemplated hereby
and any amendments to the organizational or governing documents of FUR
necessary to consummate the sale contemplated hereby as promptly as
practicable and, in any event, before the date that would allow
sufficient time to declare a record date, mail proxy statements, solicit
proxies and conduct a meeting of FUR's shareholders in accordance with
all
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applicable laws, rules and regulations and FUR's organizational and
governing documents by no later than the Shareholder Approval Deadline,
and (ii) duly call, give notice of, convene and hold such meeting on or
before the Shareholder Approval Deadline.
(c) FUR and Purchaser shall consult with each other before issuing
any press release or otherwise making any public statements with respect
to the sale contemplated hereby and shall not issue any such press
release or make any such public statement prior to such consultation,
except as may be required or advisable under applicable law, rules or
regulations (including, without limitation, the rules and regulations of
the New York Stock Exchange).
25. Intentionally deleted.
26. Notices. All notices, requests, demands and other communications
provided for by this Agreement shall be in writing and shall be deemed to
have been given (a) when hand delivered, or (b) if sent same day or
overnight recognized commercial courier service, when received, or (c)
three (3) business days after being mailed in any general or branch office
of the United States Postal Service, enclosed in a registered or certified
postpaid envelope, addressed to the address of the parties stated below or
to such changed address as such party may have fixed by notice:
To Seller:
c/o Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, N.Y. 10004-1980
Attention: Steven G. Scheinfeld, Esq.
with a copy to:
Stroock & Stroock & Lavan LLP
180 Maiden Lane
New York, New York 10038-4982
Attention: Peter A. Miller, Esq.
To Purchaser:
c/o Radiant Partners LLC
551 Fifth Avenue, Suite 1416
New York, New York 10176
with a copy to:
Goldberg Weprin & Ustin LLP
1501 Broadway
New York, New York 10036
Attention: Andrew W. Albstein, Esq.
To Escrowee:
Stroock & Stroock & Lavan LLP
180 Maiden Lane
New York, New York 10038-4982
Attention: Peter A. Miller, Esq.
provided, that any notice of change of address shall be effective
only upon receipt.
27. Amendments. This Agreement may not be modified or terminated
orally or in any manner other than by an agreement in writing signed by all
the parties hereto or their respective successors in interest.
28. Governing Law; Construction. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York (except
to such matters of real estate law that
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must be governed by the law of the State in which the Property is located),
without giving effect to principles of conflicts of law.
29. No Offer. This document is not an offer by Seller, and under no
circumstances shall this Agreement have any binding effect upon Purchaser
or Seller unless and until Purchaser and Seller shall each have executed
this Agreement and delivered to each other executed counterparts of this
Agreement.
30. Partial Invalidity. If any provision of this Agreement is held to
be invalid or unenforceable as against any person or under certain
circumstances, the remainder of this Agreement and the applicability of
such provision to other persons or circumstances shall not be affected
thereby. Each provision of this Agreement shall be valid and enforceable to
the fullest extent permitted by law.
31. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall constitute an original, but all of which,
taken together, shall constitute but one and the same instrument.
32. No Third Party Beneficiaries. The warranties, representations,
agreements and undertakings contained herein shall not be deemed to have
been made for the benefit of any person or entity other than the parties
hereto.
33. Memorandum of Contract. Purchaser covenants and agrees that in no
event will Purchaser record or cause to be recorded this Agreement or any
memorandum hereof and that Purchaser's breach of this provision shall
represent a default of the nature governed by Subsection 15(a) hereof and
Seller shall have all of the rights and remedies provided under Subsection
15(a) including, without limitation, the option of terminating this
Agreement and retaining the Deposit as liquidated damages.
34. Waiver. No failure or delay of either party in the exercise of any
right given to such party hereunder or the waiver by any party of any
condition hereunder for its benefit (unless the time specified herein for
exercise of such right, or satisfaction of such condition, has expired)
shall constitute a waiver of any other or further right nor shall any
single or partial exercise of any right preclude other or further exercise
thereof or any other right. The waiver of any breach hereunder shall not be
deemed to be a waiver of any other or any subsequent breach hereof.
35. Assignment. Purchaser shall not have the right to assign its
rights or obligations under this Agreement without the prior written
consent of Seller, except that Purchaser may assign such rights and
obligations to one or more entities with a net worth of at least
$40,000,000 and with respect to which Radiant and/or its principals shall
have an economic interest and maintains and/or participates in managerial
control and direction of the business activities and operations of said
entity (each such entity shall hereinafter be called a "Permitted
Assignee"). Seller hereby approve an assignment of Purchaser's rights and
obligations under this Agreement to an entity wholly owned by Radiant,
Landmark Realty Advisors LLC and a minority equity investor, provided that
such assignee shall have a net worth of at least $40,000,000. In the event
of any proposed transfer or assignment to a Permitted Assignee, the
transfer or assignment shall not be deemed effective unless and until the
proposed transferee or assignee executes, acknowledges and delivers to
Seller an instrument of assumption in form and consent reasonably
satisfactory to Seller pursuant to which it assumes and agrees to perform
all obligations of Purchaser under this Agreement with respect to the
applicable Property, including, but not limited to, all obligations of
Purchaser which survive the Closing hereunder, agrees to be bound by all
other terms and provisions of this Agreement, confirms that all
representations and warranties made by Purchaser in this Agreement are
true, accurate and complete as they pertain to such transferee or assignee
(subject to any exceptions thereto that are reasonably acceptable to
Seller), and provides the addresses and telecopier numbers to which Notices
to such transferee or assignee should be sent. Notwithstanding the above to
the contrary, at Closing, Purchaser can direct that Seller deliver a deed
to an entity, with respect to
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the Property, as Purchaser shall designate, so long as such entity is owned
one hundred (100%), directly or indirectly, by Purchaser or a Permitted
Assignee.
