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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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For Quarter Ended March 31, 2000 Commission File Number 1-6249
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First Union Real Estate Equity and Mortgage Investments
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(Exact name of registrant as specified in its charter)
Ohio 34-6513657
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
551 Fifth Avenue, Suite 1416
New York, New York 10176-1499
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 905-1104
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Former name, former address and former fiscal year, if changed since last
report.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
42,471,729 Shares of Beneficial Interest outstanding as of March 31, 2000
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Total number of pages contained in this report: 19
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
The financial statements represent the combined results of the
registrant, First Union Real Estate Equity and Mortgage Investments (the
"Trust") and First Union Management Inc., (the "Company"). Under a trust
agreement, the shares of the Company are held for the benefit of the
shareholders of the Trust. Accordingly, the financial statements of the Company
and the Trust have been combined. Additionally, the Company owned voting control
of Imperial Parking Limited ("Impark"). The Trust distributed all common stock
of Impark to its shareholders in March 2000 and has classified Impark's
financial information as discontinued operations.
The combined financial statements included herein have been prepared by
the Trust, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations, although the Trust believes that the disclosures
contained herein are adequate to make the information presented not misleading.
These combined financial statements should be read in conjunction with the
combined financial statements and the notes thereto included in the Trust's
latest annual report on Form 10-K/A.
The "Combined Balance Sheets" as of March 31, 2000 (unaudited) and
December 31, 1999 (audited) and "Combined Statements of Operations, Combined
Statements of Comprehensive Income and Combined Statements of Cash Flows" for
the periods ended March 31, 2000 (unaudited) and 1999 (unaudited), of the Trust,
and "Notes to Combined Financial Statements," are included herein. These
financial statements reflect, in the opinion of the Trust, all adjustments
(consisting of normal recurring accruals) necessary to present fairly the
combined financial position and results of operations for the respective periods
in conformity with generally accepted accounting principles consistently
applied. The results of operations for the three months ended March 31, 2000 and
1999, are not necessarily indicative of the results to be expected for the full
year. Certain amounts from 1999 have been reclassified to conform to the 2000
presentation.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Financial Condition
In March 2000, the Trust distributed all common stock of Impark to its
shareholders. One share of Impark common stock was distributed for every 20 of
the Trust's 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 Trust repaid Impark's bank credit facility of
approximately $24.2 million, contributed approximately $7.5 million of cash, its
14 Canadian parking properties and $6.7 million for a parking development
located in San Francisco, California. The Trust will also provide a secured line
of credit for $8 million to Impark. As of May 1, 2000, there were no outstanding
amounts under the line of credit. Impark's common stock is listed on the
American Stock Exchange under the symbol "IPK". Ownership of Ventek
International, Inc., a manufacturing subsidiary of Impark, was retained by the
Company.
The Trust also adjusted the conversion price with respect to its Series
A Cumulative Redeemable Preferred Shares of Beneficial Interest ("Preferred
Shares"). The conversion price of the Preferred Shares has been decreased to
$5.0824 per common share (equivalent to a conversion rate of 4.92 common shares
for each Preferred Share) in connection with the distribution of the Impark
shares, in accordance with the provisions of the documents establishing the
terms of the Preferred Shares.
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For tax reporting purposes, the Trust will take a dividend deduction of
$19.375 per share for the approximate 2.1 million shares of Impark common stock
distributed to the shareholders.
In April 2000, the Trust sold Crossroads Center Mall for $80.3 million,
of which approximately $78.3 million was applied against a loan payable to the
purchaser and the assumption of the first mortgage debt on the mall. The Trust
will recognize a gain on the sale of approximately $58 million, less an
extraordinary loss on extinguishment of debt of approximately $2.4 million
during the second quarter of 2000.
The Trust amended the employment agreements of each of Messrs. Friedman
and Schonberger and Ms. Zahner (each, an "Executive"). The amended agreements
provide 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/her
employment with the Trust on or after June 1, 2000, and then shall be entitled
to receive a severance payment from First Union 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 the Trust anticipates that each
Executive will terminate his/her employment agreement and receive the severance
payment on or about June 1. The amended employment agreements also provide,
among other things, that the options held by the Executives with exercise prices
of $8.50 and $6.50 shall be canceled and that each Executive may invest in other
businesses, provided that the Executive first offers such opportunity to the
Trust. Finally, the amended employment agreements provide that (A) two of the
Executives, Messrs. Friedman and Schonberger, will receive options to purchase
shares of Impark and (B) the Trust will pay Ms. Zahner an additional cash
payment of $110,000.
Simultaneously with the execution of the amended employment agreements,
the Trust entered into an asset management agreement with Radiant Partners, LLC
(the "Management Company"), which is owned and controlled by the Executives. The
agreement will become effective when the employment of each Executive with the
Trust is terminated, after which time the Trust will become externally managed.
The agreement will have a two year term, but the Trust will have the option of
(i) extending the term for an additional year and (ii) terminating the 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 Trust has a fair market value of less than $20,000,000 or (D) prior to June
1, 2000. There can be no assurance that the agreement will not be terminated
before its effectiveness on June 1, 2000. During the effectiveness of the
agreement, the Management Company will be responsible for conducting and
overseeing the business and financial affairs of the Trust. As compensation for
its services, the Management Company will receive an annual fee of $1,500,000
and an incentive fee equal to 10% of (A) the aggregate of all distributions,
other than the Impark spin-off, in respect of a single common share of the
Trust, first made after March 1, 2000, which exceeds $4.60 per share, multiplied
by (B) the number of the Trust common shares in respect of which such
distributions are made. If the Trust terminates the agreement after June 1,
2000, then the Management Company will also receive a termination fee of between
$500,000 and $750,000, unless the agreement is terminated for default.
Liquidity and Capital Resources
Unrestricted and restricted cash decreased by approximately $38.5
million (from $57.8 million to $19.3 million) when comparing March 31, 2000 to
the balance at December 31, 1999. The decrease in cash was primarily related to
the Impark transaction.
The Trust's net cash provided by operating activities of $2.4 million
and net cash provided by investing activities of $4.9 million was more than
offset by $43.4 million utilized for financing activities. Net cash provided by
investing activities consisted of the receipt of $2.6 million of principal on a
mortgage investment, proceeds from the sale of fixed assets of $.2 million and
the excess of sales over purchases of U.S. Treasury bills of $4.4 million, which
was partially offset by $2.4 million of improvements to properties. Net cash
used in
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financing activities included $36 million of payments related to the Impark
spin-off, $7.3 million of cash dividends, $10.6 million to pay a deferred
obligation relating to the purchase of the Huntington garage, a $3.1 million
penalty to prepay the deferred obligation, a mortgage payment of $1 million and
$.4 million of mortgage amortization. Cash provided by financing activities
consisted of $16 million borrowed pursuant to a reverse repurchase agreement
which was utilized to purchase a U.S. Treasury bill. The Trust invests its
excess cash primarily in U.S. Treasury bills or money market funds investing in
U.S. Treasury bills.
The Trust declared a dividend of $6.6 million ($.155 per share) to
Common Shareholders of beneficial interest and a dividend of $.7 million ($.525
per share) to Series A Cumulative Preferred Shareholders in the first quarter of
2000. Both dividends are payable April 28, 2000 to shareholders of record at the
close of business on March 31, 2000. In addition, the Trust paid a dividend for
1999 of $6.6 million ($.155 per share) to common shareholders and $.7 million
($.525 per share) to preferred shareholders in the first quarter of 2000.
During the first quarter of 2000, the Trust invested $2.4 million in
capital and tenant improvements. The investment was made primarily for tenant
improvements to continue to tenant the former retail center in Denver, Colorado,
which has been converted into an office technology center. In addition, the
Trust incurred capital and tenant improvements at the 55 Public Square office
building in Cleveland, Ohio and to complete an anchor tenant store in Abilene,
Texas.
In January 2000, the Trust received $2.5 million from the Richmond
Redevelopment and Housing Authority (the "Authority") to expand the Trust's
garage located in Richmond, Virginia. If the Trust is unable to successfully
complete the renovation or does not continue to provide an easement for a period
of 84 years, all or a portion of the $2.5 million will have to be returned to
the Authority. Construction began in April 2000.
In April 2000, the Trust obtained a $42 million first mortgage loan
secured by the Park Plaza Mall. The loan is non-recourse, has a 10 year term and
a fixed interest rate of 8.69% payable on a 30 year amortization schedule. The
Trust received proceeds, net of closing costs and escrow deposits, of $41.4
million. The loan requires monthly payments of approximately $397,000 for
principal, interest and escrow deposits. Prepayment of the loan is permitted
(after an initial lockout period of three years or two years from
securitization), only with yield maintenance or defeasance, as defined in the
loan agreement. The Trust purchased a $100 million U.S. Treasury bill with $35
million of the loan proceeds and an additional $65 million of borrowings
utilizing a reverse repurchase agreement (the "Reverse Repo") with the U.S.
Treasury bill as collateral. At May 1, 2000, the Trust owned $200 million in
face value of U.S. Treasury bills and owed $130 million in Reverse Repos. The
U.S. Treasury bills are classified as held to maturity. The interest rate on the
Reverse Repos was 5.965% at May 1, 2000. The Reverse Repo outstanding at March
31, 2000 is included in notes payable.
Results of Operations
Net loss applicable to common shares before discontinued operations for
the three months ended March 31, 2000 was $7.0 million as compared to a net loss
before discontinued operations of $3.1 million for the three months ended March
31, 1999. Net loss before discontinued operations for 2000 included a capital
loss of $.1 million compared to a capital gain of $.5 million in 1999. Capital
loss for 2000 included the sale of certain fixed assets. The capital gain in
1999 was the result of the sale of a shopping center in February 1999. The net
loss for 2000 included $3.1 million in extraordinary loss from early
extinguishment of debt relating to the payoff of the Trust's deferred obligation
of $10.6 million.
Mortgage loan investment income declined for 2000 as compared to 1999,
due to the collection of a note receivable during 2000.
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Short term investment income increased significantly during 2000, as
compared to 1999, due to the investment of proceeds received from the 1999
property sales.
Property net operating income, which is defined as rent less operating
expenses and real estate taxes, decreased for 2000 to $8.2 million from $19.1
million in 1999. The decrease was attributable to the sale of properties in
1999.
Property net operating income, for properties in the portfolio for 2000
and 1999 increased by $.2 million. The increase was attributable to an increase
in revenues of $.7 million, which was partially offset by an increase in
operating expenses of $.3 million and in real estate taxes of $.2 million.
Revenues increased by $.7 million, for properties in the portfolio in
2000 and 1999, primarily due to an increase in rental rates and occupancy at Two
Rivers, an increase in rental rates at Park Plaza and an increase in occupancy
at North Valley, which were partially offset by a decrease in occupancy at 55
Public Square. Operating expenses increased at Park Plaza and real estate taxes
increased at all the Trust's remaining properties.
Depreciation and amortization and mortgage loans interest expense
decreased from 1999 to 2000 primarily due to the sale of properties and the
repayment of debt in 1999. With respect to the remaining properties,
depreciation and amortization expense increased slightly due to the effect of
improvements to properties. Mortgage interest expense declined, with respect to
the remaining properties, primarily due to the amortization of mortgage
principal balances.
Interest expense relating to bank loans and notes payable decreased due
to the payoff of debt with the proceeds from property sales.
General and administrative expenses increased primarily due to increases
in stay bonuses, severance expense and professional fees. Included in general
and administrative expenses for 2000 is approximately $1.7 million of stay
bonuses and severance expense.
In addition, sales and income improved substantially at the Company's
manufacturing facility.
Certain statements contained in this Form 10-Q that are forward-looking
are based on current expectations that are subject to a number of uncertainties
and risks, and actual results may differ materially. The uncertainties and risks
include, but are not limited to, changes in market activity, changes in local
real estate conditions and markets, actions by competitors, interest rate
movements and general economic conditions. Further information about these
matters can be found in the Trust's Annual Report filed with the SEC on Form
10K/A.
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Item 3.
Quantitative and Qualitative Disclosures of Market Risk
Interest Rate Risk
The Trust has entered into certain financing arrangements that require
interest payments based on variable interest rates. As such, the combined
financial statements are subject to changes in the market rate of interest. To
reduce the exposure to changes in the market rate of interest, the Trust has
entered into a rate guarantee contract (also known as an interest rate cap) for
a portion of its floating rate financing arrangements. The Trust does not enter
into rate guarantee contracts for trading purposes.
The table below provides information about the Trust's derivative
financial instruments and other financial instruments that are sensitive to
changes in interest rates, including the interest rate cap and debt obligations.
Weighted average variable rates are based on the rates in effect at March 31,
2000. No assumptions have been made about the future interest rates.
<TABLE>
<CAPTION>
AS OF MARCH 31, 2000
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EXPECTED MATURITY DATES (AMOUNTS IN MILLIONS)
------------------------------------------------ FAIR
2000 2001 2002 2003 2004 THEREAFTER TOTAL VALUE
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<S> <C> <C> <C> <C> <C> <C> <C> <C>
LIABILITIES
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Mortgage loans
- - Fixed rate $1.3 $1.9 $46.4 $2.0 $31.1 $40.8 $123.5 $128.5
Average interest rate 10.7% 10.7% 10.7% 12.8% 11.5% 11.5%
Variable rate (based on LIBOR) $33.0 $37.1 $70.1 $70.1
Weighted average interest rate 7.7% 9.1%
Senior notes
- - Fixed rate $12.5 $12.5 $12.3
Interest rate 8.875%
Notes payable (Reverse Repo)
- - Note payable $65.0 $.1 $65.1 $65.1
Interest rate 5.965% 7.5%
</TABLE>
Interest Rate Derivatives
The Trust owns two interest rate caps that protect it from increases in
LIBOR. The interest rate caps have notional amounts of approximately $16 million
and $21 million covering the variable rate loans maturing in 2002.
Exchange Rate Risk
The Trust and the Company do not have any foreign exchange rate risk as
a result of the spin-off of Impark and the Canadian parking facilities in March
2000.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None
Item 2. Changes in Securities.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
Exhibit (10)(s) Amendment to Employment Agreement
executed March 27, 2000 with Daniel P.
Friedman.
Exhibit (10)(t) Amendment to Employment Agreement
executed March 27, 2000 with David
Schonberger.
Exhibit (10)(u) Amendment to Employment Agreement
executed March 27, 2000 with Anne
Nelson Zahner.
Exhibit (10)(v) Asset Management Agreement executed
March 27, 2000 with Radiant Partners,
LLC.
Exhibit (10)(w) Second Amendment to Employment
Agreement dated as of May 12, 2000
with Anne Zahner
Exhibit (20) - Financial Statements
Combined Balance Sheets as of March
31, 2000 (unaudited) and December
31, 1999 (audited).
Combined Statements of Operations
for the Three Months ended March 31,
2000 (unaudited) and 1999
(unaudited).
Combined Statements of Comprehensive
Income for the Three Months ended
March 31, 2000 (unaudited) and 1999
(unaudited).
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Combined Statements of Cash Flows
for the Three Months ended March 31,
2000 (unaudited) and 1999
(unaudited).
Notes to Combined Financial
Statements.
Exhibit (27) - Financial Data Schedule
Three months ended March 31, 2000
(unaudited).
(b) Reports on Form 8-K:
February 16, 2000
Item 5 - The Trust announced its intention to
spin-off Impark to its shareholders.
Item 7(b) - Proforma financial information
Proforma combined balance sheet as of
September 30, 1999
Proforma combined statement of
operations for the nine months ended
September 30, 1999
Proforma combined statement of
operations for the twelve months ended
December 31, 1998
Notes to combined proforma financial
statements
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Trust has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
First Union Real Estate Equity and
Mortgage Investments
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(Trust)
Date: May 15, 2000 By: /s/Daniel P. Friedman
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Daniel P. Friedman
President and Chief Executive Officer
Date: May 15, 2000 By: /s/Brenda J. Mixson
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Brenda J. Mixson,
Chief Financial Officer
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Index to Exhibits
Exhibit (10)(s) Amendment to Employment Agreement executed March 27,
2000 with Daniel P. Friedman.
Exhibit (10)(t) Amendment to Employment Agreement executed March 27,
2000 with David Schonberger.
Exhibit (10)(u) Amendment to Employment Agreement executed March 27,
2000 with Anne Nelson Zahner.
Exhibit (10)(v) Asset Management Agreement executed March 27, 2000
with Radiant Partners, LLC.
Exhibit (10)(w) Second Amendment to Employment Agreement dated as of
May 12, 2000 with Anne Zahner
Exhibit (20) - Financial Statements
Combined Balance Sheets as of March 31, 2000 (unaudited)
and December 31, 1999 (audited).......................
Combined Statements of Operations for the Three
Months ended March 31, 2000 (unaudited) and 1999
(unaudited).............................................
Combined Statements of Comprehensive Income for the
Three Months ended March 31, 2000 (unaudited) and
1999 (unaudited)
Combined Statements of Cash Flows for the
Three Months ended March 31, 2000 (unaudited) and
1999 (unaudited)........................................
Notes to Combined Financial Statements..................
Exhibit (27) -Financial Data Schedule
Three months ended March 31, 2000 (unaudited)
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EXHIBIT (10)(s)
AMENDMENT TO EMPLOYMENT AGREEMENT
AMENDMENT executed March 27, 2000 as of November 30, 1999 (the
"Amendment") to Employment Agreement entered into as of by and between DANIEL
P. FRIEDMAN, an individual residing at 23 Prospect Avenue, Port Washington, New
York 11050 ("Executive"), and FIRST UNION REAL ESTATE EQUITY AND MORTGAGE
INVESTMENTS, an Ohio business trust with offices at 55 Public Square, Suite
1900, Cleveland, Ohio 44113 (the "Company").
IMPERIAL PARKING CORPORATION (formerly named First Union Canadian
Holdings, Inc.), a Delaware corporation with offices at 601 West Cordova
Street, Suite 300, Vancouver, British Columbia, Canada V6B1G1 ("Impark") is
joining in this Agreement with respect to Section C hereof.
(1) The Executive and the Company entered into an Employment Agreement
dated November 2, 1998 (the "Original Agreement");
(2) Certain significant operational and business developments affecting
the Company have occurred since the date the Original Agreement was executed,
as a result of which the parties have concluded that an amendment to the
Agreement would be in the best interests of both parties, and the parties have
accordingly agreed to amend the Agreement in the manner and upon the
considerations set forth in this Amendment;
(3) Impark is executing this agreement, and shall be bound only by the
terms of Section C hereof.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements set forth herein, the parties hereby agree as follows:
A. CERTAIN DEFINED TERMS; CONTINUATION OF ORIGINAL EMPLOYMENT AGREEMENT
(1) Amended Agreement The term "Amended Agreement" as used in this
Amendment refers to the Original Agreement, as amended by this Amendment.
