-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NW6J1SI8kYkMviJwPVNNuipwbOoeS0GV6jpj7zQs5jwcS/wr3buIFR8PCEKks6b4 K8B+yCdxOADVFOJIJtIQiQ== /in/edgar/work/0000950123-00-010545/0000950123-00-010545.txt : 20001115 0000950123-00-010545.hdr.sgml : 20001115 ACCESSION NUMBER: 0000950123-00-010545 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRST UNION REAL ESTATE EQUITY & MORTGAGE INVESTMENTS CENTRAL INDEX KEY: 0000037008 STANDARD INDUSTRIAL CLASSIFICATION: [6798 ] IRS NUMBER: 346513657 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-06249 FILM NUMBER: 764196 BUSINESS ADDRESS: STREET 1: 551 FIFTH AVE STREET 2: STE 1416 CITY: NEW YORK STATE: NY ZIP: 10176 BUSINESS PHONE: 2129051104 MAIL ADDRESS: STREET 1: 551 FIFTH AVE STREET 2: SUITE 1416 CITY: NEW YORK STATE: NY ZIP: 10176 FORMER COMPANY: FORMER CONFORMED NAME: FIRST UNION REALTY DATE OF NAME CHANGE: 19691012 10-Q 1 y42691e10-q.txt FIRST UNION 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended September 30, 2000 Commission File Number 1-6249 First Union Real Estate Equity and Mortgage Investments - ------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Ohio 34-6513657, - ------------------------------- ------------------------------------ (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 1212 Avenue of the Americas, 18th Floor New York, New York 10036 - ------------------------------------------ ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (212) 905-1104 -------------- 551 Fifth Avenue, Suite 1416, New York, NY 10176 - -------------------------------------------------------------------------------- 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. 41,045,774 Shares of Beneficial Interest outstanding as of September 30, 2000 - -------------------------------------------------------------------------------- Total number of pages contained in this report: 25 ---- 2 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 common 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 ("Imperial"). In March 2000, the Trust entered into a plan of settlement and a plan of reorganization with a number of its affiliated companies which resulted in a transfer of the assets of Imperial to a subsidiary of the Trust, Imperial Parking Corporation, a Delaware corporation ("Impark"), the common stock of which was distributed to the shareholders of the Trust. The Trust classified Imperial'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, as amended. The "Combined Balance Sheets" as of September 30, 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 September 30, 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 and nine months ended September 30, 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 Trust 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 Imperial's bank credit facility of approximately $24.2 million, contributed to Impark 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 has also provided a secured line of credit for $8 million to Impark. The unused line of credit expired on September 27, 2000. Impark's common stock is listed on the American Stock Exchange under the symbol "IPK". The Company retained ownership of Ventek International, Inc. ("Ventek"), formerly a manufacturing subsidiary of Impark. The Trust has performance guarantees outstanding for Ventek's manufacture and installation of transit ticket vending equipment. The guarantees of $5.3 million and $6.2 million expire in February 2001 and 2002, respectively. 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. 2 3 For tax reporting purposes, the Trust will take a dividend deduction of $19.375 per share for the approximately 2.1 million shares of Impark common stock distributed to the shareholders. The Trust amended the employment agreements of each of Messrs. Friedman and Schonberger and Ms. Zahner (each, an "Executive"). The amended agreements provided that after (i) the Impark spin-off and (ii) a sale or financing of Park Plaza mall (the "Park Plaza Financing"), each Executive 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 on June 1, each Executive terminated his/her employment agreement and received the severance payment. The amended employment agreements also provided, among other things, that the options held by the Executives with exercise prices of $8.50 and $6.50 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 provided 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 (as amended, the "Agreement") with Radiant Partners, LLC (the "Management Company"), which is owned and controlled by the Executives. The Agreement became effective upon the termination of employment of the Executives and the Trust became externally managed. The Agreement has 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, and (C) in the event that the remaining equity of the Trust has a fair market value of less than $20,000,000. While the Agreement is in effect, 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, under certain conditions, then the Management Company will also receive a termination payment of between $500,000 and $750,000. However, if the Agreement is terminated for default or by either party giving notice prior to January 16, 2001 of its intention to terminate the Agreement, the Agreement will terminate 30 days later and the Trust will not be responsible for any incentive fee or termination payments otherwise provided under the Agreement. The interim Chief Financial Officer of the Trust, Brenda Mixson, submitted her resignation effective August 18, 2000, in order to pursue other business opportunities. Neil H. Koenig has assumed the position of interim Chief Financial Officer. Mr. Koenig is currently the managing member of the Real Estate Systems Implementation Group, LLC, a company assisting First Union with financial reporting and advisory services. Mr. Koenig is also a partner of Imowitz Koenig & Co., LLP, a certified public accounting firm. In September 2000, the Trust entered into two sales contracts and a letter agreement (the "Sale Contract") for a significant asset sale to Radiant Investors LLC ("Radiant"). The proposed transactions contemplate the sale of certain real estate assets (the "Purchased Assets") for a sales price of approximately $205 million (which includes approximately $125 million in assumed mortgage debt at September 30, 2000) and subject to certain adjustments including the Trust's share of certain transaction costs. 3 4 In connection with the sale, Radiant has made deposits of $7 million as required under the terms of the Sale Contract. The deposits are non-refundable with respect to financing contingencies. In October 2000, Radiant confirmed to the Trust, by amendment to the Sale Contract, that it had obtained acceptable financing with respect to the Sale Contract. In the event that Radiant is not able to obtain consents to assignments of existing mortgages or obtain third party financing on one or more of the Purchased Assets, the Trust may be required to provide Radiant with up to $46 million in financing. However, based upon written assurances from Radiant, the Trust does not expect that it will be required to provide financing to Radiant. In October 2000, the Trust entered into a definitive purchase agreement (the "Northeastern Contract") for the sale of the Huntington Garage property in Cleveland, Ohio to Northeastern Security Development Corp., a private real estate investment firm headquartered in New York. The purchase price is $21,250,000 and the purchaser has made a non-refundable deposit of $1,000,000 to be applied to the purchase price at closing. The sale is expected to close no later than January 2001. This property is among those that Radiant agreed to acquire from the Trust under the Sale Contract. Under the Sale Contract, Radiant and the Trust had agreed that the Trust was permitted to sell the Huntington Garage property to a third party. The Sale Contract as amended provides that Radiant will receive a credit towards the $205 million purchase price equal to the net sales price to be realized by the Trust from the sale of the Huntington Garage under the Northeastern Contract. Following the execution of the Sale Contract, the Trust notified the party holding the right of first refusal for the purchase of the Long Street Garage in Columbus, Ohio of the terms and conditions of the offer by Radiant. Such party failed to exercise its right of first refusal within the time frame permitted and as a result the Long Street Garage is among the Purchased Assets that will be sold to Radiant. The assets to be purchased by Radiant under the Sale Contract include: - 55 Public Square and CEI Office Buildings - Cleveland, Ohio - 55 Public Square Garage - Cleveland, Ohio - West Third Street Parking Lot - Cleveland, Ohio - North Valley Tech Center - Thornton, Colorado - Two Rivers Business Center - Clarksville, Tennessee - Westgate Town Center - Abilene, Texas - Pecanland Mall - Monroe, Louisiana - Long Street Garage - Columbus, Ohio - Madison and Wells Garage - Chicago, Illinois - Printers Alley Garage - Nashville, Tennessee - 5th and Marshall Garage - Richmond, Virginia - Club Associates' note receivable, face amount of approximately $1.5 million. - Ancillary assets including furniture, fixtures and equipment, and reserve and escrow accounts related to the Purchased Assets. - Net operating income from all of the Purchased Assets from June 1, 2000 less (a) debt service on the Purchased Assets, (b) capital expenditures committed subsequent to May 9, 2000 and (c) 66.6% of asset management fees paid to the Management Company from June 1, 2000 until the closing of the transaction. 4 5 The Trust would retain ownership of the following assets: - Unrestricted cash and Treasury bills - Convertible preferred investment in HQ Global Workplaces, Inc. - Severance and prior trustees escrow account - Park Plaza Mall - Little Rock, Arkansas - Circle Tower - Indianapolis, Indiana - Peachtree Mall legal claim In addition, the Company would retain ownership of Ventek. The Trust will remain liable for the following obligations: - 8.2% convertible preferred shares; $33,725,000 approximate face amount (reduced to $24,620,000 as of September 30, 2000) - 8.875% publicly-traded senior notes; $12,500,000 approximate face amount - Dallas management office lease (the Trust has sub-leased this space) - Certain liabilities arising out of the Purchased Assets arising prior to June 1, 2000, except for certain potential liabilities of the Westgate Town Center - Corporate expenses and liabilities not related to the Purchased Assets (including the Ventek guarantee) - Property level mortgage debt on retained assets - Other ordinary course liabilities The Sale Contract provided that the Management Company would continue to manage the Trust's remaining assets for $250,000 per year for two years. The Sale Contract is subject to several conditions, including the consent of shareholders of the Trust. The closing is expected to occur during December 2000 or January 2001, although it may be extended under certain circumstances to a date not later than April 29, 2001. A preliminary proxy statement seeking shareholder consent to the Sale Contract was filed with the Securities and Exchange Commission on September 22, 2000, and an amended preliminary proxy statement was filed on November 7, 2000. Under the Sale Contract, the aggregate purchase price of the Purchased Assets is $205 million. The Trust will receive approximately $199 million in aggregate consideration for the Purchased Assets after the payment of expenses, including legal and accounting fees and miscellaneous costs and adjustments, but not including operating income and expense prorations. Of the approximately $199 million, it is expected that approximately $74 million will be in cash and approximately $125 million will be from the assumption of mortgage indebtedness on the Purchased Assets. These amounts are subject to adjustment in the event the Trust provides financing to Radiant or certain Purchased Assets are eliminated from the Sale Contract. The Trust is in the process of exploring alternative uses for the net cash proceeds to be received, including, without limitation: - Acquisition of interests in real estate or non-real estate assets or businesses; - Implementing or continuing a common or preferred share repurchase or similar program; - Distributing all or a portion of such net proceeds to the shareholders; including, but not necessarily limited to, amounts required to satisfy certain REIT distribution requirements resulting from previous asset sales and net income in 2000, if any; and 5 6 - Making other new investments, including investments in REMICs to generate REIT-qualified income while maintaining liquidity. The Trust's long-term economic goal is to increase the per share net asset value of the Trust at the highest possible rate, without undue risk. The Trust continues to monitor the benefits of, and the restrictions imposed by, maintaining its REIT status. The Trust presently desires and intends to maintain its status as a REIT for federal income tax purposes but, if appropriate, would consider other organizational structures. Based upon the structure of the current transaction, it is expected that the Trust will be in compliance with REIT requirements subsequent to the sale of the Purchased Assets, will retain REIT status and thus maintain eligibility for listing on the New York Stock Exchange. The Trust believes that it is reasonably probable that it will maintain its REIT status through 2001. The Trust does not anticipate selling its non-real estate assets in the near term, and has no immediate plans to do so. The Trust has made no firm decision regarding selling its remaining real estate assets, although it has retained a broker to solicit indications of interest in the sale of the Park Plaza property. There are no plans for major improvements that the Trust is considering for the properties that will remain after the asset sale. The Trust expects to incur legal fees in connection with the Peachtree Mall legal claim (in the original amount of $32 million) against the State of California for damages sustained in connection with a flood that occurred in 1986. On June 22, 2000, a complaint was filed in New York Supreme Court, County of New York, against the Trust, its trustees and certain former trustees, Radiant Partners, LLC and its principals by a purported shareholder of the Trust in connection with the proposed asset sale (Brickell Partners v. Friedman, et al.). On July 12, 2000, a complaint against the same defendants, making similar allegations, was commenced by another purported shareholder of the Trust in the Court of Common Pleas of Cuyahoga County, Ohio (Donald Cunningham v. Friedman, et al.). Both of these lawsuits are purported class actions brought on behalf of all shareholders of the Trust. In these complaints, plaintiffs allege that the terms of the proposed asset sale are unfair and that the Trust's officers and trustees breached their fiduciary duties to the Trust's shareholders by agreeing to a transaction that fails to maximize shareholder value. Specifically, the lawsuits allege that the Management Company, as a party to the Asset Management Agreement with the Trust, was made privy to inside information regarding the Trust's assets and thus allowed the Management Company to negotiate the purchase of the most valuable assets of the Trust at the lowest possible price, to the detriment of the Trust's shareholders. The complaints further allege that the Management Company and the Trust were not engaging in arm's length negotiations and that the Management Company was acting in its own self interest at the expense of the interests of the Trust's shareholders. Additionally, the complaints allege that the Management Company has material conflicts of interest. The lawsuits seek preliminary and permanent injunctive relief against the consummation of the asset sale in addition to unspecified damages, costs and attorney's fees. The Trust believes that these lawsuits are without merit. The Trust has retained counsel with regard to these lawsuits and has given plaintiffs' counsel the opportunity to review documents concerning the background of the asset sale. In the event that plaintiffs continue the actions, the Trust will seek to vigorously defend the actions. In April 2000, the Trust sold Crossroads Center Mall for $80.1 million, of which approximately $78.1 million was applied against a loan payable to the purchaser, the assumption of the first mortgage debt and other liabilities of the mall. The Trust recognized a gain on the sale of approximately $59 million, less an extraordinary loss on extinguishment of debt of approximately $2.4 million. 6 7 In August 2000, the Trust received approximately $2.4 million representing its 50% non-controlling ownership interest in the net proceeds from the sale of Temple Mall. The Trust accounted for its interest in Temple Mall as an investment in a joint venture using the equity method of accounting. The Trust recognized a gain from the investment in the joint venture of approximately $.8 million during the third quarter of 2000. Temple Mall was sold for approximately $25.7 million, of which approximately $19.5 million was applied against the first mortgage debt on the mall. In addition, Temple Mall repaid its $1.2 million note payable to the Trust from cash reserves. At the 1999 Special Meeting, shareholders approved an amendment to the Declaration of Trust providing authority to the Board of Trustees to effectuate, from time to time, reverse and forward splits of the Shares. The Board of Trustees of the Trust has considered a share combination or reverse split of the Shares (the "Reverse Split"), whereby shareholders would receive one Share for a number of Shares owned. It is anticipated that a Reverse Split with respect to the Shares will be made effective by the Board of Trustees after the record date for the Shareholder Meeting. The precise timing and ratio of the Reverse Split has not been determined. Liquidity and Capital Resources Unrestricted and restricted cash decreased by approximately $31.9 million (from $57.8 million to $25.9 million) when comparing the balance at September 30, 2000 to the balance at December 31, 1999. The decrease in cash was primarily related to the Impark spin-off. The Trust's net cash provided by operating activities of $4.6 million and net cash provided by financing activities of $69.7 million was more than offset by the $103.8 million utilized for investing activities. Cash provided by financing activities included $101.0 million borrowed pursuant to reverse repurchase agreements which were utilized to purchase U.S. Treasury bills and to invest in convertible preferred stock of HQ Global Workplaces, Inc. The Trust invests its excess cash primarily in U.S. Treasury bills. The Trust also obtained a $42.5 million non-recourse mortgage loan secured by the Trust's Park Plaza Mall property and a $7.5 million dollar mortgage loan secured by the Trust's Westgate Town Center property. Cash used in financing activities included $37.1 million of payments related to the Impark spin-off, $15.3 million of cash dividends, $10.6 million to pay a deferred obligation relating to the Huntington Garage, a $3.1 million penalty to prepay the deferred obligation, a balloon mortgage payment of $1.0 million, $1.1 million of mortgage amortization and $11.9 million to repurchase common and preferred shares. Cash provided by investing activities consisted of the receipt of $3.9 million of principal on two mortgage investments, proceeds from the sale of fixed assets of $.2 million, net proceeds from the sale of real estate of $2.5 million and net proceeds from the sale of the Trust's joint venture interest in Temple Mall of $2.4 million. Cash utilized by investing activities consisted of the excess of purchases over sales of U.S. Treasury bills of approximately $96 million, an investment in HQ Global Workplaces, Inc. for approximately $10 million and $7.1 million of improvements to properties. The Trust declared a dividend of $.5 million ($.525 per share) to Series A Cumulative Preferred Shareholders in the third quarter of 2000. The dividend was payable October 31, 2000 to shareholders of record at the close of business on September 29, 2000. The Trust also paid a dividend for the second quarter of 2000 of $.7 million ($.525 per share) to preferred shareholders in the third quarter of 2000. In addition, the Trust paid a dividend for the first quarter of 2000 of $6.6 million ($.155 per share) to common shareholders and $.7 million ($.525 per share) to preferred shareholders in the second quarter of 2000 and paid 1999 dividends of the same amounts in the first quarter of 2000. 