36. Interpretation. Words of any gender used in this Agreement shall
include any other gender and words in the singular shall include the
plural, and vice versa, unless the context requires otherwise. The words
"herein," "hereof," "hereunder" and other similar compounds of the words
"here" when used in this Agreement shall refer to the entire Agreement and
not to any particular provision or section. As used in this Agreement, the
term "business day" means every day other than (i) Saturdays and Sundays,
(ii) all days observed by the Federal or New York State governments as
legal holidays, and (iii) all days on which commercial banks in New York
State are required by law to be closed.
37. Construction. This Agreement shall be given a fair and reasonable
construction in accordance with the intentions of the parties hereto. Each
party hereto acknowledges that it has participated in the drafting of this
Agreement, and any applicable rule of construction to the effect that
ambiguities are to be resolved against the drafting party shall not be
applied in connection with the construction or interpretation hereof. Each
party has been represented by independent counsel in connection with this
Agreement. For purposes of construction of this Agreement, provisions which
are deleted or crossed out shall be treated as if never included herein.
38. Access to Books and Records. For a period of one (1) year after
the Closing, Purchaser shall give Seller and its representatives access,
during normal business hours and upon reasonable prior notice to Purchaser,
to such books, accounts, records and Leases relating to the Property
(including the right, at Seller's expense, to make photostatic copies of
same) as are reasonably necessary to enable Seller to verify any rights or
obligations of Seller or Purchaser under this Agreement which survive the
Closing and to enable Seller to respond to any tax inquiries or audits, or
to comply with any other obligations to Governmental Authorities.
39. Binding Effect. This Agreement is binding upon, and shall inure to
the benefit of, the parties and each of their respective successors and
permitted assigns, if any.
40. Waiver of Jury Trial. Each of Purchaser and Seller hereby
irrevocably waive all right to trial by jury in any action, proceeding or
counterclaim arising out of or relating to this Agreement.
41. Collectibility of Checks. If the Deposit is paid by check and said
check fails collection in due course, Seller, at its option, may declare
this Agreement null, void and of no force and effect, and may pursue its
remedies against Purchaser upon said check, or in any other manner
permitted by law, such remedies being cumulative.
42. Section Headings. The headings of the various sections of this
Agreement have been inserted only for the purpose of convenience and are
not part of this Agreement and shall not be deemed in any manner to modify,
expand, explain or restrict any of the provisions of this Agreement.
43. Federal I.D. Number/Social Security Number. FUR's Federal I.D.
Number is 34-6513657. Purchaser's Federal I.D. Number is being applied for.
44. Incorporation by Reference; Inconsistency. The Schedules and
Exhibits to this Agreement are incorporated herein by reference and made a
part hereof.
45. Acquisition of Ownership Interest. Seller and Purchaser agree that
it may be more advantageous with respect to the Property for Purchaser to
acquire a one hundred (100%) percent ownership interest in the Seller
entity and/or a constituent member or principal of such entity (or, at
Purchaser's election, structure such a purchase whereby Seller shall retain
a record ownership interest but not a beneficial interest or economic
interest in such entity) in lieu of acquiring fee simple title to the
Property. In the event Purchaser shall so elect to acquire such ownership
interest in lieu of acquiring fee title with respect to the Property and
provided that there is no material adverse effect to Seller, then the
parties agree to cooperate with each other and perform, execute
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<PAGE> 156
and deliver, such documents and instruments as may be reasonable and
customary to effect such acquisition.
46. (a) Notwithstanding anything contained in this Agreement to the
contrary, this Agreement is made and executed on behalf of FUR, 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 FUR shall have any liability in
his personal or individual capacity, but instead, all parties shall look
solely to the property and assets of FUR for satisfaction of claims of any
nature arising or in connection with this Agreement.
(b) Notwithstanding anything contained in this Agreement to the
contrary, Seller acknowledges and agrees that it has not relied upon any
representations, warranties or statements made or information provided by
Purchaser, and that Seller has relied on, inter alia, information provided
by Radiant Partners LLC and its principals. In the event of any dispute
regarding information received by Seller from Radiant Partners LLC or its
principals, Seller will not seek to enforce any remedy to which they are
entitled against Purchaser, but will look solely to the assets of Radiant
Partners LLC and its principals, including, but not limited to their
respective direct and indirect interests in the Purchaser. Except for
Radiant Partners LLC and its principals, neither the Purchaser nor any
holder of a legal or beneficial interest in the Purchaser shall have any
obligation to Seller arising out of this Agreement except for the
contractual obligations of Purchaser set forth in this Agreement.
47. Entire Agreement. This Agreement contains the entire agreement
between the parties respecting the matters herein set forth and supersedes
(i) any and all prior agreements between the parties hereto, except with
respect to that certain letter agreement, dated April 28, 2000, between FUR
and Radiant Partners LLC ("April 28 Letter"), which April 28 Letter shall
survive the Closing hereunder, and (ii) that certain letter of intent,
dated June 20, 2000, by and among Radiant Partners LLC, as purchaser, and
FUR, as seller, respecting such matters. This Agreement may not be modified
or amended except by written agreement signed by all parties hereto.
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<PAGE> 157
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement on
the day and year first above written.
SELLER:
FIRST UNION REAL ESTATE EQUITY AND
MORTGAGE INVESTMENTS,
an Ohio business trust
By: /s/ WILLIAM A. SCULLY
------------------------------------
Name: William A. Scully
Title: Vice Chairman
PURCHASER:
RADIANT INVESTORS LLC,
a Delaware limited liability company
By: /s/ DANIEL P. FRIEDMAN
------------------------------------
Name: Daniel P. Friedman
Title: Managing Member
Receipt of Deposit is hereby acknowledged,
subject to collection
STROOCK & STROOCK & LAVAN LLP
By: /s/ PETER A. MILLER
--------------------------------------------------------
Name: Peter A. Miller, Partner
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APPENDIX C
First Union Real Estate Equity and
Mortgage Investments
551 Fifth Avenue, Suite 1416
New York, New York 10176
September 15, 2000
Radiant Investors LLC
c/o Radiant Partners LLC
551 Fifth Avenue, Suite 1416
New York, New York 10176
Re: Purchase of Long Street Garage Columbus, Ohio (the "Premises")
Ladies and Gentlemen:
Reference is hereby made to that certain Contract of Sale, dated as of
September 15, 2000 (the "Contract") between First Union Real Estate and Mortgage
Investments ("FUR") and Radiant Investors LLC ("Purchaser"). All capitalized
terms used herein and not defined herein shall have the meanings ascribed to
them in the Contract.