(2) "Impark Spinoff" "Impark Spinoff" means (a) the reorganization of
certain of the subsidiaries of the Company in order to position the Company's
parking real estate assets under Impark and to repay certain indebtedness of
Impark, (b) the settlement of certain debts owed by First Union Management,
Inc. ("FUMI") to the Company by the transfer to the Company and its
subsidiaries of the assets of FUMI relating to its business of leasing and
managing parking facilities and (c) and distributing all of the shares of
Impark not owned by its directors to the owners of the common shares of the
Company (the "Common Shares"), (the date of such distribution being referred to
as the "Impark Spinoff Date").
(3) Other Defined Terms Unless otherwise provided herein, capitalized
terms herein shall have the meanings ascribed to them in the Original
Agreement. As used herein:
(4) Continued Effectiveness of Original Agreement Except as
otherwise provided in this Amendment to the contrary, the terms and conditions
of the Original Agreement as amended by this Amendment shall remain in effect.
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(5) Inconsistent Provisions In any case in which the terms of this
Amendment are inconsistent with the terms of the Original Agreement, the terms
of this Amendment shall control.
B. AMENDMENT OF CERTAIN SECTIONS OF THE ORIGINAL AGREEMENT
THE FOLLOWING SECTIONS OF THE ORIGINAL AGREEMENT ARE HEREBY AMENDED AS
SPECIFIED BELOW:
(1) Section 4(c)(v) ("Share Option. Grant") is amended so that the three
(3) paragraphs included within the subsection captioned "Vesting/Exercise" are
deleted; and the following paragraph is inserted:
"All of the Share Options vested as of November 2, 1998
(other than the Additional Options, which vested upon
grant). All of the $6.50 Options, all of the $8.50 Options,
and all of the Additional Options shall be exercisable in
full as of December 1, 1999."
(2) Section 4(c)(v) is further amended so that the paragraph in the
subsection captioned "Exercise Price" is amended in its entirety to read as
follows:
"(v) (A) The option exercise price with regard to the 1,080,000
Share Options granted pursuant to this subsection (v) shall
be as follows: 540,000 shall be exercisable at $6.50 per
Common Share (the "$6.50 Options") and 540,000 shall be
exercisable at $8.50 per Common Share (the "$8.50 Options").
(B) Additional Options to purchase 376,514 Common Shares
having an initial exercise price of $4.00 were issued to the
Executive on May 28, 1999, pursuant to the subsection of
Section 4(c)(v) captioned "Additional Options." The
Executive hereby irrevocably transfers his right to exercise
Additional Options as to 31,250 shares to Anne Nelson Zahner
and his right to exercise Additional Options as to 31,250
shares to David Schonberger; and the Company hereby agrees
and consents to such transfers.
(C) The exercise price of each Share Option (including the
Additional Share Options) will be adjusted (but not below
zero) (1) to increase on each anniversary of its grant by an
amount equal to an increase of 10% per annum (compounded
annually) and (2) to decrease from and after the date of its
grant through the date of its exercise by the sum of all
dividends or other distributions (including the value of
non-cash dividends, including without limitation, share
dividends, the Distributable Value of the Impark Spinoff and
the Attributable Value of other spin-offs) declared per
Common Share for the applicable year. As used herein, (1)
the "Distributable Value of the Impark Spinoff" means the
Initial Impark Option Price, and (2) "Attributable Value of
other spinoffs" means the value ascribed to such spin-offs
by the Company, or if not so ascribed, the fair market value
of the assets so spun off. Notwithstanding the foregoing,
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the adjustment to the exercise price set forth in clause (C)
(1) shall not commence until the eighteen (18) month
anniversary of the commencement of the Employment Period;
and (y) be applied ratably at the time(s) Executive
exercises the Share Options (e.g. if Share Options are
exercised on the 20 month anniversary of the commencement of
the Employment Term, the exercise price in effect on that
date would be increased by 1.667% (2/12 of 10%) minus any
dividends or other distributions paid on or prior to the
date of exercise (to the extent such dividends or other
distributions were not previously deducted)."
(3) Section 4(c)(v) is further amended so that, in the first paragraph
in the subsection captioned "Option Exercise Term,"
(a) the period (.) at the end of the second sentence shall be
replaced by a comma (,) and the following provision shall be
added at the end thereof:
"except that Additional Options (as defined in subsection
4(c)(vi) below) shall remain exercisable for eight (8)
months following such event after which they shall expire."
(b) a new sentence shall be added after the second sentence and
shall read as follows:
"Notwithstanding the foregoing, if the Company enters into
an Asset Management Agreement with an entity of which the
Executive, Anne Nelson Zahner and David Schonberger are the
principal equity holders then the $8.50 Options and the
$6.50 Options shall be terminated and shall no longer be
exercisable if the Asset Management Agreement is executed
and is not thereafter terminated pursuant to Article III,
Section (a)(v) of the Management Agreement"; and
(c) a period (.) shall replace the comma (,) after the first use
of the word "expire" in the last sentence, the balance of
the last sentence shall be deleted and the "(i)" in such
sentence shall be deleted.
(4) Section 5(a)(iv) (Good Reason) is amended to add the following
lettered subparagraphs (G), and (H) before the words "provided, however:"
"(G) The Board of Directors shall have adopted a resolution
approving a complete liquidation or dissolution of the Company; or
(H) there shall have occurred (1) the Impark Spinoff and (2) a
sale or refinancing of the Park Plaza mall on terms acceptable to
the Board of Directors; provided, however, that Good Reason pursuant
to this Section 5(a)(iv) shall not occur unless and until Anne
Nelson Zahner and David Schonberger shall have resigned for Good
Reason or shall have been terminated under their respective
Employment Agreements with the Company without Cause, after which
such termination by reason of the Impark Spinoff and the sale or
refinancing of the Park Plaza mall shall be deemed to have occurred
for Good Reason; and provided
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further that if such Good Reason does occur, the Company, upon
receipt of notice of resignation for such Good Reason, waives its
right to cure.
(5) Section 5(a)(iv) (Good Reason) is further amended by adding the
following sentence at the end thereof.
"Notwithstanding the foregoing, the Executive shall not be entitled
to terminate his employment for Good Reason until June 1, 2000
unless such Good Reason is described in subparagraph (A) (2) of this
subsection (iv).
(6) Section 5(a)(vii) ("Change of Control") is amended to delete
subsections (D) and (E) thereof.
(7) Section 6(c)(i) is amended in its entirety to read as follows:
"In the event the Company terminates Executive's employment
for any reason other than Cause, death or Disability, or
Executive terminates his employment for Good Reason (other
than as set forth in Paragraph 6(c)(ii)), or in the event of
a Change of Control, the Company shall pay to Executive and
Executive shall be entitled to receive the sum total of: (A)
the accrued but unpaid Annual Base Salary at the rate then
in effect; (B) earned but unpaid incentive compensation
and/or bonuses for completed performance periods; and (C)
the sum of One Million One Thousand Dollars ($1,001,000.00).
The aforesaid amounts shall be payable in cash immediately
upon such termination. In addition, the Executive shall be
entitled to continuation of Executive's participation in all
benefit plans, programs or arrangements of the Company
(except tax-qualified plans), including, without limitation,
Medical Continuation, for a period of two years following
such termination."
(8) Section 8 ("Non-Compete") is hereby amended to add a new subsection
(c) as follows:
"(c) First Refusals. (i) Executive agrees that, if,
prior to the earlier of (i) the termination of Executive's
employment and (ii) the date on which a proposal to
liquidate the Company is publicly announced, the Executive
shall be offered the opportunity to invest in or acquire an
interest in a business of any nature ("Investment
Opportunity"), he shall first offer such Investment
Opportunity to the Company. Such offer (the "Offer") shall
be in writing and shall describe the Offer and the
Investment Opportunity in sufficient detail, and provide to
the Company substantially all of the written information
furnished to him by the party ("Third Party") which made the
Offer. The Company's representatives shall thereupon have
fifteen (15) business days in which to consider and accept
the Offer, and the Executive shall reasonably cooperate with
the Company if it shall request further information
concerning the Offer and the Executive is able to obtain
such information from the Third Party. If at the end of
such period the Company has not delivered to the Third Party
its written acceptance of the Offer (or, having accepted the
Offer, shall not proceed to
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<PAGE> 5
a closing pursuant to the Offer within the time allowed in
the Offer and/or shall fail to make such payments (including
deposits) to the Third Party as would have been required
from the Executive under the terms of the Offer), the
Executive shall be free to accept the Offer and consummate
the transactions contemplated thereby. The Executive's
participation in the Investment Opportunity shall not be
deemed a violation of any fiduciary, contractual or other
obligation of the Executive to the Company, including under
the provisions of Section 3(a) of the Original Agreement.
Notwithstanding the foregoing, the time devoted by the
Executive to any Investment Opportunity shall not
substantially interfere with his performance of services as
required under this Agreement."
(ii) The obligation of the Executive to make the
offers described in subsection (a) above shall terminate upon the
date on which a proposal to liquidate or merge the Company is
publicly announced.
C. ADDITIONAL PROVISIONS ADDED BY THIS AMENDMENT
(1) Impark Options
(a) Issuance of Impark Options Impark, by its execution of this
Agreement, covenants and agrees to issue to the Executive, on the day which is
the 30th trading date following the first day on which shares of Impark Common
Stock ("Impark Shares") are publicly traded, options to purchase shares of
Impark common stock ("Impark Shares") which shall, immediately following the
issuance thereof and after giving effect thereto, result in the Executive
owning, immediately after the issuance thereof, options (the "Initial Impark
Options") to purchase two and one half percent (2 1/2 %) of all of the
outstanding common stock of Impark on a fully diluted basis (it being
understood that the grant of Initial Impark Options are in lieu of and in full
satisfaction of any right the Executive may have to receive options or any
other consideration in connection with the Impark Spinoff pursuant to the
Plan).
As to the Initial Impark Options:
(i) The Exercise Price per share of the Initial Impark Options
shall be equal to the greater of (1) the last reported sales price of a share
of Impark common stock on the day which is the thirtieth (30th) trading date
following the first day on which Impark Shares are publicly traded, or (2) the
average closing price of a share of Impark common stock for the ten (10) day
trading period ending on the date which is the thirtieth (30th) trading date
following the first day on which Impark Shares are publically traded, in either
case, as reported on the principal trading market Impark Shares where quotes
are readily available;
(ii) The Impark Options shall be vested in full upon issuance,
and shall be exercisable as follows: 25% on each of the first four
anniversaries of the Impark Spinoff Date (each 12 month period ending on such
anniversaries being an "Exercise Year"). The Impark Options shall be
exercisable for a period which ends ten years after the anniversary of the
Impark Spinoff Date ("Impark Option Term");
(iii) The Initial Impark Options shall be represented by an option
certificate which shall contain anti-dilution provisions operable in the event
of the issuance of stock splits or similar transactions. The exercise price of
the Impark Options shall (A) increase on each
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<PAGE> 6
monthly anniversary of grant at the rate of 10% per annum, compounded annually;
and (B) decrease by the amount, per share, of dividends in respect of Impark
common stock paid in cash and the fair market value of dividends paid in
property other than cash.
(b) Additional Impark Rights and Options. Impark, by its execution of
this Agreement, agrees that it will grant to the Executive, at such time as
rights to purchase common stock of Impark are offered to Impark's shareholders
subsequent to the Impark Spinoff Date ("Rights Offering") is made:
(i) The right (the "Impark Rights") to purchase such number of
shares of Impark common stock as would, after giving effect to the exercise of
such right, result in the Executive acquiring one percent (1%) of the number of
shares issued pursuant to such Rights Offering (not exceeding, however, such
number of shares as are issued for a gross aggregate price of $30,000,000) on
substantially the same terms and conditions (and identical terms relating to
price) as are contained in and are applicable to the Rights Offering; and
(ii) additional options ("Additional Impark Options") to
purchase, at an exercise price equal to the price per share at which the Rights
Offering is made, a number of shares of Impark common stock which would result
in the Executive acquiring upon exercise of one and one-half percent (1 1/2 %)
of the number of shares issued pursuant to such Rights Offering (not exceeding,
however, such number of shares as are issued for a gross aggregate price of
$30,000,000). Such Additional Impark Options shall be vested in full upon
issuance and shall be exercisable to the extent of 25% on each of the first
four anniversaries of the Impark Spinoff Date (each 12 month period ending on
such anniversaries being an "Exercise Year"); and shall remain exercisable for
a period which ends ten years after the Impark Spinoff Date ("Additional Impark
Option Term"); and
(iii) notwithstanding the foregoing, the Executive's Impark Rights
and his right to be issued Additional Impark Options shall expire upon his
Termination Date; provided, however, that if his termination is by Impark
without Cause, or by the Executive for Good Reason, or by reason of the
Executive's death or disability, his Impark Rights and his right to receive
Additional Impark Options shall expire six (6) months after his Termination
Date.
(c) Employment of Executive by Impark It shall be a condition of the
Executive's right to exercise the Initial Impark Options and the Additional
Impark Options and the Impark Rights that the Executive shall serve as an
employee of Impark under the terms described in subsections (d) and (e) below,
provided that Impark shall offer to employ and shall employ the Executive under
such terms as of the Impark Spinoff Date.
(d) Agreement to Serve as Officer of Impark The Executive agrees to
serve, at the request of the Company, as a Vice Chairman of Impark following
the Impark Spinoff Date, subject to (i) the Agreement of Impark to pay the
Executive a base salary at the rate of $82,500 per annum (payable in monthly
installments) during the period of his service; (ii) Executive receiving
directors fees equivalent to the fees paid to the other outside directors of
Impark and (iii) coverage of the Executive by a policy of Officers and
Directors liability insurance (with customary exclusions) in form and scope
reasonably satisfactory to the Executive in the amount of at least $15 million
with respect to claims made against officers and directors of Impark.
(e) Terms of Employment The Executive's employment with Impark shall be
subject to the following terms:
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<PAGE> 7
(1) Executive shall perform duties on a part-time basis as reasonably
assigned by the Board of Directors of Impark consistent with his position as a
senior executive thereof; it being understood that Executive's employment shall
be on a part-time basis, and such duties are consistent with the Executive's
other business obligations including as a member of the Management Company
which is executing the Asset Management Agreement;
(2) Executive may perform such services within Manhattan or, where his
physical presence is not required, by telephone from any location.
(3) Executive shall be reimbursed for all out-of-pocket expenses
incurred in the performance of his obligations and documented in accordance
with Impark's generally applicable reimbursement policies;
(4) For purposes of this subsection C(1)(e): (x) "Cause" shall mean (A)
Executive's conviction of a felony; (B) Executive's engaging in an embezzlement
involving Impark; or (C) Executive's repeated and willful failure to carry out
his employment obligations to Impark, which failure continues for more than 15
days after written notice to him of such failure which specifies the nature
thereof; and (y) "Good Reason" means the failure of Impark to comply with the
provisions of subsection (d) or Impark's material breach of the requirements of
paragraphs (1) through (3) above, unless such failure is cured within 15 days
after written notice to Impark specifying the nature of such failure, or any
repetition of such failure which occurs after such cure; and
(5) (i) If Impark terminates the Executive for Cause all of the
unexercised Impark Options and Additional Impark Options which have not been
exercised shall be terminated as of the Termination Date, and he shall not be
entitled to any further salary payments accruing after the Termination Date.
(ii) If Impark terminates the Executive without Cause or Executive
terminates for Good Reason, then (A) he shall have the right to payment of his
base salary from Impark through the Termination Date and no right to further
payments from Impark relating to any period after the Termination Date, and (B)
all of the Impark Options and Additional Impark Options shall become
immediately exercisable, the Impark Call Option set forth in subsection (6)
below shall not apply, and all of the Impark Options and Additional Impark
Options shall expire to the extent not exercised on or before the last day of
the six-month period following the Termination Date.
(iii) If the Executive terminates his employment voluntarily
without Good Reason, then (A) he shall have the right to payment of his base
salary through the Termination Date and no right to further payments from
Impark relating to any period after the Termination Date, (B) all of the Impark
Options and Additional Impark Options, to the extent not then exercisable,
shall continue to become exercisable in accordance with the schedules set forth
in (C)(1)(a)(ii) and (C)(1)(b)(ii), respectively, and shall expire thirty (30)
days after the date on which such options shall become exercisable, unless
exercised prior thereto; (C) the Impark Options and Additional Impark Options
which were not exercisable on the Termination Date shall become subject to the
Impark Call Option; and (D) the Impark Options and Additional Impark Options
which were exercisable on the Termination Date shall not be subject to the
Impark Call Option, shall continue to be exercisable and shall expire to the
extent not exercised on or before the last day of the thirty (30) day period
following the Termination Date.
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<PAGE> 8
(iv) Upon the termination of Executive's employment by reason of
death or disability, the Executive's estate may exercise all Impark Options and
Additional Impark Options which were exercisable on the Termination Date plus a
Pro Rata portion of the Impark Options and Additional Impark Options which
would next have become exercisable had such death or disability not occurred.
As used herein, "Pro Rata" means an amount of Impark Options and Additional
Impark Options equal to (x) the percentage equal to (i) the number of days from
the commencement of the Exercise Year (as defined in subsections (a)(ii) (as to
Impark Options) and (b)(ii) (as to Additional Impark Options) of this Section
C) in which such termination occurs through the Termination Date divided by
(ii) 365; multiplied in each case by (y) the number of Impark Options and
Additional Impark Options, respectively, which would otherwise have become
exercisable at the end of the Exercise Year in which such Termination occurs.
Such exercise may be effected until the earliest of one year following the
Executive's Termination Date or the end of the Option Term or Additional Impark
Option Terms, after which time any unexercised Impark Options or Additional
Impark Options shall expire.
(v) For purposes of this paragraph, "Termination Date" means (a)
the Executive's last day of employment on or following the date upon which
written notice of termination is delivered to him by Impark, as the same shall
be stated in such notice; (b) the Executive's last day of employment on or
following the date upon which the Executive delivers written notice of
resignation to Impark (including a resignation for Good Reason); or (c) the
date of the Executive's death or disability.