7 8 No cash dividend for the third quarter was declared with respect to the common shares. The Board of Trustees determined at that time that, as of the end of the third quarter, it was anticipated that based upon the Trust activities to date, the Trust would have made sufficient distributions to meet the real estate investment trust (REIT) qualification requirements with respect to distributions provided in the Internal Revenue Code for year 2000 taxable income, excluding gains from the proposed sale of properties to Radiant and the sale of the Huntington Garage. During the first nine months of 2000, the Trust invested $7.1 million in capital and tenant improvements. The investment was made primarily for tenant improvements to continue to lease the former retail center located near Denver, Colorado (North Valley Tech Center), 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, at the Two Rivers business center in Clarksville, Tennessee and for an anchor tenant store at Westgate Shopping Mall 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 must be returned to the Authority. This property, and the liabilities associated with it, are among those that are to be purchased and assumed by Radiant under the Sale Contract. 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. In August 2000, the Trust received an additional $.5 million on this loan. The loan requires monthly payments of approximately $401,000 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 September 30, 2000, the Trust owned $200 million in face value of U.S. Treasury bills and owed $150 million in Reverse Repos. The U.S. Treasury bills are classified as held to maturity. The interest rate on the Reverse Repos was 6.52% at September 30, 2000. The Reverse Repos outstanding at September 30, 2000 are included in notes payable. In May 2000, the Trust made a $10 million investment in convertible preferred stock issued by HQ Global Workplaces, Inc. ("HQ"). The convertible preferred stock accrues a 13.5% "payment-in-kind" dividend which increases annually. The shares and accrued dividends are convertible into common shares, if and when HQ conducts an initial public offering. In addition, the Trust received warrants to purchase shares of common stock for a nominal strike price. In June 2000, the Trust repurchased, in a private transaction, an aggregate of 364,200 shares of its Series A cumulative redeemable preferred shares of beneficial interest from three institutional investors at a purchase price of $21.25 per share, for an aggregate cash consideration of $7,739,250. As a result of this transaction, there are presently 984,800 shares of Series A cumulative redeemable preferred shares of beneficial interest outstanding. The Trust also resumed its previously authorized common share repurchase program and began to repurchase shares of common stock in 2000. From June 2000 through September 30, 2000, the Trust had repurchased 1,425,955 common shares for $4,150,488. As a result of these transactions, there are 41,045,774 common shares of beneficial interest outstanding at September 30, 2000. During November 2000, the Trust has repurchased an additional 494,700 common shares for $1,153,816. 8 9 In September 2000, the Trust obtained an $8.5 million first mortgage loan secured by the Westgate Town Center property. The Trust received $7.3 million, net of closing costs, of the proceeds at the closing and an additional $1.0 million will be advanced upon the satisfaction of certain contingencies. The loan has an interest rate option, at the election of the Trust, of either the bank's prime rate plus .25% per annum or the adjusted LIBOR rate (as defined) plus 2.6%. The interest period of the LIBOR rate is to be designated by the Trust as either 30, 60 or 90 days. The interest rate at September 30, 2000 was approximately 9.2%. The loan presently requires monthly payments of $7,576 for principal plus accrued interest. Upon the advance of the additional $1.0 million, the monthly payments of principal will increase to $8,586. The maturity date of the loan is September 30, 2003. Prepayment of the loan is permitted without premium or penalty. Results of Operations Net income applicable to common shares before discontinued operations for the nine months ended September 30, 2000 was $45.3 million as compared to net income before discontinued operations of $9.1 million for the nine months ended September 30, 1999. Net income before discontinued operations for the nine months ended September 30, 2000 included capital gains of $59.9 million compared to capital gains of $27.9 million in the comparable period of 1999. Capital gains for the nine months ended September 30, 2000 included $59 million related to the sale of Crossroads Mall, approximately $.1 million from the sale of a parcel of land and $.8 million from the sale of their joint venture interest in Temple Mall. The capital gains for the nine months ended September 30, 1999 included $8.7 million from the sale of eight apartment complexes and $19.2 million from the sale of six shopping malls and one shopping center. The net income for the nine months ended September 30, 2000 included a $3.1 million extraordinary loss from early extinguishment of debt relating to the payoff of the Trust's deferred obligation of $10.6 million and a $2.4 million loss from early extinguishment of debt relating to the first mortgage debt which was assumed as part of the sale of the Crossroads Mall. Net income for the nine months ended September 30, 1999 included a $9.0 million unrealized loss on the carrying value of assets identified for sale. Net loss before discontinued operations for the three months ended September 30, 2000 was $.9 million as compared to net loss of $2.1 million for the comparable period of 1999. The three months ended September 30, 2000 included a capital gain of $.8 million from the sale of the Trust's joint venture interest in Temple Mall. Mortgage loan investment income declined for the three and nine months ended September 30, 2000 as compared to the comparable periods of 1999, due to the collection of a note receivable during the first quarter of 2000. Short term investment income increased significantly during the three and nine months ended September 30, 2000, as compared to the comparable periods of 1999, due to the investment of proceeds received from the 1999 property sales and the leveraged purchase of Treasury bills utilizing reverse repurchase agreements. Property net operating income, which is defined as rent less operating expenses and real estate taxes, decreased for the nine months ended September 30, 2000 to $22.6 million from $49.0 million in 1999. The decrease was attributable to the sale of properties in 1999 and the sale of Crossroads Mall in 2000. 9 10 Property net operating income for the properties in the portfolio for the nine months ended September 30, 2000 and 1999 increased by $.8 million. The increase was attributable to an increase in revenues of $1.3 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 $1.3 million for properties in the portfolio for the nine months ended September 30, 2000 and 1999, primarily due to an increase in rental rates at Park Plaza and Two Rivers and an increase in occupancy at Westgate Town Center, Two Rivers and North Valley, which was partially offset by a decrease in occupancy at 55 Public Square. The increase in revenues was partially offset by an increase in operating expenses at North Valley, Pecanland, Westgate Town Center and Park Plaza and an increase in real estate taxes, primarily at Westgate Town Center. Property net operating income decreased for the three months ended September 30, 2000 to $7.0 million from $13.1 million in 1999. The decrease was attributable to the sale of properties in 1999 and the sale of the Crossroads Mall in 2000. Property net operating income for properties in the portfolio for the three months ended September 30, 2000 and 1999 increased by $.4 million. Depreciation and amortization and mortgage loan interest expense decreased when comparing the three and nine months ended September 30, 2000 to the comparable periods in 1999 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, which was partially offset by borrowings against U.S. Treasury bills utilizing reverse repurchase agreements. General and administrative expenses increased when comparing the nine months ended September 30, 2000 and the comparable period in 1999 primarily due to severance expenses incurred during the 2000 period. Included in general and administrative expenses for the nine months ended September 30, 2000 are approximately $2.7 million of stay bonuses and severance expense. General and administrative expenses decreased by $1.5 million when comparing the three months ended September 30, 2000 and the comparable period in 1999 primarily due to the decrease in payroll and related expenses. In addition, sales and cost of sales increased at the Company's manufacturing facility. Operations remained relatively constant at the Trust's parking facilities. 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. 10 11 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 rate guarantee contracts (also known as interest rate caps) 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 September 30, 2000. No assumptions have been made about future interest rates.
AS OF SEPTEMBER 30, 2000 EXPECTED MATURITY DATES (AMOUNTS IN MILLIONS) --------------------------------------------------------- FAIR 2000 2001 2002 2003 2004 THEREAFTER TOTAL VALUE ---- ---- ---- ---- ---- ---------- ----- ----- LIABILITIES Mortgage loans - - Fixed rate $ .3 $ 1.4 $ 1.5 $ 2.3 $1.9 $81.7 $ 89.1 $ 92.2 Average interest rate 9.3% 9.3% 9.3% 9.3% 9.5% 9.5% - - Variable rate (based on LIBOR) $33.0 $37.1 $ 7.5 $ 77.6 $ 77.6 Weighted average interest rate 8.1% 9.3% 9.2% Senior notes - - Fixed rate $ 12.5 $ 12.5 $ 12.5 Interest rate 8.875% Notes payable (Reverse Repo) - - Note payable $150.0 $ .1 $150.1 $150.1 Interest rate 6.52% 7.5%
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 Impark spin-off in March 2000. 11 12 PART II - OTHER INFORMATION Item 1. Legal Proceedings. On June 22, 2000, a complaint was filed in New York Supreme Court, County of New York, against the Trust, its trustees and certain former trustees, Radiant Partners, LLC and its principals by a purported shareholder of the Trust in connection with the proposed asset sale (Brickell Partners v. Friedman, et al.). On July 12, 2000, a complaint against the same defendants, making similar allegations, was commenced by another purported shareholder of the Trust in the Court of Common Pleas of Cuyahoga County, Ohio (Donald Cunningham v. Friedman, et al.). Both of these lawsuits are purported class actions brought on behalf of all shareholders of the Trust. In these complaints, plaintiffs allege that the terms of the proposed asset sale are unfair and that the Trust's officers and trustees breached their fiduciary duties to the Trust's shareholders by agreeing to a transaction that fails to maximize shareholder value. Specifically, the lawsuits allege that the Management Company, as a party to the Asset Management Agreement with the Trust, was made privy to inside information regarding the Trust's assets and thus allowed the Management Company to negotiate the purchase of the most valuable assets of the Trust at the lowest possible price, to the detriment of the Trust's shareholders. The complaints further allege that the Management Company and the Trust were not engaging in arm's length negotiations and that the Management Company is acting in its own self interest at the expense of the interests of the Trust's shareholders. Additionally, the complaints allege, that the Management Company has material conflicts of interest. The lawsuits seek preliminary and permanent injunctive relief against the consummation of the asset sale in addition to unspecified damages, costs and attorney's fees. The Trust believes that these lawsuits are without merit. The Trust has retained counsel with regard to these lawsuits and has given plaintiffs' counsel the opportunity to review documents concerning the background to the asset sale. In the even that plaintiffs continue the actions, the Trust will seek to vigorously defend the actions. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits: Exhibit (10) (x) Amendment to Asset Management Agreement Exhibit (10) (y) Second Amendment to Asset Management Agreement Exhibit (10) (z) Third Amendment to Asset Management Agreement Exhibit (10) (aa) Fourth Amendment to Asset Management Agreement Exhibit (10) (bb) Fifth Amendment to Asset Management Agreement Exhibit (10) (cc) First Amendment to Contract of Sale Exhibit (10) (dd) Second Amendment to Contract of Sale Exhibit (10) (ee) Purchase Agreement for Huntington Garage Exhibit (27) - Financial Data Schedule Nine months ended September 30, 2000 (unaudited). Exhibit (99) - Financial Statements Combined Balance Sheets as of September 30, 2000 (unaudited) and December 31, 1999 (audited). Combined Statements of Operations for the Three and Nine Months ended September 30, 2000 (unaudited) and 1999 (unaudited). Combined Statements of Comprehensive Income for the Three and Nine Months ended September 30, 2000 (unaudited) and 1999 (unaudited). Combined Statements of Cash Flows for the Nine Months ended September 30, 2000 (unaudited) and 1999 (unaudited). Notes to Combined Financial Statements. 12 13 (b) Reports on Form 8K: September 26, 2000 Item 5 - The Trust announced two sales contracts for a significant asset sale to Radiant Investors LLC and a shareholder meeting. Item 7(b) - Proforma financial information. Proforma combined balance sheet as of June 30, 2000. Proforma combined statement of operations for the six months ended June 30, 2000. Proforma combined statement of operations for the twelve months ended December 31, 1999 Notes to proforma combined financial statements. 13 14 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 (Trust) Date: November 13, 2000 By: /s/ Daniel P. Friedman --------------------------------------- Daniel P. Friedman President and Chief Executive Officer Date: November 13, 2000 By: /s/ Neil H. Koenig --------------------------------------- Neil H. Koenig, Interim Chief Financial Officer 14 15 Index to Exhibits Exhibit (10) (x) Amendment to Asset Management Agreement Exhibit (10) (y) Second Amendment to Asset Management Agreement Exhibit (10) (z) Third Amendment to Asset Management Agreement Exhibit (10) (aa) Fourth Amendment to Asset Management Agreement Exhibit (10) (bb) Fifth Amendment to Asset Management Agreement Exhibit (10) (cc) First Amendment to Contract of Sale Exhibit (10) (dd) Second Amendment to Contract of Sale Exhibit (10) (ee) Purchase Agreement for Huntington Garage Exhibit (99) - Financial Statements Combined Balance Sheets as of September 30, 2000 (unaudited) and December 31, 1999 (audited) Combined Statements of Operations for the Three and Nine Months ended September 30, 2000 (unaudited) and 1999 (unaudited) Combined Statements of Comprehensive Income for the Three and Nine Months ended September 30, 2000 (unaudited) and 1999 (unaudited) Combined Statements of Cash Flows for the Nine Months ended September 30, 2000 (unaudited) and 1999 (unaudited) Notes to Combined Financial Statements 15 EX-10.X 2 y42691ex10-x.txt AMENDMENT TO ASSET MANAGEMENT AGREEMENT 1 EXHIBIT (10)(x) AMENDMENT TO ASSET MANAGEMENT AGREEMENT This Amendment to Asset Management Agreement dated as of May 31, 2000 (this "Amendment") is entered into by and between Radiant Partners, LLC, a New York limited liability company (the "Manager") and First Union Real Estate Equity and Mortgage Investments (the "Company"). RECITALS 1. The Manager and the Company executed an Asset Management Agreement, dated as of March 27, 2000 (the "Agreement"); 2. The parties hereto have determined to enter into this Amendment for purposes of amending the 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. Clause (v) of Article III(a) is deleted in its entirety and replaced by the following clause (v) of Article III(a): (v) at the election of either party, any time prior to July 31, 2000, upon thirty (30) days prior written notice to the other party. B. The Agreement, as amended by this Amendment, constitutes the entire agreement between the parties with respect to the subject matter hereof. C. Unless otherwise provided herein, capitalized terms herein shall have the meanings ascribed to them in the Agreement. D. Except as otherwise provided in this Amendment to the contrary, the terms and conditions of the Agreement as amended by this Amendment shall remain in full force and effect. E. In any case in which the terms of this Amendment are inconsistent with the terms of the Agreement, the terms of this Amendment shall govern. -1- 2 IN WITNESS WHEREOF, the undersigned have executed this 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 RADIANT PARTNERS, LLC By: /s/ Daniel P. Friedman ------------------------------------ Daniel P. Friedman, Managing Member -2- EX-10.Y 3 y42691ex10-y.txt SECOND AMENDMENT TO ASSET MANAGEMENT AGREEMENT 1 EXHIBIT (10)(y) SECOND AMENDMENT TO ASSET MANAGEMENT AGREEMENT This Second Amendment to Asset Management Agreement, dated as of June 16, 2000 (this "Second Amendment"), is entered into by and between Radiant Partners, LLC, a New York limited liability company (the "Manager"), and First Union Real Estate Equity and Mortgage Investments (the "Company"). RECITALS 1. The Manager and the Company executed an Asset Management Agreement, dated as of March 27, 2000; 2. The Manager and the Company executed an Amendment (the "First Amendment") to the Asset Management Agreement, dated as of May 31, 2000 (as amended, the "Agreement"); 3. The parties hereto have determined to enter into this Second Amendment for purposes of further amending the 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. Clause (v) of Article III(a) of the Agreement is deleted in its entirety and replaced by the following clause (v) of Article III(a): (v) at the election of either party, any time prior to October 1, 2000, upon thirty (30) days prior written notice to the other party. B. The Agreement, as amended by this Second Amendment, constitutes the entire agreement between the parties with respect to the subject matter hereof. C. Unless otherwise provided herein, capitalized terms herein shall have the meanings ascribed to them in the Agreement. 