Notwithstanding the provisions of the Contract to the contrary, it is
agreed as follows:
(i) In the event Purchaser shall fail to make the First Additional
Deposit (as said term is defined in the First Union Contract) under the
First Union Contract (as said term is defined in Section (x) below), no
later than the First Additional Deposit Date (as said term is defined in
the First Union Contract) and the Tenant has not then elected to purchase
the Property pursuant to the terms of the Contract, the Contract shall
thereupon immediately terminate and be null, void and of no force and
effect and Escrowee shall disburse the Deposit to Purchaser, together with
any interest earned on such amount. In addition, Purchaser agrees to
deliver or cause to be delivered to FUR all reports, studies, memorandums,
tests, evaluations and assessments (collectively, the "Study") for the
Property obtained and/or conducted by or on behalf of Purchaser, together
with all reliance letters from each provider of same which were obtained by
Purchaser upon receipt of each Study. Purchaser agrees to use its good
faith, reasonable efforts to obtain a reliance letter from the provider of
each Study, which reliance letter shall provide that the Study prepared by
the provider may be relied upon by FUR, any prospective or actual purchaser
of the Property and any prospective or actual lender that may provide
financing to the owner of the Property.
(ii) Notwithstanding any provisions of Section (i) above to the
contrary, in the event that Purchaser (or an affiliate thereof), enters
into a Limited Liability Company Agreement of (the "JV Agreement"), with
U.S. Trust Corporation, National Association, As Trustees Under That
Certain Agreement And Declaration Of Trust Dated As Of September 4, 1997,
As Amended, Known As Landmark Equity Trust VII ("Landmark"), and such
entity shall obtain commitments for Acceptable Financing, as such term is
defined in the JV Agreement, for some or all of the Properties (as such
term shall be defined in the First Union Contract), in addition to the
Property, from and after September 11, 2000, and pursuant to the terms of
the JV Agreement, Purchaser or an affiliate thereof is no longer obligated
to return the Initial Contribution #1 (as such term shall be defined in the
JV Agreement), then in the event Purchaser shall fail to make the First
Additional Deposit under the First Union Contract, no later than the First
Additional Deposit Date, the Contract shall immediately terminate and be
null, void and of no force and effect and Escrowee shall disburse the
Deposit to FUR, together with any interest earned thereon. In addition,
Purchaser shall deliver to FUR each Study and all reliance letters thereto
in accordance with the provisions of Section (i) above. Notwithstanding the
foregoing, if Purchaser (or an affiliate thereof) is obligated to return
the Initial Contribution #1 prior to First Additional Deposit Date then the
provisions of this Section (ii) shall no longer be applicable.
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(iii) In the event the Right of First Refusal (as said term is defined
in Section 20(a) of the Contract) is exercised by the Tenant at the
Property, the Deposit being held by Escrowee pursuant to the terms of this
Agreement, plus all interest earned thereon, shall be credited by Escrowee
(being the same escrowee as under the First Union Contract) as an
additional deposit being held under the First Union Contract, and shall be
deemed part of the "Deposit" under the First Union Contract. Should the
Deposit under the Contract be credited to the First Union Contract prior to
the Purchaser making the First Additional Deposit under the First Union
Contract, the Deposit under the Contract shall be disbursed to the escrowee
under the First Union Contract and shall be credited and added to the
"Initial Deposit" (as said term is defined in the First Union Contract)
under the First Union Contract.
(iv) With respect to Section 5 of the Contract, if the closing of the
sale of the Huntington Garage (as said term is defined in the First Union
Contract) shall have occurred prior to December 29, 2000, Purchaser shall
have the right to adjourn the Closing, at any time and from time to time to
a date no later than the earlier of (i) forty five (45) days after the date
that FUR shall notify Purchaser that it has received the Shareholder
Ratification and (ii) January 31, 2001. TIME SHALL BE OF THE ESSENCE, with
respect to Purchaser's obligation to close hereunder as of such date. If
FUR shall have the right and shall desire to adjourn the Closing to a date
after December 29, 2000 and such proposed adjourned date shall be later
than the date that the lender providing mezzanine financing to Purchaser or
any lender agreeing to provide mortgage financing for the Property shall be
obligated to close its respective loan, each such lender shall have agreed
to extend its outside closing date. Notwithstanding the provisions of this
Section (iv) to the contrary, if FUR shall have the right and shall desire
to adjourn the Closing to a date later than December 29, 2000, Purchaser
shall have the right, by notice to FUR, to elect to terminate this
Agreement, on December 29, 2000 or February 28, 2001, in which case, the
Escrowee shall disburse the Deposit hereunder to the escrowee under the
First Union Contract and the Deposit shall be credited and added to the
"Deposit" being held under the First Union Contract.
(v) With respect to Section 17 of the Contract, if Seller is unable to
deliver the Tenant's Estoppel Certificate and fails to deliver a Seller's
Certificate in the event such Tenant's Estoppel Certificate is not
obtained, and as a result thereof the lender providing the mortgage
financing for the Property or the lender providing mezzanine financing
shall elect not to provide the financing for the Property, in such case FUR
shall have the right to elect to provide (or to cause another party to
provide) to Purchaser the financing that such lender was otherwise prepared
to provide to Purchaser, it being agreed that if FUR shall make such
election, such loan shall be provided upon the same or better terms to
Purchaser than those terms that were offered by Purchaser's mezzanine
lender or mortgage lender. If FUR shall not elect to provide such
financing, in such case, Purchaser, as its sole and absolute remedy, shall
have the right to elect not to purchase the Property. If Purchaser shall
make such election, the Escrowee shall deliver the Deposit to the escrowee
under the First Union Contract, and such Deposit shall be added to and
become part of the "Deposit" being held under the First Union Contract. The
Contract shall then terminate and neither party shall have any further
obligation to the other party under the Contract, except for those
provisions which are expressly stated to survive termination of the
Contract.