(6) Impark Call Option. If any Impark Options and Additional Impark
Options are subject to an Impark Call Option pursuant to subsection (5) above
(the Impark Call Option) then Impark shall have the right to require the
Executive to transfer such Options (the "Subject Options") to Impark at any
time after his Termination Date for a price equal to the "Exercise Spread" (as
defined herein). If such Exercise Spread is zero or less, Impark may purchase
the Subject Options for no consideration. Impark shall provide written notice
to Executive that it is exercising the Call Option and the date on which such
notice is deemed to have been given under the terms of this Agreement shall be
deemed the "Valuation Date". The "Exercise Spread" shall be (i) the difference
between (a) the exercise price of a Subject Option and (b) the "Closing Price"
of a share of Impark common stock ("Common Stock") on the Valuation Date. The
"Closing Price" means (i) if the Common Stock is listed or admitted to trading
on the New York Stock Exchange (the "NYSE"), the American Stock Exchange
("AMEX") any national securities exchange or the Nasdaq Stock Market
("Nasdaq"), the closing price on the Valuation Date, or if no such sale takes
place on such day, the average of the closing bid and asked prices on such day;
(ii) if the Common Stock is not listed or admitted to trading on the NYSE, the
AMEX, any national securities exchange or the Nasdaq, the last reported sale
price on the Valuation Date or, if no sale takes place on such day, the average
of the closing bid and asked prices on such day, as reported by a reliable
quotation source designated by Impark; (iii) if the Common Stock is not listed
or admitted trading on the NYSE, the AMEX, any national securities exchange or
the Nasdaq and no such last reported sale price or closing bid and asked prices
are available, the average of the reported high bid and low asked prices on the
Valuation Date, as reported by a reliable quotation source designated by
Impark, or if there shall be no bid and asked prices on the Valuation Date, the
average of the high bid and low asked prices, as so reported, on the most
recent day (not more than five (5) days prior to the date in question) for
which prices have been so reported; provided, however, that if there are no bid
and asked prices reported during the five (5) days prior to the date in
questions, the Closing Price of the Common Stock shall be determined by the
independent trustees of Impark acting in good faith on the basis of such
quotations and other information as they consider, in their reasonable
judgment, appropriate.
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<PAGE> 9
D. GENERAL PROVISIONS
(1) Notices.
All notices or other communications required or permitted hereunder shall
be made in writing and shall be deemed to have been duly given if delivered by
hand or delivered by a recognized delivery service or mailed, postage prepaid,
by express, certified or registered mail, return receipt requested, and
addressed to (1) to the Company and Impark at their respective addresses as set
forth above and (2) to the Executive at his address as set forth in the Company
records and 23 Prospect Avenue, Port Washington, New York 11050 (or to such
other address as shall have been previously provided in accordance with this
Section 7). In addition, copies of any notice to the Executive shall be
delivered to Herrick, Feinstein LLP, 2 Park Avenue, 21st Floor, New York, New
York 10016, Attention: Harvey S. Feuerstein, Esq.
(2) Governing Law.
This Amendment will be governed by and construed in accordance with the
laws of the State of New York without regard to principles of conflicts of laws
thereunder.
(3) Severability.
Whenever possible, each provision and term of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision or term of this Amendment shall be held to be prohibited
by or invalid under such applicable law, then, such provision or term shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating or affecting in any manner whatsoever the remainder of such
provisions or term or the remaining provisions or terms of this Amendment.
(4) Counterparts.
This Amendment may be executed in separate counterparts, each of which is
deemed to be an original and both of which taken together shall constitute one
and the same agreement.
(5) Headings.
The headings of the Paragraphs of this Agreement are inserted for
convenience only and shall not be deemed to constitute a part hereof and shall
not affect the construction or interpretation of this Agreement.
(6) Entire Agreement.
This Amendment and the Original Agreement constitute the entire agreement
of the parties with respect to the subject matter hereof and thereof, and
supersede all other prior agreements and undertakings, both written and oral,
among the parties with respect to the subject matter hereof.
(7) Waiver and Modification. No amendment, modification, waiver,
termination or cancellation of this Amendment shall be binding or effective for
any purpose unless it is made in a writing signed by the party against whom
enforcement of such amendment, modification,
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<PAGE> 10
waiver, termination or cancellation is sought. No course of dealing between or
among the parties to this Amendment shall be deemed to affect or to modify,
amend or discharge any provision or term of this Amendment. No delay on the
part of the Company or Executive in the exercise of any of their respective
rights or remedies shall operate as a waiver thereof, and no single or partial
exercise by the Company or Executive of any such right or remedy shall preclude
other or further exercise thereof. A waiver of right or remedy on any one
occasion shall not be construed as a bar to or waiver of any such right or
remedy on any other occasion.
The respective rights and obligations of the parties hereunder shall
survive the Executive's termination of employment and termination of this
Amendment to the extent necessary for the intended preservation of such rights
and obligations.
(8) Exculpation.
Notwithstanding anything contained herein to the contrary, this Agreement
is made and executed on behalf of the Company by its officer(s) on behalf of
the trustees thereof, and none of the trustees or any additional or successor
trustee hereafter appointed, or any beneficiary, officer, employee or agent of
the Company shall have any liability in his personal or individual capacity,
but instead, Executive shall look solely to the property and assets of the
Company for satisfaction of claims of any nature arising from or in connection
with this Agreement.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first above written.
<TABLE>
<S> <C>
Executive: First Union Real Estate Equity And Mortgage
Investments
DANIEL P. FRIEDMAN
/s/ Daniel P. Friedman By: /s/ WILLIAM ACKMAN
---------------------- -------------------------
Name: WILLAM ACKMAN
Title: CHAIRMAN
IMPERIAL PARKING CORPORATION
(formerly known as First Union Canadian
Holdings, Inc.)
(as to Section C only)
By: /s/ CHARLES HUNTZINGER
-------------------------
Name: CHARLES HUNTZINGER
Title PRESIDENT
</TABLE>
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<PAGE> 1
EXHIBIT (10)(t)
AMENDMENT TO EMPLOYMENT AGREEMENT
AMENDMENT executed March 27, 2000 as of November 30, 1999 (the
"Amendment") to Employment Agreement entered into as of by and between DAVID
SCHONBERGER, an individual residing at 90 Paulding Drive, Chappaqua, New York
10514 ("Executive"), and FIRST UNION REAL ESTATE EQUITY AND MORTGAGE
INVESTMENTS, an Ohio business trust with offices at 55 Public Square, Suite
1900, Cleveland, Ohio 44113 (the "Company").
IMPERIAL PARKING CORPORATION (formerly named First Union Canadian
Holdings, Inc.), a Delaware corporation with offices at 601 West Cordova
Street, Suite 300, Vancouver, British Columbia, Canada V6B1G1 ("Impark") is
joining in this Agreement with respect to Section C hereof.
(1) The Executive and the Company entered into an Employment
Agreement dated November 2, 1998 (the "Original Agreement");
(2) Certain significant operational and business developments
affecting the Company have occurred since the date the Original Agreement was
executed, as a result of which the parties have concluded that an amendment to
the Agreement would be in the best interests of both parties, and the parties
have accordingly agreed to amend the Agreement in the manner and upon the
considerations set forth in this Amendment;
(3) Impark is executing this agreement, and shall be bound only by
the terms of Section C hereof.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements set forth herein, the parties hereby agree as follows:
A. CERTAIN DEFINED TERMS; CONTINUATION OF ORIGINAL EMPLOYMENT AGREEMENT
(1) Amended Agreement The term "Amended Agreement" as used in
this Amendment refers to the Original Agreement, as amended by this Amendment.
(2) "Impark Spinoff" "Impark Spinoff" means (a) the reorganization
of certain of the subsidiaries of the Company in order to position the
Company's parking real estate assets under Impark and to repay certain
indebtedness of Impark, (b) the settlement of certain debts owed by First Union
Management, Inc. ("FUMI") to the Company by the transfer to the Company and its
subsidiaries of the assets of FUMI relating to its business of leasing and
managing parking facilities and (c) and distributing all of the shares of
Impark not owned by its directors to the owners of the common shares of the
Company (the "Common Shares"), (the date of such distribution being referred to
as the "Impark Spinoff Date").
(3) Other Defined Terms Unless otherwise provided herein,
capitalized terms herein shall have the meanings ascribed to them in the
Original Agreement. As used herein:
(4) Continued Effectiveness of Original Agreement Except as
otherwise provided in this Amendment to the contrary, the terms and conditions
of the Original Agreement as amended by this Amendment shall remain in effect.
(5) Inconsistent Provisions In any case in which the terms of
this Amendment are inconsistent with the terms of the Original Agreement, the
terms of this Amendment shall control.
<PAGE> 2
B. AMENDMENT OF CERTAIN SECTIONS OF THE ORIGINAL AGREEMENT
THE FOLLOWING SECTIONS OF THE ORIGINAL AGREEMENT ARE HEREBY AMENDED AS
SPECIFIED BELOW:
(1) Section 4 (a) ("Salary") of the Original Agreement is amended
to be Section 4(a)(i) and a new Section 4(a)(ii) is added to read as follows:
"(ii) Bonus The Executive shall be entitled to a bonus,
on or before December 29, 1999, of $135,000, in cash.
(2) Section 4(c)(v) ("Share Option. Grant") is amended so that the
three (3) paragraphs included within the subsection captioned "Vesting/Exercise"
are deleted; and the following paragraph is inserted:
"All of the Share Options vested as of November 2,
1998 (other than the Additional Options, which vested
upon grant). All of the $6.50 Options, all of the
$8.50 Options, and all of the Additional Options
shall be exercisable in full as of December 1, 1999."
(3) Section 4(c)(v) is further amended so that the paragraph in
the subsection captioned "Exercise Price" is amended in its entirety to read as
follows:
"(v) (A) The option exercise price with regard to the
360,000 Share Options granted pursuant to this
subsection (v) shall be as follows: 180,000 shall be
exercisable at $6.50 per Common Share (the "$6.50
Options") and 180,000 shall be exercisable at $8.50
per Common Share (the "$8.50 Options").
(B) Additional Share Options to purchase 125,504
Common Shares having an initial exercise price of
$4.00 were issued to the Executive on May 28, 1999,
pursuant to the subsection of Section 4(c)(vi)
captioned "Additional Share Options." In addition,
Additional Options to purchase 31,250 shares have
been transferred to the Executive by Daniel Friedman
contemporaneously herewith (the "Transferred
Options"), and the Company has agreed and consented
to such transfer. The Transferred Options shall be
exercisable in full as of December 1, 1999. The term
"Additional Share Options" shall be deemed to include
such Transferred Options.
(C) The exercise price of each Share Option
(including the Additional Share Options) will be
adjusted (but not below zero) (1) to increase on each
anniversary of its grant by an amount equal to an
increase of 10% per annum (compounded annually) and
(2) to decrease from and after the date of its grant
through the date of its exercise by the sum of all
dividends or other distributions (including the value
of non-cash dividends, including without limitation,
share dividends, the Distributable Value of the
Impark Spinoff and the Attributable Value of other
spin-offs) declared per Common Share for the
applicable year. As used herein, (1) the
"Distributable Value of the Impark Spinoff" means the
Initial Impark Option Price, and (2) "Attributable
Value of other spinoffs" means the value ascribed to
such spin-offs by the Company, or if not so ascribed,
the fair market value of the assets so spun off.
Notwithstanding the foregoing, the adjustment to the
exercise price set forth in clause (C) (1) shall not
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<PAGE> 3
commence until the eighteen (18) month anniversary of
the commencement of the Employment Period; and (y) be
applied ratably at the time(s) Executive exercises
the Share Options (e.g. if Share Options are
exercised on the 20 month anniversary of the
commencement of the Employment Term, the exercise
price in effect on that date would be increased by
1.667% (2/12 of 10%) minus any dividends or other
distributions paid on or prior to the date of
exercise (to the extent such dividends or other
distributions were not previously deducted)."
(4) Section 4(c)(v) is further amended so that, in the first
paragraph in the subsection captioned "Option Exercise Term,"
(a) the period (.) at the end of the second sentence
shall be replaced by a comma (,) and the following
provision shall be added at the end thereof:
"except that Additional Options (as defined in
subsection 4(c)(vi) below) shall remain exercisable
for eight (8) months following such event after which
they shall expire."
(b) a new sentence shall be added after the second
sentence and shall read as follows:
"Notwithstanding the foregoing, if the Company enters
into an Asset Management Agreement with an entity of
which the Executive, Anne Nelson Zahner and Daniel P.
Friedman are the principal equity holders then the
$8.50 Options and the $6.50 Options shall be
terminated and shall no longer be exercisable if the
Asset Management Agreement is executed and is not
thereafter terminated pursuant to Article III,
Section (a)(v) of the Management Agreement"; and
(c) a period (.) shall replace the comma (,) after the
first use of the word "expire" in the last sentence,
the balance of the last sentence shall be deleted and
the "(i)" in such sentence shall be deleted.
(5) Section 5(a)(iv) (Good Reason) is amended to add the following
lettered subparagraphs (G), and (H) before the words "provided, however:"
"(G) The Board of Directors shall have adopted a
resolution approving a complete liquidation or dissolution of
the Company; or
(H) there shall have occurred (1) the Impark Spinoff and
(2) a sale or refinancing of the Park Plaza mall on terms
acceptable to the Board of Directors; provided, however, that
Good Reason pursuant to this Section 5(a)(iv)(H) shall not
occur unless and until Anne Nelson Zahner and Daniel Friedman
shall have resigned for Good Reason or shall have been
terminated under their respective Employment Agreements with
the Company without Cause, after which such termination by
reason of the Impark Spinoff and the sale or refinancing of
the Park Plaza mall shall be deemed to have occurred for Good
Reason; and provided further that if such Good Reason does
occur, the Company, upon receipt of notice of resignation for
such Good Reason, waives its right to cure.
(6) Section 5(a)(iv) (Good Reason) is further amended by adding
the following sentence at the end thereof.
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<PAGE> 4
"Notwithstanding the foregoing, the Executive shall not be
entitled to terminate his employment for Good Reason until
June 1, 2000 unless such Good Reason is described in
subparagraph (A) (2) of this subsection (iv).
(7) Section 5(a)(vii) ("Change of Control") is amended to delete
subsections (D) and (E) thereof.
(8) Section 6(c)(i) is amended in its entirety to read as follows:
"In the event the Company terminates Executive's
employment for any reason other than Cause, death or
Disability, or Executive terminates his employment
for Good Reason (other than as set forth in Paragraph
6(c)(ii)), or in the event of a Change of Control,
the Company shall pay to Executive and Executive
shall be entitled to receive the sum total of: (A)
the accrued but unpaid Annual Base Salary at the rate
then in effect; (B) earned but unpaid incentive
compensation and/or bonuses for completed performance
periods; and (C) the sum of Six Hundred Thirty
Thousand Dollars ($630,000). The aforesaid amounts
shall be payable in cash immediately upon such
termination. In addition, the Executive shall be
entitled to continuation of Executive's participation
in all benefit plans, programs or arrangements of the
Company (except tax-qualified plans), including,
without limitation, Medical Continuation, for a
period of two years following such termination."
(9) Section 8 ("Non-Compete") is hereby amended to add a new
subsection (c) as follows:
"(c) First Refusals. (i) Executive agrees that,
if, prior to the earlier of (i) the termination of
Executive's employment and (ii) the date on which a
proposal to liquidate the Company is publicly
announced, the Executive shall be offered the
opportunity to invest in or acquire an interest in a
business of any nature ("Investment Opportunity"), he
shall first offer such Investment Opportunity to the
Company. Such offer (the "Offer") shall be in
writing and shall describe the Offer and the
Investment Opportunity in sufficient detail, and
provide to the Company substantially all of the
written information furnished to him by the party
("Third Party") which made the Offer. The Company's
representatives shall thereupon have fifteen (15)
business days in which to consider and accept the
Offer, and the Executive shall reasonably cooperate
with the Company if it shall request further
information concerning the Offer and the Executive is
able to obtain such information from the Third Party.
If at the end of such period the Company has not
delivered to the Third Party its written acceptance
of the Offer (or, having accepted the Offer, shall
not proceed to a closing pursuant to the Offer within
the time allowed in the Offer and/or shall fail to
make such payments (including deposits) to the Third
Party as would have been required from the Executive
under the terms of the Offer), the Executive shall be
free to accept the Offer and consummate the
transactions contemplated thereby. The Executive's
participation in the Investment Opportunity shall not
be deemed a violation of any fiduciary, contractual
or other obligation of the Executive to the Company,
including under the provisions of Section 3(a) of the
Original Agreement. Notwithstanding the foregoing,
the time devoted by the Executive to any Investment
Opportunity shall not substantially interfere with
his performance of services as required under this
Agreement."
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<PAGE> 5
(ii) The obligation of the Executive to
make the offers described in subsection (a) above shall
terminate upon the date on which a proposal to liquidate or
merge the Company is publicly announced.
C. ADDITIONAL PROVISIONS ADDED BY THIS AMENDMENT
(1) Impark Options Impark, by its execution of this Agreement,
covenants and agrees to issue to the Executive, on the day which is the 30th
trading date following the first day on which shares of Impark Common Stock
("Impark Shares") are publicly traded, options to purchase shares of Impark
common stock ("Impark Shares") which shall, immediately following the issuance
thereof and after giving effect thereto, result in the Executive owning,
immediately after the issuance thereof, options (the "Initial Impark Options")
to purchase one and one quarter percent (1.25%) of all of the outstanding
common stock of Impark on a fully diluted basis (it being understood that the
grant of Initial Impark Options are in lieu of and in full satisfaction of any
right the Executive may have to receive options or any other consideration in
connection with the Impark Spinoff pursuant to the Plan).
As to the Initial Impark Options:
(i) The Exercise Price per share of the Initial Impark
Options shall be equal to the greater of (1) the last reported sales price of a
share of Impark common stock on the day which is the thirtieth (30th) trading
date following the first day on which Impark Shares are publicly traded, or (2)
the average closing price of a share of Impark common stock for the ten (10)
day trading period ending on the date which is the thirtieth (30th) trading
date following the first day on which Impark Shares are publically traded, in
either case, as reported on the principal trading market Impark Shares where
quotes are readily available;
(ii) The Impark Options shall be vested in full upon
issuance, and shall be exercisable as follows: 25% on each of the first four
anniversaries of the Impark Spinoff Date (each 12 month period ending on such
anniversaries being an "Exercise Year"). The Impark Options shall be
exercisable for a period which ends ten years after the anniversary of the
Impark Spinoff Date ("Impark Option Term");
(a) Issuance of Impark Options
(iii) The Initial Impark Options shall be represented by an
option certificate which shall contain anti-dilution provisions operable in the
event of the issuance of stock splits or similar transactions. The exercise
price of the Impark Options shall (A) increase on each monthly anniversary of
grant at the rate of 10% per annum, compounded annually; and (B) decrease by
the amount, per share, of dividends in respect of Impark common stock paid in
cash and the fair market value of dividends paid in property other than cash.