2 D. Except as otherwise provided in this Second Amendment to the contrary, the terms and conditions of the Agreement as amended by this Second Amendment shall remain in full force and effect. E. In any case in which the terms of this Second Amendment are inconsistent with the terms of the Agreement, the terms of this Second Amendment shall govern. IN WITNESS WHEREOF, the undersigned have executed this 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 RADIANT PARTNERS, LLC By: /s/ Daniel P. Friedman ------------------------------------ Daniel P. Friedman, Managing Member 358298 -2- EX-10.Z 4 y42691ex10-z.txt THIRD AMENDMENT TO ASSET MANAGEMENT AGREEMENT 1 EXHIBIT (10)(z) THIRD AMENDMENT TO ASSET MANAGEMENT AGREEMENT This Third Amendment to Asset Management Agreement, dated as of August 17, 2000 (this "Third Amendment"), is entered into by and between Radiant Partners, LLC, a New York limited liability company (the "Manager"), and First Union Real Estate Equity and Mortgage Investments (the "Company"). RECITALS 1. The Manager and the Company executed an Asset Management Agreement, dated as of March 27, 2000; 2. The Manager and the Company executed a first amendment (the "First Amendment") to the Asset Management Agreement, dated as of May 31, 2000 and a second amendment (the "Second Amendment") to the Asset Management Agreement, dated as of June 16, 2000 (as amended, the "Agreement"); 3. The parties hereto have determined to enter into this Third Amendment for purposes of further amending the 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. Clause (v) of Article III(a) of the Agreement is deleted in its entirety and replaced by the following clause (v) of Article III(a): 2 (v) at the election of either party, any time prior to December 1, 2000, upon thirty (30) days prior written notice to the other party. B. The Agreement, as amended by this Third Amendment, constitutes the entire agreement between the parties with respect to the subject matter hereof. C. Unless otherwise provided herein, capitalized terms herein shall have the meanings ascribed to them in the Agreement. D. Except as otherwise provided in this Third Amendment to the contrary, the terms and conditions of the Agreement as amended by this Third Amendment shall remain in full force and effect. E. In any case in which the terms of this Third Amendment are inconsistent with the terms of the Agreement, the terms of this Third Amendment shall govern. -2- 3 IN WITNESS WHEREOF, the undersigned have executed this Third 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 RADIANT PARTNERS, LLC By: /s/ Daniel P. Friedman ------------------------------------ Daniel P. Friedman, Managing Member -3- EX-10.AA 5 y42691ex10-aa.txt FOURTH AMENDMENT TO ASSET MANAGEMENT AGREEMENT 1 EXHIBIT (10)(aa) FOURTH AMENDMENT TO ASSET MANAGEMENT AGREEMENT This Fourth Amendment to Asset Management Agreement, dated as of September 15, 2000 (this "Fourth Amendment"), is entered into by and between Radiant Partners, LLC, a New York limited liability company (the "Manager"), and First Union Real Estate Equity and Mortgage Investments (the "Company"). RECITALS 1. The Manager and the Company executed an Asset Management Agreement, dated as of March 27, 2000; 2. The Manager and the Company executed a first amendment (the "First Amendment") to the Asset Management Agreement, dated as of May 31, 2000, a second amendment (the "Second Amendment") to the Asset Management Agreement, dated as of June 16, 2000 and a third amendment (the "Third Amendment") to the Asset Management Agreement, dated as of August 17, 2000 (as amended, the "Agreement"); 3. The parties hereto have determined to enter into this Fourth Amendment for purposes of further amending the 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. The following provisions are added as clause 1.2(b) of Article I of the Agreement: 2 "(b) Manager shall cooperate with the Trust in connection with and use its reasonable best efforts to (i) prepare and file and clear with the Securities and Exchange Commission the proxy statement and any amendments or supplements thereto required to obtain the approval of the shareholders of the Trust to the sale contemplated by the Contracts of Sale between the Trust, Radiant Investors LLC, and the other parties signatory thereto and the Trust and Radiant Investors LLC dated September 15, 2000 and September 15, 2000 (the "Contracts of Sale") and any amendments to the organizational or governing documents of the Trust necessary to consummate the sales contemplated by the Contracts of Sale as promptly as practicable and, in any event, before the date that would allow sufficient time to declare a record date, mail proxy statements, solicit proxies and conduct a meeting of the Trust's shareholders in accordance with all applicable laws, rules and regulations and the Trust's organizational and governing documents by no later than the applicable Shareholder Approval Deadline (as defined in the Contracts of Sale), and (ii) duly call, give notice of, convene and hold such meeting on or before the applicable Shareholder Approval Deadline (as defined in the Contracts of Sale)." B. Unless otherwise provided herein, capitalized terms herein shall have the meanings ascribed to them in the Agreement. C. Except as otherwise provided in this Fourth Amendment to the contrary, the terms and conditions of the Agreement as amended by this Fourth Amendment shall remain in full force and effect. D. In any case in which the terms of this Fourth Amendment are inconsistent with the terms of the Agreement, the terms of this Fourth Amendment shall govern. -2- 3 IN WITNESS WHEREOF, the undersigned have executed this Fourth 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 RADIANT PARTNERS, LLC By: /s/ Daniel P. Friedman ------------------------------------ Daniel P. Friedman, Managing Member -3- EX-10.BB 6 y42691ex10-bb.txt FIFTH AMENDMENT TO ASSET MANAGEMENT AGREEMENT 1 EXHIBIT (10)(bb) FIFTH AMENDMENT TO ASSET MANAGEMENT AGREEMENT This Fifth Amendment to Asset Management Agreement, dated as of October 23, 2000 (this "Fifth Amendment"), is entered into by and between Radiant Partners, LLC, a New York limited liability company (the "Manager"), and First Union Real Estate Equity and Mortgage Investments (the "Company"). RECITALS 1. The Manager and the Company executed an Asset Management Agreement, dated as of March 27, 2000; 2. The Manager and the Company executed a first amendment to the Asset Management Agreement, dated as of May 31, 2000, a second amendment to the Asset Management Agreement, dated as of June 16, 2000, a third amendment to the Asset Management Agreement, dated as of August 17, 2000 and a fourth amendment to the Asset Management Agreement, dated as of September 15, 2000 (as amended, the "Agreement"); and 3. The parties hereto have determined to enter into this Fifth Amendment for purposes of further amending the 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. Clause (v) of Article III(a) of the Agreement is deleted in its entirety and replaced by the following clause (v) of Article III(a): 2 (v) at the election of either party, any time prior to February 15, 2001, upon thirty (30) days prior written notice to the other party. B. The Agreement, as amended by this Fifth Amendment, constitutes the entire agreement between the parties with respect to the subject matter hereof. C. Unless otherwise provided herein, capitalized terms herein shall have the meanings ascribed to them in the Agreement. D. Except as otherwise provided in this Fifth Amendment to the contrary, the terms and conditions of the Agreement as amended by this Fifth Amendment shall remain in full force and effect. E. In any case in which the terms of this Fifth Amendment are inconsistent with the terms of the Agreement, the terms of this Fifth Amendment shall govern. -2- 3 IN WITNESS WHEREOF, the undersigned have executed this Fifth 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 RADIANT PARTNERS, LLC By: /s/ Daniel P. Friedman ------------------------------------ Daniel P. Friedman, Managing Member -3- EX-10.CC 7 y42691ex10-cc.txt FIRST AMENDMENT TO CONTRACT OF SALE 1 EXHIBIT (10)(cc) FIRST AMENDMENT TO CONTRACT OF SALE This First Amendment to the Contract of Sale (this "First Amendment") is made and entered into as of this 29th day of September, 2000 by and among 55 Public LLC, North Valley Tech, LLC, Southwest Shopping Centers Co. I, L.L.C., First Union Madison L.L.C., Printer's Alley Garage, LLC, First Union Real Estate Equity and Mortgage Investments and First Union Commercial Properties Expansion Company, collectively as "Seller," and Radiant Investors LLC, as "Purchaser." WHEREAS, the Seller and the Purchaser have entered into a Contract of Sale dated as of the 15th day of September, 2000 (the "Agreement") with respect to the sale and purchase of the properties known as 55 Public Square/CEI Building, Cleveland Ohio; North Valley Tech Center, Thornton, Colorado; Westgate Business Center, Abilene, Texas; Madison & Wells Garage, Chicago, Illinois; Printer's Alley Garage, Nashville, Tennessee; Pecanland Mall, Monroe, Louisiana; West 3rd Street Lot, Cleveland, Ohio; Long Street Lot, Columbus, Ohio, 5th & Marshall Garage, Richmond, Virginia; Two Rivers Business Center, Clarksville, Tennessee and Huntington Garage, Cleveland, Ohio (collectively, the "Premises"); WHEREAS, the Seller and the Purchaser desire to modify and amend the Agreement as hereinafter set forth in this First Amendment, the provisions of this First Amendment being paramount and the Agreement being construed accordingly; NOW THEREFORE, the parties hereto do hereby agree that the Agreement is modified and amended as hereinafter set forth: 1. All capitalized terms herein, unless otherwise defined, shall have the meaning ascribed in the Agreement. 2. Section 2(a) of the Agreement is modified by providing that Schedules B-1 and B-2 will be provided by the parties and annexed to the Agreement on or before the Closing Date. 3. Section 2(a)(vi) of the Agreement is modified by providing at the end thereof a new Section (C) as follows: (C) Notwithstanding the provisions of Sections 2(a)(ii), 2(a)(vi)(A) and 2(a)(vi)(B) to the contrary, unless and until Purchaser has obtained firm commitments for Acceptable Financing (as such term is defined in the JV Agreement), Purchaser at its option may elect to terminate the Agreement on or before October 26, 2000 and the Sellers shall receive the amount set forth at Section 2(a)(vi)(A) and the balance of the Deposit shall be paid to Purchaser. In such event, Purchaser shall deliver to Sellers each Study and all reliance letters thereto in accordance with the provisions of Section 2(a)(vi)(A). Purchaser shall regularly advise Seller of its progress in obtaining Acceptable Financing. 2 4. Section 2(b) of the Agreement is modified to provide that Seller will accept a Letter of Credit from Fleet Bank, provided that same may be presented for payment at one of its New York City branches. 5. Section 2(c) of the Agreement is modified to provide that the Westgate financing is in the amount of $8,500,000.00, of which $7,500,000.00 is to be advanced at Closing, and $1,000,000.00 is to be held in escrow. 6. Schedule A-6 of the Agreement will be modified to reflect the accurate description of the Pecanland Mall Adjacent Land as and when the survey has been received and the new metes and bounds description has been provided by the Title Company. 7. Section 3 of the Agreement is modified by providing at the end thereof a new Section 3(q) as follows: (q) Notwithstanding anything in Section 3(a) or 4(c) to the contrary, in the event and to the extent the revised metes and bounds description of the Pecanland Mall Adjacent Land referenced in paragraph 6 above results in a Title Company continuation of the Title Report referenced at Schedule G-1(iv) of the Agreement containing a new exception to title (not disclosed on the Title Report received as of the date hereof) having a material adverse effect on any Pecanland Mall Adjacent Land, Purchaser may exercise those options set forth at Section 3(p) with respect to such Pecanland Mall Adjacent Land. 8. Except as modified hereby, the Agreement shall remain in full force and effect. 2 3 SELLERS: 55 PUBLIC LLC, a Delaware limited liability company By: 55 PUBLIC REALTY CORP., a Delaware corporation, Managing Member By: /s/ William A. Scully ------------------------------------ Name: William A. Scully Title: Authorized Signatory NORTH VALLEY TECH LLC, a Delaware limited liability company By: NVT Corp., a Delaware corporation, its Managing Member By: /s/ William A. Scully ------------------------------------ Name: William A. Scully Title: Authorized Signatory SOUTHWEST SHOPPING CENTERS CO. I, L.L.C., a Delaware limited liability company By: First Union Southwest L.L.C., a Delaware limited liability company, its manager By: First Southwest I, Inc., a Delaware corporation, its manager By: /s/ William A. Scully ------------------------------------ Name: William A. Scully Title: Authorized Signatory FIRST UNION MADISON L.L.C., an Illinois limited liability company By: First Union Real Estate Equity and Mortgage Investments, and Ohio business trust, its member By: /s/ William A. Scully ------------------------------------ Name: William A. Scully Title: Authorized Signatory 3 4 PRINTER'S ALLEY GARAGE, LLC, a Delaware limited liability company By: First Union Real Estate Equity and Mortgage Investments, an Ohio business trust, its managing member By: /s/ William A. Scully ------------------------------------ Name: William A. Scully Title: Authorized Signatory FIRST UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS, an Ohio business trust By: /s/ William A. Scully ------------------------------------ Name: William A. Scully Title: Vice Chairman FIRST UNION COMMERCIAL PROPERTIES EXPANSION COMPANY By: /s/ William A. Scully ----------------------------------- Name: William A. Scully Title: Authorized Signatory PURCHASER: RADIANT INVESTORS LLC, a Delaware limited liability company By: /s/ Daniel P. Friedman ------------------------------------ Name: Daniel P. Friedman Title: Managing Member 4 EX-10.DD 8 y42691ex10-dd.txt SECOND AMENDMENT TO CONTRACT OF SALE 1 Exhibit (10)(dd) SECOND AMENDMENT TO CONTRACT OF SALE This Second Amendment to the Contract of Sale (this "Second Amendment") is made and entered into as of this 26th day of October, 2000 by and among 55 Public LLC, North Valley Tech, LLC, Southwest Shopping Centers Co. I, L.L.C., First Union Madison L.L.C., Printer's Alley Garage, LLC, First Union Real Estate Equity and Mortgage Investments and First Union Commercial Properties Expansion Company, collectively as "Seller" and Radiant Investors LLC, as "Purchaser." WHEREAS, the Seller and the Purchaser have entered into a Contract of Sale dated as of the 15th day of September, 2000 (the "Agreement") with respect to the sale and purchase of the properties known as 55 Public Square/CEI Building, Cleveland, Ohio; North Valley Tech Center, Thornton, Colorado; Westgate Shopping Center, Abilene, Texas; Madison & Wells Garage, Chicago, Illinois; Printer's Alley Garage, Nashville, Tennessee; Pecanland Mall, Monroe, Louisiana; West 3rd Street Parking Lot, Cleveland, Ohio; Long Street Lot, Columbus, Ohio; 5th and Marshall Garage, Richmond, Virginia; Two Rivers Business Center, Clarksville, Tennessee and Huntington Garage, Cleveland, Ohio (collectively, the "Premises"); WHEREAS, the Seller and the Purchaser entered into the First Amendment to Contract of Sale as of the 29th day of September, 2000 (the "First Amendment"); WHEREAS, the Seller and the Purchaser desire further to modify and amend the Agreement as hereinafter set forth in this Second Amendment, the provisions of this Second Amendment being paramount and the Agreement, as modified by the First Amendment (the "Existing Agreement") being construed accordingly. NOW THEREFORE, the parties hereto do hereby agree that the Existing Agreement is further modified and amended as hereinafter set forth: 1. All capitalized terms herein, unless otherwise defined, shall have the meaning ascribed in the Existing Agreement. 2. Supplementing paragraph 3 of the First Amendment and Section 2(a)(vi) of the Existing Agreement, Purchaser confirms that it has obtained firm commitments for Acceptable Financing (as such term is defined in the JV Agreement). 3. Pursuant to Section 1(b) of the Existing Agreement, FUR has entered into and Purchaser hereby consents to, the Purchase and Sale Agreement (the "Huntington Garage Contract") with Northeastern Security Development Corp., dated October 26, 2000 for the sale of the Huntington Garage. Pursuant to the Huntington Garage Contract, Northeastern Security Development Corp. has deposited with Commonwealth Land Title Insurance Company a $1 million good faith deposit. 4. As a result of FUR having entered into the Huntington Garage Contract: 2 (i) Purchaser shall not be required to acquire the Huntington Garage or assume or otherwise pay the principal balance of the mortgage encumbering the Huntington Garage, which mortgage shall be deleted as a "Mortgage" under the Existing Agreement; and (ii) the purchase price set forth at Section 2(a) of the Existing Agreement shall be reduced by (x) if the closing on the Huntington Garage has occurred prior to the Closing under the Existing Agreement, the Net Sales Price received by FUR from said sale, or (y) if the closing on the Huntington Garage has not occurred on or before the Closing under the Existing Agreement, $21,250,000.00, less the reasonable estimate of the parties of any and all fees, expenses, charges and other costs that would have been paid by FUR in connection with the sale of the Huntington Garage to Northeastern Security Development Corp. (the "Costs of Closing"), including, without limitation, brokerage fees, attorney's fees and disbursements and the transfer taxes, survey fees, escrow charges, recording fees and other closing costs payable by FUR under the Huntington Garage Contract. Two business days prior to the Closing under the Existing Agreement as amended hereby, the parties will jointly determine their estimate of the Costs of Closing which shall include reasonable supporting detail for the calculation of the Costs of Closing. Appropriate adjustments shall be made to Sections 2(a)(iv) and 2(a)(v) of the Existing Agreement to effect the foregoing. 5. For computing Apportionments at Section 6A of the Existing Agreement, the Huntington Garage income and expenses, ordinary and capital, including monthly interest payments on the mortgage encumbering the Huntington Garage, shall be included in and subject to the Existing Agreement through the earlier of the date of the consummation of the sale of the Huntington Garage or the consummation of the sale of the Properties by the Seller to the Purchaser under and pursuant to the terms of the Existing Agreement. 6. Except as modified hereby, the Existing Agreement shall remain in full force and effect. SELLERS: 55 PUBLIC LLC, a Delaware limited liability company By: 55 PUBLIC REALTY CORP., a Delaware corporation, Managing Member By: /s/ William A. Scully ------------------------------------ Name: William A. Scully Title: Authorized Signatory 3 NORTH VALLEY TECH LLC, a Delaware Limited liability company By: NVT Corp., a Delaware corporation, its Managing Member By: /s/ William A. Scully ------------------------------------ Name: William A. Scully Title: Authorized Signatory SOUTHWEST SHOPPING CENTERS CO. I, L.L.C., a Delaware limited liability company By: First Union Southwest L.L.C., a Delaware limited liability company, its manager By: First Union Southwest I, Inc., a Delaware corporation, its manager By: /s/ William A. Scully ------------------------------------ Name: William A. Scully Title: Authorized Signatory FIRST UNION MADISON L.L.C., an Illinois limited liability company By: First Union Real Estate Equity and Mortgage Investments, an Ohio Business trust, its member By: /s/ William A. Scully ------------------------------------ Name: William A. Scully Title: Authorized Signatory PRINTER'S ALLEY GARAGE, LLC, a Delaware limited liability company By: First Union Realty Equity and Mortgage Investments, an Ohio business trust, its managing member By: /s/ William A. Scully ------------------------------------ Name: William A. Scully Title: Authorized Signatory 4 FIRST UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS, an Ohio business trust By: /s/ William A. Scully ------------------------------------ Name: William A. Scully Title: Authorized Signatory FIRST UNION COMMERCIAL PROPERTIES EXPANSION COMPANY By: /s/ William A. Scully ------------------------------------ Name: William A. Scully Title: Authorized Signatory PURCHASER: RADIANT INVESTORS LLC, a Delaware limited liability company By: /s/ Daniel P. Friedman ------------------------------------ Name: Daniel P. Friedman TITLE: MANAGING MEMBER EX-10.EE 9 y42691ex10-ee.txt PURCHASE AGREEMENT FOR HUNTINGTON GARAGE 1 EXHIBIT (10)(ee) PURCHASE AND SALE AGREEMENT BETWEEN FIRST UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS, AS SELLER AND NORTHEASTERN SECURITY DEVELOPMENT CORP., A NEW YORK CORPORATION, AS PURCHASER HUNTINGTON GARAGE, CLEVELAND, OHIO EFFECTIVE DATE: OCTOBER 26, 2000 2 PURCHASE AND SALE AGREEMENT THIS PURCHASE AND SALE AGREEMENT (the "Agreement") is made as of this 26th day of October, 2000 (the "Effective Date"), by and between FIRST UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS, an Ohio business trust, and NORTHEASTERN SECURITY DEVELOPMENT CORP., a New York corporation. WITNESSETH: In consideration of and upon the terms and conditions herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: ARTICLE 1 DEFINITIONS 1.1 DEFINITIONS. Except as may otherwise be expressly provided herein, and in addition to other defined terms contained herein, the following terms, for all purposes of this Agreement, have the respective meanings set forth below: "ASSIGNMENT AND ASSUMPTION OF CONTRACTS" means an assignment in the form of EXHIBIT 5.2(d) attached hereto, to be executed and acknowledged by Seller and Purchaser, pursuant to which Seller assigns to Purchaser, and Purchaser assumes, all of Seller's right, title and interest under the Contracts and the Other Assets, from and after the Closing. "ASSIGNMENT AND ASSUMPTION OF GROUND LEASES" means an assignment in the form of EXHIBIT 5.2(b) attached hereto, to be executed and acknowledged by Seller and Purchaser, pursuant to which Seller assigns to Purchaser, and Purchaser assumes, all of Seller's right, title and interest under the Ground Leases from and after the Closing. "BALANCE OF THE PURCHASE PRICE" means the Purchase Price (a) less the Deposit (to the extent then held by Escrowee), and (b) plus or minus the net sum of the prorations, allocations, charges, credits, withholdings and other adjustments as provided in this Agreement. "BILL OF SALE" means the bill of sale in the form of EXHIBIT 5.2(c) attached hereto, to be executed and delivered by Seller, pursuant to which Seller transfers and assigns, and Purchaser accepts, the right, title and interest of Seller in and to the Personalty owned by Seller and used in connection with the management and operation of the Garage. "BROKER" means Eastern Consolidated, New York, New York, and Brandon Wiant Converse, Cleveland, Ohio. "BUSINESS DAY" means, collectively, any day other than a Saturday, Sunday or legal holiday in the State of Ohio. "CLOSING" means the transfer of title to the Property to Purchaser and the related transactions required by the terms of this Agreement to occur contemporaneously therewith. 