(vi) With respect to Sections 4(a), 5, 17 and 20(a)(i) of the
Contract, in the event that Escrowee shall disburse the Deposit to
Purchaser in accordance with the terms of such Sections, Purchaser hereby
instructs Escrowee to disburse such Deposit directly to the escrowee under
the First Union Contract and credit and add such Deposit to the "Deposit"
being held under the First Union Contract. Should the Deposit under the
Contract be credited to the First Union Contract prior to the Purchaser
making the First Additional Deposit under the First Union Contract, the
Deposit under the Contract shall be disbursed to the escrowee under the
First Union Contract and shall be credited and added to the "Initial
Deposit" (as said term is defined in the First Union Contract) under the
First Union Contract.
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(vii) With respect to Section 6.A.(f) of the Contract, after the words
"management fees" in the fourth line of such Section 6.A.(f) the following
words shall be added immediately thereafter:
"(except that only two-thirds of the amount of management fees
payable to Radiant Partners LLC shall be used for proration
purposes)."
(viii) With respect to Section 12(b) of the Contract, any amount which
FUR shall be required to pay; under Section 12(b) of the Contract shall be
credited against the maximum amount which FUR is required to pay in
accordance with the terms of Section 12(b) of the First Union Contract, in
the aggregate.
(ix) With respect to the Section 15(a) of the Contract, clause (iv) is
added immediately after clause (iii) (as an additional Purchaser default
thereunder) as follows:
"or (iv) Purchaser shall default, beyond the expiration of any
applicable notice and cure period, under the terms of the First Union
Contract"
(x) With respect to Section 20(a)(i) of the Contract, the following
language is hereby added to end of the first sentence of Section 20(a)(i):
"and sellers under the First Union Contract shall have performed,
satisfied and complied with, or tendered performance of, in all
material respects, all of the covenants, agreements and conditions
required by the First Union Contract. For purposes of this Agreement,
the First Union Contract shall mean that certain Contract of Sale
between FUR, among others, as sellers and Purchaser as purchaser,
dated as of the date hereof, respecting the purchase of various
office, garage and retail properties, among other things. Except as
otherwise set forth immediately below, Purchaser shall have no
obligation to close hereunder unless the sellers under the First
Union Contract shall close simultaneously herewith."
(xi) If required by Purchaser's mezzanine lender or any other lender
providing financing for the Property, an updated Rent Roll together with a
list of delinquent and unpaid rent, accompanied by an instrument executed
by FUR, addressed to Purchaser, pursuant to which FUR states, without
representation or warranty, that it has no actual knowledge that said Rent
Roll is not true and correct in all material respects as of the Closing
Date. In addition, either such instrument (or a separate instrument) shall
contain a provision pursuant to which Purchaser, acknowledges that it shall
have no rights, remedies or recourse of any nature whatsoever against FUR
by reason of the foregoing statement by FUR not being true, correct or
complete in any respect. In the event that Purchaser's mezzanine lender or
any other lender providing financing for the Property requires a certified
updated Rent Roll, as described above in this Section (vii), pursuant to
which FUR shall represent and warrant that it has no actual knowledge that
said Rent Roll is not true and correct in all material respects as of the
Closing Date, Purchaser shall cause to be provided to FUR a complete and
unconditional indemnification from an entity which shall own 100% of the
beneficial interests in the Property and all of the properties being sold
pursuant to the First Union Contract as of the Closing Date, and has a net
worth of at least Forty Million ($40,000,000) Dollars, in form reasonably
acceptable to FUR, against all liability that FUR shall incur on account of
FUR having delivered such representation and warranty.
(xii) With respect to Section 20(b)(i) of the Contract, the following
language is hereby added to end of Section 20(b)(i):
"and the First Union Contract. If the Tenant at the Property does not
exercise its Right of First Refusal, then Seller shall have no
obligation to close hereunder unless Purchaser closes simultaneously
herewith on the First Union Contract on the Closing Date."
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(xiii) With respect to Section 21(b) of the Contract, the following
language is hereby added to end of Section 21(b):
"and shall not terminate that certain Asset Management Agreement,
dated March, 2000, between Radiant Partners, LLC and FUR ("Asset
Management Agreement"), except as a result of Radiant's default,
beyond the expiration of all applicable notice and cure periods
thereunder. The parties acknowledge that to the extent not
inconsistent with (i) the Asset Management Agreement, including,
without limitation, the oversight powers of the Board of Trustees of
FUR, or (ii) the fiduciary duties and other obligations of the
principals of Radiant Partners, LLC to FUR as officers and/or
directors of FUR, Radiant Partners, LLC shall exercise its rights and
obligations under the Asset Management Agreement (x) consistent with
the provisions of any asset management agreement to be entered into
by Radiant Partners, LLC or its affiliates with the Purchaser (the
"Purchaser Management Agreement"); (y) subject to Purchaser's
supervision (in particular such supervision as provided for under the
Purchaser Management Agreement); and (z) without limiting the
generality of the foregoing, by routinely consulting with Purchaser
as to its activities under the Asset Management Agreement and
reasonably taking the views of Purchaser into account."
(xiv) If FUR shall default under the provisions of the Contract or
fails to obtain Shareholder Ratification for the sale contemplated under
the Contract, the provisions of Section 15(b) and Sections 16(b)-(e) of the
First Union Contract, shall apply in determining any remedies Purchaser may
have under the Contract, subject to the monetary limits set forth in such
Sections of the First Union Contract.
Please acknowledge your agreement with the foregoing by executing this
letter in the space provided below.