(b) Additional Impark Rights and Options. Impark, by its execution
of this Agreement, agrees that it will grant to the Executive, at such time as
rights to purchase common stock of Impark are offered to Impark's shareholders
subsequent to the Impark Spinoff Date ("Rights Offering") is made:
(i) The right (the "Impark Rights") to purchase such
number of shares of Impark common stock as would, after giving effect to the
exercise of such right, result in the Executive acquiring 0.417% of the number
of shares issued pursuant to such Rights Offering (not exceeding, however, such
number of shares as are issued for a gross aggregate price of $30,000,000) on
substantially the same terms and conditions (and identical terms relating to
price) as are contained in and are applicable to the Rights Offering; and
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<PAGE> 6
(ii) additional options ("Additional Impark Options") to
purchase, at an exercise price equal to the price per share at which the Rights
Offering is made, a number of shares of Impark common stock which would result
in the Executive acquiring upon exercise 0.833% of the number of shares issued
pursuant to such Rights Offering (not exceeding, however, such number of shares
as are issued for a gross aggregate price of $30,000,000). Such Additional
Impark Options shall be vested in full upon issuance and shall be exercisable
to the extent of 25% on each of the first four anniversaries of the Impark
Spinoff Date (each 12 month period ending on such anniversaries being an
"Exercise Year"); and shall remain exercisable for a period which ends ten
years after the Impark Spinoff Date ("Additional Impark Option Term"); and
(iii) notwithstanding the foregoing, the Executive's Impark
Rights and his right to be issued Additional Impark Options shall expire upon
his Termination Date; provided, however, that if his termination is by Impark
without Cause, or by the Executive for Good Reason, or by reason of the
Executive's death or disability, his Impark Rights and his right to receive
Additional Impark Options shall expire six (6) months after his Termination
Date.
(c) Employment of Executive by Impark It shall be a condition of
the Executive's right to exercise the Initial Impark Options and the Additional
Impark Options and the Impark Rights that the Executive shall serve as an
employee of Impark under the terms described in subsections (d) and (e) below,
provided that Impark shall offer to employ and shall employ the Executive under
such terms as of the Impark Spinoff Date.
(d) Agreement to Serve as Officer of Impark The Executive agrees
to serve, at the request of the Company, as a Vice President of Impark
following the Impark Spinoff Date, subject to (i) the Agreement of Impark to
pay the Executive a base salary at the rate of $112,000 per annum (payable in
monthly installments) during the period of his service; and (ii) coverage of
the Executive by a policy of Officers and Directors liability insurance (with
customary exclusions) in form and scope reasonably satisfactory to the
Executive in the amount of at least $15 million with respect to claims made
against officers and directors of Impark.
(e) Terms of Employment The Executive's employment with Impark
shall be subject to the following terms:
(1) Executive shall perform duties on a part-time basis as
reasonably assigned by the President of Impark consistent with his position as
a senior executive thereof; it being understood that Executive's employment
shall be on a part-time basis, and such duties are consistent with the
Executive's other business obligations including as a member of the Management
Company which is executing the Asset Management Agreement;
(2) Executive may perform such services within Manhattan or, where
his physical presence is not required, by telephone from any location.
(3) Executive shall be reimbursed for all out-of-pocket expenses
incurred in the performance of his obligations and documented in accordance
with Impark's generally applicable reimbursement policies;
(4) For purposes of this subsection C(1)(e): (x) "Cause" shall
mean (A) Executive's conviction of a felony; (B) Executive's engaging in an
embezzlement involving Impark; or (C) Executive's repeated and willful failure
to carry out his employment obligations to Impark, which failure continues for
more than 15 days after written notice to him of such failure which specifies
the nature thereof; and (y) "Good Reason" means the failure of Impark to comply
with the provisions of subsection (d) or Impark's material breach of the
requirements of paragraphs (1) through (3) above, unless such failure is cured
within 15 days after written notice to Impark
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<PAGE> 7
specifying the nature of such failure, or any repetition of such failure which
occurs after such cure; and
(5) (i) If Impark terminates the Executive for Cause all of the
unexercised Impark Options and Additional Impark Options which have not been
exercised shall be terminated as of the Termination Date, and he shall not be
entitled to any further salary payments accruing after the Termination Date.
(ii) If Impark terminates the Executive without Cause or
Executive terminates for Good Reason, then (A) he shall have the right to
payment of his base salary from Impark through the Termination Date and no
right to further payments from Impark relating to any period after the
Termination Date, and (B) all of the Impark Options and Additional Impark
Options shall become immediately exercisable, the Impark Call Option set forth
in subsection (6) below shall not apply, and all of the Impark Options and
Additional Impark Options shall expire to the extent not exercised on or before
the last day of the six-month period following the Termination Date.
(iii) If the Executive terminates his employment voluntarily
without Good Reason, then (A) he shall have the right to payment of his base
salary through the Termination Date and no right to further payments from
Impark relating to any period after the Termination Date, (B) all of the Impark
Options and Additional Impark Options, to the extent not then exercisable,
shall continue to become exercisable in accordance with the schedules set forth
in (C)(1)(a)(ii) and (C)(1)(b)(ii), respectively, and shall expire thirty (30)
days after the date on which such options shall become exercisable, unless
exercised prior thereto; (C) the Impark Options and Additional Impark Options
which were not exercisable on the Termination Date shall become subject to the
Impark Call Option; and (D) the Impark Options and Additional Impark Options
which were exercisable on the Termination Date shall not be subject to the
Impark Call Option, shall continue to be exercisable and shall expire to the
extent not exercised on or before the last day of the thirty (30) day period
following the Termination Date.
(iv) Upon the termination of Executive's employment by reason
of death or disability, the Executive's estate may exercise all Impark Options
and Additional Impark Options which were exercisable on the Termination Date
plus a Pro Rata portion of the Impark Options and Additional Impark Options
which would next have become exercisable had such death or disability not
occurred. As used herein, "Pro Rata" means an amount of Impark Options and
Additional Impark Options equal to (x) the percentage equal to (i) the number
of days from the commencement of the Exercise Year (as defined in subsections
(a)(ii) (as to Impark Options) and (b)(ii) (as to Additional Impark Options) of
this Section C) in which such termination occurs, through the Termination Date
divided by (ii) 365; multiplied in each case by (y) the number of Impark
Options and Additional Impark Options, respectively, which would otherwise have
become exercisable at the end of the Exercise Year in which such Termination
occurs. Such exercise may be effected until the earliest of one year
following the Executive's Termination Date or the end of the Option Term or
Additional Impark Option Terms, after which time any unexercised Impark Options
or Additional Impark Options shall expire.
(v) For purposes of this paragraph, "Termination Date"
means (a) the Executive's last day of employment on or following the date upon
which written notice of termination is delivered to him by Impark, as the same
shall be stated in such notice; (b) the Executive's last day of employment on
or following the date upon which the Executive delivers written notice of
resignation to Impark (including a resignation for Good Reason); or (c) the
date of the Executive's death or disability.
(6) Impark Call Option. If any Impark Options and Additional
Impark Options are subject to an Impark Call Option pursuant to subsection (5)
above (the Impark Call Option) then Impark shall have the right to require the
Executive to transfer such Options (the "Subject Options") to Impark at any
time after his Termination Date for a price equal to the "Exercise
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<PAGE> 8
Spread" (as defined herein). If such Exercise Spread is zero or less, Impark
may purchase the Subject Options for no consideration. Impark shall provide
written notice to Executive that it is exercising the Call Option and the date
on which such notice is deemed to have been given under the terms of this
Agreement shall be deemed the "Valuation Date". The "Exercise Spread" shall be
(i) the difference between (a) the exercise price of a Subject Option and (b)
the "Closing Price" of a share of Impark common stock ("Common Stock") on the
Valuation Date. The "Closing Price" means (i) if the Common Stock is listed or
admitted to trading on the New York Stock Exchange (the "NYSE"), the American
Stock Exchange ("AMEX") any national securities exchange or the Nasdaq Stock
Market ("Nasdaq"), the closing price on the Valuation Date, or if no such sale
takes place on such day, the average of the closing bid and asked prices on
such day; (ii) if the Common Stock is not listed or admitted to trading on the
NYSE, the AMEX, any national securities exchange or the Nasdaq, the last
reported sale price on the Valuation Date or, if no sale takes place on such
day, the average of the closing bid and asked prices on such day, as reported
by a reliable quotation source designated by Impark; (iii) if the Common Stock
is not listed or admitted trading on the NYSE, the AMEX, any national
securities exchange or the Nasdaq and no such last reported sale price or
closing bid and asked prices are available, the average of the reported high
bid and low asked prices on the Valuation Date, as reported by a reliable
quotation source designated by Impark, or if there shall be no bid and asked
prices on the Valuation Date, the average of the high bid and low asked prices,
as so reported, on the most recent day (not more than five (5) days prior to
the date in question) for which prices have been so reported; provided,
however, that if there are no bid and asked prices reported during the five (5)
days prior to the date in questions, the Closing Price of the Common Stock
shall be determined by the independent trustees of Impark acting in good faith
on the basis of such quotations and other information as they consider, in
their reasonable judgment, appropriate.
D. GENERAL PROVISIONS
(1) Notices.
All notices or other communications required or permitted hereunder
shall be made in writing and shall be deemed to have been duly given if
delivered by hand or delivered by a recognized delivery service or mailed,
postage prepaid, by express, certified or registered mail, return receipt
requested, and addressed to (1) to the Company and Impark at their respective
addresses as set forth above and (2) to the Executive at his address as set
forth in the Company records and 90 Paulding Drive, Chappaqua, New York 10514
(or to such other address as shall have been previously provided in accordance
with this Section 7). In addition, copies of any notice to the Executive shall
be delivered to Herrick, Feinstein LLP, 2 Park Avenue, 21st Floor, New York,
New York 10016, Attention: Harvey S. Feuerstein, Esq.
(2) Governing Law.
This Amendment will be governed by and construed in accordance with
the laws of the State of New York without regard to principles of conflicts of
laws thereunder.
(3) Severability.
Whenever possible, each provision and term of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision or term of this Amendment shall be held to be prohibited
by or invalid under such applicable law, then, such provision or term shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating or affecting in any manner whatsoever the remainder of such
provisions or term or the remaining provisions or terms of this Amendment.
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<PAGE> 9
(4) Counterparts.
This Amendment may be executed in separate counterparts, each of which
is deemed to be an original and both of which taken together shall constitute
one and the same agreement.
(5) Headings.
The headings of the Paragraphs of this Agreement are inserted for
convenience only and shall not be deemed to constitute a part hereof and shall
not affect the construction or interpretation of this Agreement.
(6) Entire Agreement.
This Amendment and the Original Agreement constitute the entire
agreement of the parties with respect to the subject matter hereof and thereof,
and supersede all other prior agreements and undertakings, both written and
oral, among the parties with respect to the subject matter hereof.
(7) Waiver and Modification. No amendment, modification, waiver,
termination or cancellation of this Amendment shall be binding or effective for
any purpose unless it is made in a writing signed by the party against whom
enforcement of such amendment, modification, waiver, termination or
cancellation is sought. No course of dealing between or among the parties to
this Amendment shall be deemed to affect or to modify, amend or discharge any
provision or term of this Amendment. No delay on the part of the Company or
Executive in the exercise of any of their respective rights or remedies shall
operate as a waiver thereof, and no single or partial exercise by the Company
or Executive of any such right or remedy shall preclude other or further
exercise thereof. A waiver of right or remedy on any one occasion shall not be
construed as a bar to or waiver of any such right or remedy on any other
occasion.
The respective rights and obligations of the parties hereunder shall
survive the Executive's termination of employment and termination of this
Amendment to the extent necessary for the intended preservation of such rights
and obligations.
(8) Exculpation.
Notwithstanding anything contained herein to the contrary, this
Agreement is made and executed on behalf of the Company by its officer(s) on
behalf of the trustees thereof, and none of the trustees or any additional or
successor trustee hereafter appointed, or any beneficiary, officer, employee or
agent of the Company shall have any liability in his personal or individual
capacity, but instead, Executive shall look solely to the property and assets
of the Company for satisfaction of claims of any nature arising from or in
connection with this Agreement.
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<PAGE> 10
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
<TABLE>
<S> <C>
Executive: First Union Real Estate Equity And Mortgage
--------- Investments
DAVID SCHONBERGER
/s/ DAVID SCHONBERGER By: /s/ WILLIAM ACKMAN
--------------------- -----------------------------
Name: WILLIAM ACKMAN
Title: CHAIRMAN
IMPERIAL PARKING CORPORATION
(formerly known as First Union Canadian
Holdings, Inc.)
(as to Section C only)
By: /s/ CHARLES HUNTZINGER
-------------------------
Name: CHARLES HUNTZINGER
Title PRESIDENT
</TABLE>
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<PAGE> 1
EXHIBIT (10)(u)
AMENDMENT TO EMPLOYMENT AGREEMENT
AMENDMENT executed March 27, 2000 as of November 30, 1999 (the
"Amendment") to Employment Agreement entered into as of by and between ANNE
NELSON ZAHNER, an individual residing at 15 Woodlawn Avenue, New Rochelle, New
York 10804 ("Executive"), and FIRST UNION REAL ESTATE EQUITY AND MORTGAGE
INVESTMENTS, an Ohio business trust with offices at 55 Public Square, Suite
1900, Cleveland, Ohio 44113 (the "Company").
IMPERIAL PARKING CORPORATION (formerly named First Union Canadian
Holdings, Inc.), a Delaware corporation with offices at 601 West Cordova
Street, Suite 300, Vancouver, British Columbia, Canada V6B1G1 ("Impark") is
joining in this Agreement with respect to Section C hereof.
(1) The Executive and the Company entered into an Employment
Agreement dated November 2, 1998 (the "Original Agreement");
(2) Certain significant operational and business developments
affecting the Company have occurred since the date the Original Agreement was
executed, as a result of which the parties have concluded that an amendment to
the Agreement would be in the best interests of both parties, and the parties
have accordingly agreed to amend the Agreement in the manner and upon the
considerations set forth in this Amendment;
(3) Impark is executing this agreement, and shall be bound only by
the terms of Section C hereof.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements set forth herein, the parties hereby agree as follows:
A. CERTAIN DEFINED TERMS; CONTINUATION OF ORIGINAL EMPLOYMENT AGREEMENT
(1) Amended Agreement The term "Amended Agreement" as used in
this Amendment refers to the Original Agreement, as amended by this Amendment.
(2) "Impark Spinoff" "Impark Spinoff" means (a) the reorganization
of certain of the subsidiaries of the Company in order to position the
Company's parking real estate assets under Impark and to repay certain
indebtedness of Impark, (b) the settlement of certain debts owed by First Union
Management, Inc. ("FUMI") to the Company by the transfer to the Company and its
subsidiaries of the assets of FUMI relating to its business of leasing and
managing parking facilities and (c) and distributing all of the shares of
Impark not owned by its directors to the owners of the common shares of the
Company (the "Common Shares"), (the date of such distribution being referred to
as the "Impark Spinoff Date").
(3) Other Defined Terms Unless otherwise provided herein,
capitalized terms herein shall have the meanings ascribed to them in the
Original Agreement. As used herein:
(4) Continued Effectiveness of Original Agreement Except as
otherwise provided in this Amendment to the contrary, the terms and conditions
of the Original Agreement as amended by this Amendment shall remain in effect.
<PAGE> 2
(5) Inconsistent Provisions In any case in which the terms of
this Amendment are inconsistent with the terms of the Original Agreement, the
terms of this Amendment shall control.
B. AMENDMENT OF CERTAIN SECTIONS OF THE ORIGINAL AGREEMENT
THE FOLLOWING SECTIONS OF THE ORIGINAL AGREEMENT ARE HEREBY AMENDED AS
SPECIFIED BELOW:
(1) Section 4 (a) ("Salary") of the Original Agreement is amended
to be Section 4(a)(i) and a new Section 4(a)(ii) is added to read as follows:
"(ii) Bonus The Executive shall be entitled to a bonus,
on or before December 29, 1999, of $135,000, in cash.
(2) Section 4(c)(v) ("Share Option. Grant") is amended so that the
three (3) paragraphs included within the subsection captioned
"Vesting/Exercise" are deleted; and the following paragraph is inserted:
"All of the Share Options vested as of November 2,
1998 (other than the Additional Options, which vested
upon grant). All of the $6.50 Options, all of the
$8.50 Options, and all of the Additional Options
shall be exercisable in full as of December 1, 1999."
(3) Section 4(c)(v) is further amended so that the paragraph in
the subsection captioned "Exercise Price" is amended in its entirety to read as
follows:
"(v) (A) The option exercise price with regard to the
360,000 Share Options granted pursuant to this
subsection (v) shall be as follows: 180,000 shall be
exercisable at $6.50 per Common Share (the "$6.50
Options") and 180,000 shall be exercisable at $8.50
per Common Share (the "$8.50 Options").
(B) Additional Share Options to purchase 125,504
Common Shares having an initial exercise price of
$4.00 were issued to the Executive on May 28, 1999,
pursuant to the subsection of Section 4(c)(vi)
captioned "Additional Share Options." In addition,
Additional Options to purchase 31,250 shares have
been transferred to the Executive by Daniel Friedman
contemporaneously herewith (the "Transferred
Options"), and the Company has agreed and consented
to such transfer. The Transferred Options shall be
exercisable in full as of December 1, 1999. The term
"Additional Share Options" shall be deemed to include
such Transferred Options.
(C) The exercise price of each Share Option
(including the Additional Share Options) will be
adjusted (but not below zero) (1) to increase on each
anniversary of its grant by an amount equal to an
increase of 10% per annum (compounded annually) and
(2) to decrease from and after the date of its grant
through the date of its exercise by the sum of all
dividends or other distributions (including the value
of non-cash dividends, including without limitation,
share dividends, the Distributable Value of the
Impark Spinoff and the Attributable Value of other
spin-offs) declared per Common Share for the
applicable year. As used herein, (1) the
"Distributable Value of the Impark
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<PAGE> 3
Spinoff" means the Initial Impark Option Price, and
(2) "Attributable Value of other spinoffs" means the
value ascribed to such spin-offs by the Company, or
if not so ascribed, the fair market value of the
assets so spun off. Notwithstanding the foregoing,
the adjustment to the exercise price set forth in
clause (C) (1) shall not commence until the eighteen
(18) month anniversary of the commencement of the
Employment Period; and (y) be applied ratably at the
time(s) Executive exercises the Share Options (e.g.
if Share Options are exercised on the 20 month
anniversary of the commencement of the Employment
Term, the exercise price in effect on that date would
be increased by 1.667% (2/12 of 10%) minus any
dividends or other distributions paid on or prior to
the date of exercise (to the extent such dividends or
other distributions were not previously deducted)."
(4) Section 4(c)(v) is further amended so that, in the first
paragraph in the subsection captioned "Option Exercise Term,"
(a) the period (.) at the end of the second sentence
shall be replaced by a comma (,) and the following
provision shall be added at the end thereof:
"except that Additional Options (as defined in
subsection 4(c)(vi) below) shall remain exercisable
for eight (8) months following such event after which
they shall expire."
(b) a new sentence shall be added after the second
sentence and shall read as follows:
"Notwithstanding the foregoing, if the Company enters
into an Asset Management Agreement with an entity of
which the Executive, David Schonberger and Daniel P.