2 3 "CLOSING DATE" means December 22, 2000, provided, however, that Seller shall have the right and option, in its sole discretion, to extend the Closing Date from December 22, 2000 to January 16, 2001 by written notice given to Purchaser by no later than November 22, 2000, as either such date for Closing may be further extended pursuant to the provisions of Sections 2.4(b), 4.3, 5.1 and 8.3 hereof, or some other date for Closing that is mutually agreed to by the parties. "CLOSING DOCUMENTS" means the Seller Closing Documents and the Purchaser Closing Documents without distinction between them. "CONFIDENTIAL INFORMATION" means the terms of this Agreement and all information or documentation reviewed or received by Purchaser from Seller and its brokers, employees, agents and contractors in connection with either this Agreement or the Property. "CONTRACTS" means all (a) service, maintenance, and repair contracts (excluding recorded documents evidencing the Permitted Exceptions) relating to the Garage and to which Seller is a party that are listed in EXHIBIT C, attached hereto and made a part hereof, and (b) equipment leases to which Seller is a party that are listed in EXHIBIT C, attached hereto, and all rights and options of Seller thereunder, including rights to renew or extend the term or purchase leased equipment, relating to equipment or property located in or upon the Garage and used by Seller in connection therewith. "CUTOFF DATE" means 11:59 p.m. on the day preceding the Closing Date. "DAMAGE NOTICE" shall have the meaning set forth in Section 8.1 hereof. "DAMAGES" means any and all actual losses, costs, claims, liabilities, damages, obligations, judgments, settlements, awards, offsets, fees and expenses (including, without limitation, reasonable attorneys' fees and expenses), fines, penalties, and charges. "DEPOSIT" shall mean the sum of One Million Dollars ($1,000,000), together with any additional amounts deposited with Escrowee pursuant to and in accordance with the provisions of Section 5.1 hereof. "DISAPPROVAL NOTICE" means a written notice given by Purchaser identifying any title matter related to the Property which Purchaser disapproves pursuant to Section 4.3. "EFFECTIVE DATE" shall have the meaning set forth in the first sentence of this Agreement. "EMPLOYEES" means the on-site employees of Seller at the Garage as of the Effective Date. "ENVIRONMENTAL LAW" means the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (42 U.S.C. Section 9601 et seq.), as amended, or the Resource Conservation and Recovery Act (42 U.S.C. Section 6901 et seq.), as amended, or any counterpart thereof applicable in the State of Ohio. "ESCROWEE" means LandAmerica National Commercial Services, 1300 E. 9th Street, Suite 1201, Cleveland, Ohio 44114, Attention: Deborah Lawrence-Auten. 3 4 "ESTOPPEL CERTIFICATES" means estoppel certificates dated no earlier than forty-five (45) days of the Closing Date as to the status of the following described leases, signed by the lessor thereof: (a) Boalt Ground Lease (b) Lake Ground Lease (c) Pugh Ground Lease such certificates to be in the form required by each such lease, and confirming that the Ground Leases are in full force and effect and have not been modified except as described in Exhibit A, and that Seller, as the lessee thereunder, is not in default of any of the terms, covenants and conditions thereof. "FILING DOCUMENTS" shall have the meaning set forth in Section 5.4 hereof. "FINAL PRORATION STATEMENT" shall have the meaning set forth in Section 6.4(b) hereof. "GARAGE" means a 1,129 space, 6 level automobile parking garage located on the Real Property and commonly known as the "Huntington Garage", Cleveland, Ohio. "GARAGE INFORMATION" means the following existing information that is within Seller's possession or control, or reasonably obtainable by Seller, wherever located, with respect to the Property: structural, mechanical, environmental, geotechnical or other engineering studies, Plans, surveys, summaries, the Contracts, the Ground Leases, and all other contracts, agreements and/or documents relating to the Property. "GROUND LEASES" means, collectively, the three ground leases described in Exhibit A hereto, which are sometimes herein referred to respectively as the "Boalt Ground Lease", the "Lake Ground Lease", and the "Pugh Ground Lease". "INSURANCE POLICIES" means the liability and property damage insurance policies for the Garage listed in EXHIBIT 7.2 attached hereto. "LAWS" means all applicable laws, ordinances, rules, regulations, codes, orders and requirements of any federal, state or local governmental authority, including, without limitation, the Americans With Disabilities Act of 1990 (the "ADA") and regulations promulgated thereunder. "LIENS" means any liens and/or security interests that encumber any part of the Real Property, Personalty or Other Assets owned by Seller, including, but not limited to, mortgages, deeds of trust, mechanics, materialmen's, judicial, tax or governmental liens of any nature whatsoever relating to the Real Property, Personalty or Other Assets. "MATERIAL CONTRACTS" means any contracts or other agreements that would require performance (in whole or in part) by Purchaser on or after the Closing Date. "OTHER ASSETS" means (a) all warranties and guaranties of design, construction, materials, buildings, and improvements comprising the Real Property and claims with respect thereto, if any; (b) all Plans, (to the extent same are owned by Seller and/or are within Seller's possession and/or control); (c) all warranties with respect to the Personalty, if any; (d) all logos, 4 5 trademarks, trade names, and service marks associated with the Property, but excluding those that are owned by any third party; (e) all telephone numbers and facsimile numbers, if any, designated for the Garage; (f) License granted by letter dated March 10, 1969 from The Union Commerce Bank to Investment Plaza Company authorizing installation of flood lights on the roof of the parking garage building for illumination of the east side of the Investment Plaza Building, a true, correct and complete copy of which is attached hereto and made a part hereof as Exhibit E; (g) License granted by letter dated May 25, 1971 from The Union Commerce Bank to Investment Plaza Company authorizing communications conduit through the garage building from the Investment Plaza Building to the Park (Penton) Plaza Building, a true, correct and complete copy of which is attached hereto and made a part hereof as Exhibit F; (h) License granted by letter dated December 8, 1971 from The Union Commerce Bank to The Penton Publishing Company authorizing the opening and use of a three foot by four foot hole in the wall between the garage building and the Penton Plaza Building and parking space No. 380 on the fourth floor of the garage building, a true, correct and complete copy of which is attached hereto and made a part hereof as Exhibit G; (i) License granted by letter dated March 4, 1974 from The Union Commerce Bank to Consolidated Paint & Varnish Corp. authorizing a vent for an exhaust fan from the premises on the second floor of the Investment Plaza Building into the garage building, a true, correct and complete copy of which is attached hereto and made a part hereof as Exhibit H; (j) such rights as First Union Real Estate Equity and Mortgage Investments has or may have pursuant to and in accordance with the provisions of that certain Agreement dated as of December 31, 1975 by and between The Union Commerce Bank and First Union Real Estate Equity and Mortgage Investments, a true, correct and complete copy of which is attached hereto and made a part hereof as Exhibit I, together with such rights as First Union Real Estate Equity and Mortgage Investments has or may have pursuant to and in accordance with the provisions thereof in and to that certain Agreement dated December 15, 1967 between The Union Commerce Bank and Investment Plaza Company, a true, correct and complete copy of which is attached thereto as Exhibit A; and (k) rights of First Union Real Estate Equity and Mortgage Investments under and by virtue of letter dated December 31, 1975 from The Union Commerce Bank to First Union Real Estate Equity and Mortgage Investments, whereby The Union Commerce Bank agreed that it shall not, from and after the date thereof, "grant to any third party any new rights of access to the tunnel which connects the Union Commerce Building" with the Garage, a true, correct and complete copy of which is attached hereto and made a part hereof as Exhibit J. "PARTY" means a party to a Material Contract, other than Seller or its predecessors in title, with respect to the Property. "PERMITTED EXCEPTIONS" means (a)(i) all streets and public rights-of way; (ii) all Laws now in effect; (iii) Taxes not due and payable as of the Closing Date; (iv) restrictions, encumbrances, reservations, limitations, conditions, easements, agreements or other matters affecting the Property that are referred to in Exhibit B hereto or in the documents listed therein; (v) matters disclosed by the Survey; and (vi) the Ground Leases; and (b) exceptions to title that are approved or deemed approved by Purchaser pursuant to Section 4.3. "PERSON" means a natural person, a partnership, a corporation, a limited liability company, a trust, an unincorporated organization, a government or any department or agency thereof, or any other juridical entity. "PERSONALTY" means all equipment, appliances, trade fixtures, machinery, furniture, furnishings, supplies, and other personal property that is (a) owned by Seller, and (b) located on and used in connection with the operation, ownership or management of the Garage, and/or (c) listed on Exhibit D, attached hereto and made a part hereof. 5 6 "PLANS" means the drawings and specifications for all buildings and improvements comprising any portion of the Real Property, including, without limitation, the plans and specifications for all existing renovations and improvements to the Garage and all space and common areas therein, to the extent within Seller's possession or control. "PROPERTY" means (i) the Real Property, (ii) Other Assets, (iii) the Personalty, and (iv) the Contracts. "PURCHASE PRICE" means Twenty-One Million Two Hundred Fifty Thousand Dollars ($21,250,000.00). "PURCHASER" means Northeastern Security Development Corp., a New York corporation or its permitted assigns. "PURCHASER CLOSING DOCUMENTS" shall have the meaning set forth in Section 5.3 hereof. "REAL PROPERTY" means, collectively, the fee simple estate, leasehold interests, and tunnel easement of Seller (as described in Exhibit A hereto) in and to the lands legally described in Exhibit A hereto, together with all buildings, improvements and fixtures thereon or therein; all privileges, rights, easements, hereditaments, and appurtenances thereunto belonging; and all right, title and interest of Seller in and to any streets, alleys, passages and other rights-of-way included therein or adjacent thereto (before or after the vacation thereof). "RENT" means all rents, fees or charges payable to Seller by any tenant or licensee of the Property. "SELLER" means First Union Real Estate Equity and Mortgage Investments, an Ohio business trust. "SELLER CLOSING DOCUMENTS" shall have the meaning set forth in Section 5.2 hereof. "SURVEY" means the following survey, updated and certified by the surveyor to Seller, Purchaser, Purchaser's lender, and the Title Insurer as of a date not earlier than sixty (60) days prior to the Closing Date: ALTA/ACSM Title Survey prepared by Garrett & Associates, Inc., Cleveland, Ohio, dated December 1, 1993, and last revised October 18, 2000, and bearing No. 93-72 and Map No. 2018-H. "TAXES" shall have the meaning set forth in Section 6.1 hereof. "TITLE COMMITMENT" means the ALTA Commitment for Title Insurance, effective August 8, 2000 (File No. 99-0342), and endorsed on October 23, 2000 to amend Schedule B, Section 2, items 34 and 35 thereof, heretofore issued by the Title Insurer committing to the issuance of a Title Policy, a complete copy of which has been delivered to Purchaser. "TITLE INSURER" means Commonwealth Land Title Insurance Company. "TITLE POLICY" means an ALTA Owner's/Leasehold Policy, Form 1992 (Rev. 10-17-92), of Title Insurance issued by Title Insurer for the Real Property in the amount specified in Section 4.1, insuring Purchaser as owner of the fee simple estate, leasehold interests, and tunnel easement comprising the Real Property, subject only to the Permitted Exceptions. 6 7 1.2 GENDER AND NUMBER. Words of any gender shall include the other gender and the neuter. Whenever the singular is used, the same shall include the plural wherever appropriate, and whenever the plural is used, the same shall also include the singular wherever appropriate. Without limiting the generality of the foregoing, the plural form of any term that is defined in the singular shall mean collectively all items so defined, and the singular form of any term that is defined in the plural shall mean singly each item so defined. 1.3 REFERENCES. All references in this Agreement to particular sections, subsections or articles shall, unless expressly otherwise provided, or unless the context otherwise requires, be deemed to refer to the specific sections or articles in this Agreement. The words "herein", "hereof", "hereunder", "hereinabove" and other words of similar import refer to this Agreement as a whole and not to any particular section, subsection or article hereof. 1.4 ILLUSTRATIVE TERMS. Whenever the word "including", "includes" or any variation thereof is used herein, such term shall be construed as a term of illustration and not a term of limitation. For example, the term "including" shall be deemed to mean "including, without limitation", and the term "includes" shall be deemed to mean "includes, without limitation". ARTICLE 2 AGREEMENT TO SELL 2.1 AGREEMENT. Upon and subject to the terms and conditions contained in this Agreement, Seller agrees to sell to Purchaser, and Purchaser agrees to purchase from Seller, the Property, in as-is physical and environmental condition. SELLER DOES HEREBY DISCLAIM ANY AND ALL WARRANTIES OF HABITABILITY, MERCHANTABILITY AND FITNESS THAT MAY BE DUE FROM SELLER TO PURCHASER, WHETHER IN REGARD TO THE REAL PROPERTY, PERSONALTY, OTHER ASSETS, FIXTURES, OR OTHER PROPERTY TRANSFERRED PURSUANT TO THIS AGREEMENT. THIS SECTION SHALL EXPRESSLY SURVIVE THE CLOSING. 2.2 PURCHASE PRICE. The Purchase Price for the Property shall be payable as follows: (a) Purchaser has heretofore deposited with Escrowee the Deposit of $1,000,000, by wire transfer of immediately available federal funds, which, together with all interest or other earnings accrued on such sum, shall serve as earnest money for this transaction. (b) Purchaser shall, on the Closing Date, deposit the Balance of the Purchase Price in immediately available "same-day" federal funds wired for credit into the escrow account established by Escrowee for this transaction. 2.3 DEPOSIT. The Deposit shall be held by Escrowee and shall be invested by Escrowee in short term obligations of the U. S. Treasury. The interest earned on the Deposit shall accrue to the benefit of the party to this Agreement entitled to receive the Deposit pursuant to the terms of this Agreement. The Deposit and all interest thereon (which interest shall belong to Seller and shall not be credited against the Purchase Price) shall be non-refundable to Purchaser and shall be disbursed to Seller except: (i) in the case of Seller's default as set forth in Section 10.1; (ii) in the event Seller is unable to deliver title to the Property to Purchaser in accordance with the terms of this Agreement; or (iii) as otherwise specifically set forth in Section 4.3 and Article 8. 7 8 2.4 COVENANTS OF SELLER. (a) Seller agrees to request Estoppel Certificates dated after the Effective Date as to the status of the Ground Leases, signed by the respective lessors thereof. Purchaser and its lenders, if any, shall be entitled to rely upon the Estoppel Certificates by their terms, which Estoppel Certificates shall confirm that the Ground Leases are in full force and effect, and have not been modified except as described in Exhibit A, and that Seller, as the lessee thereunder, is not in default of any of the terms, covenants and conditions thereof. (b) Seller agrees to use reasonable efforts to obtain the Estoppel Certificates by the Closing Date; provided, however, that Seller shall have the right to extend the Closing Date for five (5) Business Days to secure said Estoppel Certificates. However, notwithstanding anything to the contrary, Seller's failure to secure the Estoppel Certificates shall not be a default under this Agreement, and shall not entitle Purchaser to damages or other remedy of any nature or description. As used in this Section 2.4(b), the phrase "reasonable efforts" shall mean that Seller shall send the Estoppel Certificates to the lessors thereunder within ten (10) Business Days after the Effective Date, and shall thereafter make at least two telephone calls to each such lessor in an attempt to obtain same. Purchaser shall have the right, but not the obligation, to also contact each such lessor about said Estoppel Certificates, and Seller agrees to provide Purchaser with a list of telephone numbers and contact names for such purpose. Seller and Purchaser each agree to: (i) provide the other with a copy of each Estoppel Certificate that they receive within five (5) Business Days of receipt thereof, and (ii) to exchange status reports on their progress in obtaining Estoppel Certificates on each Monday following the Effective Date. (c) Seller shall obtain any releases of Liens (other than Permitted Exceptions) and shall be obligated to pay any amount and/or to perform any act to obtain same that is otherwise required to be paid and/or performed by Seller under this Agreement. 2.5 AUTHORITY OF SELLER AND PURCHASER. Within ten (10) days after the Effective Date, (i) Seller shall deliver to Purchaser evidence that is reasonably acceptable to Purchaser that Seller has ratified and approved the transactions provided for under this Agreement, and (ii) Purchaser shall deliver to Seller evidence that is reasonably acceptable to Seller that Purchaser has ratified and approved the transactions provided for under this Agreement. ARTICLE 3 INSPECTIONS BY PURCHASER 3.1 INDEMNIFICATION BY PURCHASER. Purchaser agrees to repair any damage to the Property caused by the entry of Purchaser or any of Purchaser's agents, employees, contractors and other representatives upon the Property, and Purchaser shall indemnify, defend and hold Seller harmless from and against any and all Damages caused by or resulting from any inspections, surveys, tests, acts or omissions of Purchaser, its agents, employees, 8 9 contractors, and other representatives while at the Property. The provisions of this Section 3.1 shall survive the Closing. 3.2 LIMITATIONS ON PURCHASER'S INSPECTIONS. Any inspections, tests, studies and/or reviews of the Garage by Purchaser and its agents shall in each case be conducted so as not to unreasonably interfere with any tenant's or licensee's quiet enjoyment of, access to, use of, or business operations in the Garage. Any inspections, tests, studies and/or reviews may be observed by Seller or Seller's agents, including Broker. 3.3 CONDITION OF PROPERTY. Purchaser acknowledges that neither Seller nor any of its agents, representatives or employees, nor Broker, have made any representation or warranty of any kind or nature concerning the Property other than those representations and warranties of Seller expressly set forth in this Agreement. The provisions of this Section 3.3 shall survive the Closing. ARTICLE 4 TITLE AND SURVEYS 4.1 TITLE AND SURVEY. Seller has furnished to Purchaser a current Title Commitment relative to the Real Property and copies of matters of record reflected in the Title Commitment, together with a copy of the Survey (to be updated and re-certified) of the Real Property. On the Closing Date, Purchaser shall request delivery of the Title Policy in the insured amount equal to the Purchase Price. 4.2 LIENS. Seller shall remove at or before Closing all Liens on any of the Property that are not Permitted Exceptions including, without limitation, any delinquent taxes, assessments, interest and penalties thereon that are a Lien on the Real Property. Notwithstanding the foregoing, Seller shall have the right to cure monetary liens from sale proceeds. 