Very truly yours,
FIRST UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS, an Ohio business trust
By:
Name: William A. Scully
Title: Vice Chairman
ACCEPTED AND AGREED:
RADIANT INVESTORS LLC, a Delaware limited liability company
By:
Name: Daniel P. Friedman
Title: Managing Member
STROOCK & STROOCK & LAVAN LLP, as escrowee
By:
Name: Peter A. Miller, Partner
For the limited purpose of acknowledging and agreeing to Section (xii) above.
RADIANT PARTNERS, LLC
By:
Name: Daniel P. Friedman
Title: Managing Director
C-4
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APPENDIX D
FIRST AMENDMENT TO CONTRACT OF SALE
This First Amendment to the Contract of Sale (this "First Amendment") is
made and entered into as of this 29th day of September, 2000 by and among 55
Public LLC, North Valley Tech, LLC, Southwest Shopping Centers Co. I, L.L.C.,
First Union Madison L.L.C., Printer's Alley Garage, LLC, First Union Real Estate
Equity and Mortgage Investments and First Union Commercial Properties Expansion
Company, collectively as "Seller," and Radiant Investors LLC, as "Purchaser."
WHEREAS, the Seller and the Purchaser have entered into a Contract of Sale
dated as of the 15th day of September, 2000 (the "Agreement") with respect to
the sale and purchase of the properties known as 55 Public Square/CEI Building,
Cleveland Ohio; North Valley Tech Center, Thornton, Colorado; Westgate Business
Center, Abilene, Texas; Madison & Wells Garage, Chicago, Illinois; Printer's
Alley Garage, Nashville, Tennessee; Pecanland Mall, Monroe, Louisiana; West 3rd
Street Lot, Cleveland, Ohio; Long Street Lot, Columbus, Ohio, 5th & Marshall
Garage, Richmond, Virginia; Two Rivers Business Center, Clarksville, Tennessee
and Huntington Garage, Cleveland, Ohio (collectively, the "Premises");
WHEREAS, the Seller and the Purchaser desire to modify and amend the
Agreement as hereinafter set forth in this First Amendment, the provisions of
this First Amendment being paramount and the Agreement being construed
accordingly;
NOW THEREFORE, the parties hereto do hereby agree that the Agreement is
modified and amended as hereinafter set forth:
1. All capitalized terms herein, unless otherwise defined, shall have
the meaning ascribed in the Agreement.
2. Section 2(a) of the Agreement is modified by providing that
Schedules B-1 and B-2 will be provided by the parties and annexed to the
Agreement on or before the Closing Date.
3. Section 2(a)(vi) of the Agreement is modified by providing at the
end thereof a new Section (C) as follows:
(C) Notwithstanding the provisions of Sections 2(a)(ii),
2(a)(vi)(A) and 2(a)(vi)(B) to the contrary, unless and until
Purchaser has obtained firm commitments for Acceptable Financing
(as such term is defined in the JV Agreement), Purchaser at its
option may elect to terminate the Agreement on or before October
26, 2000 and the Sellers shall receive the amount set forth at
Section 2(a)(vi)(A) and the balance of the Deposit shall be paid to
Purchaser. In such event, Purchaser shall deliver to Sellers each
Study and all reliance letters thereto in accordance with the
provisions of Section 2(a)(vi)(A). Purchaser shall regularly advise
Seller of its progress in obtaining Acceptable Financing.
4. Section 2(b) of the Agreement is modified to provide that Seller
will accept a Letter of Credit from Fleet Bank, provided that same may be
presented for payment at one of its New York City branches.
5. Section 2(c) of the Agreement is modified to provide that the
Westgate financing is in the amount of $8,500,000.00, of which
$7,500,000.00 is to be advanced at Closing, and $1,000,000.00 is to be held
in escrow.
6. Schedule A-6 of the Agreement will be modified to reflect the
accurate description of the Pecanland Mall Adjacent Land as and when the
survey has been received and the new metes and bounds description has been
provided by the Title Company.
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<PAGE> 163
7. Section 3 of the Agreement is modified by providing at the end
thereof a new Section 3(q) as follows:
(q) Notwithstanding anything in Section 3(a) or 4(c) to the
contrary, in the event and to the extent the revised metes and
bounds description of the Pecanland Mall Adjacent Land referenced
in paragraph 6 above results in a Title Company continuation of the
Title Report referenced at Schedule G-1(iv) of the Agreement
containing a new exception to title (not disclosed on the Title
Report received as of the date hereof) having a material adverse
effect on any Pecanland Mall Adjacent Land, Purchaser may exercise
those options set forth at Section 3(p) with respect to such
Pecanland Mall Adjacent Land.
6. Except as modified hereby, the Agreement shall remain in full force
and effect.
SELLERS:
55 PUBLIC LLC,
a Delaware limited liability company
By: 55 PUBLIC REALTY CORP., a Delaware
corporation, Managing Member
By: /s/ WILLIAM A. SCULLY
------------------------------------
Name: William A. Scully
Title: Authorized Signatory
NORTH VALLEY TECH LLC,
a Delaware limited liability company
By: NVT Corp., a Delaware corporation,
its Managing Member
By: /s/ WILLIAM A. SCULLY
------------------------------------
Name: William A. Scully
Title: Authorized Signatory
SOUTHWEST SHOPPING CENTERS CO. I,
L.L.C., a Delaware limited liability
company
By: First Union Southwest L.L.C., a
Delaware limited liability company,
its manager
By: First Southwest I, Inc., a
Delaware corporation, its manager
By: /s/ WILLIAM A. SCULLY
------------------------------------
Name: William A. Scully
Title: Authorized Signatory
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<PAGE> 164
FIRST UNION MADISON L.L.C.,
an Illinois limited liability company
By: First Union Real Estate Equity and
Mortgage Investments, and Ohio
business trust, its member
By: /s/ WILLIAM A. SCULLY
------------------------------------
Name: William A. Scully
Title: Authorized Signatory
PRINTER'S ALLEY GARAGE, LLC,
a Delaware limited liability company
By: First Union Real Estate Equity and
Mortgage Investments, an Ohio business
trust, its managing member
By: /s/ WILLIAM A. SCULLY
------------------------------------
Name: William A. Scully
Title: Authorized Signatory
FIRST UNION REAL ESTATE EQUITY AND
MORTGAGE INVESTMENTS,
an Ohio business trust
By: /s/ WILLIAM A. SCULLY
------------------------------------
Name: William A. Scully
Title: Vice Chairman
FIRST UNION COMMERCIAL PROPERTIES
EXPANSION COMPANY
By: /s/ WILLIAM A. SCULLY
------------------------------------
Name: William A. Scully
Title: Authorized Signatory
PURCHASER:
RADIANT INVESTORS LLC,
a Delaware limited liability company
By: /s/ DANIEL P. FRIEDMAN
------------------------------------
Name: Daniel P. Friedman
Title: Managing Member
D-3
<PAGE> 165
SECOND AMENDMENT TO CONTRACT OF SALE
This Second Amendment to the Contract of Sale (this "Second Amendment") is
made and entered into as of this 26th day of October, 2000 by and among 55
Public LLC, North Valley Tech, LLC, Southwest Shopping Centers Co. I, L.L.C.,
First Union Madison L.L.C., Printer's Alley Garage, LLC, First Union Real Estate
Equity and Mortgage Investments and First Union Commercial Properties Expansion
Company, collectively as "Seller" and Radiant Investors LLC, as "Purchaser."