Friedman are the principal equity holders then the
$8.50 Options and the $6.50 Options shall be
terminated and shall no longer be exercisable if the
Asset Management Agreement is executed and is not
thereafter terminated pursuant to Article III,
Section (a)(v) of the Management Agreement"; and
(c) a period (.) shall replace the comma (,) after the
first use of the word "expire" in the last sentence,
the balance of the last sentence shall be deleted and
the "(i)" in such sentence shall be deleted.
(5) Section 5(a)(iv) (Good Reason) is amended to add the following
lettered subparagraphs (G), and (H) before the words "provided, however:"
"(G) The Board of Directors shall have adopted a
resolution approving a complete liquidation or dissolution of
the Company; or
(H) there shall have occurred (1) the Impark Spinoff and
(2) a sale or refinancing of the Park Plaza mall on terms
acceptable to the Board of Directors; provided, however, that
the Good Reason pursuant to this Section 5(a)(iv)(H) shall not
occur unless and until David Schonberger and Daniel Friedman
shall
3
<PAGE> 4
have resigned for Good Reason or shall have been terminated
under their respective Employment Agreements with the Company
without Cause, after which such termination by reason of the
Impark Spinoff and the sale or refinancing of the Parl Plaza
mall shall be deemed to have occurred for Good Reason; and
provided further that if such Good Reason does occur, the
Company, upon receipt of notice of resignation for such Good
Reason, waives its right to cure. .
(6) Section 5(a)(iv) (Good Reason) is further amended by adding
the following sentence at the end thereof.
"Notwithstanding the foregoing, the Executive shall not be
entitled to terminate her employment for Good Reason until June
1, 2000 unless such Good Reason is described in subparagraph
(A) (2) of this subsection (iv).
(7) Section 5(a)(vii) ("Change of Control") is amended to delete
subsections (D) and (E) thereof.
(8) Section 6(c)(i) is amended in its entirety to read as follows:
"In the event the Company terminates Executive's
employment for any reason other than Cause, death or
Disability, or Executive terminates her employment
for Good Reason (other than as set forth in Paragraph
6(c)(ii)), or in the event of a Change of Control,
the Company shall pay to Executive and Executive
shall be entitled to receive the sum total of: (A)
the accrued but unpaid Annual Base Salary at the rate
then in effect; (B) earned but unpaid incentive
compensation and/or bonuses for completed performance
periods; and (C) the sum of Six Hundred Thirty
Thousand Dollars ($630,000). The aforesaid amounts
shall be payable in cash immediately upon such
termination. In addition, the Executive shall be
entitled to continuation of Executive's participation
in all benefit plans, programs or arrangements of the
Company (except tax-qualified plans), including,
without limitation, Medical Continuation, for a
period of two years following such termination."
(9) Section 8 ("Non-Compete") is hereby amended to add a new
subsection (c) as follows:
"(c) First Refusals. (i) Executive agrees that,
if, prior to the earlier of (i) the termination of
Executive's employment and (ii) the date on which a
proposal to liquidate the Company is publicly
announced, the Executive shall be offered the
opportunity to invest in or acquire an interest in a
business of any nature ("Investment Opportunity"),
she shall first offer such Investment Opportunity to
the Company. Such offer (the "Offer") shall be in
writing and shall describe the Offer and the
Investment Opportunity in sufficient detail, and
provide to the Company substantially all of the
written information furnished to her by the party
("Third Party") which made the Offer. The Company's
representatives shall thereupon have fifteen (15)
business days in which to consider and accept the
Offer, and the Executive shall reasonably cooperate
with the Company if it shall request further
information concerning the Offer and the Executive is
able
4
<PAGE> 5
to obtain such information from the Third Party. If
at the end of such period the Company has not
delivered to the Third Party its written acceptance
of the Offer (or, having accepted the Offer, shall
not proceed to a closing pursuant to the Offer within
the time allowed in the Offer and/or shall fail to
make such payments (including deposits) to the Third
Party as would have been required from the Executive
under the terms of the Offer), the Executive shall be
free to accept the Offer and consummate the
transactions contemplated thereby. The Executive's
participation in the Investment Opportunity shall not
be deemed a violation of any fiduciary, contractual
or other obligation of the Executive to the Company,
including under the provisions of Section 3(a) of the
Original Agreement. Notwithstanding the foregoing,
the time devoted by the Executive to any Investment
Opportunity shall not substantially interfere with
her performance of services as required under this
Agreement."
(ii) The obligation of the Executive to
make the offers described in subsection (a) above shall
terminate upon the date on which a proposal to liquidate or
merge the Company is publicly announced.
C. ADDITIONAL PROVISIONS ADDED BY THIS AMENDMENT
(1) Impark Options
(a) Issuance of Impark Options Impark, by its execution of
this Agreement, covenants and agrees to issue to the Executive, on the day
which is the 30th trading date following the first day on which shares of
Impark Common Stock ("Impark Shares") are publicly traded, options to purchase
shares of Impark common stock ("Impark Shares") which shall, immediately
following the issuance thereof and after giving effect thereto, result in the
Executive owning, immediately after the issuance thereof, options (the "Initial
Impark Options") to purchase two and one half percent (2 1/2 %) of all of the
outstanding common stock of Impark on a fully diluted basis (it being
understood that the grant of Initial Impark Options are in lieu of and in full
satisfaction of any right the Executive may have to receive options or any
other consideration in connection with the Impark Spinoff pursuant to the
Plan).
As to the Initial Impark Options:
(i) The Exercise Price per share of the Additional Impark
Options shall be equal to the greater of (1) the last reported sales price of a
share of Impark common stock on the day which is the thirtieth (30th) trading
date following the first day on which Impark Shares are publicly traded, or (2)
the average closing price of a share of Impark common stock for the ten (10)
day trading period ending on the date which is the thirtieth (30th) trading
date following the first day on which Impark Shares are publically traded, in
either case, as reported on the principal trading market Impark Shares where
quotes are readily available;
(ii) The Impark Options shall be vested in full upon
issuance, and shall be exercisable as follows: 25% on each of the first four
anniversaries of the Impark Spinoff Date (each 12 month period ending on such
anniversaries being an "Exercise Year"). The Impark Options shall be
exercisable for a period which ends ten years after the anniversary of the
Impark Spinoff Date ("Impark Option Term");
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<PAGE> 6
(iii) The Initial Impark Options shall be represented by an
option certificate which shall contain anti-dilution provisions operable in the
event of the issuance of stock splits or similar transactions. The exercise
price of the Impark Options shall (A) increase on each monthly anniversary of
grant at the rate of 10% per annum, compounded annually; and (B) decrease by
the amount, per share, of dividends in respect of Impark common stock paid in
cash and the fair market value of dividends paid in property other than cash.
(b) Additional Impark Rights and Options. Impark, by its execution
of this Agreement, agrees that it will grant to the Executive, at such time as
rights to purchase common stock of Impark are offered to Impark's shareholders
subsequent to the Impark Spinoff Date ("Rights Offering") is made:
(i) The right (the "Impark Rights") to purchase such
number of shares of Impark common stock as would, after giving effect to the
exercise of such right, result in the Executive acquiring 0.417% of the number
of shares issued pursuant to such Rights Offering (not exceeding, however, such
number of shares as are issued for a gross aggregate price of $30,000,000) on
substantially the same terms and conditions (and identical terms relating to
price) as are contained in and are applicable to the Rights Offering; and
(ii) additional options ("Additional Impark Options") to
purchase, at an exercise price equal to the price per share at which the Rights
Offering is made, a number of shares of Impark common stock which would result
in the Executive acquiring upon exercise 0.833% of the number of shares issued
pursuant to such Rights Offering (not exceeding, however, such number of shares
as are issued for a gross aggregate price of $30,000,000). Such Additional
Impark Options shall be vested in full upon issuance and shall be exercisable
to the extent of 25% on each of the first four anniversaries of the Impark
Spinoff Date (each 12 month period ending on such anniversaries being an
"Exercise Year"); and shall remain exercisable for a period which ends ten
years after the Impark Spinoff Date ("Additional Impark Option Term"); and
(iii) notwithstanding the foregoing, the Executive's Impark
Rights and her right to be issued Additional Impark Options shall expire upon
the Termination Date with respect to Daniel P. Friedman's and David
Schonberger's employment with Impark whichever is the latter such Termination
Date; provided, however, that if such termination (with respect to the latter
Termination Date) is by Impark without Cause, or by the person so terminating
for Good Reason, or by reason of the death or disability of the person so
terminating, her Impark Rights and her right to receive Additional Impark
Options shall expire six (6) months after such latter Termination Date.
(c) Pursuant to amendments to the Employment Agreements between
each of Daniel Friedman and David Schonberger and the Company of even date
herewith (which amendments have been executed by Impark) Impark intends to
employ Daniel Friedman and David Schonberger, and Daniel Friedman and David
Schonberger have agreed to accept employment in executive positions with
Impark. If, following the grant of Impark Options and Additional Impark Options
pursuant hereto, neither Daniel Friedman nor David Schonberger remain employed
by Impark, then, as of the last of employment date ("Last Employment Date") of
the later of Daniel Friedman or David Schonberger ("Last Impark Executive") ,
(i) If Impark terminated the Last Impark Executive
without Cause, or the Last Impark Executive terminated his employment for Good
Reason (as such terms are defined in the Employment Agreements applicable to
Daniel Friedman and David Shonberger); then (A) all of
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<PAGE> 7
the Impark Options and Additional Impark Options shall become immediately
exercisable, the Impark Call Option (as defined below) shall not apply, and (B)
all of the Impark Options and Additional Impark Options shall expire to the
extent not exercised on or before the last day of the six-month period
following the Termination Date; and
(ii) if the Last Impark Executive terminated his
employment voluntarily without Good Reason, then (A) all of the Impark Options
and Additional Impark Options, to the extent not then exercisable, shall
continue to become exercisable in accordance with the schedules set forth in
(C)(1)(a)(ii) and (C)(1)(b)(ii), respectively; (B) the Impark Options and
Additional Impark Options which were not exercisable on the Termination Date
shall become subject to the Impark Call Option; and (C) the Impark Options and
Additional Impark Options which were exercisable on the Termination Date shall
not be subject to the Impark Call Option, shall continue to be exercisable and
shall expire to the extent not exercised on or before the last day of the
six-month period following the Last Employment Date.
(iii) Upon the Executive's death or disability, the
Executive's estate may exercise all Impark Options and Additional Impark
Options which were exercisable on the date of death or disability plus a Pro
Rata portion of the Impark Options and Additional Impark Options which would
next have become exercisable had such death or disability not occurred. As
used herein, "Pro Rata" means an amount of Impark Options and Additional Impark
Options equal to (x) the percentage equal to (i) the number of days from the
commencement of the Exercise Year (as defined in subsections (a)(ii) (as to
Impark Options) and (b)(ii) (as to Additional Impark Options) of this Section
C) in which such termination occurs through the Termination Date divided by
(ii) 365; multiplied in each case by (y) the number of Impark Options and
Additional Impark Options, respectively, which would otherwise have become
exercisable at the end of the Exercise Year in which such death or disability
occurs. Such exercise may be effected until the earliest of one year
following the Executive's death or disability Date or the end of the Option
Term or Additional Impark Option Terms, after which time any unexercised Impark
Options or Additional Impark Options shall expire.
(d) Impark Call Option. If any Impark Options and Additional
Impark Options are subject to an Impark Call Option pursuant to subsection
(c)(ii) above (the Impark Call Option) then Impark shall have the right to
require the Executive to transfer such Options (the "Subject Options") to
Impark at any time after the Last Employment Date for a price equal to the
"Exercise Spread" (as defined herein). If such Exercise Spread is zero or
less, Impark may purchase the Subject Options for no consideration. Impark
shall provide written notice to Executive that it is exercising the Call Option
and the date on which such notice is deemed to have been given under the terms
of this Agreement shall be deemed the "Valuation Date". The "Exercise Spread"
shall be (i) the difference between (a) the exercise price of a Subject Option
and (b) the "Closing Price" of a share of Impark common stock ("Common Stock")
on the Valuation Date. The "Closing Price" means (i) if the Common Stock is
listed or admitted to trading on the New York Stock Exchange (the "NYSE"), the
American Stock Exchange ("AMEX") any national securities exchange or the Nasdaq
Stock Market ("Nasdaq"), the closing price on the Valuation Date, or if no such
sale takes place on such day, the average of the closing bid and asked prices
on such day; (ii) if the Common Stock is not listed or admitted to trading on
the NYSE, the AMEX, any national securities exchange or the Nasdaq, the last
reported sale price on the Valuation Date or, if no sale takes place on such
day, the average of the closing bid and asked prices on such day, as reported
by a reliable quotation source designated by Impark; (iii) if the Common Stock
is not listed or admitted trading on the NYSE, the AMEX, any national
securities exchange or the Nasdaq and no such last reported sale price or
closing bid and asked prices are available, the average of the reported high
bid and low asked prices on the Valuation
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<PAGE> 8
Date, as reported by a reliable quotation source designated by Impark, or if
there shall be no bid and asked prices on the Valuation Date, the average of
the high bid and low asked prices, as so reported, on the most recent day (not
more than five (5) days prior to the date in question) for which prices have
been so reported; provided, however, that if there are no bid and asked prices
reported during the five (5) days prior to the date in questions, the Closing
Price of the Common Stock shall be determined by the independent trustees of
Impark acting in good faith on the basis of such quotations and other
information as they consider, in their reasonable judgment, appropriate.
D. GENERAL PROVISIONS
(1) Notices.
All notices or other communications required or permitted hereunder
shall be made in writing and shall be deemed to have been duly given if
delivered by hand or delivered by a recognized delivery service or mailed,
postage prepaid, by express, certified or registered mail, return receipt
requested, and addressed to (1) to the Company and Impark at their respective
addresses as set forth above and (2) to the Executive at her address as set
forth in the Company records and at 15 Woodlawn Avenue, New Rochelle, New York
10804 (or to such other address as shall have been previously provided in
accordance with this Section 7). In addition, copies of any notice to the
Executive shall be delivered to Herrick, Feinstein LLP, 2 Park Avenue, 21st
Floor, New York, New York 10016, Attention: Harvey S. Feuerstein, Esq.
(2) Governing Law.
This Amendment will be governed by and construed in accordance with
the laws of the State of New York without regard to principles of conflicts of
laws thereunder.
(3) Severability.
Whenever possible, each provision and term of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision or term of this Amendment shall be held to be prohibited
by or invalid under such applicable law, then, such provision or term shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating or affecting in any manner whatsoever the remainder of such
provisions or term or the remaining provisions or terms of this Amendment.
(4) Counterparts.
This Amendment may be executed in separate counterparts, each of which
is deemed to be an original and both of which taken together shall constitute
one and the same agreement.
(5) Headings.
The headings of the Paragraphs of this Agreement are inserted for
convenience only and shall not be deemed to constitute a part hereof and shall
not affect the construction or interpretation of this Agreement.
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<PAGE> 9
(6) Entire Agreement.
This Amendment and the Original Agreement constitute the entire
agreement of the parties with respect to the subject matter hereof and thereof,
and supersede all other prior agreements and undertakings, both written and
oral, among the parties with respect to the subject matter hereof.
(7) Waiver and Modification. No amendment, modification, waiver,
termination or cancellation of this Amendment shall be binding or effective for
any purpose unless it is made in a writing signed by the party against whom
enforcement of such amendment, modification, waiver, termination or
cancellation is sought. No course of dealing between or among the parties to
this Amendment shall be deemed to affect or to modify, amend or discharge any
provision or term of this Amendment. No delay on the part of the Company or
Executive in the exercise of any of their respective rights or remedies shall
operate as a waiver thereof, and no single or partial exercise by the Company
or Executive of any such right or remedy shall preclude other or further
exercise thereof. A waiver of right or remedy on any one occasion shall not be
construed as a bar to or waiver of any such right or remedy on any other
occasion.
The respective rights and obligations of the parties hereunder shall
survive the Executive's termination of employment and termination of this
Amendment to the extent necessary for the intended preservation of such rights
and obligations.
(8) Exculpation.
Notwithstanding anything contained herein to the contrary, this
Agreement is made and executed on behalf of the Company by its officer(s) on
behalf of the trustees thereof, and none of the trustees or any additional or
successor trustee hereafter appointed, or any beneficiary, officer, employee or
agent of the Company shall have any liability in her personal or individual
capacity, but instead, Executive shall look solely to the property and assets
of the Company for satisfaction of claims of any nature arising from or in
connection with this Agreement.
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<PAGE> 10
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
<TABLE>
<S> <C>
Executive: First Union Real Estate Equity And Mortgage
--------- Investments
ANNE NELSON ZAHNER
/s/ Anne Nelson Zahner By: [SIG]
---------------------- -------------------------
Name:
Title:
IMPERIAL PARKING CORPORATION
(formerly known as First Union Canadian
Holdings, Inc.)
(as to Section C only)
By:
--------------------------
Name:
Title
</TABLE>
10
<PAGE> 1
EXHIBIT (10)(v)
ASSET MANAGEMENT AGREEMENT
THIS ASSET MANAGEMENT AGREEMENT is executed as of March 27, 2000, by
and between RADIANT PARTNERS, LLC, a New York limited liability company (the
"Manager") and FIRST UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS, an Ohio
business trust (the "Trust") with principal executive offices at 551 Fifth
Avenue, Suite 1416, New York, New York 10176.
W I T N E S S E T H:
WHEREAS, the Board of Trustees of the Trust (the "Board") has
determined that the best interests of the Trust's beneficiaries would be served
by a reorganization of the Trust's management structure pursuant to which the
management of the assets and supervision of the operations of the properties of
the Trust and of its affiliates would be undertaken by an independent entity
reporting to the Board;
WHEREAS, the principal officers of the Manager previously held senior
executive positions with the Trust and have a substantial familiarity with the
assets of the Trust and of its affiliates, which assets consist of fee,
leasehold and mortgage interests in office and residential buildings, shopping
centers, and parking facilities (the "Properties" - such term to include
properties owned or controlled, directly or indirectly, by affiliates of the
Trust on the date hereof and by any future affiliates, including, without
limitation, any liquidating trust to be created by the Trust, formed by and
owned or controlled, directly or indirectly, by the Trust to own, operate
and/or dispose of properties owned by the Trust or its affiliates);
WHEREAS, the Trust desires to retain the Manager to operate and
administer the Properties and to provide corporate management services, and the
Manager is willing to be so retained and to perform such services during the
term hereof and any extension thereof on behalf of the Trust and its
affiliates;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
ENGAGEMENT OF THE MANAGER
1.1 APPOINTMENT. The Trust hereby retains the Manager, and the
Manager hereby agrees to so serve, on the terms and conditions herein set
forth, to provide asset and corporate management services with respect to the
Trust and its affiliates and the Properties, in accordance with the terms of
this Agreement.