4.3 APPROVAL/DISAPPROVAL OF ADDITIONAL TITLE EXCEPTIONS. Purchaser has the right to approve or disapprove any and all exceptions to title that are not shown or referenced as Permitted Exceptions in the Title Commitment or Survey ("additional title exceptions"), in the exercise of Purchaser's sole discretion, on or before ten (10) Business Days following receipt of notice of such additional title exceptions accompanied by copies of any document or instrument evidencing or referring to such additional title exceptions. If Purchaser disapproves any additional title exceptions, Purchaser shall deliver to Seller a Disapproval Notice. If Purchaser fails to give Seller such Disapproval Notice, Purchaser shall be deemed to have approved such additional title exceptions. With respect to any additional title exceptions referred to in such Disapproval Notice (such additional title exceptions being collectively referred to as "Disapproved Title Matter"), Seller shall notify Purchaser in writing within ten (10) days after receipt of the Disapproval Notice whether Seller will cause all or any Disapproved Title Matters to be removed or cured at or prior to Closing, and Seller shall be deemed to have elected to remove or cure all Disapproved Title Matters by Closing if Seller does not notify Purchaser to the contrary in writing within such ten (10) day period. If Seller elects not to remove or cure all Disapproved Title Matters, Purchaser may elect, in its sole discretion, by giving written notice to Seller with five (5) Business Days after receipt of Seller's designation of those Disapproved Title Matters, if any, that Seller will not cause to be removed or cured at or prior to Closing, either: (a) (subject to satisfaction of the other conditions to Closing) to close the purchase of the Property and take title to the Property subject to the Disapproved Title Matter (s) that Seller elects not to remove or cure, or (b) to terminate this Agreement, in which event the Deposit shall be returned to Purchaser. If Purchaser does not give such written notice within said five-day period, it shall be deemed to have elected the option in clause (b). Seller shall have thirty 9 10 (30) days (following its said election) to remove or cure any Disapproved Title Matters that it has elected to remove or cure, subject to extensions of such thirty (30)-day period as Seller may request and Purchaser, in its sole discretion, may elect to grant to Seller. The Closing Date shall be extended as necessary to permit the parties to exercise their respective rights and obligations pursuant to this Section 4.3. Notwithstanding anything contained herein to the contrary, under no circumstances may Seller refuse to cure or remove a Disapproved Title Matter which can be cured by the payment of money. 4.4 PURCHASER'S OPTIONS. If any Disapproved Title Matters that Seller has elected to remove or cure have not been removed at or prior to Closing (as same may be extended pursuant to Section 4.3 hereof), or provision for their removal or cure by Closing has not been made to Purchaser's satisfaction, Purchaser may elect, in its sole discretion: (a) (subject to satisfaction of the other conditions to Closing) to close the purchase of the Property and take title to the Property subject to any Disapproved Title Matters that have not been cured or removed at or before Closing, or (b) to terminate this Agreement, in which event the Deposit shall be returned to Purchaser. 4.5 ESCROW AND TITLE COSTS. Title insurance, survey and escrow charges, transfer taxes and other closing costs shall be paid as follows, except as otherwise expressly provided in this Agreement: (a) All real property transfer taxes, excise taxes, documentary stamps and other taxes, fees or charges imposed in connection with the conveyance of the Property, the cost of the Survey, and the fees charged by Escrowee or its agents, if any, shall be divided equally between Seller and Purchaser. (b) Purchaser shall pay all title examination (including special tax searches) and title commitment costs, the premium cost for the Title Policy, the cost of any endorsements to the Title Policy requested by Purchaser and/or any lender, and all fees, costs and expenses associated with obtaining and consummating any mortgage loan obtained by Purchaser. (c) Seller shall pay any recording fees or charges with respect to any instruments recorded in order to eliminate Liens (except Permitted Exceptions) or Disapproved Title Matters, but otherwise the payment of any other recording fees or charges with respect to the transfer of the Property to Purchaser shall be divided equally between Seller and Purchaser. (d) At the Closing, and in addition to the delivery of any required Closing Documents, Seller and Purchaser shall execute, acknowledge and deliver such returns, questionnaires, certificates, affidavits, declarations and other documents that may be required in connection with the payment of transfer taxes, sales taxes, mortgage taxes, and other taxes, fees or charges imposed by any governmental authority in connection with the transactions contemplated hereby. ARTICLE 5 CLOSING 5.1 CLOSING. Provided all conditions set forth in Sections 9.1 and 9.2 hereof have been either satisfied or waived, the Closing shall take place on the Closing Date at the office of 10 11 Arter & Hadden LLP in Cleveland, Ohio, or such other date or place as the parties shall agree; provided, however, that either party shall have the right to close by depositing its Closing Documents and funds due from it in escrow with the Escrowee, and in such case it shall not be required to attend the Closing. 5.2 SELLER CLOSING DOCUMENTS. On or before the Closing Date, or, if a deadline is specified below, by such deadline, and as a condition to Purchaser's obligation to pay the Balance of the Purchase Price, Seller shall deliver, directly to Purchaser or to Escrowee, as is specified in Section 5.4 hereof, the number of executed original counterparts specified below of each of the following documents with respect to the Garage (the "Seller Closing Documents"): (a) One counterpart of the Limited Warranty Deed transferring to Purchaser fee simple title to the Real Property in the form attached as EXHIBIT 5.2(a). (b) Four (4) counterparts of the Assignment and Assumption of Ground Leases. (c) Four (4) counterparts of the Bill of Sale. (d) Intentionally omitted. (e) Four (4) counterparts of the Assignment and Assumption of Contracts. (f) Intentionally omitted. (g) Intentionally omitted. (h) A FIRPTA affidavit, executed by Seller. (i) Four (4) counterparts of written notices (i) to tenants or licensees advising such tenants or licensees of the change of ownership and directing them to pay Rent for all periods from and after the Closing Date as directed by Purchaser; and (ii) a general notice to any party to the Contracts assigned to Purchaser advising of the transfer and assignment of Seller's interest in the Contracts to Purchaser and Purchaser's assumption thereof and directing that future inquiries be made directly to Purchaser. (j) Not later than seven (7) Business Days before the Closing Date, a resolution of Seller, certified by its secretary or an assistant secretary, authorizing the execution and delivery of this Agreement, the Seller Closing Documents and the consummation of the transactions contemplated by this Agreement, that is satisfactory to Purchaser and Title Insurer. (k) Not later than seven (7) Business Days before the Closing Date, a certificate of the secretary or an assistant secretary of Seller as to its governing documents (i.e., declaration of trust, bylaws and amendments thereto, certificate of existence and good standing, etc.) and the incumbency and authority of the Persons executing and delivering this Agreement and the Seller Closing Documents on behalf of Seller. 11 12 (l) Subject to the provisions of Section 2.4(b) hereof, the Estoppel Certificates. (m) An "owner's affidavit" relative to mechanics liens, addressed to and otherwise in form acceptable to the Title Insurer. (n) Such other documents, instruments or agreements as Seller may reasonably be required to execute and/or deliver on or prior to Closing pursuant to any provision of this Agreement, or as may reasonably be required by the Title Insurer. In addition, at or prior to Closing, Seller shall also deliver to, or at the direction of, Purchaser all keys, security codes, files, books, records, files, surveys, plans, specifications, and other written information or documents relating to the Property in Seller's possession and control. 5.3 PURCHASER CLOSING DOCUMENTS. On or before the Closing Date, or, if a deadline is specified below, by such deadline, Purchaser shall deliver, directly to Seller or to Escrowee, as is specified in Section 5.4 hereof, the number of executed original counterparts specified below of each of the following documents with respect to the Garage (the "Purchaser Closing Documents"): (a) Four (4) counterparts of the Assignment and Assumption of Ground Leases. (b) Four (4) counterparts of the Bill of Sale. (c) Intentionally omitted. (d) Four (4) counterparts of the Assignment and Assumption of Contracts. (e) Intentionally omitted. (f) Not later than seven (7) Business Days before the Closing Date, a resolution of the board of directors of Purchaser, certified by its Secretary (or, if this Agreement is transferred to a limited liability company pursuant to and in accordance with the provisions of Section 14.9 hereof, the unanimous written consent of all members of such limited liability company or the equivalent), authorizing the execution and delivery of this Agreement, the Purchaser Closing Documents and the consummation of the transactions contemplated by this Agreement, that is satisfactory to Seller and Title Insurer. (g) Not later than seven (7) Business Days before the Closing Date, a certificate of the secretary of Purchaser as to its articles of incorporation, by-laws and the incumbency and authority of the Persons (or, if this Agreement is transferred to a limited liability company pursuant to and in accordance with the provisions of Section 14.9 hereof, the certificate of the duly authorized manager thereof (whose identity and power to so act shall be substantiated by all members thereof) as to the certificate of formation, operating agreement and any other formation documents of such company, and the identity and authority of such manager) of 12 13 Purchaser executing and delivering this Agreement and the Purchaser Closing Documents on behalf of Purchaser. (h) Such other documents, instruments or agreements as Purchaser may reasonably be required to execute and/or deliver on or prior to Closing pursuant to any provision of this Agreement. 5.4 OCCURRENCE OF CLOSING. Seller shall deposit with Escrowee the Limited Warranty Deed, and Seller and Purchaser shall deposit jointly with Escrowee counterpart executed copies of the Assignment and Assumption of Ground Leases, and any documentation to be filed with any governmental office (the "Filing Documents"), accompanied by joint filing instructions setting forth the order of recording. The Closing shall be deemed to have occurred upon the completion of the following: (a) Delivery of the Filing Documents to Escrowee. (b) Delivery of the other Seller Closing Documents to Purchaser and of the other Purchaser Closing Documents to Seller; or the written acknowledgment of Escrowee that it holds all such documents and the unconditional and irrevocable written commitment of Escrowee to effect such delivery on the Closing Date. (c) Seller's receipt of the full Purchase Price, less prorations, costs and expenses properly chargeable to Seller hereunder. (d) Issuance of the Title Policy to Purchaser in strict accordance with the provisions of this Agreement or the irrevocable commitment of Title Insurer to so issue the Title Policy. 5.5 CLOSING COSTS. Closing costs shall be paid in accordance with the provisions of Section 4.5 hereof. ARTICLE 6 APPORTIONMENTS AND PAYMENTS 6.1 PRORATIONS. The following items pertaining to the Property shall be prorated or credited as of the Cutoff Date, and appropriate adjustments made to the Purchase Price on the Closing Date or at the times and in the manner set forth below: (a) RENT. Seller shall be entitled to receive and retain all Rent which is attributable to any period preceding the Closing Date. (b) TAXES. Real estate taxes and assessments, both general and special, against or encumbering the Property ("Taxes") shall be prorated on a fiscal tax year basis as of the Closing Date on the basis of the most recent ascertainable amounts of each such items, and the net credit to Purchaser shall be applied against the Purchase Price on the Closing Date. Seller shall have no right to participate in or settle any controversies or proceedings regarding Taxes which are attributable to periods subsequent to the Closing Date, but shall be entitled to receive and retain any and all refunds, reductions and settlements with respect to Taxes which are attributable to periods preceding the Closing Date. 13 14 (c) CONTRACTS. Purchaser shall be entitled to a credit against the Purchase Price for sums that are due (or accrued) and unpaid as of the Closing Date under any Contracts relating to the Property, and Seller shall be entitled to a credit to the extent that sums have been paid under any Contracts for services to be performed or goods to be delivered after the Closing Date. (d) OTHER ITEMS OF INCOME OR EXPENSE. All other items of income or expense, whether Rent, rental under the Ground Leases, utilities, or other items, shall be prorated between the parties hereto as of the Closing Date. Except with respect to expense items prorated as of and on the Closing Date, Seller shall be responsible for payment of any and all bills or charges incurred prior to the Closing Date for work, services, supplies or materials, and Purchaser shall be responsible for payment of any and all bills or charges incurred on or after the Closing Date for work, services, supplies or materials. 6.2 ADJUSTMENTS. All prepaid Rent shall be paid or credited by Seller to Purchaser on the Closing Date. 6.3 COLLECTIONS AND APPLICATION OF PAYMENTS AFTER CLOSING. After the Closing Date, Purchaser shall bill all Rent, including amounts accruing after the Closing Date but prior to the last day of the month in which the Closing occurs. Purchaser shall prepare all financial statements and data relating to the billing of such Rent, and Seller shall cooperate and assist Purchaser in preparing same as may be reasonably required and requested by Purchaser. Any Rent with respect to which Seller is entitled to receive a share under this Agreement, which is due but unpaid as of the Closing Date and which is not paid within sixty (60) days after the due date, is collectively herein called "Delinquent Amounts". Notwithstanding the foregoing, rental and other payments received by Purchaser or Seller shall be applied (a) first, towards the payment of Rent attributable to the calendar month in which the Closing Date occurs, (b) second, towards the payment of Rent attributable to periods after the Closing Date, and (c) third, towards the payment of Delinquent Amounts. Purchaser may not waive any Delinquent Amounts nor reduce amounts or charges owed for any period in which Seller is entitled to receive a share of charges or amounts, without first obtaining Seller's written consent. Seller shall have and reserves the right to pursue any remedy relative to Delinquent Amounts provided that (i) Seller shall notify Purchaser of its intent to institute any legal proceeding relating thereto not less than ten (10) Business Days prior to the institution thereof, and (ii) Seller shall not take any action which would terminate or dispossess any tenant or licensee or which would limit Purchaser's rights to pursue any remedy Purchaser may have for a default. Purchaser may, by written notice to Seller within ten (10) Business Days of receipt of Seller's notice, restrict Seller from collecting such Delinquent Amounts, but only if Purchaser first pays Seller such Delinquent Amounts in exchange for Seller's assignment to Purchaser of all Seller's rights and causes of action with respect thereto. If a tenant or licensee no longer uses or occupies a parking space in the Property, Seller shall retain all rights relating to Delinquent Amounts and shall have the unrestricted right to pursue any and all remedies relative thereto. 6.4 CLOSING AND FINAL PRORATION STATEMENTS. In connection with the foregoing prorations and adjustments, Seller and Purchaser shall prepare or cause to be prepared, the following statements: (a) CLOSING PRORATION STATEMENT. Seller shall prepare and deliver on the Closing Date a proration statement in reasonable detail showing each item prorated, allocated or adjusted in accordance with this Article 6, in 14 15 such form as fairly reflects such prorations, allocations and adjustments to the reasonable satisfaction of Purchaser and Seller (the "Closing Proration Statement"). If an item is not known as of the Closing, such item shall be prorated based on a reasonable estimate thereof, subject to final proration as provided below. (b) FINAL PRORATION STATEMENT. On or before March 31, 2001, Purchaser shall submit to Seller a final proration statement consistent with the form of the Closing Proration Statement, prepared as of the Cutoff Date but employing information available as of March 31, 2001 and certified by an officer of Purchaser as being accurate and complete and in accordance with the provisions of this Article 6, and to correctly present the final prorations and adjustments to be made in accordance with the requirements of this Article 6, and as to any amounts for which final information is not available as March 31, 2001, employing an estimate agreed to by Purchaser and Seller in their reasonable judgment (the "Final Proration Statement"). Upon issuance of the Final Proration Statement, the parties shall make such final proration payments as are thereby indicated to be due. Following Seller's receipt of the Final Proration Statement, Purchaser agrees to allow Seller, its accountants and representatives, to audit, inspect and copy those books and records in the possession and control of Purchaser which relate to the Final Proration Statement for a period of six (6) months following issuance thereof, at the place or places where they are then regularly maintained, during regular business hours and upon reasonable prior notice to Purchaser, and to discuss the subject matter thereof with Purchaser's employees and accountants. Purchaser agrees to retain such books and records for six (6) months following issuance of the Final Proration Statement, and in the event of an examination thereof that is commenced during such period by Seller, then for such additional period as is reasonably necessary to permit completion thereof and the resolution of any dispute in connection therewith. ARTICLE 7 ADDITIONAL AGREEMENTS OF SELLER AND PURCHASER 7.1 CONDUCT OF BUSINESS PRIOR TO CLOSING DATE. Prior to Closing, Seller covenants and agrees as follows: (a) Seller shall comply with (or cause to be complied with) all of the Ground Leases, all Contracts and any other agreements, instruments and easements applicable to the Property and, subject to the provisions of Article 6, pay (or cause to be paid) all taxes, assessments, utility charges and other operating costs and expenses relating to the Garage as and when due. (b) Nothing contained herein shall restrict Seller from entering into parking licenses or contracts on a month-to-month (or shorter-term) basis at rates in excess of those in effect on the Effective Date. Seller shall have the right at any time prior to Closing to exercise any or all of its legal remedies against any tenant or licensee who is in default. 15 16 (c) Seller shall operate and manage (or cause to be operated and managed) the Garage in the ordinary course of business in accordance with Seller's past practice, but subject to the terms of this Agreement, and in accordance with all applicable permits, licenses, and Laws, maintain in full force and effect through the Closing Date all material licenses, all permits (including, without limitation, all building permits and occupancy permits) such that on the Closing Date, the Garage shall be in at least as good a state of condition and repair as on the Effective Date, reasonable wear and tear and damage by fire or other casualty excepted, subject to the provisions of Article 8. (d) Except with Purchaser's prior written consent, which may be withheld for any or no reason, Seller shall not enter into any Material Contracts that will be an obligation affecting Purchaser subsequent to Closing, except for arms-length, market rate contracts with unaffiliated parties in the ordinary course of business that can be terminated upon not more than thirty (30) days notice. (e) Except with Purchaser's prior written consent, which may be withheld for any or no reason, and except for bonuses paid, if any, by Seller to Employees in an effort to retain their employment through the Closing Date, Seller shall not, (i) enter into any contract of employment with any Employee; (ii) grant any increases in the rates of pay, salaries, or other compensation of any Employees or any increase in the other benefits to which such Employees are presently entitled, other than scheduled increases for management employees consistent with Seller's compensation policies, and regular wage increases for employees paid on an hourly basis made in the ordinary course of business, as required by law and/or consistent with prior practice; or (iii) defer any portion of the compensation that would have been paid in the ordinary course of business. 