WHEREAS, the Seller and the Purchaser have entered into a Contract of Sale
dated as of the 15th day of September, 2000 (the "Agreement") with respect to
the sale and purchase of the properties known as 55 Public Square/CEI Building,
Cleveland, Ohio; North Valley Tech Center, Thornton, Colorado; Westgate Shopping
Center, Abilene, Texas; Madison & Wells Garage, Chicago, Illinois; Printer's
Alley Garage, Nashville, Tennessee; Pecanland Mall, Monroe, Louisiana; West 3rd
Street Parking Lot, Cleveland, Ohio; Long Street Lot, Columbus, Ohio; 5th and
Marshall Garage, Richmond, Virginia; Two Rivers Business Center, Clarksville,
Tennessee and Huntington Garage, Cleveland, Ohio (collectively, the "Premises");
WHEREAS, the Seller and the Purchaser entered into the First Amendment to
Contract of Sale as of the 29th day of September, 2000 (the "First Amendment");
WHEREAS, the Seller and the Purchaser desire further to modify and amend
the Agreement as hereinafter set forth in this Second Amendment, the provisions
of this Second Amendment being paramount and the Agreement, as modified by the
First Amendment (the "Existing Agreement") being construed accordingly.
NOW THEREFORE, the parties hereto do hereby agree that the Existing
Agreement is further modified and amended as hereinafter set forth:
1. All capitalized terms herein, unless otherwise defined, shall have
the meaning ascribed in the Existing Agreement.
2. Supplementing paragraph 3 of the First Amendment and Section
2(a)(vi) of the Existing Agreement, Purchaser confirms that it has obtained
firm commitments for Acceptable Financing (as such term is defined in the
JV Agreement).
3. Pursuant to Section 1(b) of the Existing Agreement, FUR has entered
into and Purchaser hereby consents to, the Purchase and Sale Agreement (the
"Huntington Garage Contract") with Northeastern Security Development Corp.,
dated October 26, 2000 for the sale of the Huntington Garage. Pursuant to
the Huntington Garage Contract, Northeastern Security Development Corp. has
deposited with Commonwealth Land Title Insurance Company a $1 million good
faith deposit.
4. As a result of FUR having entered into the Huntington Garage
Contract:
(i) Purchaser shall not be required to acquire the Huntington
Garage or assume or otherwise pay the principal balance of the mortgage
encumbering the Huntington Garage, which mortgage shall be deleted as a
"Mortgage" under the Existing Agreement; and
(ii) the purchase price set forth at Section 2(a) of the Existing
Agreement shall be reduced by (x) if the closing on the Huntington
Garage has occurred prior to the Closing under the Existing Agreement,
the Net Sales Price received by FUR from said sale, or (y) if the
closing on the Huntington Garage has not occurred on or before the
Closing under the Existing Agreement, $21,250,000.00, less the
reasonable estimate of the parties of any and all fees, expenses,
charges and other costs that would have been paid by FUR in connection
with the sale of the Huntington Garage to Northeastern Security
Development Corp. (the "Costs of Closing"), including, without
limitation, brokerage fees, attorney's fees and disbursements and the
transfer taxes, survey fees, escrow charges, recording fees and other
closing costs payable by FUR under the Huntington Garage Contract. Two
business days prior to the Closing under the Existing Agreement as
amended hereby, the parties will jointly determine their estimate of
D-4
<PAGE> 166
the Costs of Closing which shall include reasonable supporting detail
for the calculation of the Costs of Closing. Appropriate adjustments
shall be made to Sections 2(a)(iv) and 2(a)(v) of the Existing Agreement
to effect the foregoing.
5. For computing Apportionments at Section 6A of the Existing
Agreement, the Huntington Garage income and expenses, ordinary and capital,
including monthly interest payments on the mortgage encumbering the
Huntington Garage, shall be included in and subject to the Existing
Agreement through the earlier of the date of the consummation of the sale
of the Huntington Garage or the consummation of the sale of the Properties
by the Seller to the Purchaser under and pursuant to the terms of the
Existing Agreement.
6. Except as modified hereby, the Existing Agreement shall remain in
full force and effect.