<PAGE> 2
1.2 SERVICES OF THE MANAGER.
(a) Subject to the other terms and provisions of this
Agreement, the Manager shall be responsible for conducting and overseeing the
business and financial affairs of the Trust and its affiliates pertaining to
the ownership, management, operation, administration, promotion, maintenance,
improvement and leasing of the Properties, and administration of its corporate
functions including, but not limited to, the following:
(i) Engaging a property manager to carry out the
day-to-day operation and management of each of the Properties, and overseeing
and reviewing the performance by the property manager of the property manager's
duties, including its collection and proper deposits of rental payments;
(ii) Formulating and overseeing the implementation
of strategies for the management, operation, administration, promotion,
maintenance, improvement, financing and refinancing, leasing, and disposition
of the Properties;
(iii) Reviewing on a periodic basis the property
manager's performance of maintenance and repairs, and arranging for supervision
of tenant improvement work and capital improvement projects to be performed on
behalf of the Trust and its affiliates, at the Properties;
(iv) Disbursing all sums payable by the Trust and
its affiliates, including operating expenses, (including, but not limited to,
Manager's compensation hereunder, other than compensation to be received in
accordance with Section 2.2(b) hereof or Section 3(b) hereof) and capital
expenditures;
(v) Supervising the maintenance of the Trust's
and its affiliates' office records, books and accounts in accordance with the
governing documents of the Trust and its affiliates, as now or hereafter
amended (collectively, the "Trust Documents"), and in conformity with the
accounting principles utilized by the Trust and its affiliates, and causing to
be prepared and filed on behalf of the Trust and its affiliates, all reports,
returns and statements required to be prepared or filed by the Trust and its
affiliates;
(vi) Retaining on behalf of the Trust and its
affiliates, and at the Trust's and its affiliates' sole cost, an independent
certified public accountant to audit the financial statements for each fiscal
year of the Trust and its affiliates and to prepare quarterly and other
periodic reports reflecting, for such period, the financial status and
activities of the Trust and its affiliates and the Properties;
(vii) As and when necessary or appropriate in the
Manager's determination, engaging, at the Trust's and its affiliates' sole
cost, consultants, appraisers, legal counsel and other professionals, in
accordance with Article IV hereof;
(viii) Reviewing and evaluating bids to purchase
from the Trust and its affiliates, any of the Properties or other assets and
facilitating the consummation of the disposition of any Properties or other
assets of the Trust and its affiliates;
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<PAGE> 3
(ix) Attending regular and special meetings of the
Trustees and, as and when requested, committee meetings of the Board of
Trustees;
(x) In general, providing to the Trust and its
affiliates the services currently performed by the senior officers of the Trust
other than the chief financial officer and, after March 31, 2001, the chief
financial officer, subject to the supervision of the Board, such services to
include:
(A) recommending the timing and amount
of distributions to beneficiaries;
(B) recommending corporate finance
decisions;
(C) overseeing filings with the
Securities and Exchange Commission; and
(D) management of investor relations;
and
(xi) Taking such other actions as may be necessary
or appropriate to assist the Trust and its affiliates, in conducting its
business, including, but not limited to, causing the execution and delivery of
all agreements in the ordinary course of business of the Trust and its
affiliates, necessary in connection with the performance of the above_described
duties and within the scope of the authority granted to the Manager hereunder.
1.3 PERFORMANCE.
(a) The Manager shall perform its duties in a prudent and
businesslike manner, and shall use commercially reasonable efforts to maximize
the yield from the management, operation, maintenance, leasing, development and
financing and, where appropriate, liquidation of the assets of the Trust and
its affiliates. The Manager shall seek to realize the goals of the Trust and
its affiliates, set forth in the Trust Documents or adopted by the Board of
Trustees and shall conduct its activities hereunder (including the commencement
and settlement of legal proceedings) in accordance with the Trust Documents and
the directives of the Board of Trustees.
(b) Nothing herein shall constitute a representation,
warranty or covenant by the Manager concerning the future performance of the
Trust or its affiliates, as a whole or of any Property held by the Trust or its
affiliates. Without limitation of the foregoing, the Manager has not made any
representations concerning the fair market value of the Properties or any of
the Trust's or its affiliates' other assets, the amounts which may be realized
upon the disposition thereof, the revenues that may be received or costs
(including finance costs) that may be incurred in connection with the
operation, maintenance, improvement or disposition thereof.
1.4 ROLE OF THE TRUST. The Board reserves the right to approve in
advance, or delegate authority for such advance approval, to the Executive
Committee or other committee or representative of the Board, any major
investment, operating and financing decisions with respect
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<PAGE> 4
to the Trust or its affiliates, the Properties and other assets now owned or
hereafter acquired by the Trust or its affiliates, including, but not limited
to, decisions to:
(a) sell, lease, assign, convey, mortgage, pledge or
otherwise transfer or encumber any of the Properties or any interest of the
Trust or its affiliates, other than the sale or disposition of miscellaneous
assets not exceeding $50,000 for any transaction or series of related
transactions and not required for the operations of the Trust or its affiliates
or the Properties (such as obsolete computers or other equipment); provided,
that the Manager shall not require advance approval for the execution of a
tenant's lease for fewer than 20,000 square feet of rentable space of a
Property;
(b) borrow money or establish credit facilities on behalf
of the Trust or its affiliates (except for unsecured trade debt incurred in the
ordinary course of business), or prepay the principal balance of any mortgage
loan except out of the proceeds of the disposition or refinancing of assets
securing such mortgage loan;
(c) commence legal actions on behalf of the Trust or its
affiliates, except for actions to collect rent and evict tenants in default
under their leases;
(d) merge the Trust or any of its affiliates with another
entity, tender for Trust shares or shares or any of its affiliates, redeem
shares or pay off liabilities of the Trust or its affiliates;
(e) confess a judgment, admit a liability or accept a
settlement, compromise or payment of any claim, except for settlements of
immaterial disputes (including lease terminations and bankruptcy settlements)
with tenants;
(f) write off assets;
(g) make distributions to beneficiaries; and
(h) purchase any assets or make any investments.
ARTICLE II
COMPENSATION
2.1 ANNUAL FEE. As compensation for its services hereunder, the
Manager shall receive a fee equal to One Million Five Hundred Thousand and
00/100 Dollars ($1,500,000.00) per year (the "Annual Fee"). The Annual Fee
shall be payable monthly in advance, in installments of One Hundred Twenty-five
Thousand and 00/100 Dollars ($125,000.00), on the first business day of each
month. If the Effective Date occurs on a date other than the first business
day of a month, then the first payment of such fee shall take place one
business day after the Effective Date and such fee shall be pro rated for such
month. If this Agreement is terminated in accordance with Article III hereof
on a date other than the last business day of the month, then such fee shall be
pro rated for such month.
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<PAGE> 5
2.2 INCENTIVE FEE.
(a) As further compensation for its services hereunder,
the Manager shall be paid a fee (the "Incentive Fee"), at the times and
pursuant to the procedures set forth below, equal to ten percent (10%) of (A)
the Excess Per Share Distribution, multiplied by (B) the number of Shares of
the Trust in respect of which an Excess Per Share Distribution is made.
(b) Definitions as used herein:
(i) "Excess Per Share Distribution" means the
aggregate of all Distributions in respect of a single common share of
beneficial interest of the Trust which exceeds $4.60 per share.
(ii) "Distributions" means distributions first
made after March 1, 2000, other than the Impark Spinoff, (but not share
repurchases) in respect of common shares of beneficial interest of the Trust,
including distributions of cash, debt obligations and the fair market value of
other property whether or not in connection with the Trust's liquidation, and
the fair market value of any consideration received in exchange for common
shares of beneficial interest by reason of a merger or consolidation with a
third party entity or other similar transaction. In the event of a merger,
consolidation or other similar business combination transaction, the Manager
will receive a credit toward the Distribution amount equal to the fair market
value of the consideration received by holders of common shares of beneficial
interest of the Trust received in exchange for their common shares of
beneficial interest of the Trust, including, but not limited to, the fair
market value ascribed in the transaction to stock, preferred stock, debt
instruments, cash, warrants, options, etc., received by the holders of common
shares of beneficial interest of the Trust. For purposes hereof, "fair market
value" in connection with a merger, consolidation or other similar business
combination transaction shall be equal to the product of (A) the average of the
closing prices of the common shares of beneficial interest of the Trust on the
ten (10) consecutive trading days ending on the trading date immediately
preceding the effective date of such transaction and (B) the total number of
common shares of the Trust outstanding on the last such trading day. Except as
otherwise provided herein, "fair market value" shall be determined by the Board
of Trustees of the Trust in good faith; provided, however, that if the Manager
disagrees in good faith with such determination, then the Manager shall be
entitled to seek arbitration in accordance with Section 13.2 herein with
respect to this issue. For purposes hereof, the "Impark Spinoff" means any
distribution to holders of common shares of beneficial interest of the Trust of
all or substantially all of the interests of the Trust in Imperial Parking
Corporation in accordance with Imperial Parking Corporation's Form 10, as
amended, filed with the Securities and Exchange Commission on March 2, 2000, as
the same may be amended from time to time.
(c) Time of Payment The entire amount of the Incentive
Fee, to the extent then earned, shall be paid to the Manager from time to time,
as, when and if Distributions are made to shareholders of the Trust. The
Incentive Fee shall be deemed earned when the aggregate Distributions per share
first exceed the sum of $4.60. The amount of each payment of the Incentive Fee
shall equal the entire Incentive Fee computed pursuant to Section 2.2(a), less
the amount thereof which has theretofore been paid to the Manager.
(d) Survival of Incentive Fee Obligations Unless the
Trust terminates this Agreement in accordance with Article III(a)(ii) or
III(a)(v) hereof, the obligations of the Trust to pay
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<PAGE> 6
the Incentive Fee shall survive the termination of this Agreement, and shall
continue until the earlier of: (i) the Trust having been fully liquidated, (ii)
the consummation of a merger, consolidation or other similar business
combination transaction involving the Trust and (iii) June 30, 2003; provided,
that, notwithstanding clause (iii) of this Section 2.2(d), the Incentive Fee,
if any, may be paid after June 30, 2003 if and to the extent it is payable with
respect to Distributions made after such date that are directly attributable to
net proceeds received by the Trust from any sale or refinancing transaction
with respect to real property assets owned by the Trust as of the date hereof,
which transaction is consummated (x) on or before June 30, 2003 or (y) within
six (6) months after June 30, 2003 and a definitive agreement with respect to
such transaction is executed on or before June 30, 2003. If the Trust
terminates this Agreement in accordance with Article III (a)(ii) or (III)(a)(v)
hereof, then the obligations of the Trust to pay the Incentive Fee shall
automatically terminate.
2.3 COSTS, EXPENSES AND DISBURSEMENTS.
(a) In addition to the payments described in Sections 2.1
and 2.2 above, the Manager shall be reimbursed for (or, upon Manager's request,
the Trust shall pay directly) all out-of-pocket costs and expenses incurred by
the Manager in connection with the performance of its duties hereunder,
including, without limitation, (i) all amounts paid for travel to and from the
Properties, (ii) all fees and costs paid in connection with the business and
operations of the Trust to Third Party Advisors (as defined in Section 4.1(a))
not directly paid for by the Trust; and (iii) the salary of the Trust's Chief
Financial Officer for such time and at such amounts as mutually agreed upon by
the Trust's Board and the Manager, but in no event shall the Trust pay such
salary past March 31, 2001.
(b) All payments to be made by the Trust for
reimbursement of the Manager pursuant to the provisions hereof shall be made
within ten (10) days of the Trust's receipt of appropriate written evidence
thereof. All direct payments by the Trust pursuant to the provisions hereof
shall be made promptly as requested by the Manager, but also subject to prior
receipt of appropriate written evidence thereof.
(c) Notwithstanding the foregoing, the Manager shall, on
and after the Effective Date, credit the Trust, against the Annual Fee, with
the first $35,000 of the salary of the person serving as Chief Financial
Officer of the Trust, such credit to be effected in equal monthly amounts of
$1,458.33 for each month of the Initial Term of this Agreement.
ARTICLE III
TERM
(a) The term of this Agreement shall commence as of the
Effective Date and shall terminate on the earlier of:
(i) the second anniversary of the Effective Date
(the "Initial Term");
(ii) at the election of the Trust, a termination
effected in accordance with Article VIII hereof;
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<PAGE> 7
(iii) at the election of the Trust, any time
following the execution of an agreement relating to a merger, consolidation or
other similar business combination transaction; provided, that, the Trust
provides 30 days notice of such event to the Manager;
(iv) at the election of the Trust, any time after
the Board of Trustees determines in good faith that the remaining equity of the
Trust, including the preferred shares of the Trust, has a fair market value of
less than $20,000,000; provided, that, the Trust provides 30 days notice of
such event to the Manager; and
(v) at the election of the Trust, any time prior
to June 1, 2000, it being understood that, notwithstanding anything in this
Agreement to the contrary, the Trust may terminate this Agreement prior to the
Effective Date in accordance with this clause.
Notwithstanding the foregoing, the Initial Term may be extended by the
Trust for one (1) additional twelve-month period (the "Extended Term"),
provided that the Trust shall deliver written notice of such extension not
later than six (6) months prior to the end of the Initial Term.
(b) If the Trust terminates this Agreement after the
Effective Date and prior to the end of the Initial Term, or, having extended
this Agreement, prior to the end of the Extended Term, other than, in either
case, by reason of a termination in accordance with Article III (a)(ii) or
III(a)(v) hereof, the Trust shall be required to pay to the Manager fifty
percent of the entire amount of the unpaid Annual Fees which would have been
earned by the Manager through the balance of the Initial Term or the Extended
Term, as the case may be, had the Agreement not been so terminated; except that
in no event will such payment be more than $750,000.00 or less than
$500,000.00. In addition, upon the termination of this Agreement and
regardless of whether such termination has occurred by reasons of the
expiration of the Initial Term or the Extended Term or pursuant to Article
VIII, the Trust shall pay to the Manager all accrued and unpaid Annual Fees,
all unreimbursed costs and expenses incurred by the Manager for which
reimbursement is required pursuant to Section 2.3.
(c) Effective Date The Effective Date of this Agreement
is the date on which the employment of each of Anne Nelson Zahner, David
Schonberger and Daniel P. Friedman has terminated pursuant to their Employment
Agreements as each had been amended as of the date hereof.
ARTICLE IV
RETENTION OF CONSULTANTS: ADDITIONAL SERVICES
4.1 RETENTION OF THIRD PARTY ADVISORS.
(a) The Manager shall, subject to the reimbursement and
direct payment requirements under Section 2.3, retain such third party
consultants and professional advisors, as the Manager shall reasonably deem
necessary for the operation and management of the Trust's and its affiliates'
assets and otherwise required or necessary in order to enable the Manager to
perform the management services undertaken by the Manager hereunder. Such
third party consultants and professional advisors shall include property
managers, attorneys, accountants, financing placement agents, insurance
consultants, leasing agents, appraisers, construction managers, environmental
engineers, asbestos abatement advisors, computer hardware and software and
management
-7-
<PAGE> 8
information system consultants for the Trust's and its affiliates' operations,
and brokers (collectively, "Third Party Advisors").
(b) The retention by the Manager of legal counsel and
independent certified public accountants shall be subject to the approval of
the Trust, which approval the Trust agrees it will not unreasonably withhold,
condition or delay.
(c) The retention of general real estate consultants
(e.g., appraisers, environmental engineers, asbestos abatement advisers,
brokers, property managers, insurance agents, etc.) shall not require the
approval of the Trust, provided such retentions are at market rates, and shall
otherwise comply with all applicable provisions of the Trust Documents.
(d) The Manager agrees that during the term hereof, it
will cause each of its members to continue to hold the officer positions
currently held by them with the Trust, subject to the right of the Board to
remove any or all of them at any time. The continued holding of such positions
shall be for administrative and ministerial purposes only, and shall not
require any of such persons to perform substantive tasks, it being understood
that the performance by such persons of services related to the Trust or the
Properties shall be carried out by such persons as members and employees of the
Manager, except to the extent such officers are requested to review and execute
(i) reports, registration statements and other filings required to be filed
with state, federal and other governmental authorities, including the
Securities and Exchange Commission, and (ii) officers' certificates. The
termination by the Trust of any of such person's position as an officer of the
Trust or the voluntary termination by any such person of his or her position as
an officer if such person is immediately replaced by a person reasonably
acceptable to the Board of Trustees shall not constitute a default by the
Manager under this Agreement.
ARTICLE V
ACCOUNTING SYSTEM
5.1 The Manager shall cause to be maintained by a Third
Party Advisor an adequate and separate accounting system in connection with
its management of the Trust and its affiliates, in accordance with sound
business practices. The books and records shall be kept in a manner consistent
with the Trust Documents and in conformity with the accounting principles
utilized by the Trust and its affiliates and shall be maintained at all times
at the principal place of business of the Manager. The Trust and its
affiliates, through their duly authorized agents, shall have the right and
privilege, during normal business hours, of examining, inspecting and copying
such books and records. The principal place of business of the Manager shall be
maintained at the address set forth for notices to the Manager in Article 11
below or such other address as the Manager shall notify the Trust of in
writing.
ARTICLE VI
RELATIONSHIP AND AUTHORITY
The Trust and the Manager shall not, by virtue of this Agreement or
the performance thereof by either party, constitute a partnership, joint
venture or joint enterprise in the performance of the Manager's duties
hereunder. The Manager may, at its election, so inform third parties with whom
it deals on behalf of the Trust and may take other steps to carry out the
intent of this Article 6.
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<PAGE> 9
ARTICLE VII
POWER OF ATTORNEY
The Trust hereby irrevocably appoints the Manager, and any officer or
agent of the Manager, with full power of substitution, its true and lawful
attorney-in-fact with full, irrevocable power and authority in the Trust's
place and stead and in the Trust's name and on the Trust's behalf or in
Manager's own name, from time to time and at any time until the termination of
this Agreement pursuant to Article III or Article VIII hereof, to do any and
all things in the Manager's reasonable discretion required or desirable to be
done to carry out the terms or to accomplish the purposes of this Agreement,
consistent with and subject to the scope of the authority granted to the
Manager under the terms of this Agreement. Nothing contained in this Article
VII shall be construed to expand the scope of authority granted to the Manager
under this Agreement. The Trust hereby ratifies all actions taken by or on
behalf of the Trust pursuant to this power of attorney or otherwise as provided
in this Agreement. This power of attorney is coupled with an interest and
shall be irrevocable until this Agreement is terminated. The powers conferred
on the Manager hereunder are solely to protect its interest and shall not
impose any duty upon it to exercise any of such powers.