7.2 INSURANCE POLICIES. Seller agrees to maintain or cause to be maintained the Insurance Policies in effect through the Closing Date. Purchaser shall secure its own insurance with respect to the Property and Seller shall have the right to terminate the Insurance Policies effective on the Closing Date. Any unearned premiums and the unabsorbed portions of any deposits with respect to the Insurance Policies shall belong solely to Seller. 7.3 EMPLOYEES. Effective as of the Closing Date, Seller shall terminate the Employees. 7.4 POSSESSION. Seller shall deliver possession of the Property to Purchaser upon the completion of the Closing, subject to the Permitted Exceptions. 7.5 MANAGEMENT INFORMATION SYSTEMS. Purchaser agrees that Seller shall retain all computer disks, databases, programs and software licenses used by Seller with respect to the Garage. 16 17 ARTICLE 8 DAMAGE OR DESTRUCTION - CONDEMNATION 8.1 NOTICE. In the event of any damage to or destruction or condemnation of any portion of the Property prior to Closing (other than de minimis damage thereto, destruction thereof, or condemnation thereof), Seller shall send written notice thereof to Purchaser within five (5) days after the date of the occurrence thereof. In the event of any damage to or destruction or condemnation of any portion of the Property prior to Closing that Seller reasonably believes would require repairs at a cost in excess of Three Million Dollars ($3,000,000.00), Seller shall send written notice to Purchaser of such occurrence within five (5) days after the date of such occurrence (the "Damage Notice"). Not later than fifteen (15) days after Seller's delivery to Purchaser of the Damage Notice, Purchaser shall determine, and shall notify Seller in writing, whether a Material Part of the Property has been damaged, or whether such taking or threatened taking has affected or will affect a Material Part of the Property. For purposes of this Article 8, Purchaser may determine that a "Material Part" of the Property has been damaged or taken if (a) in the case of damage to or destruction of any portion of the Property, the estimated cost of repairing the damage (whether or not insured) will, in Purchaser's reasonable judgment equal or exceed Three Million Dollars ($3,000,000.00), or (b) in the case of a taking or threatened taking pursuant to the power of eminent domain, the value of the Property is or will, in Purchaser's reasonable judgment, be reduced by Three Million Dollars ($3,000,000.00) or more. (a) If Purchaser determines that a Material Part of the Property has been damaged, or that a Material Part of the Property has been or will be affected by the taking or threatened taking, Purchaser may elect, by written notice delivered to Seller within fifteen (15) days after giving Seller notice of such determination, to terminate this Agreement, in which event the Deposit shall be returned to Purchaser; (b) In the case of damage to a Material Part of the Property, if Purchaser does not elect to terminate this Agreement in the manner and within the time aforesaid, Seller shall (i) deliver to Purchaser at Closing all insurance proceeds received on account of such damage, and (ii) assign to Purchaser at Closing its right to recover under any insurance policies covering such damage, and (iii) pay to Purchaser the amount of any deductibles or self-insured amounts; provided, however, that the foregoing delivery, assignment, and payment of insurance policy rights and proceeds shall not include those relating to business interruption or rent loss for the period prior to Closing; and (c) In the case of a threatened or actual taking of a Material Part of the Property, if Purchaser does not elect to terminate this Agreement in the manner and within the time aforesaid, Seller shall (i) pay and deliver to Purchaser at Closing all condemnation awards and other proceeds received in connection with the taking, and (ii) assign to Purchaser at Closing Seller's entire right, title and interest in and to all awards and other proceeds connected with the taking; provided, however, that the foregoing payment, delivery and payment of proceeds and awards shall not include those relating to revenue from the Garage for the period prior to Closing. 8.2 NON-MATERIAL DAMAGE. If the Garage suffers damage to other than a Material Part, the Closing Date shall not be extended, and Seller shall (i) deliver to Purchaser at Closing 17 18 all insurance or condemnation proceeds received on account of such damage or taking (other than those relating to business interruption, rent loss and revenue for the period prior to the Closing) and (ii) assign to Purchaser at Closing Seller's right to recover such insurance or condemnation proceeds, and (iii) pay to Purchaser the amount of any deductibles or self-insured amounts. 8.3 LOSS ADJUSTMENTS. The Closing Date shall be extended as necessary to permit Purchaser and Seller to exercise their rights within the time periods set forth in this Article 8. In connection with any claim with respect to insurance or condemnation proceeds pursuant to this Article 8, Seller shall not settle or approve settlement of any claim without Purchaser's prior written consent, which consent shall not be unreasonably withheld or delayed, and Purchaser and Seller shall fully cooperate with each other in prosecuting diligently the recovery of any such claim(s). ARTICLE 9 CONDITIONS TO CLOSING 9.1 CONDITIONS TO SELLER'S OBLIGATIONS. The obligations of Seller under this Agreement are subject to satisfaction on or prior to the Closing Date of the conditions set forth in this Section 9.1. Each such condition is solely for the benefit of Seller and may be waived in whole or in part by Seller in its sole discretion by written notice to Purchaser: (a) Purchaser has performed and complied with all of its obligations under this Agreement that are to be performed or complied with by Purchaser prior to or on the Closing Date. (b) Intentionally Omitted. (c) Neither Purchaser nor Seller, as the case may be, has terminated this Agreement pursuant to any right of termination set forth herein. (d) Purchaser has delivered the Purchaser Closing Documents and paid the Balance of the Purchase Price to Seller. (e) On or prior to the Closing Date: (i) Purchaser shall not have applied for or consented to the appointment of a receiver, trustee or liquidator for itself or any of its assets unless the same shall have been discharged prior to the Closing Date, and no such receiver, liquidator or trustee shall have otherwise been appointed, (ii) Purchaser shall not have admitted in writing an inability to pay its debts as they mature, (iii) Purchaser shall not have made a general assignment for the benefit of creditors, (iv) Purchaser shall not have been adjudicated bankrupt or insolvent, or had a petition for reorganization granted with respect to Purchaser, or (v) Purchaser shall not have filed a voluntary petition seeking reorganization or an arrangement with creditors or taken advantage of any bankruptcy, reorganization, insolvency, readjustment or debt, dissolution or liquidation law or statute, or filed an answer admitting the material allegations of a petition filed against it in any proceeding under any of the foregoing laws unless the same shall have been dismissed, canceled or terminated prior to the Closing Date. (f) Purchaser shall have delivered evidence to Seller of its ratification and approval of its purchase of the Property, and Seller shall have ratified and 18 19 approved the sale of the Property, all pursuant to and in accordance with the provisions of Section 2.5 hereof. (g) The Title Insurer shall issue the Title Policy pursuant to and in strict accordance with the provisions of this Agreement. 9.2 CONDITIONS TO PURCHASER'S OBLIGATIONS. The obligations of Purchaser under this Agreement are subject to satisfaction on or prior to the Closing Date of the conditions set forth in this Section 9.2. Each such condition is solely for the benefit of Purchaser and may be waived in whole or in part by Purchaser in its sole discretion by written notice to Seller: (a) Seller has performed and complied with all of its obligations under this Agreement that are to be performed or complied with by Seller prior to or on the Closing Date. (b) Neither Purchaser nor Seller, as the case may be, shall have terminated this Agreement pursuant to any right of termination set forth herein. (c) Seller shall have delivered the Seller Closing Documents and the Estoppel Certificates; provided, however, that if all Estoppel Certificates, containing the information and confirming the matters required by this Agreement, are not delivered on the Closing Date, Purchaser agrees that Seller shall, in lieu of providing Estoppel Certificates from the lessors under the Ground Leases, have the right and option, in its discretion, to (i) itself execute and deliver to Purchaser such missing Estoppel Certificates and (ii) furnish a certificate of Key Trust Company, N.A. ("Key Trust"), as rental collection agent for the lessors under the Ground Leases, to the effect that, to Key Trust's knowledge, all ground rental has been paid by Seller under the Ground Leases in a timely manner and no ground rental remains unpaid, and Purchaser agrees to accept same in the same manner and with like effect as though the missing Estoppel Certificates were executed by the lessor(s) under the Ground Leases (as the case may be). (d) On or prior to the Closing Date: (i) Seller shall not have applied for or consented to the appointment of a receiver, trustee or liquidator for itself or any of its assets unless the same shall have been discharged prior to the Closing Date, (ii) Seller shall not have admitted in writing an inability to pay its debts as they mature, (iii) Seller shall not have made a general assignment for the benefit of creditors, (iv) Seller shall not have been adjudicated bankrupt or insolvent, or had a petition for reorganization granted with respect to Seller, or (v) Seller shall not have filed a voluntary petition seeking reorganization or an arrangement with creditors or taken advantage of any bankruptcy, reorganization, insolvency, readjustment of debt, dissolution or liquidation law or statute, or filed an answer admitting the material allegations of a petition filed against it in any proceedings under law, or had any petition filed against it in any proceeding under any of the foregoing laws unless the same shall have been dismissed, canceled or terminated prior to the Closing Date. (e) The Title Insurer shall be irrevocably bound to issue the Title Policy pursuant to and in strict accordance with the provisions of this Agreement. 19 20 (f) The representation set forth in Section 13.1(d) of this Agreement shall be true and correct at and as of the Closing Date as though such representation was made at and as of the Closing Date. 9.3 FAILURE OF CONDITIONS - DEPOSIT. If any of the conditions to the obligations of (a) Seller under Sections 9.1(f) (as to only the approval of Seller), and (g) (but only if the Title Insurer will not issue the Title Policy because of the acts or omissions of Seller, or if Seller, through no fault of Purchaser, is otherwise unable to convey the Property subject only to the Permitted Exceptions), or (b) Purchaser under Sections 9.2(a), (c), (d), (e) (but only if the Title Insurer will not issue the Title Policy because of the acts or omissions of Seller, or if Seller through no fault of Purchaser, is otherwise unable to convey the Property subject only to the Permitted Exceptions) and (f) are not satisfied or waived by such party on or prior to the Closing Date, then the Deposit shall be promptly returned to Purchaser and this Agreement shall thereupon be null and void and of no further force or effect. ARTICLE 10 DEFAULT 10.1 SELLER'S DEFAULT. If Seller shall fail to observe and/or perform any of its obligations hereunder, and if such failure is not cured within ten (10) days after written notice to Seller specifying such failure, Purchaser shall have the right to elect as its sole and exclusive remedy either to (a) proceed to Closing without any reduction or abatement of the Purchase Price and without any claim against Seller with respect to such failure, or (b) terminate this Agreement, in which event the Deposit shall be promptly returned to Purchaser, together with the amounts paid to third parties by Purchaser in connection with its negotiation of this Agreement, any activities on the Property, its activities in procuring financing for the transaction provided for in this Agreement, and in preparing for Closing hereunder, evidence of which that is reasonably satisfactory to Seller to be provided promptly to Seller upon written request as a condition to payment therefor. In addition to the foregoing amounts, if the conditions to Seller's obligations set forth in Section 9.1 are met and thereafter Seller refuses to complete the transactions provided for in this Agreement, and in lieu of (or in addition to) refinancing the Property, Seller thereafter sells, conveys and transfers all or substantially all of the Property to a third party within one hundred eighty (180) days after the Closing Date for a gross consideration in excess of the Purchase Price (an "Alternate Sale"), then in addition to the return of the Deposit and payment of the aforesaid amounts. Seller also agrees to pay to Purchaser the positive difference between the Purchase Price and the gross consideration paid to Seller by such third party for such Property. The amounts payable to Purchaser under this Section 10.1 are herein collectively referred to as "Purchaser's Damages". Purchaser covenants and agrees not to seek or attempt to seek any remedies for Seller's default other than those specifically provided to Purchaser herein, including specific performance or any other equitable remedies, and shall not have the right to file any notice of lis pendens, all such rights and remedies being hereby waived. Notwithstanding anything to the contrary, if (i) Purchaser sues Seller with respect to an Alternate Sale and, after any final appeals or determination, does not obtain an order or judgment against Seller, or (ii) if Purchaser breaches the provisions of the immediately preceding paragraph above, then Seller's remedies with respect to either (i) or (ii) (but no others) shall not be limited by the provisions of Sections 10.2 and 10.3 hereof. 10.2 PURCHASER'S DEFAULT. If Purchaser shall fail to observe and/or perform any of its obligations hereunder including, without limitation, Purchaser's failure to close due to 20 21 insufficient funds, and if such default is not cured within ten (10) days after written notice to Purchaser specifying such default, Seller shall have the right at its election and as its sole and exclusive remedy either to: (a) waive such default and proceed to Closing notwithstanding such default by Purchaser, or (b) terminate this Agreement, in which event the Deposit shall be promptly paid to Seller as full and complete liquidated damages (and not as a penalty or forfeiture) in lieu of any and all other legal and equitable rights and remedies that Seller may have hereunder or at law or in equity, and neither party shall thereupon have any claims against or liability to the other hereunder or otherwise. 10.3 LIQUIDATED DAMAGES. (a) Purchaser and Seller acknowledge that, in the event that Purchaser shall fail or refuse to perform its obligation to close the purchase and sale contemplated by this Agreement after expiration of the applicable notice and cure periods, Seller will suffer damages. The exact amount of such damages are and will be difficult to ascertain with certainty, and, accordingly, Purchaser and Seller agree that the Deposit shall constitute liquidated damages for Purchaser's default in its obligations to close the purchase and sale contemplated by this Agreement after expiration of the applicable notice and cure periods. Notwithstanding that Seller's actual damages would be uncertain and difficult to ascertain, Purchaser and Seller agree that the Deposit is reasonable and bears a relationship to the damages that Seller might sustain in the event of Purchaser's default under this Agreement. Purchaser and Seller agree that the Deposit is not intended to be, and in no event should be construed to be, a penalty, but is intended as fixed damages agreed to by the parties as settlement of damages in advance. Seller hereby agrees that its receipt of the Deposit in the event of Purchaser's failure or refusal to perform its obligation to close under this Agreement is the sole and exclusive right or remedy that Seller has, or may be entitled to exercise or pursue, against Purchaser, whether at law or in equity, as to such failure or refusal. (b) Purchaser and Seller acknowledge that, in the event that Seller shall fail or default in its obligation to close the purchase and sale contemplated by this Agreement after expiration of the applicable notice and cure periods, Purchaser will suffer damages. The exact amount of such damages are and will be difficult to ascertain with certainty, and, accordingly Purchaser and Seller agree that the Purchaser's Damages shall constitute liquidated damages for Seller's default in its obligations to close the purchase and sale contemplated by this Agreement after expiration of the applicable notice and cure periods. Notwithstanding that Purchaser's actual damages would be uncertain and difficult to ascertain, Purchaser and Seller agree that Purchaser's Damages are reasonable and bear a relationship to the damages that Purchaser might sustain in the event of Seller's default under this Agreement. Purchaser and Seller agree that Purchaser's Damages are not intended to be, and in no event should be construed to be, a penalty, but are intended as fixed damages agreed to by the parties as settlement of damages in advance. Purchaser hereby agrees that its receipt of Purchaser' Damages in the event of Seller's failure or default in its obligation to close under this Agreement is the sole and exclusive right or remedy that Purchaser has, or may be entitled to exercise or pursue, against Seller, whether at law or in equity, as to such failure or default. 21 22 10.4 CLOSING IS A WAIVER. (a) In the event that Closing shall actually occur, then the occurrence of such Closing shall be deemed a complete waiver by Purchaser of all of its rights to make any claim for Seller's failure to observe and/or perform any of its obligations under this Agreement that are required to be observed and/or performed prior to or on the Closing Date. (b) In the event that Closing shall actually occur, then the occurrence of such Closing shall be deemed a complete waiver by Seller of all of its rights to make any claim for Purchaser's failure to observe and/or perform any of its obligations under this Agreement that are required to be observed and/or performed prior to or on the Closing Date. ARTICLE 11 BROKERAGE COMMISSIONS Seller and Purchaser represent and warrant each to the other that they have not dealt with any real estate broker, sales person or finder in connection with this transaction other than Broker, and no other person initiated or participated in the negotiation of this Agreement or showed the Property to Purchaser, and to the knowledge of Seller and Purchaser, except for any obligations to Broker, there are no real estate brokerage commissions, finder's fees, or other similar fees due any person or entity on account of or as a result of this transaction, except as set forth herein. Seller and Purchaser each agree to indemnify, defend and hold the other harmless from and against any loss, cost, liability, damage or expense suffered or incurred by the other party as a result of a claim or claims for brokerage commissions, finder's fees or other similar fees from any Person that is based on the act or omission of the party in breach of the above warranty. Seller shall pay all commissions, finder's fees or other similar expenses or fees of the Broker upon transfer of title to the Property, in full satisfaction of all obligations to Broker hereunder or otherwise. ARTICLE 12 NOTICES 12.1 NOTICES. Any notice, request, demand, instruction or other document or communication to be given or served hereunder or under any document or instrument executed pursuant hereto shall be in writing and shall be deemed to be delivered: (a) upon personal delivery to and receipt by the person to whom delivered (including, without limitation, delivery to and/or receipt by confirmed telecopy), or (b) four (4) days after deposit in United States registered or certified mail, return receipt requested, postage prepaid, or (c) one (1) Business Day after deposit with a nationally recognized overnight express courier for next day delivery, in each case addressed to the parties at their respective addresses (or telecopy numbers, as applicable) set forth below: 22 23 If to Seller: First Union Real Estate Equity and Mortgage Investments 551 Fifth Avenue, Suite 1416 New York, New York 10136 Attention: David Schonberger Telecopy No.: (212) 905-1102 With a simultaneous First Union Real Estate Equity and Mortgage copy to: Investments 55 Public Square, Suite 1111 Cleveland, Ohio 44113 Attention: Don Craven Telecopy No: (216) 621-4038 And with a simultaneous Arter & Hadden LLP copy to: 1100 Huntington Building 925 Euclid Avenue Cleveland, Ohio 44115 Attention: Daniel K. Wright, II Lee A. Chilcote Telecopy No.: (216) 696-2645 If to Purchaser: Northeastern Security Development Corp. c/o Armand Lasky 336 Atlantic Avenue, 3rd Floor East Rockaway, New York 11518 Telecopy No.: (516) 569-7423 With a simultaneous Jehoshua Graff copy to: Sukenik Segal & Graff, P.C. 417 Fifth Avenue New York, New York 10016 Telecopy No.: (212) 481-5520 Any such notice, request, demand, instruction or other document or communication will be deemed delivered if given or served as hereinabove provided by one of the attorneys for parties to this Agreement. 