SELLERS:
55 PUBLIC LLC,
a Delaware limited liability company
By: 55 PUBLIC REALTY CORP., a Delaware
corporation, Managing Member
By: /s/ WILLIAM A. SCULLY
------------------------------------
Name: William A. Scully
Title: Authorized Signatory
NORTH VALLEY TECH LLC,
a Delaware limited liability company
By: NVT Corp., a Delaware corporation,
its Managing Member
By: /s/ WILLIAM A. SCULLY
------------------------------------
Name: William A. Scully
Title: Authorized Signatory
SOUTHWEST SHOPPING CENTERS CO. I,
L.L.C., a Delaware limited liability
company
By: First Union Southwest L.L.C., a
Delaware limited liability company,
its manager
By: First Union Southwest I, Inc., a
Delaware corporation, its manager
By: /s/ WILLIAM A. SCULLY
------------------------------------
Name: William A. Scully
Title: Authorized Signatory
D-5
<PAGE> 167
FIRST UNION MADISON L.L.C., an
Illinois limited liability company
By: First Union Real Estate Equity and
Mortgage Investments, an Ohio
Business trust, its member
By: /s/ WILLIAM A. SCULLY
------------------------------------
Name: William A. Scully
Title: Authorized Signatory
PRINTER'S ALLEY GARAGE, LLC, a
Delaware limited liability company
By: First Union Realty Equity and
Mortgage Investments, an Ohio business
trust, its managing member
By: /s/ WILLIAM A. SCULLY
------------------------------------
Name: William A. Scully
Title: Authorized Signatory
FIRST UNION REAL ESTATE EQUITY
AND MORTGAGE INVESTMENTS, an
Ohio business trust
By: /s/ WILLIAM A. SCULLY
------------------------------------
Name: William A. Scully
Title: Authorized Signatory
FIRST UNION COMMERCIAL
PROPERTIES EXPANSION COMPANY
By: /s/ WILLIAM A. SCULLY
------------------------------------
Name: William A. Scully
Title: Authorized Signatory
PURCHASER:
RADIANT INVESTORS LLC, a
Delaware limited liability company
By: /s/ DANIEL P. FRIEDMAN
------------------------------------
Name: Daniel P. Friedman
Title: Managing Member
D-6
<PAGE> 168
APPENDIX E
If the Amendments become effective, the following sections of the Amended
Declaration of Trust will be amended and restated to provide as follows:
SECTION 12.2 SALE OF ALL TRUST PROPERTY.
No merger of the Trust into another entity or no consolidation or
combination of the Trust with one or more other entities shall be made without
the consent of the holders of at least (i) a majority of the outstanding shares
if at least 70% of the Trustees have approved such action or (ii) 70% of the
outstanding shares if at least a majority but less than 70% of the Trustees have
approved such action, in either case given at a meeting of the shareholders held
for that purpose; provided that no vote of Trust shareholders shall be required
with respect to any merger intended merely to change the Trust from a trust
entity to a corporation and provided further that no vote of Trust shareholders
shall be required with respect to a merger of the Trust with another entity if
the Trust would be the surviving entity and if, after the transaction, no
shareholder would be in violation of any limitation on share ownership adopted
pursuant to Section 5.9. The Trustees shall have the power to sell, exchange
transfer or otherwise dispose of any or all Trust property upon approval of at
least a majority of the Trustees.
SECTION 2.8 POWER TO TRANSFER TRUST TO CORPORATION.
The Trustees shall have power to cause to be organized or assist in
organizing under the laws of any jurisdiction a corporation or corporations or
any other trust, association, or other organization to take over the Trust
property or any part or parts thereof or to carry on any business in which this
Trust shall directly or indirectly have any interest, and to sell, convey, and
transfer the Trust property or any part or parts thereof to any such
corporation, trust, association, or organization in exchange for the shares or
securities thereof or otherwise, and to lend money to, subscribe for the shares
or securities of, and enter into any contracts with any such corporation, trust,
association or organization, or any corporation, trust, partnership,
association, or organization in which this Trust holds or is about to acquire
shares or any other interest.
E-1
<PAGE> 169
EXHIBIT A
FIRST UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS
AUDIT COMMITTEE CHARTER
The Audit Committee is appointed by the Board to assist the Board in
monitoring (1) the integrity of the financial statements of the Company, (2) the
compliance by the Company with legal and regulatory requirements and (3) the
independence and performance of the Company's external auditors.
The members of the Audit Committee shall meet the independence and
experience requirements of the New York Stock Exchange. The members of the Audit
Committee shall be appointed by the Board on the recommendation of the
Nominating and Governance Committee.
The Audit Committee shall make regular reports to the Board.
The Audit Committee shall:
- Provide oversight with respect to the financial reporting process, the
system of internal controls and the external audit process.
- Review and reassess the adequacy of this Charter annually and submit it
to the Board of approval.
- Review the annual audited financial statements and MD&A with management,
including major issues regarding accounting and auditing principles and
practices as well as the adequacy of internal controls that could
significantly affect the Company's financial statements.
- Review an analysis prepared by management and the independent auditor of
significant financial reporting issues and judgments made in connection
with the preparation of the Company's financial statements.
- Review with management and the independent auditor the Company's
quarterly financial statements prior to the release of quarterly earnings.
- Meet periodically with management to review the Company's major financial
risk exposures and the steps management has taken to monitor and control
such exposures.
- Review major changes to the Company's auditing and accounting principles
and practices as suggested by the independent auditor or management.
- Recommend to the Board of Trustees on an annual basis the selection of
First Union's independent accountants who are ultimately accountable to
the Audit Committee and the Board.
- Receive periodic reports from the independent auditor regarding the
auditor's independence, discuss such reports with the auditor, and if so
determined by the Audit Committee, recommend that the Board take
appropriate action to insure the independence of the auditor.
- Prior to the annual audit, review the plans and staffing of the
independent accountants.
- Review with the independent auditor any problems or difficulties the
auditor may have encountered and any management letter provided by the
auditor and the Company's response to that letter. Such review should
include:
(a) Any difficulties encountered in the course of the audit work,
including any restrictions on the scope of activities or access to
required information.
(b) Any changes required in the planned scope of the audit.
Exhibit A-1
<PAGE> 170
- Approve the fees to be paid to the independent auditor. Evaluate the
performance of the independent auditor and, if so determined by the Audit
Committee, recommend that the Board replace the independent auditor.
- Obtain from the independent auditor assurance that Section 10A of the
Private Securities Litigation Reform Act of 1995 has not been implicated.