ARTICLE VIII
EVENTS OF DEFAULT: TERMINATION
8.1
(a) Defaults. Each of the following events shall
constitute an "Event of Default" by the Manager under this Agreement:
(i) The failure by the Manager to perform any
material duty or obligation imposed upon it under this Agreement or any other
material breach of this Agreement by the Manager; provided, however, that no
such failure or breach shall be deemed to constitute an Event of Default unless
such failure or breach continues for a period of thirty (30) days after the
Manager's receipt of written notice from the Trust of such failure or breach
or, if such failure or breach is not capable of being cured within said thirty
(30)-day period, the Manager shall have failed diligently and in good faith to
commence to cure the same within said thirty (30)-day period and to have
diligently continued to prosecute the same;
(ii) The Manager's liquidation, bankruptcy or
insolvency, including:
(A) the filing of a voluntary petition
seeking liquidation, reorganization, arrangement or readjustment, in any form,
of its debts under Title 11 of the United States Code or any other federal or
state insolvency law, or its filing an answer consenting to or acquiescing in
any such petition; or
(B) the expiration of ninety (90) days after
the filing of an involuntary petition under the Title 11 of the United States
Code, or any involuntary petition seeking liquidation, reorganization,
rearrangement or readjustment of its debts under the federal or state
insolvency law, provided that the same shall not have been vacated, set aside
or stayed within such 90-day period; or
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<PAGE> 10
(iii) The commitment by the Manager of any act of fraud,
willful misconduct or gross negligence in connection with the performance of
its duties hereunder.
(b) Termination Upon Default. The occurrence of an Event of
Default shall entitle the Trust to terminate this Agreement upon two (2) days
prior written notice to the Manager, without any further obligation or
liability to the Manager other than the Trust's liability for any compensation
or right to reimbursement accrued or otherwise payable under Article II hereof
through the date of termination only and any liability under Article IX below.
ARTICLE IX
INDEMNIFICATION
(a) The Trust shall indemnify the Manager and any present or
former officer, member, director, employee or agent of the Manager or the
personal representatives thereof ("Manager Affiliates"), made or threatened to
be made a party in any civil or criminal action or proceeding by any person
(including by the beneficiaries of the Trust whether any such proceeding is
brought directly or derivatively), arising out of or in connection with the
execution and performance of this Agreement by the Manager and/or any Manager
Affiliate, (including, but not limited to liabilities to persons relating to
the use, occupancy, visitation, catastrophe or other event pertaining to the
Properties) against judgments, fines, amounts paid in settlement and reasonable
expenses, including, without limitation, court costs, attorneys' fees and
disbursements and those of accountants and other experts and consultants
incurred as a result of such action or proceeding or any appeal therein, all of
which expenses as incurred shall be advanced by the Trust pending the final
disposition of such action or proceeding, it being understood that such
advances shall be returned by the Manager and/or Manager Affiliate to the Trust
in the event that the Manager and/or Manager Affiliate, as the case may be, is
finally determined not to be entitled to indemnification under the last
sentence of this subsection. The Trust shall also provide such indemnification
to any Manager Affiliate and the heirs, successors or assigns of such Manager
Affiliate and his or her representatives brought by reason of, arising out of
in connection with, or by virtue of the fact that such Manager Affiliate is or
was a Trustee or officer of the Trust, (including indemnification in respect of
any excise tax assessed on such a person in connection with service to an
employee benefit plan), or served any other trust, partnership, corporation,
limited liability company, joint venture, trust, employee benefit plan, or
other entity or enterprise in any capacity at the request of the Trust or at
the request of the Manager in connection with the services provided by the
Manager hereunder. Such required indemnification shall be subject only to the
exception that no indemnification may be made to or on behalf of the Manager or
a Manager Affiliate in the event and to the extent that a judgment or other
final adjudication adverse to the Manager or a Manager Affiliate establishes
that his or its acts were committed in bad faith or were the result of active
and deliberate dishonesty and were material to the cause of action so
adjudicated, or that he or it personally gained in fact a financial profit or
other advantage to which he or it was not legally entitled (provided, however,
that indemnification shall be made upon any successful appeal of any such
adverse judgment or final adjudication).
(b) If any proceeding is commenced in which any relief is
sought against both the Trust and the Manager and/or a Manager Affiliate and
the Manager or a Manager Affiliate seeks indemnification pursuant to this
Article IX, and the Manager or a Manager Affiliate reasonably determines that a
conflict exists between the Trust and the Manager or a Manager Affiliate,
separate counsel may be selected by the Manager to defend the Manager or a
Manager Affiliate, and the fees, costs and disbursements of such separate
-10-
<PAGE> 11
counsel shall be advanced by the Trust, subject, however, to reimbursement in
the event that the Manager and/or Manager Affiliate, as the case may be, is
finally determined not to be entitled to indemnification under the last
sentence of subsection (a) above.
(c) In no event shall any party to any such proceeding be
entitled to effect a settlement thereof without the written consent of all
other parties to such proceeding unless such settlement:
(i) results in a dismissal with prejudice as to
all of the claims in such proceeding with respect to a non-consenting party,
and
(ii) does not require the non-consenting party to
take any affirmative action (other than ministerial steps in connection with
such settlement) and does not require the payment of any money by the
non-consenting party.
(d) The foregoing right of indemnification shall not be
deemed exclusive of any and other rights to which the Manager or any Manager
Affiliate, or their successors, assigns or the heirs or representatives, may be
entitled apart from this Article IX under law or the Trust Documents, including
such rights of indemnification as shall otherwise be available to the Manager
or any Manager Affiliate by virtue of the fact that he or she previously served
as an officer, Trustee, employee or agent of the Trust.
(e) Neither the Manager nor any of the Manager Affiliates
shall be liable to the Trust or any of the beneficiaries of the Trust for any
acts or omissions or for any error of judgment or mistake of fact or law,
except for willful misconduct or gross negligence, but in no event shall the
liability of the Manager or Manager Affiliate exceed the personal liability
which would be imposed upon an officer of a corporation organized under the
laws of the State of Delaware.
ARTICLE X
WAIVER AND INVALIDITY
10.1 WAIVER. The failure of either party to insist upon a strict
performance of any of the terms or provisions of this Agreement or to exercise
any option, right or remedy herein contained, shall not be construed as a
waiver or as a relinquishment for the future of such term, provision, option.
right or remedy, but the same shall continue and remain in full force and
effect. No waiver by either party of any term or provision hereof shall be
deemed to have been made unless expressed in writing and signed by such party.
10.2 PARTIAL INVALIDITY. In case any one or more of the provisions
contained in this Agreement should be determined by a court of competent
jurisdiction to be invalid, illegal or unenforceable in any respect against a
party hereto, the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected or impaired
thereby and such invalidity, illegality or unenforceability shall only apply as
to such party in the specific jurisdiction where such judgment shall be made.
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<PAGE> 12
ARTICLE XI
ASSIGNMENT
Neither party shall assign or transfer or permit the assignment or
transfer this Agreement without the prior written consent of the other party.
ARTICLE XII
NOTICES
All notices provided for in this Agreement shall be in writing and
shall be delivered personally or by postage-prepaid registered or certified
mail, at the following address of each party:
TO THE TRUST:
First Union Real Estate Equity and Mortgage Investments
c/o Gotham Partners LLC
110 East 42nd Street, 18th Floor
New York, New York
Attention: William Ackman
Copies of all notices to the Trust to be sent to:
Fried, Frank, Harris, Schriver & Jacobson
One New York Plaza
New York, New York 10004-1980
Attention: Steven G. Scheinfeld, Esq.
TO THE MANAGER:
Radiant Partners, LLC
551 Fifth Avenue, Suite 1416
New York, New York 10176
Attention: Daniel Friedman
COPIES OF ALL NOTICES TO THE MANAGER TO BE SENT TO:
Herrick, Feinstein LLP
2 Park Avenue, 21st Floor
New York, New York 10011
Attention: Harvey S. Feuerstein, Esq.
AND TO
Goldberg, Weprin & Ustin
1501 Broadway, 22nd Floor
New York, New York 10036
Attention: Andrew Albstein, Esq.
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<PAGE> 13
Notice shall be deemed given upon receipt thereof. Any party hereto
may change the address herein specified for notice purposes by ten (10) days'
prior written notice to the other party. With the exception of default notices
or a notice of the exercise of any right by a party to another party, copies of
notices to attorneys are an accommodation only and are not necessary for the
validity of a notice.
ARTICLE XIII
APPLICABLE LAW; ARBITRATION
13.1 GOVERNING LAW. This Agreement is made and entered into in the
State of New York, and its interpretation, validity and performance shall be
governed by the laws of the State of New York, without regard to conflict of
laws principles.
13.2 ARBITRATION. Any dispute or controversy between the Manager
or any of its employees or the Manager Affiliates, and the Trust or any of its
affiliates arising in connection with this Agreement, any amendment thereof, or
the breach thereof shall be determined and settled by arbitration in New York,
New York, by a panel of three arbitrators in accordance with the rules of the
American Arbitration Association. Any award rendered therein shall be final and
binding upon the Trust, its affiliates and the Manager and any of its employees
or the Manager Affiliates and their respective legal representatives and
judgment may be entered in any court having jurisdiction thereof. The expenses
of such arbitration shall be paid by the party against whom the award shall be
entered, unless otherwise directed by the arbitrators.
ARTICLE XIV
MODIFICATION: COUNTERPARTS
Any change or modification of this Agreement must be in writing signed
by both parties hereto. This Agreement shall be executed in one or more
counterparts, each of which shall be deemed an original.
ARTICLE XV
MISCELLANEOUS
15.1 HEADINGS. Heading of Articles and Sections are inserted only
for convenience and are in no way to be construed as a limitation of the scope
of the particular Articles or Sections to which they refer.
15.2 ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement with respect to the subject matter hereof between the parties and
supersedes all prior understandings and writings, and may be changed only by a
writing signed by the parties hereto.
15.3 CONSENTS. All consents to be given by the Trust or its
partners must be in writing.
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<PAGE> 14
15.4 NO PERSONAL LIABILITY. Notwithstanding anything contained
herein to the contrary, this Agreement is made and executed on behalf of the
Trust, a business trust organized under the laws of the State of Ohio, by its
officer(s) on behalf of the Trustees thereof, and none of the Trustees or any
additional or successor Trustee hereafter appointed, or any beneficiary,
officer, employee or agent of the Trust shall, except as otherwise may be
required by law, have any liability in such Trustee's, beneficiary's,
officer's, employee's or agent's personal or individual capacity, but instead,
all parties shall look solely to the property and assets of the Trust for
satisfaction of claims of any nature arising under or in connection with this
Agreement.
15.5 Covenants.
(a) The Manager shall use reasonable efforts to ensure
that all persons having dealings with the Trust through Manager shall be
informed that no trustee, shareholder, officer or agent of the Trust shall be
held to any personal liability, nor shall their private property be used for
the satisfaction of any obligation or claim or otherwise in connection with the
affairs of the Trust, but the trust estate only shall be liable. The Manager
recognizes and agrees that every agreement or other written instrument entered
into by the Manager on behalf of the Trust shall contain a provision stating
the above limitation.
(b) Notwithstanding any provision in this Agreement to
the contrary, the Manager shall not knowingly take any action (including,
without limitation, the furnishing or rendering of services to tenants of
property or managing any real property) and shall use its reasonable efforts to
avoid taking any action which would (1) adversely affect the status of the
Trust as a real estate investment trust ("REIT"), as defined in the Internal
Revenue Code of 1986, as amended or (2) materially violate any law, rule,
regulation, or statement of policy of any governmental body or agency having
jurisdiction over the Trust or over the Properties, or (3) otherwise not be
permitted by Trust Documents.
(c) In the event that the terms of this Agreement at any
time shall, in the opinion of counsel for the Trust, threaten to impair the
status of the Trust as a REIT, then the Trust shall propose such amendments to
or substitute arrangements for this Agreement, with prospective or retroactive
effect, as may in its opinion be necessary to protect and preserve the status
of the Trust as a REIT, provided the material economic terms hereof are not
altered.
(d) If the Manager shall at any time become aware of
facts or circumstances which might threaten to impair the status of the Trust
as a REIT, then the Manager shall immediately make such facts and circumstances
known to the Chairman of the Board of the Trust.
(e) The Manager agrees and understands that in the
Manager's position with the Company, the Manager will be exposed to and receive
information relating to the confidential affairs of the Trust and its
affiliates, including, but not limited to, financial information, account data,
technical information, business and marketing plans, strategies, customer
information, other information concerning the Trust's products, promotions,
development, financing, expansion plans, business policies and practices, and
other forms of information considered by the Trust to be confidential and in
the nature of trade secrets. The Manager agrees that during the term of this
Agreement and thereafter, the Manager will keep such information confidential
and not disclose such information, either directly or indirectly, to any third
person or entity without the prior written consent of the Trust. This
confidentiality covenant has no temporal, geographical or territorial
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<PAGE> 15
restriction. Upon termination of this Agreement, the Manager will promptly
supply to the Trust all property, keys, notes, memoranda, writings, lists,
files, reports, tenant lists, correspondence, tapes, disks, cards, surveys,
maps, logs, machines, technical data or any other tangible product or document
which has been produced by, received by or otherwise submitted to the Manager
during or prior to the term of this Agreement.
(f) The Manager shall at all times be controlled and
majority-owned by two of the following individuals: Daniel Friedman, David
Schonberger and Anne Nelson Zahner. Such individuals shall be the employees of
the Manager who shall be primarily responsible for fulfilling the obligations
of the Manager hereunder.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
RADIANT PARTNERS, LLC
By: /s/ Daniel Friedman
-------------------------------
Daniel Friedman, Managing Member
FIRST UNION REAL ESTATE EQUITY AND
MORTGAGE INVESTMENTS
By: /s/ William Ackman
-------------------------------
Name: William Ackman
Title: Chairman
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<PAGE> 1
EXHIBIT (10)(w)
SECOND AMENDMENT TO EMPLOYMENT AGREEMENT
This Second Amendment to Employment Agreement dated as of May 12, 2000
(this "Second Amendment") is entered into by and between Anne Nelson Zahner
(the "Executive") and First Union Real Estate Equity and Mortgage Investments
(the "Company").
RECITALS
1. The Executive and the Company executed an Employment Agreement
dated November 2, 1998 (the "Original Agreement");
2. The Executive and the Company executed an amendment to the
Original Agreement dated as of November 30, 1999 (the "First
Amendment");
3. The parties hereto have determined to enter into this Second
Amendment for purposes of amending the First Amendment and the
Original Agreement.
NOW, THEREFORE, in consideration of the premises and mutual covenants and
agreements set forth herein, and for other consideration the adequacy of which
is hereby acknowledged, the parties hereby agree as follows:
A. Any and all rights and obligations of all parties to the First
Amendment pursuant Section C. of the First Amendment and all
provisions of such Section C. are hereby waived and such Section
C. is hereinafter null and void.
B. The Company shall pay the Executive a cash payment, subject to
all applicable withholding taxes, of $110,000 within five
business days from the date hereof. The Executive shall be
responsible for the payment of, and be liable for, all taxes
imposed on her by reason of such payment.
C. The Original Agreement, as amended by the First Amendment and
this Second Amendment, constitutes the entire agreement between
the parties hereto with respect to the subject matter hereof.
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<PAGE> 2
D. This Second Amendment shall inure to the benefit of and shall be
binding upon the parties hereto and their respective heirs,
legal representatives, successors and assigns. In addition,
Imperial Parking Corporation shall be a third party beneficiary
of this Second Amendment and shall be entitled to enforce this
Second Amendment.
IN WITNESS WHEREOF, the undersigned have executed this Second Amendment
as of the date first above written.