12.2 CHANGE OF ADDRESS. A party may change its address and telecopy number for receipt of notices by service of a notice of such change in accordance herewith. ARTICLE 13 SELLER'S REPRESENTATIONS 13.1 SELLER'S REPRESENTATIONS. Seller represents to Purchaser that, to Seller's knowledge, as of the Effective Date: (a) Contracts. Exhibit C is a true, correct and complete list of all Contracts, true, correct and complete copies of which have been delivered to Purchaser. 23 24 (b) Personalty. Exhibit D is a true, correct and complete list of all Personalty. (c) Compliance with Law. Except as described or referred to in the Property Condition Report and the Phase I Environmental Site Assessment, each prepared for Paine Webber Real Estate Securities by National Assessment Corporation, bearing respectively Project Nos. 00-2480.5 and 00-2480.1, and heretofore furnished to Purchaser, Seller has not received any notices from any governmental entities or agencies alleging that any Property does not comply with Laws (including Environmental Law) in any material respect that remain uncured. (d) Employees. Seller has no Employees. (e) Condemnation. Seller has received no notice from any governmental authority that any condemnation or eminent domain proceeding has been filed or is contemplated against the Property. (f) Insurance Requirements. Seller has not received notice from any insurance company currently insuring the Property that would require work to be performed on or about the Property as a condition to continuance or renewal of any policy of insurance on the Property. As used herein, the phrase "Seller's knowledge" means the actual present knowledge of Daniel Friedman, President of Seller, David Schonberger, Executive Vice President of Seller, and Don Craven, the Asset Manager assigned to the Garage on the Effective Date. ARTICLE 14 MISCELLANEOUS 14.1 HEADINGS; EXHIBITS. The headings of the various Articles and Sections of this Agreement have been inserted solely for purposes of convenience, are not part of this Agreement, and shall not be deemed in any manner to modify, explain, expand or restrict any of the provisions of this Agreement. All Schedules and Exhibits that are attached hereto are made a part hereof. All terms defined herein shall have the same meanings in the Schedules and Exhibits, except as otherwise provided therein. 14.2 INVALIDITY. If any term, provision or condition of this Agreement is found to be or is rendered invalid or unenforceable, it shall not affect the remaining terms, provisions and conditions of this Agreement, and each and every other term, provision and condition of this Agreement shall be valid and enforceable to the fullest extent permitted by law. 14.3 GOVERNING LAW. This Agreement shall, in all respects, be governed, construed, applied and enforced in accordance with the laws of the State of Ohio. 14.4 NO THIRD PARTY BENEFICIARY. This Agreement is not intended to give or confer any benefits, rights, privileges, claims, actions or remedies to any person or entity as a third party beneficiary under any statutes, laws, codes, ordinances, rules, regulations, orders, decrees or otherwise. 14.5 ENTIRETY AND AMENDMENTS. This Agreement contains the entire agreement among the parties hereto with respect to its subject matter and supersedes all negotiations, prior discussions, agreements, letters of intent and understandings between Seller, Purchaser, and their respective employees, agents and representatives, all of same being merged herein 24 25 and extinguished. This Agreement may be amended, modified and/or supplemented only by an instrument in writing executed by the party against whom enforcement is sought. This Agreement has been drafted through a joint effort of the parties and, therefore, shall not be construed in favor of or against either of the parties, but shall be construed in accordance with its fair meaning. 14.6 EXECUTION IN COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, and all of such counterparts shall constitute one agreement. Signature pages may be detached from the counterparts and attached to a single copy of this Agreement to physically form one document. 14.7 EXTENSION OF PERFORMANCE. Whenever under the terms of this Agreement the time for performance of a covenant or condition falls upon a day that is not a Business Day, such time for performance shall be extended to the next Business Day. Otherwise, unless a provision of this Agreement specifically refers to Business Days, all references in this Agreement to days shall mean calendar days. 14.8 TIME. Time is of the essence in the performance of each and every term, provision, and condition contained in this Agreement. 14.9 ASSIGNMENT. This Agreement may not be assigned by Purchaser without the prior written consent of the Seller; provided, however, that Purchaser shall have the right and option, by written notice given to Seller at least five (5) Business Days prior to the Closing Date, to nominate another Person to take and hold title to the Property, and may thereupon assign its right, title, interest, obligations and liabilities under this Agreement to such Person, without Seller's consent, on the following conditions: (a) such assignment shall be by written instrument that conforms to the requirements of this Section 14.9 and provides for the full assumption by such Person of all obligations and liabilities of Purchaser under this Agreement, and (b) upon any such assignment, all references in this Agreement to "Purchaser" shall be deemed to refer only to such assignee, and all rights, obligations, and liability of the Purchaser named herein shall apply to and bind such assignee, and the written instrument referred to hereinabove shall so provide. 14.10 CONFIDENTIALITY. (a) Prior to Closing, the Confidential Information shall be treated as confidential, and shall be maintained confidential, except as otherwise required by law by Purchaser and its employees, agents, contractors, attorneys, representatives and such other parties as Purchaser may disclose same to in connection with its activities hereunder, any such disclosure to non-parties in all events to be subject to this confidentiality provision. Prior to Closing, Purchaser agrees to use such Confidential Information only for the purpose of this transaction, and for no other purpose, and to cause all parties to whom it may disclose Confidential Information to also so agree. Purchaser acknowledges that possession of Confidential Information relating to Seller may impose upon it and all others to whom such Confidential Information is disclosed the status of "Insider" (as defined under the securities law of the United States) with respect to securities of Seller governed by such laws, and Purchaser and such others shall not engage in any transactions in such securities during the term of this Agreement, nor thereafter for a period of three (3) years from the Effective Date. 25 26 (b) Purchaser shall not contact Aid Association for Lutherans, Seller's current Lender on the Property, without First Union's express written approval, which approval may be granted or denied in Seller's sole discretion. 14.11 LIMIT OF TRUSTEE'S LIABILITY. Notwithstanding anything contained herein to the contrary, this Agreement is made and executed on behalf of Seller by its officers on behalf of the trustees thereof, and none of the trustees nor any additional or successor trustee hereunder appointed, nor any beneficiary, officer, employee or agent of Seller shall have any liability in his personal or individual capacity, but instead, all parties shall look solely to the property and assets of Seller for satisfaction of all claims of any nature in connection with this Agreement. 14.12 SUCCESSORS AND ASSIGNS. All terms, covenants, conditions and provisions of this Agreement shall be binding upon, and shall inure to the benefit of, the parties hereto and their respective heirs, devisees, executors, administrators, legal representatives, and permitted successors-in-interest and assigns. 14.13 WAIVER. (a) One or more waivers of any term, covenant or condition of this Agreement by any party shall not be construed as a waiver of any subsequent breach of the same or any other term, covenant or condition; nor shall any delay or omission by any party in seeking a remedy for any breach of this Agreement, or in exercising any right accruing to such party by reason of any such breach, be deemed a waiver by such party of its rights or remedies with respect to such breach. (b) A party's consent to or approval of any act or omission by any other party which requires such consent or approval shall not be deemed to waive or render unnecessary the requirement for such consent or approval with respect to any subsequent similar act or omission. (c) The failure of any party to insist upon the strict performance of any provision of this Agreement, or the failure of any party to exercise any right, option or remedy hereby reserved or granted, shall not be construed as a waiver for the future of any such provision, right, option or remedy, or as a waiver of any subsequent breach thereof, or as an alteration or modification of this Agreement. (d) No provision of this Agreement shall be deemed to have been waived unless such waiver shall be in writing, signed by the party against whom such waiver is sought to be enforced. (e) The receipt by any party of any amount of money or other property with knowledge of a breach of any provision of this Agreement shall not be deemed a waiver of such breach. No payment to or receipt by any party of a lesser amount than may be due it hereunder shall be deemed to be other than on account of the earliest amount then unpaid, nor shall any endorsement or statement on any check or in any letter accompanying any check or payment by a party to another party be deemed an accord and satisfaction, and any party may strike or disregard any such endorsement or statement and accept such check or payment without prejudice to such party's right to recover the balance of any amounts due, 26 27 and such party may thereafter pursue any other right or remedy provided under this Agreement or at law or in equity. 14.14 ATTORNEYS FEES. Notwithstanding the provisions of Article 10 hereof, if (x) any litigation is commenced between the parties concerning any provision of this Agreement or any rights or duties of any person or entity relative thereto, or (y) any party institutes any proceeding in any bankruptcy or similar court which has jurisdiction over any party (or any or all of its property or assets), then (xx) the party prevailing in such litigation, or (yy) the non-bankrupt party (as the case may be) shall be entitled, in addition to damages permitted under Article 10 hereof and such other and further relief as may be granted, to all costs incurred in enforcing and defending its rights and remedies under this Agreement, including but not limited to reasonable attorneys' fees, out-of-pocket costs and expenses, and court costs, together with interest on the foregoing from the date same are incurred until fully repaid at the rate of 18% per annum, or such lesser rate of interest as may from time to time be the maximum rate of interest which may, under the circumstances, be charged under applicable law. 14.15 AGREEMENT NOT TO BE RECORDED. Seller and Purchaser agree that neither party will file this Agreement for record in the official real estate records of the county in which the Property is located. 14.16 ESCROW INSTRUCTIONS. By executing this Agreement, Seller, Purchaser and Escrowee agree as follows: (a) If any disagreement or dispute shall arise between the parties hereto and/or any other persons resulting in adverse claims and demands being made for the Deposit, whether or not litigation has been instituted, then and in any such event, Escrowee shall refuse to comply with any claims or demands on it and continue to hold the Deposit until Escrowee receives either (i) a written notice signed by both Seller and Purchaser directing the disbursement of the Deposit, or (ii) a final order of a court of competent jurisdiction, entered in a proceeding in which Seller, Purchaser and Escrowee are named as parties, directing the disbursement of the Deposit, in either of which events Escrowee shall then disburse the Deposit in accordance with said direction. Escrowee shall not be or become liable in any way or to any person for its refusal to comply with any such claims or demands until and unless it has received a direction of the nature described in (i) or (ii) above, and upon (i) or (ii) above, Escrowee shall be released of and from all liability hereunder. (b) Anything to the contrary notwithstanding, Escrowee, on notice to Seller and Purchaser, (i) may take such affirmative steps as it may, at its option, elect in order to terminate its duties as escrow agent hereunder including, but not limited to, the deposit of the Deposit with a court of competent jurisdiction and the commencement of an action for interpleader, the costs thereof to be borne by whichever of Seller or Purchaser is the losing party, or, (ii) in the event litigation between Seller and Purchaser over entitlement to the Deposit has commenced, may deposit the Deposit with the clerk of the court in which said litigation is pending. Upon the taking by Escrowee of either of the actions described in (i) or (ii) above, Escrowee shall be released of and from all liability hereunder except for any previous actions or omissions taken or suffered by Escrowee in bad faith, in willful disregard of its obligations under this Agreement, or involving gross negligence on the part of Escrowee. 27 28 (c) Seller and Purchaser acknowledge that Escrowee is acting solely as a stakeholder at their request and for their convenience, that Escrowee shall not be deemed to be the agent of either of the parties, and that Escrowee shall not be liable to Seller or Purchaser for any act or omission on its part unless taken or suffered in bad faith, in willful disregard of its obligations under this Agreement, or involving gross negligence. Seller and Purchaser shall jointly and severally indemnify and hold Escrowee harmless from and against all costs, claims and expenses, including reasonable attorneys' fees, incurred in connection with the performance of Escrowee's duties hereunder, except with respect to actions or omissions taken or suffered by Escrowee in bad faith, in willful disregard of its obligations of this Agreement or involving gross negligence on the part of Escrowee. (d) A signed copy of this Agreement shall serve as escrow instructions to Escrowee, together with any additional instructions hereafter furnished by Seller and Purchaser, to the extent not inconsistent herewith. (e) The validity and enforceability of this Agreement and of any amendment hereto as between Purchaser and Seller shall not be affected by whether or not the Escrowee shall have executed this Agreement. 14.17 SURVIVAL. The following provisions of this Agreement shall survive the Closing and delivery and filing for record of the Seller Closing Documents, and shall not be merged therein or extinguished thereby: Articles 1, 6, 11, 12, 13 and 14 and Sections 2.1, 3.1 and 3.3; provided, however, that the provisions of Article 13 shall only survive for a period of one hundred eighty (180) days following the Closing Date. 14.18 EFFECTIVENESS. This Agreement is forwarded by Seller to Purchaser for its approval and execution upon the understanding and condition that it shall not become effective until (i) it is approved and executed by Seller, and (ii) Escrowee receives the Deposit. [PAGE 28, THE SIGNATURE PAGE, FOLLOWS] 28 29 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the Effective Date. SELLER: FIRST UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS an Ohio business trust By: /s/ David Schonberger ------------------------------------ David Schonberger, Executive Vice President PURCHASER: NORTHEASTERN SECURITY DEVELOPMENT CORP., a New York corporation By: /s/ Armand Lasky ------------------------------------ Name: Armand Lasky ----------------------------- Title: President ----------------------------- Attest: /s/ Jehoshua Graff -------------------------------- Name: Jehoshua Graff ------------------------- Title: Secretary ------------------------- R E C E I P T Receipt of a counterpart of the foregoing Agreement is hereby acknowledged, and the undersigned agrees to act as Escrowee in accordance with the provisions thereof. LANDAMERICA NATIONAL COMMERCIAL SERVICES By: /s/ Deborah Lawrence - Auten ------------------------------------ Title: Vice President --------------------------------- Date: 10/25/00 ------------------------ Escrow No.: 64890 ------------------ 29 EX-27 10 y42691ex27.txt FINANCIAL DATA SCHEDULE
5 0000037008 FIRST UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS 1 DOLLARS 9-MOS DEC-31-2000 JAN-01-2000 SEP-30-2000 1 25,953,000 0 4,321,000 (771,000) 5,438,000 0 296,875,000 (69,172,000) 476,891,000 0 329,415,000 0 23,171,000 41,046,000 66,976,000 476,891,000 0 44,061,000 6,410,000 23,800,000 10,059,000 0 19,087,000 0 0 (7,191,000) 0 (5,459,000) 0 45,330,000 1.09 .98
EX-99 11 y42691ex99.txt FINANCIAL STATEMENTS 1 FIRST UNION REAL ESTATE EQUITY and MORTGAGE INVESTMENTS Exhibit 99 Combined Balance Sheets (In thousands, except shares)
September 30, 2000 December 31, (Unaudited) 1999 ----------- ---- ASSETS Investments in real estate Land $ 47,292 $ 53,028 Buildings and improvements 249,583 271,223 ------------ ------------ 296,875 324,251 Less - Accumulated depreciation (69,172) (75,161) ------------ ------------ Total investments in real estate 227,703 249,090 Investment in joint venture - 1,786 Mortgage loans and notes receivable 1,483 5,426 Other assets Cash and cash equivalents - unrestricted 21,441 45,005 - restricted 4,512 12,836 Accounts receivable and prepayments, net of allowances of $771 and $496, respectively 3,550 10,386 Investments 209,914 104,013 Inventory 5,438 3,395 Unamortized debt issue costs 1,844 4,479 Other 1,006 1,629 Net assets of discontinued operations - 64,747 ------------ ------------ Total assets $ 476,891 $ 502,792 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities Mortgage loans $ 166,764 $ 195,051 Notes payable 150,113 75,628 Senior notes 12,538 12,538 Accounts payable and accrued liabilities 13,243 37,776 Deferred obligation - 10,579 Deferred items 3.040 1,510 ------------ ------------ Total liabilities 345,698 333,082 ------------ ------------ Shareholders' equity Preferred shares of beneficial interest, $25 liquidation preference, 2,300,000 shares authorized, 984,800 and 1,349,000 shares outstanding in 2000 and 1999 23,171 31,737 Shares of beneficial interest, $1 par, unlimited authorization, outstanding 41,046 42,472 Additional paid-in capital 216,269 218,831 Undistributed loss from operations (149,293) (123,322) Deferred compensation - (8) ------------ ------------ Total shareholders' equity 131,193 169,710 ------------ ------------ Total liabilities and shareholders' equity $ 476,891 $ 502,792 ============ ============
16 2 FIRST UNION REAL ESTATE EQUITY and MORTGAGE INVESTMENTS Exhibit 99 Combined Statements of Operations Unaudited (In thousands, except per share data)