- Obtain reports from management and the independent auditor that the
Company's subsidiary/foreign affiliated entities are in conformity with
applicable legal requirements and the Company's Code of Conduct.
- Discuss with the independent auditor the matters required to be discussed
by Statement on Auditing Standards No. 61 relating to the conduct of the
audit.
- Prepare the report required by the rules of the Securities and Exchange
Commission to be included in the Company's annual proxy statement.
- Advise the Board with respect to the Company's policies and procedures
regarding compliance with applicable laws and regulations.
- Review with the Company's outside counsel legal matters that may have a
material impact on the financial statements, the Company's compliance
policies and any material reports or inquiries received from regulatory or
governmental agencies.
- Meet at least annually with the chief financial officer and the
independent auditor in separate executive sessions.
- Seek periodic briefings from management and the independent accountants
on developments affecting financial reporting, including pronouncements
from the FASB, SEC or other standard-setting or regulatory authorities.
- Review the policies and procedures in effect for the approval of officer
expense reports and perquisites.
- Review First Union's controls and procedures designed to maintain its
real estate investment trust status.
- Perform such other oversight functions as may be requested by the Board
of Trustees.
- Report on its activities to the Board of Trustees on a regular basis.
The Audit Committee may cause an investigation to be made into any matter
within the scope of its responsibilities and, with the approval of the Board of
Trustees, the Committee may engage appropriate outside professional advisors
relating to such matters. The Audit Committee may request any officer or
employee of the Company or the Company's outside counsel or independent auditor
to attend a meeting of the Committee or to meet with any members of, or
consultants to, the Committee.
While the Audit Committee has the responsibilities and powers set forth in
this Charter, it is not the duty of the Audit Committee to plan or conduct
audits or to determine that the Company's financial statements are complete and
accurate and are in accordance with generally accepted accounting principles.
This is the responsibility of management and the independent auditor. Nor is it
the duty of the Audit Committee to conduct investigations to resolve
disagreements, if any, between management and the independent auditor or to
assure compliance with laws and regulations and the Company's Code of Conduct.
Membership:
The Audit Committee shall be comprised solely of independent auditors. At
least three independent trustees shall serve on the Committee. The Chairman of
the Audit Committee will be appointed by the Board of Trustees annually.
Exhibit A-2
<PAGE> 171
Frequency of Meetings:
The Audit Committee shall meet no less than four times each year. At a
meeting early in the year the Audit Committee will review audit results and MD&A
material and receive other required disclosures from the independent
accountants. At other quarterly meetings, the Audit Committee will review the
quarterly financial statements and may receive internal audit presentations,
review the plans for the upcoming annual audit and approve the fee arrangements
for the independent accountants. Other matters may be considered at either of
such meetings, and other meetings shall be held as desired by the Audit
Committee.
Exhibit A-3
<PAGE> 172
DETACH CARD
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[First Union Logo]
FIRST UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS
125 PARK AVENUE - NEW YORK, NEW YORK 10017
PROXY SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES FOR THE SPECIAL MEETING OF
THE BENEFICIARIES
TO BE HELD ON , JANUARY , 2001
The undersigned hereby appoints William A. Ackman and William A. Scully, or any
one of them, each with power of substitution, attorney and proxy (the "Proxies")
for and in the name and place of the undersigned, to vote, as designated below,
all of the shares of beneficial interest, par value $1.00 per share ("Shares"),
of First Union Real Estate Equity and Mortgage Investments (the "Company"), on
all matters at the Special Meeting in lieu of the 2000 Annual Meeting of the
Beneficiaries to be held in the Murray Hill Room of The New York Helmsley Hotel,
located at 212 East 42nd Street, New York, NY 10017, on January , 2001, at
10:00 A.M. local time, or at any adjournment or postponement thereof, according
to the number of votes that the undersigned could vote if personally present at
the meeting.
THE BOARD OF TRUSTEES RECOMMENDS A VOTE FOR THE FOLLOWING:
<TABLE>
<S> <C>
1. ELECTION OF BOARD OF TRUSTEES
FOR ALL NOMINEES LISTED BELOW [ ] WITHHOLD AUTHORITY [ ]
(except as marked to the contrary below) to vote for all nominees listed below
</TABLE>
Talton R. Embry, Steven S. Snider
INSTRUCTION: (TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE
THAT NOMINEE'S NAME ON THE SPACE PROVIDED BELOW.)
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2. CONSENT TO THE SALE OF ASSETS OF THE COMPANY PURSUANT TO TWO CONTRACTS OF
SALE BETWEEN THE COMPANY AND RADIANT INVESTORS, LLC FOR AN AGGREGATE
PURCHASE PRICE OF $205 MILLION.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3.AMENDMENTS TO THE AMENDED DECLARATION OF TRUST OF THE COMPANY ELIMINATING
SHAREHOLDER APPROVAL REQUIREMENTS WITH RESPECT TO THE DISPOSITION OF
PROPERTY OF THE COMPANY.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(CONTINUED, AND TO BE SIGNED ON OTHER SIDE)
<PAGE> 173
DETACH CARD
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(Continued from the other side)
In their discretion the Proxies are authorized to vote upon all other matters as
may properly come before the meeting.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED IN THE SPACE
PROVIDED. TO THE EXTENT NO DIRECTIONS ARE GIVEN, THEY WILL BE VOTED FOR
PROPOSALS 1, 2 AND 3 AND IN THE DISCRETION OF THE PROXIES, UPON ALL OTHER
MATTERS AS MAY PROPERLY COME BEFORE THE MEETING. THIS PROXY MAY BE REVOKED AT
ANY TIME PRIOR TO ITS EXERCISE.
Dated................., 2000
............................
Signature
............................
Signature (if jointly held)
Please sign exactly as your
name(s) appear(s) on this
Proxy. When Shares are held
by joint tenants, both
should sign. When signing as
attorney, executor,
administrator, trustee or
guardian, please give full
title as such. If a
corporation, please sign in
full corporate name by
president or other
authorized officer. If a
partnership, please sign in
partnership name by
authorized person.