FIRST UNION REAL ESTATE EQUITY
and MORTGAGE INVESTMENTS
By: /s/ William A. Ackman,
----------------------------------
William A. Ackman, Chairman
EXECUTIVE:
/s/ Anne Nelson Zahner
- --------------------------
Anne Nelson Zahner
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<PAGE> 1
FIRST UNION REAL ESTATE EQUITY and MORTGAGE INVESTMENTS Exhibit 20
Combined Balance Sheets
<TABLE>
<CAPTION>
March 31,
(In thousands, except shares) 2000 December 31,
(Unaudited) 1999
---------------------- ------------------
<S> <C> <C>
ASSETS
Investments in real estate
Land $ 53,028 $ 53,028
Buildings and improvements 273,571 271,223
---------------------- ------------------
326,599 324,251
Less - Accumulated depreciation (77,987) (75,161)
---------------------- ------------------
Total investments in real estate 248,612 249,090
Investment in joint venture 1,758 1,786
Mortgage loans and notes receivable 2,712 5,426
Other assets
Cash and cash equivalents - unrestricted 14,262 45,005
- restricted 5,031 12,836
Accounts receivable and prepayments, net of allowances
of $770 and $496, respectively 7,886 10,386
Investments 99,579 104,013
Inventory 3,904 3,395
Unamortized debt issue costs 4,118 4,479
Other 1,304 1,629
Net assets of discontinued operations - 64,747
---------------------- ------------------
Total assets $ 389,166 $ 502,792
---------------------- ------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Mortgage loans $ 193,616 $ 195,051
Notes payable 65,120 75,628
Senior notes 12,538 12,538
Accounts payable and accrued liabilities 24,039 37,776
Deferred obligation - 10,579
Deferred items 3,817 1,510
---------------------- ------------------
Total liabilities 299,130 333,082
---------------------- ------------------
Shareholders' equity
Preferred shares of beneficial interest, $25 liquidation preference,
2,300,000 shares authorized, 1,349,000 shares outstanding in 2000 and 1999 31,737 31,737
Shares of beneficial interest, $1 par, unlimited authorization, outstanding 42,472 42,472
Additional paid-in capital 218,167 218,831
Undistributed loss from operations (202,338) (123,322)
Deferred compensation (2) (8)
---------------------- ------------------
Total shareholders' equity 90,036 169,710
---------------------- ------------------
Total liabilities and shareholders' equity $ 389,166 $ 502,792
====================== ==================
</TABLE>
11
<PAGE> 2
FIRST UNION REAL ESTATE EQUITY and MORTGAGE INVESTMENTS Exhibit 20
Combined Statements of Operations
<TABLE>
<CAPTION>
Unaudited (In thousands, except per share data) Three Months Ended
March 31,
------------------------------------------
2000 1999
----------------- -----------------
<S> <C> <C>
Revenues
Rents $ 13,941 $ 33,467
Sales 2,383 693
Interest - Mortgage loans 94 115
- Short-term investments 1,892 234
Equity in (loss) income from joint venture (28) 10
Other income 116 175
----------------- -----------------
18,398 34,694
----------------- -----------------
Expenses
Property operating 4,019 11,177
Cost of goods sold 2,348 931
Real estate taxes 1,696 3,161
Depreciation and amortization 3,293 8,141
Interest - Mortgage loans 5,047 7,252
- Notes payable 927 2,538
- Senior notes 278 278
- Bank loans and other - 2,623
General and administrative 4,571 2,215
----------------- -----------------
22,179 38,316
----------------- -----------------
Loss before capital (loss) gain, extraordinary loss from early extinguishment
of debt, loss from discontinued operations and preferred dividend (3,781) (3,622)
Capital (loss) gain (108) 523
Extraordinary loss from early extinguishment of debt (3,092) -
----------------- -----------------
Loss before loss from discontinued operations and preferred dividend (6,981) (3,099)
Loss from discontinued operations - (1,793)
----------------- -----------------
Net loss before preferred dividend (6,981) (4,892)
Preferred dividend (708) (708)
----------------- -----------------
Net loss attributable to shares of beneficial interest $ (7,689) $ (5,600)
================= =================
Per share data
Basic and diluted weighted average shares 42,472 31,376
================= =================
Loss applicable to shares of beneficial interest before capital (loss) gain,
extraordinary loss and loss from discontinued operations $ (0.11) $ (0.14)
================= =================
Loss before extraordinary loss and loss from discontinued operations $ (0.11) $ (0.12)
Extraordinary loss from early extinguishment of debt (0.07) -
Loss from discontinued operations - (0.06)
----------------- -----------------
Net loss applicable to shares of beneficial interest, basic and diluted $ (0.18) $ (0.18)
================= =================
Combined Statements of Comprehensive Income
Net Loss $ (7,689) $ (5,600)
Other comprehensive income
Foreign currency translation adjustment - 139
----------------- -----------------
Comprehensive loss $ (7,689) $ (5,461)
================= =================
</TABLE>
12
<PAGE> 3
FIRST UNION REAL ESTATE EQUITY and MORTGAGE INVESTMENTS Exhibit 20
Combined Statements of Cash Flows
<TABLE>
<CAPTION>
Unaudited (In thousands) Three Months
Ended March 31,
-----------------------------------------------
2000 1999
------------------ ------------------
<S> <C> <C>
Cash provided by operations
Net loss before preferred dividend $ (6,981) $ (4,892)
Adjustments to reconcile net loss before preferred dividend
to net cash provided by operations
Depreciation and amortization 3,299 8,141
Loss from discontinued operations - 1,793
Extraordinary loss from early extinguishment of debt 3,092 -
Capital (gains) loss, net 108 (523)
Increase (decrease) in deferred items 2,307 (1,310)
Net changes in other assets and liabilities 593 605
----------------------- -----------------------
Net cash provided by operations 2,418 3,814
----------------------- -----------------------
Cash provided by investing
Principal received from mortgage investments 2,637 15
Proceeds from sale of fixed assets 175 11,092
Purchase of investments (99,232) -
Sale of investments 103,666 -
Investments in capital and tenant improvements (2,369) (1,861)
----------------------- -----------------------
Net cash provided by investing 4,877 9,246
----------------------- -----------------------
Cash used for financing
Decrease in short-term loans - (11,200)
Increase (decrease) in note payable 15,992 (11,093)
Repayment of mortgage loans - Normal payments (435) (1,003)
- Balloon payments (1,000) -
Payment of deferred obligation (10,579) -
Deferred obligation repayment penalty (3,092) -
Payments for Impark spin-off (36,319) -
Purchase of First Union shares - (233)
Income from variable stock options (666) -
Debt issue costs paid (39) (1,345)
Dividends paid on shares of beneficial interest (6,583) -
Dividends paid on preferred shares of beneficial interest (708) (708)
----------------------- -----------------------
Net cash used for financing (43,429) (25,582)
----------------------- -----------------------
Decrease in cash and cash equivalents (36,134) (12,522)
Cash and cash equivalents at beginning of period 57,841 43,019
----------------------- -----------------------
Cash and cash equivalents at end of period 21,707 30,497
Change in cash from discontinued operations (2,414) (144)
----------------------- -----------------------
Cash and cash equivalents at end of period, including discontinued
operations $ 19,293 $ 30,353
======================= =======================
Supplemental Disclosure of Cash Flow Information
Interest Paid $ 6,592 $ 12,947
======================= =======================
Supplemental Disclosure of Non-Cash Financing Activities
Discontinued operations included in accounts payable $ 2,000 $ -
======================= =======================
Discontinued non-cash net assets charged to dividends paid $ 24,014 $ -
======================= =======================
</TABLE>
13
<PAGE> 4
Notes to Combined Financial Statements Exhibit 20
Business Segments
The Trust's and Company's business segments include ownership of
shopping centers, office buildings, parking facilities, mortgage investments and
parking and transit ticket equipment manufacturing. Management evaluates
performance based upon net operating income which is income before depreciation,
amortization, interest and non-operating items. The apartment portfolio was sold
in May 1999 and during 1999, the Trust sold 16 shopping centers, two office
facilities and a parking lot. Impark and the Trust's Canadian parking facilities
are shown as discontinued operations because they were spun off to the Trust's
shareholders in March 2000. Property net operating income is property rent and
sales revenue less property operating expense, cost of goods sold and real
estate taxes. Corporate interest expense consists of the Trust's non-recourse
notes payable, senior notes, and borrowings collateralized by U.S. Treasury
bills. Corporate depreciation and amortization consist primarily of the
amortization of deferred issue costs on non-recourse debt and the leasehold
improvements for its corporate office. Corporate assets consist primarily of
cash and cash equivalents, leasehold improvements for the corporate office and
deferred issue costs for non-recourse debt and senior notes. All intercompany
transactions between segments have been eliminated (see table of business
segments).
Contingent Liability
In January 2000, the Trust received $2.5 million from the Richmond
Redevelopment and Housing Authority (the "Authority") to expand the Trust's
garage located in Richmond, Virginia. If the Trust is unable to successfully
complete the renovation or does not continue to provide an easement for a period
of 84 years, all or a portion of the $2.5 million will have to be returned to
the Authority. The receipt of the $2.5 million has been recorded as a deferred
item at March 31, 2000. Construction began in April 2000.
Deferred Obligation
In January 2000, the Trust repaid a $10.6 million deferred obligation
relating to the purchase of the Huntington garage resulting in a prepayment
penalty of $3.1 million.
14
<PAGE> 5
Distribution of Impark Exhibit 20
In March 2000, the Trust distributed all common stock of Impark to its
shareholders. One share of Impark common stock was distributed for every 20 of
the Trust's 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 Trust repaid Impark's bank credit facility of
approximately $24.2 million, contributed approximately $7.5 million of cash, its
14 Canadian parking properties and $6.7 million for a parking development
located in San Francisco, California. The Trust will also provide a secured line
of credit for $8 million to Impark. Ownership of Ventek International, Inc., a
manufacturing subsidiary of Impark, was retained by the Company.
The Trust also adjusted the conversion price with respect to its Series
A Cumulative Redeemable Preferred Shares of Beneficial Interest ("Preferred
Shares"). The conversion price of the Preferred Shares has been decreased to
$5.0824 per common share (equivalent to a conversion rate of 4.92 common shares
for each Preferred Share) in connection with the distribution of the Impark
shares, in accordance with the provisions of the documents establishing the
terms of the Preferred Shares.
Subsequent Events
In April 2000, the Trust obtained a $42 million first mortgage loan
secured by the Park Plaza Mall. The loan is non-recourse, has a 10 year term and
a fixed interest rate of 8.69% payable on a 30 year amortization schedule. The
Trust received proceeds, net of closing costs and escrow deposits, of $41.4
million. The loan requires monthly payments of approximately $397,000 for
principal, interest and escrow deposits. Prepayment of the loan is permitted
(after an initial lockout period of three years or two years from
securitization), only with yield maintenance or defeasance, as defined in the
loan agreement.
In April 2000, the Trust sold Crossroads Center Mall for $80.3 million,
of which approximately $78.3 million was applied against a loan payable to the
purchaser and the assumption of the first mortgage debt on the mall. The Trust
will recognize a gain on the sale of approximately $58 million, less an
extraordinary loss on extinguishment of debt of approximately $2.4 million
during the second quarter of 2000.
Pro Forma Financial Information
The following pro forma combined balance sheet as of March 31, 2000 and
the pro forma combined statement of operations for the three months ended March
31, 2000 give effect to the sale of the Trust's Crossroads Center Mall, the
spin-off of Impark and the Canadian parking facilities, and the financing of
Park Plaza Mall. The adjustments related to the pro forma combined balance sheet
assume the transactions were consummated at March 31, 2000, while the
adjustments to the pro forma combined statement of operations assume the
transactions were consummated at January 1, 2000. The spin-off of Impark
occurred in March 2000. The sale and financing occurred in April 2000.
These pro forma adjustments are not necessarily reflective of the
results that actually would have occurred if the sale, spin-off and financing
had been in effect, as of, and for the periods presented or what may be achieved
in the future.
15
<PAGE> 6
FIRST UNION REAL ESTATE EQUITY and MORTGAGE INVESTMENTS
Pro Forma Combined Balance Sheet
March 31, 2000
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Sale of
Historical Crossroads Center
----------------------------- --------------------------
<S> <C> <C>
ASSETS
Investment in real estate
Land $ 53,028 $ (5,490)
Building and improvements 273,571 (30,126)
-------------------------------- ------------------------------
326,599 (35,616)
Less - Accumulated depreciation (77,987) 14,637
-------------------------------- ------------------------------
Total investment in real estate 248,612 (20,979)
Investment in joint venture 1,758
Mortgage loans and notes receivable 2,712
Other assets
Cash and cash equivalents - unrestricted 14,262 1,946
- restricted 5,031 (704)
Accounts receivable and prepayments, net of allowances 7,886 (1,153)
Investments 99,579
Inventory 3,904
Unamortized debt issue costs, net 4,118 (2,409)
Other 1,304
-------------------------------- ------------------------------
Total assets $ 389,166 $ (23,299)
================================ ==============================
LIABILITIES AND SHAREHOLDER'S EQUITY
Liabilities
Mortgage loans $ 193,616 $ (76,243)
Notes payable 65,120
Senior notes 12,538
Accounts payable and accrued liabilities 24,039 (2,986)
Deferred items 3,817 (966)
-------------------------------- ------------------------------
Total liabilities 299,130 (80,195)
-------------------------------- ------------------------------
Shareholder's equity
Preferred shares of beneficial interest 31,737
Shares of beneficial interest 42,472
Additional paid in capital 218,167
Undistributed loss from operations (202,338) 56,896
Deferred compensation (2)
-------------------------------- ------------------------------
Total shareholder's equity 90,036 56,896
-------------------------------- ------------------------------
Total liabilities and shareholder's equity $ 389,166 $ (23,299)
================================ ==============================
<CAPTION>
Park Plaza
Financing Pro Forma
---------------------- -------------------------
<S> <C> <C>
ASSETS
Investment in real estate
Land $ $ 47,538
Building and improvements 243,445
------------------------- ----------------------------
290,983
Less - Accumulated depreciation (63,350)
------------------------- ----------------------------
Total investment in real estate 227,633
Investment in joint venture 1,758
Mortgage loans and notes receivable 2,712
Other assets
Cash and cash equivalents - unrestricted 41,400 57,608
- restricted 4,327
Accounts receivable and prepayments, net of allowances 6,733
Investments 99,579
Inventory 3,904
Unamortized debt issue costs, net 600 2,309
Other 1,304
------------------------- ----------------------------
Total assets $ 42,000 $ 407,867
========================= ============================
LIABILITIES AND SHAREHOLDER'S EQUITY
Liabilities
Mortgage loans $ 42,000 $ 159,373
Notes payable 65,120
Senior notes 12,538
Accounts payable and accrued liabilities 21,053
Deferred items 2,851
------------------------- ----------------------------
Total liabilities 42,000 260,935
------------------------- ----------------------------
Shareholder's equity
Preferred shares of beneficial interest 31,737
Shares of beneficial interest 42,472
Additional paid in capital 218,167
Undistributed loss from operations (145,442)
Deferred compensation (2)
------------------------- ----------------------------
Total shareholder's equity - 146,932
------------------------- ----------------------------
Total liabilities and shareholder's equity $ 42,000 $ 407,867
========================= ============================
</TABLE>
See notes to combined financial statements.
16
<PAGE> 7
FIRST UNION REAL ESTATE EQUITY and MORTGAGE INVESTMENTS
Pro Forma Combined Statement of Operations
For the three months Ended March 31, 2000
(Unaudited)
(In Thousands, Except per Share Data)
<TABLE>
<CAPTION>
Sale of
Historical Crossroads Center
------------------------- ----------------------------
<S> <C> <C>
Revenues
Rents $ 13,941 $ (2,435)
Sales 2,383
Interest - Mortgage loans 94
- Short-term investments 1,892 (2)
Equity in income from joint venture (28)
Other Income 116 (6)
----------------------------- --------------------------------
18,398 (2,443)
----------------------------- --------------------------------
Expenses
Property operating 4,019 (428)
Cost of goods sold 2,348
Real estate taxes 1,696 (554)
Depreciation and amortization 3,293 (581)
Interest - Mortgage loans 5,047 (2,055)
- Notes payable 927
- Senior notes 278
General and administrative 4,571
----------------------------- --------------------------------
22,179 (3,618)
----------------------------- --------------------------------
Income (loss) before capital loss, extraordinary loss
and preferred dividend $ (3,781) $ 1,175
============================= ================================
Per share data
Basic and diluted weighted average shares 42,472
=============================
Loss before capital loss, extraordinary loss and
preferred dividend, basic and diluted $ (0.09)
=============================
<CAPTION>
Spin-off of Park Plaza
Impark Financing
------------------------------ -------------------------
<S> <C> <C>
Revenues
Rents $ $
Sales
Interest - Mortgage loans
- Short-term investments (465) (1)
Equity income from joint venture
Other Income
------------------------------ ---------------------------
(465) -
------------------------------ ---------------------------
Expenses
Property operating
Cost of goods sold
Real estate taxes
Depreciation and amortization
Interest - Mortgage loans 912
- Notes payable
- Senior notes
General and administrative
------------------------------ ---------------------------
- 912
------------------------------ ---------------------------
Income (loss) before capital loss, extraordinary loss
and preferred dividend $ (465) $ (912)
============================== ===========================
Per share data
Basic and diluted weighted average shares
Loss before capital loss, extraordinary loss and
preferred dividend, basic and diluted
<CAPTION>
Pro Forma
---------------------------
<S> <C>
Revenues
Rents $ 11,506
Sales 2,383
Interest - Mortgage loans 94
- Short-term investments 1,425
Equity in income from joint venture (28)
Other Income 110
------------------------------
15,490
------------------------------
Expenses
Property operating 3,591
Cost of goods sold 2,348
Real estate taxes 1,142
Depreciation and amortization 2,712
Interest - Mortgage loans 3,904
- Notes payable 927
- Senior notes 278
General and administrative 4,571
------------------------------
19,473
------------------------------
Income (loss) before capital loss, extraordinary loss
and preferred dividend $ (3,983)
==============================
Per share data
Basic and diluted weighted average shares 42,472
===========================
Loss before capital loss, extraordinary loss and
preferred dividend, basic and diluted $ (0.09)
==============================
</TABLE>
(1) Interest income earned on cash utilized in the Impark spin-off.
See notes to combined financial statements.
17
<PAGE> 8
Business Segments Exhibit 20
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
2000 1999
------------------------- ----------------------------
<S> <C> <C>
Rents and Sales
Shopping Centers $ 8,171 $ 22,791
Apartments - 4,152
Office Buildings 2,955 3,571
Parking Facilities 2,815 2,683
Ventek 2,383 693
Corporate - 270
------------------------- ----------------------------
$ 16,324 $ 34,160
Less - Operating Expenses and
Costs of Goods Sold
Shopping Centers 2,227 7,673
Apartments - 1,375
Office Buildings 1,392 1,657
Parking Facilities 322 259
Ventek 2,348 931
Corporate 78 213
------------------------- ----------------------------
$ 6,367 $ 12,108
Less - Real Estate Taxes
Shopping Centers 948 2,164
Apartments - 288
Office Buildings 272 259
Parking Facilities 476 450
------------------------- ----------------------------
$ 1,696 $ 3,161
Property - Net Operating Income (Loss)
Shopping Centers 4,996 12,954
Apartments - 2,489
Office Buildings 1,291 1,655
Parking Facilities 2,017 1,974
Ventek 35 (238)
Corporate (78) 57
------------------------- ----------------------------
$ 8,261 $ 18,891
</TABLE>
18
<PAGE> 9
Business Segments (Continued) Exhibit 20
<TABLE>
<CAPTION> Three Months Ended March 31,
----------------------------
2000 1999
------------------------- ----------------------------
<S> <C> <C>
Less - Depreciation and Amortization $ 3,293 $ 8,141
Less - Interest Expense $ 6,252 $ 12,691
Mortgage Investment Income $ 94 $ 115
Corporate Income (Expense)
Short-term investment income 1,892 234
Other income 88 185
General and administrative (4,571) (2,215)
------------------------- ----------------------------
Loss before Discontinued Operations, Capital Gain
(Loss) and Extraordinary Loss $ (3,781) $ (3,622)
========================= ============================
Capital Expenditures
Shopping Centers $ 247 $ 1,101
Apartments - 181
Office Buildings 2,081 579
Parking Facilities 20 -
Ventek 21 -
------------------------- ----------------------------
$ 2,369 $ 1,861
========================= ============================
<CAPTION>
March 31,
---------
2000 1999
------------------------- ----------------------------
<S> <C> <C>
Identifiable Assets
Shopping Centers $ 152,529 $ 439,462
Apartments - 77,575
Office Buildings 44,351 42,926
Parking Facilities 73,114 72,045
Mortgages 2,712 5,493
Ventek 6,517 3,940
Corporate 109,943 25,114
------------------------- ----------------------------
Total Assets (net of discontinued operations) $ 389,166 $ 666,555
========================= ============================
</TABLE>
19
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000037008
<NAME> FIRST UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 19,293,000
<SECURITIES> 0
<RECEIVABLES> 8,656,000
<ALLOWANCES> (770,000)
<INVENTORY> 3,904,000
<CURRENT-ASSETS> 0
<PP&E> 326,599,000
<DEPRECIATION> 77,987,000
<TOTAL-ASSETS> 389,166,000
<CURRENT-LIABILITIES> 0
<BONDS> 271,274,000
42,472,000
0
<COMMON> 31,737,000
<OTHER-SE> 15,827,000
<TOTAL-LIABILITY-AND-EQUITY> 389,166,000
<SALES> 0
<TOTAL-REVENUES> 16,506,000
<CGS> 2,348,000
<TOTAL-COSTS> 9,008,000
<OTHER-EXPENSES> 4,571,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,252,000
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,781,000)
<DISCONTINUED> 0
<EXTRAORDINARY> (3,092,000)
<CHANGES> 0
<NET-INCOME> (7,689,000)
<EPS-BASIC> (.18)
<EPS-DILUTED> (.18)
</TABLE>