Three Months Ended Nine Months Ended September 30, September 30, 2000 1999 2000 1999 ---- ---- ---- ---- Revenues Rents $11,346 $22,945 $ 37,195 $ 85,636 Sales 2,063 1,429 6,642 3,152 Interest - Mortgage loans 43 116 193 346 - Short-term investments 3,119 763 7,654 1,364 Dividends 338 - 450 - Equity in loss from joint venture (33) (45) (148) (18) Other income - 655 179 968 ------- ------- -------- -------- 16,876 25,863 52,165 91,448 ------- ------- -------- -------- Expenses Property operating 3,207 7,874 10,306 28,671 Cost of goods sold 1,976 1,627 6,410 3,727 Real estate taxes 1,180 1,932 4,324 7,979 Depreciation and amortization 2,948 4,536 9,170 19,401 Interest - Mortgage loans 4,006 6,956 13,330 20,959 - Notes payable 2,290 69 4,922 4,200 - Senior notes 279 279 835 835 - Bank loans and other - 438 - 4,445 General and administrative 2,158 3,671 10,059 8,910 Unrealized loss on carrying value of assets identified for disposition and impaired assets - - - 9,002 ------- ------- -------- -------- 18,044 27,382 59,356 108,129 ------- ------- -------- -------- Loss before capital gains, extraordinary loss from early extinguishment of debt, loss from discontinued operations and preferred dividend (1,168) (1,519) (7,191) (16,681) Capital gains 772 118 59,913 27,907 Extraordinary loss from early extinguishment of debt - - (5,459) - ------- ------- -------- -------- (Loss) income before loss from discontinued operations and preferred dividend (396) (1,401) 47,263 11,226 Loss from discontinued operations - (154) - (1,763) ------- ------- -------- -------- Net (loss) income before preferred dividend (396) (1,555) 47,263 9,463 Preferred dividend (517) (708) (1,933) (2,124) ------- ------- -------- -------- Net (loss) income attributable to shares of beneficial interest $ (913) $ (2,263) $ 45,330 $ 7,339 ======= ======== ======== ======== Per share data Basic weighted average shares 41,751 43,554 42,229 35,520 ======= ======== ======== ======== Diluted weighted average shares 46,596 48,019 48,258 39,985 ======= ======== ======== ======== (Loss) income before extraordinary loss and loss from discontinued operations, basic $ (0.02) $ (0.05) $ 1.22 $ 0.26 Extraordinary loss from early extinguishment of debt, basic - - (0.13) - Loss from discontinued operations, basic - - - (0.05) ------- ------- -------- -------- Net (loss) income applicable to shares of beneficial interest, basic $ (0.02) $ (0.05) $ 1.09 $ 0.21 ======= ======== ======== ======== (Loss) income before extraordinary loss and loss from discontinued operations, diluted $ (0.02) $ (0.05) $ 1.09 $ 0.26 Extraordinary loss from early extinguishment of debt, diluted - - (0.11) - Loss from discontinued operations, diluted - - - (0.05) ------- ------- -------- -------- Net (loss) income applicable to shares of beneficial interest, diluted $ (0.02) $ (0.05) $ 0.98 $ 0.21 ======= ======== ======== ======== Combined Statements of Comprehensive Income Net (loss) income $ (913) $ (2,263) $ 45,330 $ 7,339 Other comprehensive income Foreign currency translation adjustment - 31 - 162 ------- ------- -------- -------- Comprehensive (loss) income $ (913) $ (2,232) $ 45,330 $ 7,501 ======= ======== ======== ========
17 3 FIRST UNION REAL ESTATE EQUITY and MORTGAGE INVESTMENTS Exhibit 99 Combined Statements of Cash Flows Unaudited (In thousands)
Nine Months Ended September 30, ------------------- 2000 1999 ---- ---- Cash provided by operations Net income before preferred dividend $ 47,263 $ 9,463 Adjustments to reconcile net income before preferred dividend to net cash provided by operations Depreciation and amortization 9,178 19,401 Loss from discontinued operations - 1,763 Extraordinary loss from early extinguishment of debt 5,459 - Unrealized loss on carrying value of assets identified for disposition and impaired assets - 9,002 Capital gains (59,913) (27,907) Increase (decrease) in deferred items 2,495 (2,270) Net changes in other assets and liabilities 106 3,858 ------------ ---------- Net cash provided by operations 4,588 13,310 ------------ ---------- Cash (used for) provided by investing Principal received from mortgage investments 3,866 43 Net proceeds from sale of real estate 2,451 158,071 Proceeds from sale of fixed assets 175 - Proceeds from sale of investment in joint venture 2,410 - Purchase of investments (1,109,231) - Sale of investments 1,003,668 - Sale of InnerTec - 648 Investments in capital and tenant improvements (7,118) (7,012) ------------ ---------- Net cash (used for) provided by investing (103,779) 151,750 ------------ ---------- Cash provided by (used for) financing Decrease in short-term loans - (101,000) Increase (decrease) in notes payable 100,985 (94,865) Increase in mortgage loans 50,000 37,100 Repayment of mortgage loans - Normal payments (1,098) (2,705) - Balloon payments (1,000) (3,618) Payment of deferred obligation (10,579) - Deferred obligation repayment penalty (3,092) (340) Payments for Impark spin-off (37,087) - Purchase of First Union common shares (4,150) (7,989) Purchase of First Union preferred shares (7,739) - Income from variable stock options (666) - Sale and employee option exercises of First Union shares - 46,476 Debt issue costs paid (567) (3,273) Dividends paid on shares of beneficial interest (13,166) - Dividends paid on preferred shares of beneficial interest (2,124) (2,124) ------------ ---------- Net cash provided by (used for) financing 69,717 (132,338) ------------ ---------- (Decrease) increase in cash and cash equivalents (29,474) 32,722 Cash and cash equivalents at beginning of period 57,841 43,019 ------------ ---------- Cash and cash equivalents at end of period 28,367 75,741 Change in cash from discontinued operations (2,414) 515 ------------ ---------- Cash and cash equivalents at end of period, including discontinued operations $ 25,953 $ 76,256 ============ ========== Supplemental Disclosure of Cash Flow Information Interest Paid $ 19,551 $ 31,642 ============ ========== Supplemental Disclosure of Non-Cash Investing and Financing Activities Discontinued operations included in accounts payable $ 1,232 $ - ============ ========== Discontinued non-cash net assets charged to dividends paid $ 24,014 $ - ============ ========== Transfer of mortgage loan obligations in connection with real estate sales $ 76,189 $ 49,000 ============ ==========
18 4 Exhibit 99 Notes to Combined Financial Statements Accounting Policies The Trust follows the Financial Accounting Standards Board's Emerging Issues Task Force Bulletin 98-9 (EITF98-9), "Accounting for Contingent Rent in Interim Financial Periods". EITF98-9 requires that contingent rental income, such as percentage rent which is dependent on sales of retail tenants, be recognized in the period that a tenant exceeds its specified sales breakpoint. Consequently, the Trust accrues the majority of percentage rent income in the fourth quarter of each year in accordance with EITF98-9. During 1998, the Financial Accounting Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities", which was subsequently amended in 1999 and 2000. The Statement requires companies to recognize all derivatives on the balance sheet as assets or liabilities, measured at fair value. Gains or losses resulting from changes in the values of those derivatives would be accounted for depending on the use of the derivatives and whether they qualify for hedge accounting. This Statement is effective for fiscal years beginning after June 15, 2000. The Trust believes that the effect of SFAS 133 on its financial statements will be immaterial. 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. During the nine months ended September 30, 2000, the Trust sold one shopping mall. 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 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 former corporate office. Corporate assets consist primarily of cash and cash equivalents, 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 must be returned to the Authority. The receipt of the $2.5 million has been recorded as a deferred item at September 30, 2000. This property, and the liabilities associated with it, are among those that are to be purchased and assumed by Radiant under the Sale Contract. 19 5 Exhibit 99 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. Distribution of Impark 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 Trust 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 Imperial's bank credit facility of approximately $24.2 million, contributed to Impark approximately $7.5 million in cash, its 14 Canadian parking properties and $6.7 million for a parking development located in San Francisco, California. The Trust has also provided a secured line of credit for $8 million to Impark. The unused line of credit expired on September 27, 2000. The Company retained ownership of Ventek formerly a manufacturing subsidiary of Impark. 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. Mortgage Loans 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. In August 2000, the Trust received an additional $.5 million on this loan. The loan requires monthly payments of approximately $401,000 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 September 2000, the Trust obtained an $8.5 million first mortgage loan secured by the Westgate Town Center property. The Trust received $7.3 million, net of closing costs, of the proceeds at the closing and an additional $1.0 million will be advanced upon the satisfaction of certain contingencies. The loan has an interest rate option, at the election of the Trust, of either the bank's prime rate plus .25% per annum or the adjusted LIBOR rate (as defined) plus 2.6%. The interest period of the LIBOR rate is to be designated by the Trust as either 30, 60 or 90 days. The interest rate at September 30, 2000 was approximately 9.2%. The loan presently requires monthly payments of $7,576 for principal plus accrued interest. Upon the advance of the additional $1.0 million, the monthly payments of principal will increase to $8,586. The maturity date of the loan is September 30, 2003. Prepayment of the loan is permitted without premium or penalty. Sale of Property In April 2000, the Trust sold Crossroads Center Mall for $80.1 million, of which approximately $78.1 million was applied against a loan payable to the purchaser, the assumption of the first mortgage debt on the mall and other liabilities. The Trust recognized a gain on the sale of approximately $59 million, less an extraordinary loss on extinguishment of debt of approximately $2.4 million. 20 6 Investment In May 2000, the Trust made a $10 million investment in convertible preferred stock issued by HQ Global Workplaces, Inc. ("HQ"). The convertible preferred stock accrues a 13.5% "payment-in-kind" dividend which increases annually. The shares and accrued dividends are convertible into common shares, if and when HQ conducts an initial public offering. In addition, the Trust received warrants to purchase shares of common stock for a nominal strike price. Repurchase of Shares In June 2000, the Trust repurchased, in a private transaction, an aggregate of 364,200 shares of its Series A cumulative redeemable preferred shares of beneficial interest from three institutional investors at a purchase price of $21.25 per share, for an aggregate cash consideration of $7,739,250. As a result of this transaction, there are presently 984,800 shares of Series A cumulative redeemable preferred shares of beneficial interest outstanding. The Trust also resumed its previously authorized common share repurchase program and began to repurchase shares of common stock in 2000. From June 2000 through September 30, 2000, the Trust had repurchased 1,425,955 common shares for $4,150,488. As a result of these transactions, there are 41,045,774 common shares of beneficial interest outstanding at September 30, 2000. Investment in Joint Venture In August 2000, the Trust received approximately $2.4 million representing its 50% non-controlling ownership interest in the net proceeds from the sale of Temple Mall. The Trust accounted for its interest in Temple Mall as an investment in a joint venture using the equity method of accounting. The Trust recognized a gain from the investment in the joint venture of approximately $.8 million during the third quarter of 2000. Temple Mall was sold for approximately $25.7 million, of which approximately $19.5 million was applied against the first mortgage debt on the mall. In addition, Temple Mall repaid its $1.2 million note payable to the Trust from cash reserves. Contract for Sale of Properties In September 2000, the Trust entered into two sales contracts and a letter agreement (the "Sale Contract") for a significant asset sale to Radiant Investors LLC ("Radiant"). The proposed transactions contemplate the sale of certain real estate assets (the "Purchased Assets") for a sales price of approximately $205 million (which includes approximately $125 million in assumed mortgage debt at September 30, 2000) and subject to certain adjustments including the Trust's share of certain transaction costs. In connection with the sale, Radiant has made deposits of $7 million as required under the terms of the Sale Contract. The deposits are non-refundable with respect to financing contingencies. In October 2000, Radiant confirmed to the Trust, by amendment to the Sale Contract, that it had obtained acceptable financing with respect to the Sale Contract. In the event that Radiant is not able to obtain consents to assignments of existing mortgages or obtain third party financing on one or more of the Purchased Assets, the Trust may be required to provide Radiant with up to $46 million in financing. However, based upon written assurances from Radiant, the Trust does not expect that it will be required to provide financing to Radiant. 21 7 In October 2000, the Trust entered into a definitive purchase agreement (the "Northeastern Contract") for the sale of the Huntington Garage property in Cleveland, Ohio to Northeastern Security Development Corp., a private real estate investment firm headquartered in New York. The purchase price is $21,250,000 and the purchaser has made a non-refundable deposit of $1,000,000 to be applied to the purchase price at closing. The sale is expected to close no later than January 2001. This property is among those that Radiant agreed to acquire from the Trust under the Sale Contract. Under the Sale Contract, Radiant and the Trust had agreed that the Trust was permitted to sell the Huntington Garage property to a third party. The Sale Contract as amended provides that Radiant will receive a credit towards the $205 million purchase price equal to the net sales price to be realized by the Trust from the sale of the Huntington Garage under the Northeastern Contract. Following the execution of the Sale Contract, the Trust notified the party holding the right of first refusal for the purchase of the Long Street Garage in Columbus, Ohio of the terms and conditions of the offer by Radiant. Such party failed to exercise its right of first refusal within the time frame permitted and as a result the Long Street Garage is among the Purchased Assets that will be sold to Radiant. The assets to be purchased by Radiant under the Sale Contract include: - 55 Public Square and CEI Office Buildings - Cleveland, Ohio - 55 Public Square Garage - Cleveland, Ohio - West Third Street Parking Lot - Cleveland, Ohio - North Valley Tech Center - Thornton, Colorado - Two Rivers Business Center - Clarksville, Tennessee - Westgate Town Center - Abilene, Texas - Pecanland Mall - Monroe, Louisiana - Long Street Garage - Columbus, Ohio - Madison and Wells Garage - Chicago, Illinois - Printers Alley Garage - Nashville, Tennessee - 5th and Marshall Garage - Richmond, Virginia - Club Associates' note receivable, face amount of approximately $1.5 million. - Ancillary assets including furniture, fixtures and equipment, and reserve and escrow accounts related to the Purchased Assets. - Net operating income from all of the Purchased Assets from June 1, 2000 less (a) debt service on the purchased assets, (b) capital expenditures committed subsequent to May 9, 2000 and (c) 66.6% of asset management fees paid to the Management Company from June 1, 2000 until the closing of the transaction. The Trust would retain ownership of the following assets: - Unrestricted cash and Treasury bills - Convertible preferred investment in HQ Global Workplaces, Inc. - Severance and prior trustees escrow account - Park Plaza Mall - Little Rock, Arkansas - Circle Tower - Indianapolis, Indiana - Peachtree Mall legal claim In addition, the Company would retain ownership of Ventek. 22 8 The Trust will remain liable for the following obligations: - 8.2% convertible preferred shares; $33,725,000 approximate face amount (reduced to $24,620,000 as of September 30, 2000) - 8.875% publicly-traded senior notes; $12,500,000 approximate face amount - Dallas management office lease (the Trust has sub-leased this space) - Certain liabilities arising out of the Purchased Assets arising prior to June 1, 2000, except for certain potential liabilities of the Westgate Town Center - Corporate expenses and liabilities not related to the Purchased Assets (including the Ventek guarantee) - Property level mortgage debt on retained assets - Other ordinary course liabilities The Sale Contract provided that the Management Company would continue to manage the Trust's remaining assets for $250,000 per year for two years. The Sale Contract is subject to several conditions, including the consent of shareholders of the Trust. The closing is expected to occur during December 2000 or January 2001, although it may be extended under certain circumstances to a date not later than April 29, 2001. Earnings Per Share The computation of basic and diluted earnings per share before extraordinary loss and loss from discontinued operations is as follows (in thousands, except per share data):
Three Months Ended Nine Months Ended September 30, September 30, ---------------------- ----------------------- 2000 1999 2000 1999 ---- ---- ---- ---- Basic (Loss) income before extraordinary loss and loss from discontinued operations, basic $ (396) $ (1,401) $ 52,722 $ 11,226 Preferred dividend (517) (708) (1,933) (2,124) Discount on preferred stock redemption - - 827 - -------- -------- -------- -------- (Loss) income before extraordinary loss and loss from discontinued operations attributable to common shares, basic $ (913) $ (2,109) $ 51,616 $ 9,102 ======== ======== ======== ======== Basic weighted average shares 41,751 43,554 42,229 35,520 ======== ======== ======== ======== (Loss) income per share before extraordinary loss and loss from discontinued operations, basic $ (0.02) $ (0.05) $ 1.22 $ .26 ======== ======== ======== ======== Diluted (Loss) income before extraordinary loss and loss from discontinued operations, diluted $ (396) $ (1,401) $ 52,722 $ 11,226 Preferred dividend (517) (708) - (2,124) Discount on preferred stock redemption - - - - -------- -------- -------- -------- (Loss) income before extraordinary loss and loss from discontinued operations attributable to commons shares, diluted $ (913) $ (2,109) $ 52,722 $ 9,102 ======== ======== ======== ======== Basic weighted average shares 41,751 43,554 - 35,520 ======== ======== ======== ======== Diluted weighted average shares - - 48,258 - ======== ======== ======== ======== (Loss) income per share before extraordinary loss and loss from discontinued operations, diluted $ (0.02) $ (0.05) $ 1.09 $ .26 ======== ======== ======== ========
23 9 Business Segments Exhibit 99
Nine Months Ended September 30, ------------------------------- 2000 1999 -------- -------- Rents and Sales Shopping Centers $ 19,731 $ 61,279 Apartments - 6,046 Office Buildings 9,490 9,723 Parking Facilities 7,766 7,972 Ventek 6,642 3,152 Corporate 208 616 -------- -------- 43,837 88,788 Less - Operating Expenses and Costs of Goods Sold Shopping Centers 5,855 20,881 Apartments - 2,353 Office Buildings 4,103 4,265 Parking Facilitie 355 602 Ventek 6,410 3,727 Corporate (7) 570 -------- -------- 16,716 32,398 Less - Real Estate Taxes Shopping Centers 1,891 5,320 Apartments - 339 Office Buildings 1,005 850 Parking Facilities 1,428 1,470 -------- -------- 4,324 7,979 Property - Net Operating Income (Loss) Shopping Centers 11,985 35,078 Apartments - 3,354 Office Buildings 4,382 4,608 Parking Facilities 5,983 5,900 Ventek 232 (575) Corporate 215 46 -------- -------- 22,797 48,411
24 10 Business Segments (Continued) Exhibit 99
Nine Months Ended September 30, ------------------------------- 2000 1999 ------- ------ Less - Depreciation and Amortization $ 9,170 $ 19,401 Less - Interest Expense 19,087 30,439 Mortgage Investment Income 193 346 Corporate Income (Expense) Short-term investment income 8,104 1,364 Other income 31 950 General and administrative (10,059) (8,910) Unrealized loss on carrying value of real estate - (9,002) -------- -------- Loss before Capital Gains, Discontinued Operations, Extraordinary Loss and Preferred Dividend $ (7,191) $(16,681) ======== ======== Capital Expenditures Shopping Centers $ 830 $ 4,418 Apartments - 262 Office Buildings 5,979 2,235 Parking Facilities 224 97 Ventek 44 - Corporate 41 - -------- -------- $ 7,118 $ 7,012 ======== ========
September 30, --------------------------- 2000 1999 ------ ------ Identifiable Assets Shopping Centers $149,701 $350,351 Apartments - - Office Buildings 55,080 42,477 Parking Facilities 77,046 70,110 Mortgages 1,483 5,465 Ventek 7,258 3,913 Corporate 186,323 62,510 -------- -------- Total Assets (net of discontinued operations) $476,891 $534,826 ======== ======== 25
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